EXHIBIT 10.2
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$75,000,000
CREDIT AGREEMENT
DATED AS OF FEBRUARY 18, 1999
AMONG
PANOLAM INDUSTRIES INTERNATIONAL, INC.,
AS BORROWER,
THE FINANCIAL INSTITUTIONS NAMED HEREIN,
AS INITIAL LENDERS,
DLJ CAPITAL FUNDING, INC.,
AS SYNDICATION AGENT,
CREDIT SUISSE FIRST BOSTON,
AS ADMINISTRATIVE AGENT
AND
ROYAL BANK OF CANADA,
AS DOCUMENTATION AGENT
LEAD ARRANGED BY:
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ SECURITIES CORPORATION
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TABLE OF CONTENTS
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PAGE
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ARTICLE I. DEFINITIONS AND ACCOUNTING TERMS.......................................................................2
Section 1.01. Certain Defined Terms......................................................................2
Section 1.02. Computation of Time Periods...............................................................41
Section 1.03. Accounting Terms..........................................................................41
Section 1.04. Other Definitional Provisions.............................................................42
ARTICLE II. AMOUNTS AND TERMS OF THE LOANS.......................................................................42
Section 2.01. The Loans.................................................................................42
Section 2.02. Making the Loans..........................................................................43
Section 2.03. Scheduled Repayment.......................................................................47
Section 2.04. Prepayments; Reduction of Revolving Commitments and Swing Line Commitment.................50
Section 2.05. Interest..................................................................................55
Section 2.06. Fees 58
Section 2.07. Increased Costs, Etc......................................................................59
Section 2.08. Payments and Computations.................................................................60
Section 2.09. Taxes.....................................................................................62
Section 2.10. Sharing of Payments, Etc..................................................................64
Section 2.11. Use of Proceeds...........................................................................65
Section 2.12. Evidence of Debt..........................................................................66
ARTICLE III. AMOUNTS AND TERMS OF LETTERS OF CREDIT..............................................................66
Section 3.01. The Letter of Credit Subfacility..........................................................66
Section 3.02. Issuance of Letters of Credit.............................................................67
Section 3.03. Drawing and Reimbursement.................................................................68
Section 3.04. Obligations Absolute......................................................................68
Section 3.05. Letter of Credit Fees.....................................................................69
Section 3.06. Use of Letters of Credit..................................................................70
ARTICLE IV. CONDITIONS OF LENDING................................................................................70
Section 4.01. Conditions Precedent to Initial Borrowings................................................70
Section 4.02. Conditions Precedent to Each Borrowing and Issuance.......................................76
Section 4.03. Determinations Under Section 4.01.........................................................77
ARTICLE V. REPRESENTATIONS AND WARRANTIES........................................................................77
Section 5.01. Representations and Warranties of the Borrower............................................77
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ARTICLE VI. COVENANTS OF THE BORROWER............................................................................86
Section 6.01. Affirmative Covenants.....................................................................86
Section 6.02. Negative Covenants........................................................................92
Section 6.03. Reporting Requirements...................................................................101
Section 6.04. Financial Covenants......................................................................104
ARTICLE VII. EVENTS OF DEFAULT..................................................................................107
Section 7.01. Events of Default........................................................................107
Section 7.02. Actions in Respect of the Letters of Credit Upon Default.................................109
ARTICLE VIII. THE ADMINISTRATIVE AGENT..........................................................................110
Section 8.01. Authorization and Action.................................................................110
Section 8.02. Administrative Agent's Reliance, Etc.....................................................110
Section 8.03. Agents and Affiliates....................................................................111
Section 8.04. Lender Credit Decision...................................................................111
Section 8.05. Indemnification..........................................................................111
Section 8.06. Successor Administrative Agents..........................................................112
Section 8.07. Documentation Agent......................................................................113
Section 8.08. Ministerial Acts.........................................................................113
ARTICLE IX. MISCELLANEOUS.......................................................................................113
Section 9.01. Amendments, Etc.; Release of Collateral..................................................113
Section 9.02. Notices, Etc.............................................................................114
Section 9.03. No Waiver, Remedies......................................................................115
Section 9.04. Costs and Expenses.......................................................................115
Section 9.05. Right of Set-Off.........................................................................117
Section 9.06. Binding Effect...........................................................................117
Section 9.07. Assignments and Participations...........................................................117
Section 9.08. Governing Law; Jurisdiction; Waiver of Jury Trial, Etc...................................121
Section 9.09. Execution in Counterparts................................................................122
Section 9.10. No Liability of the Issuing Banks........................................................122
Section 9.11. Confidentiality..........................................................................122
Section 9.12. Waiver of Jury Trial.....................................................................123
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SCHEDULES AND EXHIBITS
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SCHEDULES
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Schedule I Commitments, Etc.
Schedule II Collateral Reports
Schedule 1.01(a) Historical Restructuring Costs
Schedule 1.01(b) Future Restructuring Costs
Schedule 2.04(c)(iii) Equipment
Schedule 4.01(k)(ii) jurisdictions of Incorporation; Foreign
Qualifications
Schedule 4.01(k)(vii) Government and Third-Party Approvals
Schedule 4.01(k)(xv) Secured Properties
Schedule 4.01(k)(xxi) Environmental Reports
Schedule 5.01(b) Capital Stock
Schedule 5.01(d) Approvals and Consents
Schedule 5.01(j) Pension Plans
Schedule 5.01(l)(i) Environmental Law and Permit Exceptions
Schedule 5.01(l)(ii) Environmental Disclosure
Schedule 5.01(l)(iii) Hazardous Materials Disposals and Releases
Schedule 5.01(m) Open Years
Schedule 5.01(q)(i) Existing Debt
Schedule 5.01(q)(ii) Surviving Debt
Schedule 5.01(s) Real Property
Schedule 5.01(t) Material Contracts
Schedule 5.01(v) Investments
Schedule 5.01(w) Intellectual Property
Schedule 5.01(x) Other Agreements
Schedule 6.01(d) Policies of Insurance
Schedule 6.02(a)(iii) Existing Liens
Schedule 6.02(e) Sale of Assets
Schedule 6.02(r) Affiliate Transactions
EXHIBITS
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Exhibit I Form of Assignment and Acceptance
Exhibit II Form of Notice of Borrowing
Exhibit III Form of Notice of Conversion/Continuation
Exhibit IV Form of Notice of Issuance
Exhibit V Form of Notice of Swing Line Borrowing
Exhibit VI Form of Borrowing Base Certificate
Exhibit VII-A Form of Revolving Note
Exhibit VII-B Form of Term A Note
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Exhibit VII-C Form of Term B Note
Exhibit VII-D Form of Swing Line Note
Exhibit VIII Form of Compliance Certificate / Quarterly
Compliance Certificate
Exhibit IX Form of Security Agreement
Exhibit X Form of Guaranty
Exhibit XI Form of Deed of Trust / Mortgage /
Leasehold Deed of Trust /
Leasehold Mortgage
Exhibit XII Form of Opinion of Borrower's Counsel
Exhibit XIII-A Form of Intercompany Subordinated Demand
Promissory Note
Exhibit XIII-B Form of Intercompany Promissory Note
Exhibit XIV Form of Amendment to Guaranty
Exhibit XV Form of Amendment to Security Agreement
Exhibit XVI Form of Intercreditor and Subordination
Agreement
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PANOLAM INDUSTRIES INTERNATIONAL, INC.
CREDIT AGREEMENT
DATED AS OF FEBRUARY 18, 1999
This CREDIT AGREEMENT (this "AGREEMENT") is dated as of
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February 18, 1999, and entered into among PANOLAM INDUSTRIES INTERNATIONAL,
INC., a Delaware corporation (the "BORROWER"), the financial institutions and
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other entities listed on the signature pages hereof as initial Lenders (the
"INITIAL LENDERS"), DLJ CAPITAL FUNDING, INC. ("DLJ CAPITAL FUNDING"), for
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itself as an Initial Lender and as Syndication Agent, CREDIT SUISSE FIRST BOSTON
("CSFB"), for itself as an Initial Lender and as Administrative Agent, and ROYAL
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BANK OF CANADA, for itself as an Initial Lender and as Documentation Agent.
RECITALS
A. The Borrower has requested the Lenders to extend certain
credit facilities to the Borrower of up to $75,000,000 in the aggregate in US
Dollars to provide funds (i) to consummate the Pioneer Acquisition (this and the
other capitalized terms used in these recitals without definition being used as
defined in Section 1.01 hereof), (ii) to refinance certain existing indebtedness
of the Company, (iii) to pay fees and expenses in connection with the
Transactions, (iv) for the Borrower's working capital requirements, (v) for
Permitted Acquisitions and (vi) for other general corporate purposes of the
Borrower and its Subsidiaries.
B. The Borrower has requested, on the terms and conditions set
forth herein, (a) that the Lenders make Revolving Loans to the Borrower from
time to time in an aggregate principal amount not to exceed at any time
outstanding the lesser of (1) the Borrowing Base Amount and (2) the aggregate
Revolving Commitments of the Lenders (less the Letter of Credit Usage at such
time and the Swing Line Loans outstanding at such time), (b) that the Term A
Lenders make Term A Loans to the Borrower on the Closing Date in an aggregate
principal amount not to exceed the aggregate Term A Commitments of the Term A
Lenders, (c) that the Term B Lenders make Term B Loans to the Borrower on the
Closing Date in an aggregate principal amount not to exceed the Term B
Commitments of the Term B Lenders, (d) that the Swing Line Lender make Swing
Line Loans to the Borrower from time to time in an aggregate principal amount
not to exceed at any time outstanding the Swing Line Sublimit and (e) that the
Letter of Credit Bank and the other Issuing Banks issue Letters of Credit for
the account of the Borrower from time to time up to an aggregate Letter of
Credit Usage not to exceed the Letter of Credit Sublimit.
C. The Borrower desires to secure all of its obligations under
the Loan Documents by granting to Administrative Agent, for the benefit of the
Agents and the Lender Parties, a security interest in and Lien upon
substantially all of its existing and after-acquired personal and real property
and to pledge to the Administrative Agent, for the benefit of the
Agents and the Lender Parties, all of the Capital Stock of its existing and
future Domestic Subsidiaries and 65% of the capital stock of its existing and
future Foreign Subsidiaries, including without limitation, a second priority
lien with respect to 65% of the Capital Stock of Panolam Canada.
D. Each of the Borrower's Parents and Domestic Subsidiaries
has agreed to guarantee all of the obligations of the Borrower to the Lender
Parties under the Loan Documents and to pledge to the Administrative Agent, for
the benefit of the Agents and the Lender Parties, all of the Capital Stock of
each of their respective existing and future Domestic Subsidiaries and 65% of
the Capital Stock of each of their existing and future Foreign Subsidiaries to
secure such guarantees.
E. Subject to the terms and conditions set forth in this
Agreement, (a) the Revolving Lenders have agreed severally to make such
Revolving Loans to the Borrower, (b) the Term A Lenders have agreed severally to
make such Term A Loans to the Borrower, (c) the Term B Lenders have agreed
severally to make such Term B Loans to the Borrower, (d) the Swing Line Lender
has agreed to make such Swing Line Loans to the Borrower and (e) the Letter of
Credit Bank has agreed to issue such Letters of Credit for the account of the
Borrower.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and of the
mutual covenants and agreements contained herein, and for other good and
valuable consideration the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
ARTICLE I.
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.01. CERTAIN DEFINED TERMS. As used in this
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Agreement, the following terms shall have the following meanings (such meanings
to be equally applicable to both the singular and plural forms of the terms
defined):
"ACQUISITION" means the acquisition, in one transaction or a
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series of transactions, by Holdings or any of its Subsidiaries or the Excluded
Acquisition Sub of all or substantially all the stock, partnership or other
Equity Interests or assets of any other Person or all or substantially all of
the assets of any division or business of any other Person.
"ACQUISITION CONSIDERATION" means the purchase consideration
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for any Permitted Acquisition and all other payments made and liabilities
incurred by Holdings or any of its Subsidiaries in exchange for, or as part of,
or in connection with, any Permitted Acquisition, whether paid in cash or in
Capital Stock or by exchange of assets or otherwise and whether payable at or
prior to the consummation of such Permitted Acquisition or deferred for payment
at any future time, whether or not any such future payment is subject to the
occurrence of any contingency, and includes any and all payments and liabilities
representing the purchase price and any assumption of Debt, "earn-outs" and
other Profit Payment Agreements, consulting
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agreements, services agreements and non-competition agreements and other
liabilities of every type and description.
"ADDITIONAL MORTGAGES" has the meaning specified in Section
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6.01(n)(i).
"ADMINISTRATIVE AGENT" means Credit Suisse First Boston, as
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administrative agent under this Agreement, and its successors and assigns in
such capacity.
"ADMINISTRATIVE AGENT'S ACCOUNT" means the US Dollar account
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of the Administrative Agent maintained by the Administrative Agent with Bank of
New York, ABA ▇▇▇▇▇▇▇▇▇, Account No. 8900387645, Reference: Panolam, or such
other account or accounts as may be specified by the Administrative Agent in a
written notice to the Borrower and the Lender Parties from time to time.
"AFFECTED LENDER" has the meaning specified in Section
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2.07(c).
"AFFILIATE" means, as to any Person, any other Person that,
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directly or indirectly, controls, is controlled by or is under common control
with such Person or is a director or officer of such Person. For purposes of
this definition, the term "control" (including the terms "controlling",
"controlled by" and "under common control with") of a Person means the
possession, direct or indirect, of the power either (a) to vote 5% or more (or,
in the case of limited partners or members of Genstar Capital, 25% or more) of
the Voting Equity Interests of such Person or to direct or cause the direction
of the management and policies of such Person, whether through the ownership of
Voting Equity Interests, by contract or otherwise. Notwithstanding the
foregoing, no Lender Party or any Affiliate thereof shall be deemed an
"Affiliate" of any Loan Party for any reason.
"AGENTS" means the Syndication Agent, the Administrative Agent
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and the Documentation Agent.
"APPLICABLE BASE RATE MARGIN" means, as of any date of
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determination, (i) with respect to Revolving Loans, Swing Line Loans and Term A
Loans, (A) from the Closing Date through and including the six-month anniversary
of the Closing Date, a rate per annum equal to 1.75%, and (B) thereafter, with
respect to each such Type of Loan, a rate per annum equal to the percentage set
forth in the table below opposite the Applicable Leverage Ratio in effect as of
such date, any change in the Applicable Base Rate Margin to be effective on the
date of any corresponding change in the Applicable Leverage Ratio; and (ii) with
respect to Term B Loans, a rate per annum equal to 2.50%.
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APPLICABLE BASE RATE MARGIN
WITH RESPECT TO REVOLVING
APPLICABLE LOANS, SWING LINE LOANS AND
LEVERAGE RATIO TERM A LOANS
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4.0:1.0 or greater 1.75%
3.5:1.0 or greater, but less than 1.50%
4.0:1.0
3.0:1.0 or greater, but less than 1.25%
3.5:1.0
2.5:1.0 or greater, but less than 1.00%
3.0:1.0
less than 2.5:1.0 0.75%
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"APPLICABLE EURODOLLAR RATE MARGIN" means, as of any date of
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determination, (i) with respect to Revolving Loans and Term A Loans, (A) from
the Closing Date through and including the six-month anniversary of the Closing
Date, a rate per annum equal to 2.75%, and (B) thereafter, with respect to each
such Type of Loan, a rate per annum equal to the percentage set forth in the
table below opposite the Applicable Leverage Ratio in effect as of such date,
any change in the Applicable Eurodollar Rate Margin to be effective on the date
of any corresponding change in the Applicable Leverage Ratio; and (ii) with
respect to Term B Loans, a rate per annum equal to 3.50%.
APPLICABLE EURODOLLAR RATE
MARGIN WITH RESPECT TO
APPLICABLE REVOLVING LOANS AND
LEVERAGE RATIO TERM A LOANS
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4.0:1.0 or greater 2.75%
3.5:1.0 or greater, but less than 2.50%
4.0:1.0
3.0:1.0 or greater, but less than 2.25%
3.5:1.0
2.5:1.0 or greater, but less than 2.00%
3.0:1.0
less than 2.5:1.0 1.75%
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"APPLICABLE LENDING OFFICE" means, with respect to each
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Lender, such Lender's Domestic Lending Office in the case of a Base Rate Loan
and such Lender's Eurodollar Lending Office in the case of a Eurodollar Rate
Loan.
"APPLICABLE LEVERAGE RATIO" means, with respect to any date of
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determination, the Consolidated Leverage Ratio for the Borrower and its
Subsidiaries set forth in the Effective Quarterly Compliance Certificate (as
defined below) in respect of the Pricing Period (as defined below) in which such
date of determination occurs. For purposes of this definition, (i) "PRICING
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PERIOD" means each period commencing on the third Business Day after the
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delivery (or deemed delivery as provided below) to the Administrative Agent of a
Quarterly Compliance Certificate (the "EFFECTIVE QUARTERLY COMPLIANCE
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CERTIFICATE" in respect of such Pricing Period) and ending on the second
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Business Day after the next Quarterly Compliance Certificate is delivered (or
deemed to be delivered as provided below) to the Administrative Agent; provided
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that, in the event the Borrower fails to deliver to the Administrative Agent a
Quarterly Compliance Certificate on or before the 45th day after the end of any
of the first three fiscal quarters of any Fiscal Year or the
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90th day after the end of the fourth fiscal quarter of any Fiscal Year (the
"CUTOFF DATE" with respect to any such fiscal quarter), the Borrower shall be
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deemed, for purposes of this definition, to have delivered to the Administrative
Agent, on the Cutoff Date, a Quarterly Compliance Certificate which establishes
that the Consolidated Leverage Ratio for the Borrower and its Subsidiaries as of
the last day of such fiscal quarter was 4.0:1.0; provided further that if the
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Borrower delivers to the Administrative Agent a Quarterly Compliance Certificate
after the Cutoff Date, then commencing with the third Business Day after the
date of such delivery the Applicable Leverage Ratio shall be the Consolidated
Leverage Ratio set forth in such Quarterly Compliance Certificate.
"APPLICABLE US FACILITY PERCENTAGE" means, as of any date of
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determination, the quotient (expressed as a percentage) obtained by dividing (a)
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the sum of (i) the aggregate principal amount of Loans and Letter of Credit
Obligations outstanding at such time, plus (ii) the aggregate Unused Revolving
----
Commitments in effect at such time, by (b) the sum of (i) the amount determined
according to the foregoing clause (a), plus (ii) the aggregate principal amount
----
of loans and letter of credit obligations outstanding under the Canadian Credit
Agreement at such time, plus (iii) the aggregate unused revolving commitments in
----
effect under the Canadian Credit Agreement at such time.
"APPROPRIATE LENDER" means, at any time, (a) with respect to
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either of the Term Facilities, a Lender that has a Term Loan outstanding under
such Term Facility at such time, (b) with respect to the Revolving Facility, a
Revolving Lender, (c) with respect to the Letter of Credit Subfacility, (i) any
Issuing Bank and (ii) any other Revolving Lender that has paid on any Letter of
Credit Drawings pursuant to Section 3.01 which are outstanding at such time, and
(d) with respect to the Swing Line Facility, (i) the Swing Line Lender and (ii)
any other Revolving Lender that has funded its participation in any Swing Line
Loans pursuant to Section 2.02(f) which are outstanding at such time.
"APPROVED COST ADJUSTMENTS" means, for any period, charges
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against the income of any business or Person acquired in a Permitted Acquisition
for the portion of such period prior to the consummation of such Permitted
Acquisition, but only if and to the extent such charges would be adjusted
pursuant to Article 11 of Regulation S-X of the Securities and Exchange
Commission subject to agreed upon procedures to be performed by the Borrower's
independent accountants, if prior to the consummation of such Permitted
Acquisition the Borrower delivers to the Administrative Agent and the Lenders a
certificate signed by the Chief Financial Officer of the Borrower describing
such adjustments in reasonable detail and stating that such procedures have been
performed by such officer and that such adjustments are permitted under Article
11 of Regulation S-X.
"APPROVED FUND" means, with respect to any Lender that is a
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fund that invests in commercial loans, any other fund that invests in commercial
loans and is managed or advised by the same investment advisor as such Lender or
by an Affiliate of such investment advisor.
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"ASSIGNMENT AND ACCEPTANCE" means an assignment and acceptance
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entered into by a Lender and an Eligible Assignee, and accepted by the
Administrative Agent, in accordance with Section 9.07 and substantially in the
form of Exhibit I hereto.
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"BANK HEDGE AGREEMENT" means an Interest Rate Contract or
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Currency Hedging Agreement entered into between the Borrower and a Lender.
"BASE AMOUNT" has the meaning specified in Section 6.04(d).
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"BASE RATE" means a fluctuating interest rate per annum in
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effect from time to time, which rate per annum shall at all times be equal to
the higher of: (a) the rate of interest announced publicly by the Administrative
Agent from time to time as the Administrative Agent's prime rate in effect for
United States borrowers at its principal office in New York City; and (b) 1/2 of
one percent per annum above the Federal Funds Rate. Any change in the Base Rate
due to a change in the Administrative Agent's prime rate or the Federal Funds
Rate shall be effective as of the opening of business on the effective day of
such change in the Administrative Agent's prime rate or the Federal Funds Rate,
as the case may be.
"BASE RATE LOAN" means a Loan that bears interest as provided
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in Section 2.05(a).
"BORROWER" has the meaning set forth in the introduction to
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this Agreement.
"BORROWER'S ACCOUNT" means the US Dollar account of the
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Borrower maintained by the Borrower with Mellon Bank (ABA No. ▇▇▇-▇▇▇-▇▇▇,
Account No. 005-7314) or such other account or accounts as may be specified from
time to time by the Administrative Agent and the Borrower in a written notice to
the Lenders.
"BORROWING" means a Term Borrowing, a Revolving Borrowing or a
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Swing Line Borrowing.
"BORROWING BASE AMOUNT" means, as at any date of
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determination, (i) the sum of 60% of Eligible Inventory plus 85% of Eligible
Receivables less (ii) any Reserves.
"BORROWING BASE CERTIFICATE" means a certificate of the
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Borrower in the form attached hereto as Exhibit VI.
"BUSINESS DAY" means a day of the year on which banks are not
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required or authorized by law to close in New York, New York and, if the
applicable Business Day relates to any Eurodollar Rate Loans, a day of the year
on which dealings in US Dollars are carried on in the London interbank market.
"CANADIAN ADMINISTRATIVE AGENT" means the Administrative Agent
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under the Canadian Credit Agreement.
"CANADIAN CREDIT AGREEMENT" means the Credit Agreement dated
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as of the date hereof, and entered into among Panolam Canada, the financial
institutions and other entities
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party thereto as Canadian Lenders, and Credit Suisse First Boston Canada, as
Administrative Agent thereunder.
"CANADIAN CREDIT AGREEMENT GUARANTY" means the US Guaranty
----------------------------------
dated as of the date hereof, and entered into among Holdings, Group, PII Second,
the Borrower, Panolam US and Pioneer, and acknowledged by Panolam Canada and the
Canadian Administrative Agent, as the same may be amended, supplemented or
otherwise modified from time to time.
"CANADIAN HEDGE AGREEMENTS" means "Hedge Agreements" as
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defined in the Canadian Credit Agreement.
"CANADIAN LENDERS" means the lenders under the Canadian Credit
----------------
Agreement.
"CANADIAN LOAN DOCUMENTS" means the Canadian Credit Agreement,
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the Canadian Credit Agreement Guaranty, the notes (if any), the other
guaranties, the collateral documents, the letter of credit agreements and each
bank hedge agreement in each case in connection with the Canadian Credit
Agreement executed and delivered to, or in favor of, the Canadian Administrative
Agent and/or any of the Canadian Lenders.
"CANADIAN OBLIGATIONS" means all Obligations of Panolam Canada
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and any other Loan Party of any kind or nature, present or future, whether or
not evidenced by any note, agreement or other instrument, arising under or
pursuant to the Canadian Credit Agreement or any of the other Canadian Loan
Documents.
"CANADIAN SECURITY AGREEMENT" means the Security Agreement
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dated as of the date hereof, made by Panolam Canada in favor of the Canadian
Administrative Agent for the benefit of itself and the Canadian Lenders, as the
same may be amended, supplemented or otherwise modified from time to time.
"CAPITAL EXPENDITURES" means, for any period, the sum of all
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expenditures during such period by the Borrower and its Subsidiaries for
equipment, fixed assets, real property or improvements, or for replacements or
substitutions therefor or additions thereto, that have a useful life of more
than one year and that are required to be capitalized under generally accepted
accounting principles. For purposes of calculating Capital Expenditures for any
period that includes periods prior to the Closing Date, Capital Expenditures of
Pioneer for such periods shall be included as if Pioneer was a Subsidiary of the
Borrower during such periods.
"CAPITAL LEASE" means, with respect to any Person, any lease
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of any property (whether real, personal or mixed) by such Person as lessee that,
in accordance with GAAP, would be required to be classified and accounted for as
a capital lease on a balance sheet of such Person.
"CAPITAL LEASE OBLIGATION" means, with respect to any Capital
------------------------
Lease of any Person, the amount of the obligation of the lessee thereunder that,
in accordance with GAAP, would appear on a balance sheet of such lessee in
respect of such Capital Lease.
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"CAPITAL STOCK" means, with respect to any corporation, any
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and all shares, interests, rights to purchase (other than convertible or
exchangeable Debt that is not itself otherwise capital stock), warrants,
options, participations or other equivalents of or interests (however
designated) in stock issued by that corporation.
"CASH COLLATERAL ACCOUNT" has the meaning specified in the
-----------------------
Security Agreement.
"CASH EQUIVALENTS" means any of the following, to the extent
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owned by a Loan Party free and clear of all Liens: (i) marketable direct
obligations issued or unconditionally guaranteed by the United States of America
or any agency thereof maturing within one year from the date of acquisition
thereof; (ii) commercial paper maturing no more than nine months from the date
of creation thereof and currently having the highest rating obtainable from
either Standard & Poor's Ratings Services or ▇▇▇▇▇'▇ Investors Service, Inc.;
and (iii) certificates of deposit or time deposits, maturing no more than nine
months from the date of creation thereof, issued by (A) commercial banks
incorporated under the laws of the United States of America, each having
combined capital, surplus and undivided profits of not less than $300,000,000
and having a senior unsecured rating of "A" or better by a nationally recognized
rating agency, (B) the Administrative Agent or (C) any Lender.
"CERCLA" means the Comprehensive Environmental Response,
------
Compensation and Liability Act of 1980, as amended or supplemented from time to
time, and the regulations promulgated pursuant thereto.
"CHANGE OF CONTROL" means:
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(a) prior to consummation of an Initial Public Equity
Offering, Genstar Capital shall cease beneficially to own, directly or
indirectly, at least 60% of the voting power of the Voting Equity Interests of
Holdings; or
(b) following the consummation of an Initial Public Equity
Offering:
(i) Genstar Capital shall cease beneficially to own at
least 40% of the voting power of the Voting Equity Interests of Holdings;
(ii) any "person" or "group" (as such terms are used for
purposes of Sections 13(d) and 14(d) of the Exchange Act, whether or not
applicable) (other than Genstar Capital) is or becomes the "beneficial owner",
directly or indirectly, of more than 35% of the total voting power in the
aggregate of all classes of Capital Stock of the Borrower then outstanding
normally entitled to vote in elections of directors; or
(iii) during any period of 12 consecutive months after
the Closing Date, individuals who at the beginning of any such 12-month period
constituted the Board of Directors of the Borrower (together with any new
directors whose election by such Board of Directors or whose nomination for
election by the shareholders of the Borrower was approved by a vote of a
majority of the directors then still in office who were either directors at the
beginning of such
8
period or whose election or nomination for election was previously so approved)
cease for any reason to constitute a majority of the Board of Directors of the
Borrower then in office; or
(c) a "Change of Control" occurs under and as defined in the
Subordinated Note Indenture; or
(d) Holdings shall cease to own, directly or indirectly, 100%
of the Capital Stock of the Borrower or of any Parent; or
(e) The Borrower shall cease to own 100% of the Capital Stock
of Panolam Canada, Panolam US or Pioneer.
"CHATTEL PAPER" means any "chattel paper", as such term is
-------------
defined in the Code, now owned or hereafter acquired by any Credit Party,
wherever located.
"CHIEF FINANCIAL OFFICER" means the Chief Financial Officer of
-----------------------
the Borrower, or at any time that there is no chief financial officer, the
director of finance or the treasurer of the Borrower.
"CLOSING DATE" means the date on or before February 26, 1999,
------------
on which each of the conditions in Section 4.01 is satisfied or waived and the
initial Borrowings are made.
"CODE" means the Uniform Commercial Code as the same may, from
----
time to time, be enacted and in effect in the State of New York; provided,
--------
however, in the event that, by reason of mandatory provisions of law, any or all
-------
of the attachment, perfection or priority of the Administrative Agent's or any
Lender's security interest in any Collateral is governed by the Uniform
Commercial Code as enacted and in effect in a jurisdiction other than the State
of New York, the term "CODE" shall mean the Uniform Commercial Code as enacted
----
and in effect in such other jurisdiction solely for purposes of the provisions
hereof relating to such attachment, perfection or priority and for purposes of
definitions related to such provisions.
"COLLATERAL" means all "Collateral" referred to in the
----------
Collateral Documents and all other property that is subject to any Lien in favor
of the Administrative Agent, the Lenders or any Issuing Bank.
"COLLATERAL DOCUMENTS" means the Security Agreement, the
--------------------
Mortgages and any other instrument or agreement purporting to create a Lien to
secure the Obligations under the Loan Documents.
"COLLATERAL REPORTS" means the Borrower's reports required as
------------------
set forth in Schedule II.
"COMMITMENT" means a Term A Commitment, a Term B Commitment, a
----------
Revolving Commitment, a Swing Line Commitment or a Letter of Credit Commitment.
"COMPANY" means Holdings together with its direct and indirect
-------
Subsidiaries, including, but not limited to, the Borrower and Pioneer.
9
"COMPLIANCE CERTIFICATE" means a certificate of the Chief
----------------------
Financial Officer of the Borrower substantially in the form attached as Exhibit
-------
VIII hereto, certifying (i) the truth, accuracy and completeness in all material
----
respects of all financial information provided therewith pursuant to Section
6.03(b), (c) or (d) or in connection with a Permitted Acquisition, (ii) that all
financial information provided therewith has been prepared in accordance with
generally accepted accounting principles and that such information presents
fairly in accordance with generally accepted accounting principles (subject to
normal year-end adjustments) the financial position and results of operations of
the Borrower and its Subsidiaries, on a Consolidated and consolidating basis, in
each case as at the end of the relevant period and for the period then ended,
(iii) that no Default or Event of Default has occurred and is continuing at such
time or, if a Default or Event of Default has occurred and is continuing,
describing the nature thereof and the action that the Borrower has taken and
proposes to take with respect thereto, and (iv) when required, setting forth the
computations used by the Borrower in determining compliance with the covenants
contained in Section 6.04.
"CONFIDENTIAL INFORMATION" means information that a Loan Party
------------------------
furnishes to the Administrative Agent or any Lender in a writing designated as
confidential, but does not include any such information (i) that is or becomes
generally available to the public through no action or inaction by the
Administrative Agent or any Lender in violation of Section 9.11 or (ii) that is
or becomes available to the Administrative Agent or such Lender from a source
other than a Loan Party, which source, to the knowledge of the recipient, is not
bound by and in breach of an obligation of confidentiality to such Loan Party or
any of its Affiliates.
"CONSOLIDATED" refers to the consolidation of accounts in
------------
accordance with GAAP.
"CONSOLIDATED EBITDA" means, for any period, the EBITDA for
-------------------
the Borrower and its Subsidiaries determined on a Consolidated basis in
conformity with GAAP for such period. For purposes of calculating Consolidated
EBITDA for any period that includes periods prior to the Closing Date, the
EBITDA of Pioneer for such prior periods shall be included as if Pioneer was a
Subsidiary of the Borrower during such periods. For purposes of calculating
Consolidated EBITDA for any period prior to the end of the fourth full fiscal
quarter of the Borrower ending after the consummation of any Permitted
Acquisition, the pro forma EBITDA (reflecting only such adjustments to actual
EBITDA as would constitute Approved Cost Adjustments) of or attributable to the
Person or assets acquired in such Permitted Acquisition for periods prior to the
date of the consummation of such Permitted Acquisition shall be included as if
such Person was or such assets were held by a Subsidiary of the Borrower during
such periods.
"CONSOLIDATED FIXED CHARGES" means, for any period, the sum of
--------------------------
Consolidated Interest Expense, Capital Expenditures (excluding any portion
thereof constituting Debt), cash tax expense, principal payments due in respect
of Funded Debt in the period of four consecutive fiscal quarters following the
end of such period, amounts paid or accrued pursuant to any earn-out or similar
provisions in connection with any Acquisition (including without limitation,
pursuant to Section 2(e)(v) of the Pioneer Acquisition Agreement), amounts paid
for any share repurchases by any Loan Party and cash dividends paid, in each
case determined for such period for the Borrower and its Subsidiaries on a
Consolidated basis in conformity with GAAP.
10
Consolidated Fixed Charges for periods prior to the completion of four full
fiscal quarters following the Closing Date, shall be determined on a pro forma
--- -----
basis by annualizing the cash tax expense of the Borrower and its Subsidiaries
for the period following the Closing Date. Consolidated Fixed Charges shall be
adjusted with respect to any Person or assets acquired in a Permitted
Acquisition for the period prior to the completion of four fiscal quarters
following the consummation of such Permitted Acquisition by including in the
calculation thereof cash tax expense of such Person or assets determined by
annualizing such cash tax expense for the period following the consummation of
such Permitted Acquisition.
"CONSOLIDATED INTEREST EXPENSE" means, for any period, total
-----------------------------
cash Interest Expense (including the interest component of Capital Leases) of
the Borrower and its Subsidiaries on a Consolidated basis for such period in
conformity with GAAP, including (without duplication) interest accrued and/or
paid with respect to the Subordinated Notes. Consolidated Interest Expense for
periods prior to the completion of four full fiscal quarters following the
Closing Date shall be determined on a pro forma basis by annualizing the actual
--- -----
Consolidated Interest Expense of the Borrower and its Subsidiaries (including
Pioneer) for the period from the Closing Date through the end of the most recent
fiscal quarter. Consolidated Interest Expense shall be adjusted with respect to
any Person or assets acquired in a Permitted Acquisition for the period prior to
the completion of four fiscal quarters following the consummation of such
Permitted Acquisition by adding to the actual Consolidated Interest Expense of
the Borrower and its Subsidiaries (other than the newly-acquired Person or
assets) for such period the annualized amount of Interest Expense on Debt
assumed or otherwise incurred in connection with such Permitted Acquisition with
interest calculated at the average weighted interest rate on the Debt incurred
and assumed (including Borrowings hereunder and borrowings under the Canadian
Credit Agreement) for such Permitted Acquisition on the closing date thereof.
"CONSOLIDATED LEVERAGE RATIO" means, as of any date of
---------------------------
determination, the ratio of (i) Consolidated Total Debt as of the last day of
the most recently completed fiscal quarter in respect of which the Borrower has
delivered (or is then required to have (but has not yet) delivered) to
Administrative Agent the financial statements required to be delivered pursuant
to Section 6.03(c) or (in the case of the last fiscal quarter of any Fiscal
Year) Section 6.03(d), to (ii) Consolidated EBITDA for the four fiscal quarter
period ending on the last day of the applicable fiscal quarter specified under
clause (i) above.
"CONSOLIDATED NET INCOME" means, for any period, the net
-----------------------
earnings (or loss) after taxes of the Borrower and its Subsidiaries on a
Consolidated basis determined for such period in conformity with GAAP.
"CONSOLIDATED TOTAL DEBT" means, as of any date of
-----------------------
determination, the aggregate stated balance sheet amount of all Debt (excluding
the items described in clauses (b)(ii) and (b)(iii) of the definition of "Debt"
and excluding any Permitted Seller Financing) of the Borrower and its
Subsidiaries, as determined on a Consolidated basis in conformity with GAAP.
11
"CONVERSION", "CONVERT" and "CONVERTED" each refer to a
---------- ------- ---------
conversion of Loans of one Interest Type into Loans of the other Interest Type
pursuant to Section 2.05.
"CREDIT PARTY" means the Borrower and each Guarantor.
------------
"CURRENCY HEDGING AGREEMENTS" means currency swap agreements,
---------------------------
currency future or option contracts and other similar agreements.
"CURRENT ASSETS" means, with respect to any Person, all
--------------
current assets of such Person as of any date of determination calculated in
accordance with GAAP, but excluding cash, Cash Equivalents and debts due from
Affiliates.
"CURRENT LIABILITIES" means, with respect to any Person, all
-------------------
liabilities which should, in accordance with GAAP, be classified as current
liabilities, and in any event shall include all Debt payable on demand or within
one year from any date of determination without any option on the part of the
obligor to extend or renew beyond such year, all accruals for federal or other
taxes based on or measured by income and payable within such year, but excluding
the current portion of long-term debt required to be paid within one year and,
in the case of the Borrower and Panolam Canada, the aggregate outstanding
principal balances of the Revolving Loans, Swing Line Loans and Letters of
Credit advanced or Issued under this Agreement, and the aggregate outstanding
principal balances of the revolving loans, swing line loans and letters of
credit advanced or issued under the Canadian Credit Agreement.
"DEBT" of any Person means, without duplication, (a) all
----
indebtedness of such Person for borrowed money, (b) all Obligations of such
Person for the deferred purchase price of property or services (other than (i)
trade payables not overdue by more than 90 days incurred in the ordinary course
of such Person's business, (ii) amounts owing under the Genstar Agreements, and
(iii) any earn-outs or similar obligations pursuant to the Pioneer Acquisition
Agreement or arising in connection with any Permitted Acquisition (including,
without limitation, pursuant to any Profit Payment Agreements) but in each case
only for so long as payment thereof is contingent, (c) all Obligations of such
Person evidenced by notes, bonds, debentures or other similar instruments, (d)
all Obligations of such Person created or arising under any conditional sale or
other title retention agreement with respect to property acquired by such Person
(even though the rights and remedies of the seller or lender under such
agreement in the event of default are limited to repossession or sale of such
property), (e) all Obligations of such Person as lessee under Capital Leases,
(f) all Obligations, contingent or otherwise, of such Person under acceptance,
letter of credit or similar facilities, (g) all Obligations of such Person to
purchase, redeem, retire, defease or otherwise make any payment in respect of
any Capital Stock of or other ownership or profit interest in such Person or any
other Person or any warrants, rights or options to acquire such Capital Stock,
valued, in the case of Redeemable Preferred Stock, at the greater of its
voluntary or involuntary liquidation preference plus accrued and unpaid
dividends, (h) all net obligations of such Person in respect of Hedge
Agreements, (i) all Debt of others referred to in clauses (a) through (h) above
guaranteed directly or indirectly in any manner by such Person, or in effect
guaranteed directly or indirectly by such Person through an agreement (i) to pay
or purchase such Debt or to advance or supply funds for the payment or purchase
of
12
such Debt, (ii) to purchase, sell or lease (as lessee or lessor) property, or to
purchase or sell services, primarily for the purpose of enabling the debtor to
make payment of such Debt or to assure the holder of such Debt against loss,
(iii) to supply funds to or in any other manner invest in the debtor (including
any agreement to pay for property or services irrespective of whether such
property is received or such services are rendered) or (iv) otherwise to assure
a creditor against loss, and (j) all Debt referred to in clauses (a) through (h)
above secured by (or for which the holder of such Debt has an existing right,
contingent or otherwise, to be secured by) any Lien on property (including,
without limitation, accounts and contract rights) owned by such Person, even
though such Person has not assumed or become liable for the payment of such
Debt.
"DEFAULT" means any Event of Default or any event that would
-------
constitute an Event of Default but for the requirement that notice be given or
time elapse or both.
"DEFAULT RATE" has the meaning specified in Section 2.05(d).
------------
"DEFAULTING LENDER" means a Lender that has a Revolving
-----------------
Commitment and fails to make all the Revolving Loans required pursuant to
Section 2.01(c), or fails to fully fund the purchase of its participation
obligations pursuant to Section 2.02 or 3.03.
"DISQUALIFIED CAPITAL STOCK" means (a) except as set forth in
--------------------------
(b) below, with respect to any Person, any Equity Interest of such Person that,
by its terms or by the terms of any security into which it is convertible,
exercisable or exchangeable is, or upon the happening of an event (other than
customary change of control provisions) or the passage of time or both would be,
required to be redeemed or repurchased (including at the option of the holder
thereof) by such Person or any of its Subsidiaries, in whole or in part, other
than solely for Qualified Capital Stock of the Borrower, on or prior to 91 days
following the stated maturity of the Subordinated Notes and (b) with respect to
any Subsidiary of such Person (including with respect to any Subsidiary of the
Borrower), any Equity Interests other than any common equity with no preference,
privileges or redemption or repayment provisions.
"DOCUMENTATION AGENT" means Royal Bank of Canada, as
-------------------
documentation agent under this Agreement, and its successors and assigns in such
capacity.
"DOCUMENTS" means any "documents," as such term is defined in
---------
the Code, now owned or hereafter acquired by any Credit Party, wherever located.
"DOMESTIC LENDING OFFICE" means, with respect to any Lender,
-----------------------
the office of such Lender specified as its "Domestic Lending Office" opposite
its name on Schedule I hereto or in the Assignment and Acceptance pursuant to
which it became a Lender, or such other office of such Lender as such Lender may
from time to time specify in writing to the Borrower and the Administrative
Agent.
"DOMESTIC SUBSIDIARY" means any direct or indirect Subsidiary
-------------------
of the Borrower that is not a Foreign Subsidiary.
"DOMTAR" means Domtar Inc.
------
13
"DOMTAR LITIGATION" means the lawsuit commenced by Panolam
-----------------
Canada against Domtar in the Ontario Court (General Division) in respect of a
claim for breach of warranty pursuant to the Asset Purchase Agreement dated
February 15, 1996 between Panolam Canada and Domtar, as amended.
"DOMTAR NOTE" means the $8,000,000 Promissory Note due
-----------
December 10, 2001, executed by Holdings in favor of Domtar Industries Inc. on
June 12, 1996.
"EBITDA" means, with respect to any Person for any fiscal
------
period, an amount equal to (a) Consolidated Net Income of such Person for such
period, minus (b) the sum, without duplication, and to the extent otherwise
-----
included in determining Consolidated Net Income in accordance with GAAP for such
period, of (i) income tax credits, (ii) interest income, (iii) gain from
extraordinary items for such period, (iv) any aggregate net gain during such
period arising from the sale, exchange or other disposition of capital assets by
such Person (including any fixed assets, all inventory sold in conjunction with
the disposition of fixed assets and all securities), and (v) any other non-cash
gains which have been added in determining Consolidated Net Income, minus (c)
-----
without duplication, and to the extent not otherwise deducted from Consolidated
Net Income in accordance with GAAP for such period, fees paid under any Genstar
Agreement, plus (d) the sum, without duplication, and to the extent deducted in
----
determining Consolidated Net Income in accordance with GAAP for such period, of
(i) any provision for income taxes for such period, (ii) Consolidated Interest
Expense, (iii) loss from extraordinary items for such period, (iv) the amount of
non-cash charges (including depreciation and amortization) for such period, (v)
amortized debt discount for such period, (vi) any aggregate net loss during such
period arising from the sale, exchange or other disposition of capital assets by
such Person (including any fixed assets, all inventory sold in conjunction with
the disposition of fixed assets and all securities), (vii) for the periods
indicated on Schedule 1.01(a) hereto, the amounts indicated on such Schedule
1.01(a) relating to historical restructuring charges and (viii) any applicable
Restructuring Costs, plus (e) without duplication, and to the extent not
----
otherwise included in determining Consolidated Net Income in accordance with
GAAP for such period, the amount of business interruption insurance proceeds
actually received by such Person during such period.
"ELIGIBLE ASSIGNEE" means (a) any Lender and any Affiliate or
-----------------
Approved Fund of any Lender, and the investment advisor of any Approved Fund,
and (b) any commercial bank, savings and loan association, savings bank, finance
company, insurance company, mutual fund or other financial institution, fund or
investor which has been approved in writing (or, in the case of the Borrower,
deemed approved as provided below) by the Borrower and the Administrative Agent
as an Eligible Assignee for purposes of this Agreement, provided in each such
--------
case that (x) such approval shall not be unreasonably withheld, (y) if the
Borrower is requested in writing at any time to approve any Person as an
Eligible Assignee hereunder and the Administrative Agent has not received
written notice from the Borrower, within three Business Days of such request to
the Borrower, that the Borrower does not approve such Person as an Eligible
Assignee, the Borrower shall be deemed to have approved such Person as an
Eligible Assignee, and (z) such approval of the Borrower shall not be required
if an Event of Default has occurred and is
14
continuing. Neither the Borrower nor any Affiliate of the Borrower shall qualify
as an Eligible Assignee under clause (a) or (b) of this definition.
"ELIGIBLE INVENTORY" means only such Inventory of the Borrower
------------------
and its Domestic Subsidiaries as the Administrative Agent, in its reasonable
credit judgment and in good faith, shall from time to time elect to consider
Eligible Inventory for purposes of this Agreement. The value of such Inventory
shall be determined by the Administrative Agent in its reasonable credit
judgment and in good faith taking into consideration, among other factors, the
lowest of its cost, its book value determined in accordance with GAAP and its
liquidation value. The Administrative Agent reserves the right, at any time and
from time to time after the Closing Date, to adjust any such criteria, to
establish new criteria or to impose and modify Reserves against the Borrowing
Base Amount, in its reasonable credit judgment and in good faith, based on
changes in the salability of or access to Inventory, and otherwise in accordance
with this Agreement, subject to the approval of Supermajority Lenders in the
case of adjustments or new criteria which have the effect of making more credit
available (except in the case of any modification of Reserves referred to in
clause (a) of the definition of "Reserves" in which case no such approval shall
be required). By way of example only, and without limiting the discretion of the
Administrative Agent to consider any Inventory not to be Eligible Inventory,
Eligible Inventory shall not include Inventory:
(a) that is not owned by the Borrower or a Domestic Subsidiary
free and clear of all Liens and rights of any other Person (including
the rights of a purchaser that has made progress payments and the
rights of a surety that has issued a bond to assure the Borrower's or
the applicable Domestic Subsidiary's performance with respect to that
Inventory), except the Liens in favor of the Administrative Agent, on
behalf of itself and the Lender Parties, and Permitted Liens;
(b) that is (i) not located on premises owned, leased or
operated by the Borrower or a Domestic Subsidiary or (ii) stored with a
bailee, warehouseman or similar Person, unless the Administrative Agent
has given its prior written consent thereto and unless (x) a
satisfactory bailee letter or landlord waiver has been delivered to the
Administrative Agent, or (y) Reserves satisfactory to the
Administrative Agent have been established with respect thereto;
(c) that is placed on consignment or is in transit unless it
meets the criteria for not being ineligible under (d) below;
(d) that is covered by a negotiable document of title, unless
such document has been delivered to the Administrative Agent with all
necessary endorsements, free and clear of all Liens except Permitted
Liens;
(e) that consists of display items or packing or shipping
materials, manufacturing supplies, work-in-process Inventory or
replacement parts (other than 65% of the value of belts and plates used
in the finishing process less the disposal costs thereof);
15
(f) that consists of goods which have been returned by the
buyer;
(g) that is not of a type held for sale in the ordinary course
of the Borrower's or a Domestic Subsidiary's business;
(h) as to which the Administrative Agent's Lien, on behalf of
itself and the Lender Parties, therein is not a first priority
perfected Lien;
(i) as to which any of the representations or warranties
pertaining to Inventory set forth in this Agreement or the Security
Agreement is untrue;
(j) that consists of any costs associated with "freight-in"
charges;
(k) that consists of Hazardous Materials or goods that can be
transported or sold only with licenses that are not readily available;
or
(l) that is not covered by casualty insurance that complies
with Section 6.01(d).
"ELIGIBLE RECEIVABLES" means only such Receivables of the
--------------------
Borrower and its Domestic Subsidiaries as the Administrative Agent, in its
reasonable credit judgment and in good faith, shall from time to time elect to
consider Eligible Receivables for purposes of this Agreement. The value of such
Receivables shall be determined by the Administrative Agent in its reasonable
credit judgment and in good faith taking into consideration, among other
factors, their book value determined in accordance with GAAP. The Administrative
Agent reserves the right, at any time and from time to time after the Closing
Date, to adjust any such criteria, to establish new criteria or to impose and
modify Reserves against the Borrowing Base Amount, in its reasonable credit
judgment and in good faith, based on changes following the Closing Date in the
collectibility by the Administrative Agent of such Receivables and, otherwise,
in accordance with this Agreement, subject to the approval of Supermajority
Lenders in the case of adjustments or new criteria that have the effect of
making more credit available. By way of example only, and without limiting the
discretion of the Administrative Agent to consider any Receivables not to be
Eligible Receivables, Eligible Receivables shall not include any Receivable:
(a) that does not arise from the sale of goods or the
performance of services by the Borrower or any of its Domestic
Subsidiaries in the ordinary course of its business;
(b) (i) upon which the Borrower's or the applicable Domestic
Subsidiary's right to receive payment is not absolute or is contingent
upon the fulfillment of any condition whatsoever or (ii) upon which the
Borrower or the applicable Domestic Subsidiary is not able to bring
suit or otherwise enforce its remedies against the Receivables Debtor
through judicial process or binding arbitration, or (iii) if the
Receivable represents a progress billing consisting of an invoice for
goods sold or used or services rendered pursuant to a contract under
which the Receivables Debtor's obligation to pay that invoice is
subject to the Borrower's or the applicable Domestic Subsidiary's
16
completion of further performance under such contract other than usual
ordinary course warranties or as may be covered by Reserves;
(c) to the extent any defense, counterclaim, setoff or dispute
is asserted as to such Receivable;
(d) that is not a true and correct statement of bona fide
indebtedness incurred in the amount of the Receivable for merchandise
sold and shipped, or services rendered, to the applicable Receivables
Debtor;
(e) with respect to which an invoice, acceptable to the
Administrative Agent in form and substance, has not been sent to the
applicable Receivables Debtor;
(f) that (i) is not owned by the Borrower or any of its
Domestic Subsidiaries or (ii) is subject to any right, claim, security
interest or other interest of any other Person, other than Liens in
favor of the Administrative Agent, on behalf of itself and the Lender
Parties, and Permitted Liens;
(g) that arises from a sale to any director, officer, other
employee or Affiliate of any Loan Party;
(h) that is the obligation of a Receivables Debtor that is the
U.S. government or a state government or a political subdivision of any
thereof, or any department, agency or instrumentality of any thereof
unless the Administrative Agent, in its sole discretion, has agreed to
the contrary in writing and the Borrower or the applicable Domestic
Subsidiary, if necessary or desirable, has complied with the Federal
Assignment of Claims Act of 1940, and any amendments thereto and any
analogous provisions of state law, with respect to such obligation;
(i) that is the obligation of a Receivables Debtor located in
a foreign country other than Canada (excluding the Province of
Newfoundland and the Northwest Territories, unless a perfected first
priority Lien in favor of the Administrative Agent is obtained therein
under the laws of such jurisdiction) unless payment thereof is assured
by a letter of credit assigned and delivered to the Administrative
Agent, satisfactory to the Administrative Agent as to form, amount and
issuer;
(j) to the extent a Loan Party or any holding company or any
Subsidiary thereof is liable for goods sold or services rendered by the
applicable Receivables Debtor to such Loan Party or holding company or
Subsidiary thereof, but only to the extent of the potential offset;
(k) that arises with respect to goods which are delivered on a
▇▇▇▇-and-hold, cash-on-delivery basis or placed on consignment,
guaranteed sale or other terms by reason of which the payment by the
Receivables Debtor is or may be conditional;
17
(l) that is in default; provided that, without limiting the
generality of the foregoing, a Receivable shall be deemed in default
upon the occurrence of any of the following:
(i) that is not paid within the earlier of 60 days
following its due date or 90 days following its original invoice date;
(ii) if any Receivables Debtor obligated upon such
Receivable suspends business, makes a general assignment for the
benefit of creditors or fails to pay its debts generally as they come
due; or
(iii) if any assignment or petition is filed by or
against any Receivables Debtor obligated upon such Receivable under any
bankruptcy law or any other federal, state or foreign (including any
provincial) receivership, insolvency relief or other law or laws for
the relief of debtors;
(m) that is the obligation of a Receivables Debtor if 50% or
more of the dollar amount of all Receivables owing by that Receivables
Debtor are ineligible under the criteria set forth in clause (l) above;
(n) as to which the Administrative Agent's Lien thereon, on
behalf of itself and the Lender Parties, is not a first priority
perfected Lien;
(o) as to which any of the representations or warranties
pertaining to Receivables set forth in this Agreement or in any of the
Loan Documents is untrue;
(p) to the extent such Receivable is evidenced by a judgment,
instrument or chattel paper;
(q) of any Receivables Debtor if, when aggregated with all
other Receivables of such Receivables Debtor owed to the Borrower or
any of its Domestic Subsidiaries, the Receivable exceeds 10% (or, with
respect to Rugby U.S.A., Inc. only, 20%) in face value of all
Receivables of the Borrower and its Domestic Subsidiaries then
outstanding, to the extent of such excess; or
(r) that is payable in any currency other than US Dollars.
"ELKHART PROPERTY" has the meaning set forth in Section
----------------
6.01(p)(i).
"ENVIRONMENTAL ACTION" means any administrative, regulatory or
--------------------
judicial action, suit, demand, demand letter, claim, notice of non-compliance or
violation, investigation, proceeding, consent order or consent agreement
relating in any way to any Environmental Law or any Environmental Permit
including, without limitation, (a) any claim by any governmental or regulatory
authority for enforcement, cleanup, removal, response, remedial or other actions
or damages pursuant to any Environmental Law and (b) any claim by any third
party seeking damages, contribution, indemnification, cost recovery,
compensation or injunctive relief
18
resulting from Hazardous Materials or arising from alleged injury or threat of
injury to health, safety or the environment.
"ENVIRONMENTAL LAW" means any domestic or foreign, federal,
-----------------
state or local law, rule, regulation, order or judgment relating to the
environment, occupational health and safety or Hazardous Materials, including,
without limitation, CERCLA, the Resource Conservation and Recovery Act, the
Hazardous Materials Transportation Act, the Clean Water Act, the Toxic
Substances Control Act, the Clean Air Act, the Safe Drinking Water Act, the
Atomic Energy Act, the Federal Insecticide, Fungicide and Rodenticide Act and
the Occupational Safety and Health Act.
"ENVIRONMENTAL PERMIT" means any permit, approval,
--------------------
identification number, license or other authorization required under any
Environmental Law.
"EQUITY INTERESTS" means, with respect to any Person, any
----------------
Capital Stock of such Person or membership interests, partnership interests
(whether general or limited), participations or other equity interests (however
designated) in such Person, regardless of type, class, preference or
designation, and all warrants, options, purchase rights, conversion or exchange
rights, voting rights, calls or claims of any character with respect thereto, in
each case whether outstanding on the date of this Agreement or issued or granted
at any time thereafter.
"ERISA" means the Employee Retirement Income Security Act of
-----
1974, as amended from time to time, and the regulations promulgated and rulings
issued thereunder.
"ERISA AFFILIATE" of any Person means any other Person that
---------------
for purposes of Title IV of ERISA is a member of such Person's controlled group,
or under common control with such Person, within the meaning of Section 414 (b),
(c), (m) or (o) of the Internal Revenue Code.
"ERISA EVENT" with respect to any Person means (a) the
-----------
occurrence of a reportable event, within the meaning of Section 4043 of ERISA,
with respect to any Plan of such Person or any of its ERISA Affiliates unless
the 30-day notice requirement with respect to such event has been waived by the
PBGC; (b) the provision by the administrator of any Plan of such Person or any
of its ERISA Affiliates of a notice of intent to terminate such Plan, pursuant
to Section 4041(a)(2) of ERISA (including any such notice with respect to a plan
amendment referred to in Section 4041(e) of ERISA); (c) the cessation of
operations at a facility of such Person or any of its ERISA Affiliates in the
circumstances described in Section 4062(e) of ERISA; (d) the withdrawal by such
Person or any of its ERISA Affiliates from a Multiple Employer Plan during a
plan year for which it was a substantial employer, as defined in Section
4001(a)(2) of ERISA; (e) the failure by such Person or any of its ERISA
Affiliates to make a payment to a Plan required under Section 302(f)(1) of
ERISA; (f) the adoption of an amendment to a Plan of such Person or any of its
ERISA Affiliates requiring the provision of security to such Plan, pursuant to
Section 307 of ERISA; or (g) the institution by the PBGC of proceedings to
terminate a Plan of such Person or any of its ERISA Affiliates, pursuant to
Section 4042 of ERISA, or the occurrence of any event or condition described in
Section 4042 of ERISA, other than subsection (a)(4) thereof, that could
constitute grounds for the termination of, or the appointment of a trustee to
administer, such Plan.
19
"EUROCURRENCY LIABILITIES" has the meaning specified in
------------------------
Regulation D of the Board of Governors of the Federal Reserve System, as in
effect from time to time.
"EURODOLLAR LENDING OFFICE" means, with respect to any Lender,
-------------------------
the office of such Lender specified as its "Eurodollar Lending Office" opposite
its name on Schedule I hereto or in the Assignment and Acceptance pursuant to
which it became a Lender (or, if no such office is specified, its Domestic
Lending Office), or such other office of such Lender as such Lender may from
time to time specify in writing to the Borrower and the Administrative Agent.
"EURODOLLAR RATE" means for any Eurodollar Rate Loan for any
---------------
Interest Period therefor, an interest rate per annum (rounded upwards, if
necessary, to the nearest 1/100 of 1%) equal to the rate per annum obtained by
dividing (a) the rate per annum determined by the Administrative Agent at
approximately 11:00 a.m. (London time) on the date which is two Business Days
prior to the beginning of the relevant Interest Period (as specified in the
applicable Notice of Borrowing or Notice of Conversion/Continuation) by
reference to the British Bankers' Association Interest Settlement Rates for
deposits in US Dollars (as set forth by any service selected by the
Administrative Agent which has been nominated by the British Bankers'
Association as an authorized information vendor for the purpose of displaying
such rates) for a period equal to such Interest Period by (b) a percentage equal
to 100% minus the Eurodollar Rate Reserve Percentage for such Interest Period;
-----
provided that, to the extent that an interest rate is not ascertainable pursuant
--------
to the foregoing provisions of this definition, the "Eurodollar Rate" shall be
an interest rate per annum (rounded upwards, if necessary, to the nearest 1/100
of 1%) equal to the rate per annum obtained by dividing (a) the interest rate
per annum determined by the Administrative Agent to be the rate per annum at
which deposits in US Dollars are offered for such relevant Interest Period to
major banks in the London interbank market in London, England by the Eurodollar
Reference Lender at approximately 11:00 a.m. (London time) on the date which is
two Business Days prior to the beginning of such Interest Period by (b) a
percentage equal to 100% minus the Eurodollar Rate Reserve Percentage for such
-----
Interest Period.
"EURODOLLAR RATE LOAN" has the meaning specified in Section
--------------------
2.05(b).
"EURODOLLAR RATE RESERVE PERCENTAGE" means, for any Interest
----------------------------------
Period for any Eurodollar Rate Loan, the reserve percentage applicable two
Business Days before the first day of such Interest Period under regulations
issued from time to time by the Board of Governors of the Federal Reserve System
(or any successor) for determining the maximum reserve requirement (including,
without limitation, any emergency, supplemental or other marginal reserve
requirement) for a member bank of the Federal Reserve System in New York City
with respect to liabilities or assets consisting of or including Eurocurrency
Liabilities (or with respect to any other category of liabilities that includes
deposits by reference to which the interest rate on Eurodollar Rate Loans is
determined) having a term equal to such Interest Period.
"EURODOLLAR REFERENCE LENDER" means CSFB.
---------------------------
"EVENTS OF DEFAULT" has the meaning specified in Section 7.01.
-----------------
20
"EXCESS CASH FLOW" means, without duplication, with respect to
----------------
any Fiscal Year of the Borrower, (a) Consolidated Net Income, plus (b) to the
----
extent deducted from or not otherwise included in Consolidated Net Income in
accordance with GAAP for such period (i) depreciation, amortization and
Consolidated Interest Expense, (ii) the amount of any insurance proceeds
received during such Fiscal Year and not applied (or committed to be applied) to
restore or replace property (but only to the extent not otherwise required to be
applied to prepayments hereunder), (iii) taxes deducted in determining
Consolidated Net Income to the extent not paid for in cash, (iv) settlement
amounts received from Domtar in connection with the final settlement of the
Domtar Litigation to the extent not used to offset or reduce the Domtar Note,
and (v) restructuring reserves minus (c) to the extent not deducted in
-----
determining Consolidated Net Income in accordance with GAAP for such period (i)
Capital Expenditures during such Fiscal Year (excluding the portion thereof
financed by third party credit sources and excluding any Capital Expenditures in
such Fiscal Year to the extent in excess of the amount permitted to be made in
such Fiscal Year pursuant to Section 6.04(d) (unless financed with the proceeds
of casualty insurance)), (ii) Consolidated Interest Expense paid or accrued
(excluding any original issue discount, interest paid in kind or amortized debt
discount, to the extent included in determining Interest Expense) and scheduled
principal payments paid or payable in respect of Funded Debt, (iii) voluntary
prepayments paid pursuant to Section 2.04(a) or Section 2.04(b), (iv) earn-out
payments made to Rugby U.S.A., Inc. pursuant to the Pioneer Acquisition
Agreement, (v) the cash portion of restructuring costs incurred and (vi) that
portion of the fees paid under the Genstar Agreements but not deducted in the
calculation of Consolidated Net Income, plus or minus (as the case may be) (d)
---- -----
to the extent otherwise included or deducted or to the extent not otherwise
included or deducted (as the case may be), in determining Consolidated Net
Income in accordance with GAAP for such period (i) decreases or increases (as
the case may be) in Working Capital, (ii) extraordinary gains or losses which
are cash items, and (iii) foreign currency unrealized gains or losses. For
purposes of this definition, "WORKING CAPITAL" means Current Assets less Current
---------------
Liabilities.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
------------
amended.
"EXCLUDED ACQUISITION" means the Acquisition by the Excluded
--------------------
Acquisition Sub of a Person disclosed to the Lenders prior to the date hereof on
substantially the terms disclosed to the Lenders prior to the date hereof.
"EXCLUDED ACQUISITION SUB" means a wholly owned Domestic
------------------------
Subsidiary of the Borrower that (a) has no Debt other than Non-Recourse Debt,
(b) is not party to any agreement, contract, arrangement or understanding with
any Loan Party unless the terms of any such agreement, contract, arrangement or
understanding are no less favorable to such Loan Party than those that might be
obtained at the time from Persons who are not Affiliates of the Borrower, (c) is
a Person with respect to which no Loan Party has any direct or indirect
obligation (i) to subscribe for additional Equity Interests, or (ii) 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 Debt of a Loan Party, and
(e) constitutes an "Unrestricted Subsidiary" as defined in the Subordinated Note
Indenture.
21
"EXCLUDED FOREIGN SUBSIDIARY" means a Foreign Subsidiary other
---------------------------
than the Canadian Borrower and its Subsidiaries.
"EXCLUDED MELAMINE SUBS" means The Melamine Group Inc.,
----------------------
Melamine Decorative Laminate, Inc. and any successor to either of them; provided
--------
that any such Person shall cease to be an "Excluded Melamine Sub" if and to the
extent that the Loan Parties and such Person have complied with all applicable
provisions of Section 6.01(n) as if such Person were a newly acquired Domestic
Subsidiary of the Borrower.
"EXEMPTED AFFILIATE TRANSACTION" means (a) customary employee
------------------------------
compensation arrangements approved by a majority of independent (as to such
transactions) members of the Board of Directors of the Borrower, (b) dividends
permitted by Section 6.02(g) and payable, in form and amount, on a pro rata
basis to all holders of common stock of the Borrower, (c) transactions solely
between the Borrower and any of its Subsidiaries or solely among Subsidiaries of
the Borrower, (d) any issuance of securities, or other payments, awards or
grants in cash, securities or otherwise pursuant to, or the funding of,
employment arrangements, stock options and stock ownership plans approved by a
majority of members of the Board of Directors of the Borrower and, if any, a
majority of the independent members of such Board consistent with industry
practice, (e) the grant of stock options or similar rights to employees and
directors of the Borrower and its Subsidiaries pursuant to plans approved by a
majority of members of the Board of Directors of the Borrower and, if any, a
majority of the independent members of such Board, (f) loans or advances to
employees in the ordinary course of business in accordance with applicable law
and the past practices of the Borrower or its Subsidiaries, but in any event not
to exceed $1,500,000 in the aggregate outstanding at any one time, (g) the
payment of reasonable fees and indemnities to directors of the Borrower and its
Subsidiaries who are not employees of the Borrower or its Subsidiaries, and (h)
transactions (including, subject to Section 6.02(r), the payment of fees)
pursuant to the Genstar Agreements. For the avoidance of doubt, no transaction
with the Excluded Acquisition Sub shall constitute an Exempted Affiliate
Transaction.
"EXISTING CANADIAN CREDIT AGREEMENT" means the Credit
----------------------------------
Agreement dated as of November 19, 1997, by and among Panolam Industries Ltd.,
as Borrower, the other credit parties signatory thereto, General Electric
Capital Canada Inc., as a lender and as agent for the lenders thereunder, and
the other entities signatory thereto as lenders, as the same may have been
amended or otherwise modified to date.
"EXISTING CREDIT AGREEMENT" means the Credit Agreement dated
-------------------------
as of November 19, 1997, by and among Panolam Industries, Inc., as Borrower,
Holdings, the other credit parties signatory thereto, General Electric Capital
Corporation, as a lender and as agent for the lenders thereunder, and the other
financial institutions signatory thereto as lenders, as the same may have been
amended or otherwise modified to date.
"EXISTING CREDIT DOCUMENTATION" means, collectively, the
-----------------------------
Existing Credit Agreement, the Existing Canadian Credit Agreement and all
ancillary documents.
"EXISTING DEBT" means all preexisting Debt of Holdings and its
-------------
Subsidiaries set forth on Schedule 5.01(q)(i).
22
"EXISTING LENDERS" means, collectively, the agent and lenders
----------------
under the Existing Credit Agreement and the agent and lenders under the Existing
Canadian Credit Agreement.
"FACILITY" means either of the Term Facilities, the Revolving
--------
Facility, the Swing Line Facility or the Letter of Credit Subfacility, and
"FACILITIES" means all of them collectively.
----------
"FEDERAL FUNDS RATE" means, for any period, a fluctuating
------------------
interest rate per annum equal for each day during such period to the weighted
average of the rates on overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers, as published for such
day (or, if such day is not a Business Day, for the next preceding Business Day)
by the Federal Reserve Bank of New York, or, if such rate is not so published
for any day that is a Business Day, the average of the quotations for such day
for such transactions received by the Administrative Agent from three Federal
funds brokers of recognized standing selected by it.
"FISCAL MONTH" shall mean any calendar month.
------------
"FISCAL YEAR" means a fiscal year of the Borrower and its
-----------
Subsidiaries, which currently ends on December 31 of each calendar year.
"FOREIGN ACQUISITION" means any Acquisition of a Person not
-------------------
organized under the laws of the United States of America, Canada or any state or
province of either of them, as applicable.
"FOREIGN SUBSIDIARY" means (i) Panolam Canada and its
------------------
Subsidiaries and (ii) any "controlled foreign corporation" within the meaning of
Section 957(a) of the Internal Revenue Code as to which Holdings or any of its
Subsidiaries is a "United States shareholder" as defined in Section 951(b) of
the Internal Revenue Code.
"FUNDED DEBT" means, with respect to any Person, all Debt for
-----------
borrowed money evidenced by notes, bonds, debentures, or similar evidences of
Debt and which by its terms matures more than one year from the date of
determination, or is directly or indirectly renewable or extendible at such
Person's option under a revolving credit or similar agreement obligating the
lender or lenders to extend credit over a period of more than one year from the
date of determination, and specifically including Capital Lease Obligations,
current maturities of long-term debt, revolving credit and short-term debt
extendible beyond one year at the option of the debtor, and also including, in
the case of Borrower, all Debt for borrowed money which is part of the
Obligations under the Loan Documents or the Canadian Loan Documents.
"GAAP" has the meaning specified in Section 1.03.
----
"GENSTAR AGREEMENTS" means the Transaction Fee Agreement and
------------------
the Management Services Agreement.
"GENSTAR CAPITAL" means Genstar Capital Partners II, L.P. and
---------------
any Person who controls, is controlled by or is under common control with
Genstar Capital Partners II, L.P.;
23
provided that for purposes of this definition, "control" means the beneficial
-------- ----
ownership of more than 50% of the total voting power of a Person normally
entitled to vote in the election of directors, managers or trustees, as
applicable, of a Person.
"GRANTING LENDER" has the meaning specified in Section
---------------
9.07(h).
"GROUP" means Panolam Group, Inc., a Delaware corporation.
-----
"GUARANTORS" means Holdings, Group, PII Second, Panolam US,
----------
Pioneer and each other Person, if any, that executes or otherwise becomes a
party to the Guaranty or any other guaranty or other similar agreement in favor
of the Administrative Agent, the Lender Parties and the other Agents in
connection with the transactions contemplated by this Agreement and the other
Loan Documents.
"GUARANTY" has the meaning specified in Section 4.01(k)(xvi).
--------
"HAZARDOUS MATERIALS" means (a) petroleum or petroleum
-------------------
products, natural or synthetic gas, asbestos in any form that is or could become
friable, urea formaldehyde foam insulation and radon gas, (b) any substances
defined as or included in the definition of "hazardous substances", "hazardous
wastes", "hazardous materials", "extremely hazardous wastes", "restricted
hazardous wastes", "toxic substances", "toxic pollutants", "dangerous goods",
"contaminants" or "pollutants", or words of similar import, under any
Environmental Law and (c) any other substance exposure to which is regulated
under any Environmental Law.
"HEDGE AGREEMENTS" means Interest Rate Contracts and Currency
----------------
Hedging Agreements.
"HOLDINGS" means Panolam Industries Holdings, Inc., a Delaware
--------
corporation.
"INDEMNIFIED PARTY" has the meaning specified in Section
-----------------
9.04(b).
"INFORMATION MEMORANDUM" means the information memorandum
----------------------
dated January 1999 used by the Syndication Agent and the Administrative Agent in
connection with the syndication of the Commitments.
"INITIAL LENDERS" has the meaning specified in the recital of
---------------
parties to this Agreement.
"INITIAL PUBLIC EQUITY OFFERING" means an initial Public
------------------------------
Equity Offering following which the common stock of the Borrower or any of the
Borrower's Parents, as the case may be, is listed on a national securities
exchange or quoted on the national market system of the Nasdaq stock market. For
purposes of this definition, (i) a "PUBLIC EQUITY OFFERING" means an
----------------------
underwritten public offering pursuant to a registration statement filed with the
Securities and Exchange Commission in accordance with the Securities Act of
1933, as amended, of (a) Qualified Capital Stock of the Borrower or (b)
Qualified Capital Stock of any of the Borrower's Parents, to the extent that the
cash proceeds therefrom are used as a Capital Contribution to the
24
Borrower; (ii) "QUALIFIED CAPITAL STOCK" means any Capital Stock of the Borrower
-----------------------
that is not Disqualified Capital Stock; and (iii) "CAPITAL CONTRIBUTION" means
--------------------
any contribution to the equity of the Borrower from any of its Parents for which
no consideration other than the issuance of Qualified Capital Stock is given.
"INSTRUMENTS" means any "instruments", as such term is defined
-----------
in the Code, now owned or hereafter acquired by any Credit Party, wherever
located, and, in any event, including without limitation, all certificated
securities, all certificates of deposit, and all notes and other evidences of
indebtedness, other than instruments that constitute, or are a part of a group
of writings that constitute, Chattel Paper.
"INSUFFICIENCY" means, with respect to any Plan, the amount,
-------------
if any, of its unfunded benefit liabilities, as defined in Section 4001(a)(18)
of ERISA.
"INSURANCE/CONDEMNATION PROCEEDS" means any cash payments or
-------------------------------
proceeds received by Holdings or its Domestic Subsidiaries (i) under any
business interruption or casualty insurance policy in respect of a covered loss
thereunder or (ii) as a result of the taking of any assets of Holdings or any of
its Domestic Subsidiaries by any Person pursuant to the power of eminent domain,
condemnation or otherwise, or pursuant to a sale of any such assets to a
purchaser with such power under threat of such a taking, in each case net of any
actual and reasonable documented costs (including commissions and reasonable
attorneys' fees) incurred by Holdings or any of its Domestic Subsidiaries in
connection with the adjustment or settlement of any claims of Holdings or such
Domestic Subsidiary in respect thereof. Cash payments or proceeds payable in
respect of any loss incurred by Holdings or any of its Domestic Subsidiaries or
any taking of assets of Holdings or any of its Domestic Subsidiaries of the
nature described above shall be deemed to be received by the Borrower for the
purposes of this Agreement notwithstanding that such cash payments or proceeds
may actually be paid to Holdings or another Domestic Subsidiary of Holdings.
"INTERCOMPANY NOTE" means a promissory note in the form of
-----------------
Exhibit XIII-A or Exhibit XIII-B hereto or Exhibit XVII to the Canadian Credit
-------------- -------------- ------------
Agreement, as applicable, evidencing intercompany Debt and pledged to the
Administrative Agent or the Canadian Administrative Agent in accordance with the
Security Agreement or the Canadian Security Agreement and subject to the
Intercreditor Agreement.
"INTERCREDITOR AGREEMENT" has the meaning specified in Section
-----------------------
4.01(k)(xxviii).
"INTEREST EXPENSE" means, with respect to any Person for any
----------------
fiscal period, interest expense (whether cash or non-cash) of such Person
determined in accordance with GAAP for the relevant period ended on such date,
including, in any event, interest expense with respect to any Funded Debt of
such Person and interest expense for the relevant period that has been
capitalized on the balance sheet of such Person.
"INTEREST PERIOD" has the meaning specified in Section
---------------
2.05(b).
25
"INTEREST RATE CONTRACTS" means interest rate swap, cap or
-----------------------
collar agreements, interest rate future or option contracts and other similar
agreements.
"INTEREST TYPE" refers to the distinction between Loans
-------------
bearing interest based on the Base Rate and Loans bearing interest based on the
Eurodollar Rate.
"INTERNAL REVENUE CODE" means the Internal Revenue Code of
---------------------
1986, as amended from time to time, and the regulations promulgated and rulings
issued thereunder.
"INVENTORY" means any "inventory", as such term is defined in
---------
the Code, now or hereafter owned or acquired by any Credit Party, wherever
located, and in any event including inventory, merchandise, goods and other
personal property which are held by or on behalf of any Credit Party for sale or
lease or are furnished or are to be furnished under a contract of service, or
which constitute raw materials, work in process or materials used or consumed or
to be used or consumed in such Credit Party's business or in the processing,
production, packaging, promotion, delivery or shipping of the same, including
other supplies.
"INVESTMENT" in any Person means any loan or advance to such
----------
Person, any purchase or other acquisition of any Capital Stock, warrants,
rights, options, obligations or other securities of such Person, any capital
contribution to such Person or any other investment in such Person, including,
without limitation, any arrangement pursuant to which the investor incurs Debt
of the types referred to in clauses (i) and (j) of the definition of "Debt" in
----
respect of such Person.
"ISSUE" means, with respect to any Letter of Credit, issue
-----
such Letter of Credit, extend the expiration of such Letter of Credit (other
than any such extension occurring pursuant to the terms of such Letter of
Credit), renew such Letter of Credit (other than any such renewal occurring
pursuant to the terms of such Letter of Credit), or increase the amount of such
Letter of Credit, and the terms "ISSUED", "ISSUING" and "ISSUANCE" shall have
------ ------- --------
corresponding meanings.
"ISSUING BANK" means the Letter of Credit Bank and any other
------------
Revolving Lender that is a commercial bank, acting through a domestic branch, as
issuer of a Letter of Credit.
"LEAD ARRANGER" means ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ Securities
-------------
Corporation, as lead arranger under this Agreement.
"LENDER PARTY" means any Lender or any Issuing Bank.
------------
"LENDERS" means the Initial Lenders, the Swing Line Lender and
-------
each Eligible Assignee that shall become a party hereto pursuant to Section
9.07.
"LETTER OF CREDIT" means any letter of credit issued
----------------
hereunder.
"LETTER OF CREDIT AGREEMENT" has the meaning specified in
--------------------------
Section 3.02(a).
"LETTER OF CREDIT BANK" means CSFB in its capacity as an
---------------------
Issuing Bank.
26
"LETTER OF CREDIT CASH COLLATERAL ACCOUNT" has the meaning
----------------------------------------
specified in the Security Agreement.
"LETTER OF CREDIT COMMITMENT" means, with respect to any
---------------------------
Issuing Bank at any time, the amount set forth opposite such Issuing Bank's name
on Schedule I hereto under the caption "Letter of Credit Commitment" or, if such
Issuing Bank has entered into one or more Assignments and Acceptances, set forth
for such Issuing Bank in the Register maintained by the Administrative Agent
pursuant to Section 9.07(c) as such Issuing Bank's "Letter of Credit
Commitment", as such amount may be reduced at or prior to such time pursuant to
Section 2.04.
"LETTER OF CREDIT DOCUMENTS" has the meaning specified in
--------------------------
Section 3.04(a).
"LETTER OF CREDIT DRAWING" means a payment made by an Issuing
------------------------
Bank against a drawing under a Letter of Credit.
"LETTER OF CREDIT OBLIGATIONS" means, as of any date of
----------------------------
determination with respect to any Letter of Credit, the sum of (a) the then
outstanding amount of such Letter of Credit available for drawing plus (b) the
aggregate amount of the Unreimbursed Letter of Credit Liability thereunder.
"LETTER OF CREDIT SUBFACILITY" has the meaning specified in
----------------------------
Section 3.01.
"LETTER OF CREDIT SUBLIMIT" has the meaning specified in
-------------------------
Section 3.01.
"LETTER OF CREDIT USAGE" means, as at any date of
----------------------
determination, the sum of (i) the maximum aggregate amount which is or at any
time thereafter may become available for drawing under all Letters of Credit
then outstanding plus (ii) the aggregate amount of all Letter of Credit Drawings
not theretofore reimbursed by the Borrower.
"LIEN" means any lien, mortgage, pledge, security interest,
----
charge, assignment, hypothecation or encumbrance of any kind (including any
conditional sale or other title retention agreement, any lease in the nature
thereof, and any agreement to give any security interest) and any other
agreement intended to create any of the foregoing.
"LOAN" means a Term Loan, a Revolving Loan, a Swing Line Loan
----
or the Issuance of a Letter of Credit.
"LOAN DOCUMENTS" means this Agreement, the Notes (if any), the
--------------
Guaranties, the Intercreditor Agreement, the Collateral Documents, each Letter
of Credit Agreement and each Bank Hedge Agreement.
"LOAN PARTIES" means the Borrower, each of the Guarantors and
------------
each of their respective present and future Subsidiaries.
"MANAGEMENT SERVICES AGREEMENT" means the Amended and Restated
-----------------------------
Management Advisory and Consulting Agreement dated as of January 24, 1999,
between
27
Panolam US, Panolam Canada and Genstar Capital, as in effect on the date hereof
and as thereafter amended to the extent permitted by Section 6.02(n).
"MARGIN STOCK" has the meaning specified in Regulation T or
------------
Regulation U, as applicable.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on,
-----------------------
or change in, (a) the business, condition (financial or otherwise), operations,
assets, liabilities, performance, properties or prospects of Holdings and its
Subsidiaries, taken as a whole, (b) the rights and remedies of the
Administrative Agent or any Lender under any Loan Document or Related Document
or (c) the ability of any Loan Party to perform its Obligations under any Loan
Document or Related Document to which it is or is to be a party.
"MATERIAL CONTRACT" means, with respect to any Person, each
-----------------
contract to which such Person is a party involving aggregate consideration
payable to or by such Person of $1,000,000 or more in any year or otherwise
material to the business, condition (financial or otherwise), operations,
performance, properties or prospects of such Person and which is not cancelable
without penalty (or with a penalty of $50,000 or less) on three months or less
notice.
"MATERIAL LEASES" means, as of any date of determination, all
---------------
leases of real property that are subject to any Mortgage or Additional Mortgage.
"MORTGAGES" has the meaning specified in Section 4.01(k)(xv)
---------
and shall also include any Additional Mortgages.
"MORTGAGE POLICIES" has the meaning specified in Section
-----------------
4.01(k)(xv)(B).
"MULTIEMPLOYER PLAN" of any Person means a multiemployer plan,
------------------
as defined in Section 4001(a)(3) of ERISA, to which such Person or any of its
ERISA Affiliates is making or accruing an obligation to make contributions, or
has within any of the preceding five plan years made or accrued an obligation to
make contributions.
"MULTIPLE EMPLOYER PLAN" of any Person means a single employer
----------------------
plan, as defined in Section 4001(a)(15) of ERISA, that (a) is maintained for
employees of such Person or any of its ERISA Affiliates and at least one Person
other than such Person and its ERISA Affiliates or (b) was so maintained and in
respect of which such Person or any of its ERISA Affiliates could have liability
under Section 4064 or 4069 of ERISA in the event such plan has been or were to
be terminated.
"NET BORROWING AVAILABILITY" shall mean, as of any date of
--------------------------
determination (a) the lesser of the amount of the Revolving Facility and the
amount of the Borrowing Base Amount, less (b) the Total Utilization of Revolving
Commitments.
"NET CASH PROCEEDS" means, with respect to any sale, lease,
-----------------
transfer or other disposition of any asset or the sale or issuance of any Debt
or Capital Stock, any securities convertible into or exchangeable for Capital
Stock or any warrants, rights or options to acquire
28
Capital Stock by any Person, the aggregate amount of cash received from time to
time by or on behalf of such Person in connection with such transaction after
deducting therefrom only (a) reasonable and customary brokerage commissions,
underwriting fees and discounts, legal fees, finder's fees and other similar
fees and commissions, (b) the amount of taxes payable in connection with or as a
direct result of such transaction and (c) the amount of any Debt secured by a
Lien on such asset that, by the terms of such transaction, is required to be
repaid upon such disposition, in each case with respect to the foregoing clauses
(a) and (c) to the extent, but only to the extent, that the amounts so deducted
are, at the time of receipt of such cash, actually paid to a Person that is not
an Affiliate of Holdings (unless such payments are permitted hereunder) and are
properly attributable to such transaction or to the asset that is the subject
thereof.
"NON-RECOURSE DEBT" means Debt which satisfies each of the
-----------------
following requirements: (a) no Loan Party (i) provides credit support of any
kind (including any undertaking, agreement or instrument that would constitute
Debt), (ii) is directly or indirectly liable as a guarantor or otherwise, or
(iii) constitutes the lender; (b) no default with respect to such Debt
(including any rights that the holders thereof may have to take enforcement
action against the Excluded Acquisition Sub) would permit upon notice, lapse of
time or both any holder of any other Debt (other than the Obligations under this
Agreement and the Canadian Credit Agreement) of any Loan Party to declare a
default on such other Debt or cause the payment thereof to be accelerated or
payable prior to its stated maturity; (c) the lenders with respect to such Debt
have been notified, and have acknowledged in writing or pursuant to the terms of
the instruments and agreements governing such Debt, in each case prior to the
incurrence of such Debt, that they will not have any recourse to the stock or
assets of any Loan Party; (d) the Administrative Agent and the Lenders have
received notice of the amount and principal terms of such Debt prior to its
incurrence; and (e) such Debt is otherwise on terms and conditions reasonably
satisfactory to the Syndication Agent and the Administrative Agent.
"NOTE" means a Term A Note, a Term B Note, a Revolving Note or
----
a Swing Line Note.
"NOTICE OF BORROWING" means a notice in substantially the form
-------------------
of Exhibit II hereto.
----------
"NOTICE OF CONVERSION/CONTINUATION" means a notice in
---------------------------------
substantially the form of Exhibit III hereto.
-----------
"NOTICE OF ISSUANCE" means a notice in substantially the form
------------------
of Exhibit IV hereto.
----------
"NOTICE OF SWING LINE BORROWING" means either (i) a notice
------------------------------
substantially in the form of Exhibit V hereto, or (ii) notice by
---------
teletransmission or telephonic notice of the information required by Exhibit V.
---------
"OBLIGATION" means, with respect to any Person, any obligation
----------
of such Person of any kind, including, without limitation, any liability of such
Person on any claim, whether or not the right of any creditor to payment in
respect of such claim is reduced to judgment, liquidated,
29
unliquidated, fixed, contingent, matured, disputed, undisputed, legal,
equitable, secured or unsecured, and whether or not such claim is discharged,
stayed or otherwise affected by any proceeding referred to in Section 7.01(g).
Without limiting the generality of the foregoing, the Obligations of the Credit
Parties under the Loan Documents include (a) the obligation to pay principal,
interest, Letter of Credit commissions, charges, expenses, fees, attorneys' fees
and disbursements, indemnities and other amounts payable by any Credit Party
under any Loan Document and (b) the obligation to reimburse any amount in
respect of any of the foregoing that any Lender, in its sole discretion, may
elect to pay or advance on behalf of such Credit Party.
"OFFICERS' CERTIFICATE" means, as applied to any corporation,
---------------------
a certificate executed on behalf of such corporation by its Chairman of the
Board (if an officer), its President, one of its Vice Presidents, the Chief
Financial Officer, its Director of Finance, its Treasurer, any of its Assistant
Treasurers, its Controller or any of its Assistant Controllers; provided that
--------
every Officers' Certificate with respect to the compliance with a condition
precedent to the making of any Loans hereunder shall include (a) a statement
that the officer or officers making or giving such Officers' Certificate have
read such condition and any definitions or other provisions contained in this
Agreement relating thereto, (b) a statement that, in the opinion of the signers,
they have made or have caused to be made such examination or investigation as is
necessary to enable them to express an informed opinion as to whether or not
such condition has been complied with, and (c) a statement as to whether, in the
opinion of the signers, such condition has been complied with.
"OPEN YEAR" has the meaning specified in Section 5.01(m)(ii).
---------
"OTHER TAXES" has the meaning specified in Section 2.09(b).
-----------
"PANOLAM CANADA" means Panolam Industries Ltd., an Ontario
--------------
corporation .
"PANOLAM US" means Panolam Industries, Inc., a Delaware
----------
corporation.
"PARENT" means each of Holdings, Group, PII Second and any
------
other direct or indirect parent company of the Borrower now or hereafter
existing.
"PBGC" means the Pension Benefit Guaranty Corporation.
----
"PERMITTED ACQUISITION" means any non-hostile Acquisition made
---------------------
after the date hereof by the Borrower or any of its Subsidiaries if all of the
following conditions are met:
(a) before and immediately after giving effect thereto, (i) no
Default has occurred and is continuing or would result therefrom and
(ii) the representations and warranties of each Loan Party set forth in
the Loan Documents and in the Canadian Loan Documents shall be true and
correct in all material respects on and as of the date of such
Acquisition, as though made on and as of such date, other than any such
representations or warranties that by their terms refer to a date other
than the date of such Acquisition, in which case such representations
and warranties shall be true and correct as of such other date;
30
(b) such Acquisition has not been preceded by an unsolicited
tender offer for such Person by the Borrower or any of its Affiliates;
(c) all transactions related thereto shall be consummated in
accordance with applicable laws;
(d) in the case of any Acquisition of shares or other Equity
Interests in any Person, such Acquisition is an Acquisition of 100% of
the Equity Interests (less directors qualifying and similar shares) in
such Person and, after giving effect to such Acquisition, such Person
becomes a wholly-owned direct or indirect Subsidiary of the Borrower;
(e) all actions required to be taken, if any, with respect to
any acquired or newly formed Subsidiary under Section 6.01(n) shall
have been taken;
(f) such assets are used for, or such Person is engaged in, a
line of business permitted under Section 6.02(h);
(g) at least (i) 30 days prior to entering into such
Acquisition, or any agreement therefor, the Borrower delivers notice
thereof to the Administrative Agent and (ii) 15 days prior to the
consummation of such Acquisition, the Borrower delivers to the
Administrative Agent and the Lenders a Compliance Certificate
containing the computations used to determine compliance with the
covenants in Section 6.04 on a pro forma basis so as to give effect to
such Acquisition (including any deferred Acquisition consideration
therefor) and all Debt assumed or incurred by any Loan Party in
connection therewith, and attaching the Borrower's then-current good
faith and reasonable financial projections for the first fiscal quarter
ending after the consummation of such Acquisition and the succeeding
three fiscal quarters, demonstrating (to the reasonable satisfaction of
the Administrative Agent) that, after giving effect to such
Acquisition, (A) the Borrower and its Subsidiaries would have been in
compliance with the covenants set forth in Section 6.04 as of the last
day of the fiscal quarter most recently ended prior to the consummation
of such Acquisition and there would have been no increase in the
Consolidated Leverage Ratio, or if there is an increase, not above
3.0:1 and (B) the Borrower can reasonably be expected to remain in
compliance with such covenants, with no increase in the Consolidated
Leverage Ratio, or if there is an increase, not above 3.0:1, for the
12-month period following the consummation of such Acquisition, and to
have sufficient cash liquidity to conduct its business, to support
working capital requirements and to make required income tax
distributions and pay its debts and other liabilities as they become
due;
(h) no Loan Party shall incur, assume or otherwise become
liable for or subject to (i) any Debt in connection with such
Acquisition (except for Debt permitted by Section 6.02(b)), or (ii) any
material contingent liabilities, except for those constituting Debt
permitted by Section 6.02(b);
(i) the aggregate Acquisition Consideration payable by the
Loan Parties in connection with all such Acquisitions does not exceed
$25,000,000 in the aggregate plus
----
31
up to an additional $5,000,000 in the aggregate of Permitted Seller
Financing and Holdings common stock (valued, prior to an Initial Public
Equity Offering, at fair market value as determined in good faith by
the Board of Directors of Holdings);
(j) the Net Borrowing Availability after giving effect to the
Acquisition shall be at least $3,000,000;
(k) except for Acquisitions consummated when the Applicable
Leverage Ratio is 3.0:1 or less, such business or Person being acquired
shall have had a positive pro forma operating cash flow (reflecting
only such adjustments to actual operating cash flow as would constitute
Approved Cost Adjustments) for the 12-month period prior to the
proposed Acquisition;
(l) the aggregate Acquisition Consideration payable by the
Loan Parties in connection with all Foreign Acquisitions does not
exceed $5,000,000 in the aggregate; and
(m) in the case of an Acquisition of an entity organized under
the laws of Canada, the acquiror shall be Panolam Canada or any of its
Subsidiaries.
"PERMITTED LIENS" means such of the following as to which no
---------------
enforcement, collection, execution, levy or foreclosure proceeding shall have
been commenced: (a) Liens for taxes, assessments and governmental charges or
levies to the extent not required to be paid under Section 6.01(b) hereof; (b)
Liens imposed by law, such as materialmen's, mechanics', carriers', workmen's
and repairmen's Liens and other similar possessory Liens arising in the ordinary
course of business securing obligations that are not overdue for a period of
more than 30 days except to the extent contested in good faith and properly
reserved against; (c) Liens in favor of depository banks arising in the ordinary
course of business in connection with the maintenance and administration of
depository and disbursement accounts; (d) pledges or deposits to secure
obligations under workers' compensation, unemployment insurance, social security
or public liability laws or similar legislation; (e) easements, rights of way
and other minor irregularities in title to real property (including
encroachments and leasehold title) that do not render title to the property
encumbered thereby unmarketable or materially impair the use, value, or
marketability of such property or that would adversely affect the Administrative
Agent's and the Lenders' abilities to exercise their rights and remedies under
the Loan Documents; (f) pledges or deposits of money securing bids, tenders,
contracts (other than contracts for the payment of money) or leases to which any
Loan Party is a party as lessee made in the ordinary course of business; (g)
deposits of money securing statutory obligations of any Loan Party for workers
compensation, unemployment compensation and similar costs (excluding Liens under
ERISA); (h) deposits securing, or in lieu of, surety, appeal or customs bonds in
proceedings to which any Loan Party is a party; (i) any attachment or judgment
lien not constituting an Event of Default under Section 7.01, so long as such
Lien does not attach to any Inventory or Receivables; and (j) presently existing
or hereafter created Liens in favor of the Administrative Agent, on behalf of
the Administrative Agent and the Lender Parties, or in favor of the
Administrative Agent and the Lender Parties.
32
"PERMITTED RESTRICTIONS", with respect to any consensual
----------------------
restriction on the ability of any Subsidiary of the Borrower to pay dividends or
make other distributions to or on behalf of, or to pay any obligation to or on
behalf of, or otherwise to transfer assets or property to or on behalf of, or
make or pay loans or advances to or on behalf of, the Borrower or any of its
Subsidiaries, means:
(a) restrictions imposed pursuant to this Agreement, the
Canadian Credit Agreement, any of the Loan Documents or any of the
Canadian Loan Documents;
(b) restrictions imposed by the Subordinated Notes or the
Subordinated Note Indenture or by other Debt of the Borrower permitted
hereunder; provided that such restrictions are no more restrictive
-------- ----
taken as a whole than those imposed by this Agreement or the Canadian
Credit Agreement or by the Subordinated Notes or the Subordinated Note
Indenture as in effect on the Closing Date;
(c) restrictions imposed by applicable law;
(d) existing restrictions under any Debt of the Borrower or
its Subsidiaries existing on the date hereof;
(e) restrictions under any Debt or Disqualified Capital Stock
of any Person existing at the time such Person becomes a Subsidiary of
the Borrower or is merged or consolidated with or into the Borrower or
one of its Subsidiaries, and which is not incurred in violation of this
Agreement, the Canadian Credit Agreement, the Subordinated Note
Indenture or any agreement relating to any property, asset, or business
acquired by the Borrower or any of its Subsidiaries, which restrictions
in each case existed at the time of acquisition, were not put in place
in connection with or in anticipation of such acquisition and are not
applicable to any Person, other than the Person acquired, or to any
property, asset or business, other than the property, assets and
business so acquired;
(f) restrictions solely with respect to a Subsidiary of the
Borrower imposed pursuant to a binding agreement which has been entered
into for the sale or disposition of all or substantially all of the
Equity Interests or assets of such Subsidiary (to the extent such sale
or disposition is permitted hereunder); provided that such restrictions
-------- ----
apply solely to the Equity Interests or assets of such Subsidiary which
are being sold;
(g) restrictions on transfer contained in Capital Leases and
purchase money Debt permitted by Section 6.02(b); provided that such
-------- ----
restrictions relate only to the transfer of the property acquired with
the proceeds of such purchase money Debt or subject to such Capital
Leases; and
(h) in connection with and pursuant to permitted refinancings,
replacements of restrictions imposed pursuant to paragraphs (a), (b),
(d), (e) or (g) of this definition that are not more restrictive taken
as a whole than those being replaced and do not apply to
33
any other Person or assets than those that would have been covered by
the restrictions in the Debt so refinanced.
"PERMITTED SELLER FINANCING" means Debt of the Borrower owing
--------------------------
to a seller in a Permitted Acquisition in respect of Acquisition Consideration
so long as (i) such Debt is expressly subordinated in right of payment to the
prior payment in full in cash of all Obligations hereunder, under the other Loan
Documents and under the Canadian Loan Documents on terms and conditions
reasonably satisfactory to the Administrative Agent and the Required Lenders,
and (ii) such Debt requires no payment of principal or interest (other than
payments in kind) prior to six months after the last to occur of (A) the
Revolving Commitment Termination Date, (B) the Term A Termination Date and (C)
the Term B Termination Date.
"PERSON" means an individual, partnership, limited liability
------
company, corporation (including a business trust), joint stock company, trust,
unincorporated association, joint venture or other entity, or a government or
any political subdivision or agency thereof.
"PII SECOND" means PII Second, Inc., a Delaware corporation.
----------
"PIONEER" means Pioneer Plastics Corporation, a Delaware
-------
corporation.
"PIONEER ACQUISITION" means the acquisition by the Borrower
--------------------
of 100% of the equity securities of Pioneer pursuant to the Pioneer Acquisition
Agreement.
"PIONEER ACQUISITION AGREEMENT" means the Stock Purchase
-----------------------------
Agreement dated as of July 17, 1998 by and between Rugby U.S.A., Inc. and the
Borrower, as in effect on July 17, 1998, and as subsequently amended by (i) the
Amendment No. 1 to Stock Purchase Agreement dated as of September 11, 1998, (ii)
the Amendment No. 2 to Stock Purchase Agreement dated as of October 16, 1998,
and (iii) the Amendment No. 3 to Stock Purchase Agreement dated as of November
30, 1998, and as such agreement may have been further amended, supplemented or
otherwise modified from time to time on or prior to the Closing Date as
permitted hereunder.
"PIONEER ACQUISITION CONSIDERATION" means the aggregate
---------------------------------
purchase price set forth in the Pioneer Acquisition Agreement, subject to
adjustment as provided therein.
"PIONEER ACQUISITION DOCUMENTS" means the Pioneer Acquisition
-----------------------------
Agreement, any non-competition agreements delivered thereunder and each
non-competition agreement and each other material document and agreement entered
into in connection therewith.
"PLAN" means a Single Employer Plan or a Multiple Employer
----
Plan.
"PREFERRED STOCK" means, with respect to any corporation,
---------------
capital stock issued by such corporation that is entitled to a preference or
priority over any other capital stock issued by such corporation upon any
distribution of such corporation's assets, whether by dividend or upon
liquidation.
34
"PROFIT PAYMENT AGREEMENT" means any agreement to make any
------------------------
payment the amount of which is, or the terms of payment of which are, in any
respect subject to or contingent upon the revenues, income, cash flow or profits
(or the like) of any Person or business.
"PROJECTIONS" means the Borrower's forecasted Consolidated and
-----------
consolidating: (a) balance sheets; (b) profit and loss statements; (c) cash flow
statements; and (d) capitalization statements, all prepared on a Subsidiary by
Subsidiary or division by division basis, if applicable, and otherwise
consistent with the historical financial statements of the Borrower, together
with appropriate supporting details and a statement of underlying assumptions.
"QUARTERLY COMPLIANCE CERTIFICATE" means a Compliance
--------------------------------
Certificate of the Borrower, substantially in the form attached as Exhibit VIII
------------
hereto and otherwise satisfactory to the Administrative Agent, including all of
the certifications required in the Compliance Certificate and also setting forth
the computations used by the Borrower in determining compliance with the
covenants contained in Section 6.04.
"RECEIVABLES" means all "accounts", as such term is defined in
-----------
the Code, now owned or hereafter acquired by any Credit Party and, in any event,
including (a) all accounts receivable, other receivables, book debts and other
forms of obligations (other than forms of obligations evidenced by Chattel
Paper, Documents or Instruments) now owned or hereafter received or acquired by
or belonging or owing to any Credit Party, whether arising out of goods sold or
services rendered by it or from any other transaction (including any such
obligations which may be characterized as an account or contract right under the
Code), (b) all of each Credit Party's rights in, to and under all purchase
orders or receipts now owned or hereafter acquired by it for goods sold or
services rendered, (c) all of each Credit Party's rights to any goods
represented by any of the foregoing (including unpaid sellers' rights of
rescission, replevin, reclamation and stoppage in transit and rights to
returned, reclaimed or repossessed goods), (d) all monies due or to become due
to any Credit Party, under all purchase orders and contracts for the sale of
goods or the performance of services or both by such Credit Party or in
connection with any other transaction (whether or not yet earned by performance
on the part of such Credit Party) now or hereafter in existence, including the
right to receive the proceeds of said purchase orders and contracts, and (e) all
collateral security and guarantees of any kind, now or hereafter in existence,
given by any Person with respect to any of the foregoing.
"RECEIVABLES DEBTOR" means any Person who may become obligated
------------------
to any Credit Party under, with respect to, or on account of, a Receivable.
"REDEEMABLE" means, with respect to any Capital Stock, Debt or
other right or Obligation, any such right or Obligation that (a) the issuer has
undertaken to redeem at a fixed or determinable date or dates, whether by
operation of a sinking fund or otherwise, or upon the occurrence of a condition
not solely within the control of the issuer or (b) is redeemable at the option
of the holder.
"REGISTER" has the meaning specified in Section 9.07(c).
--------
35
"REGULATION T" means Regulation T of the Board of Governors of
------------
the Federal Reserve System, as in effect from time to time.
"REGULATION U" means Regulation U of the Board of Governors
------------
of the Federal Reserve System, as in effect from time to time.
"RELATED DOCUMENTS" means the Pioneer Acquisition Documents,
-----------------
the Subordinated Debt Documents and the Canadian Loan Documents .
"REPLACEMENT LENDER" has the meaning specified in Section
------------------
2.07(c).
"REQUIRED LENDERS" means at any time Lenders owed or holding
----------------
at least 51% of the sum of (a) the aggregate principal amount of the Loans
outstanding at such time, (b) the aggregate Letter of Credit Usage at such time
and (c) the aggregate unused Commitments under the Term Facilities plus the
-----
aggregate Unused Revolving Commitments at such time, without duplication. For
purposes of this definition, the amount of the Letter of Credit Usage and the
aggregate principal amount of all outstanding Swing Line Loans shall be
considered to be owed to the Revolving Lenders ratably in accordance with their
respective Revolving Pro Rata Shares.
"RESERVES" means, with respect to the Borrowing Base Amount of
--------
the Borrower, (a) reserves for Inventory that is excess, obsolete, unsaleable,
shopworn, seconds, damaged or unfit for sale and (b) reserves established and
modified by the Administrative Agent from time to time against Eligible
Inventory and/or Eligible Receivables in accordance with this Agreement.
"RESTRUCTURING COSTS" means non-recurring charges up to the
-------------------
maximum amount and meeting the criteria set forth on Schedule 1.01(b), properly
characterized as "restructuring" charges under generally accepted accounting
principles in connection with the Pioneer Acquisition and related to the closure
of plants, related severance costs and integration, provided that such costs
--------
occur within two years after the closing of the Pioneer Acquisition.
"REVOLVING BORROWING" means a borrowing consisting of
-------------------
simultaneous Revolving Loans of the same Interest Type made by the Revolving
Lenders.
"REVOLVING COMMITMENT" means (i) with respect to any Revolving
--------------------
Lender listed on Schedule I, the amount set forth opposite such Lender's name on
Schedule I under the caption "Revolving Commitment", (ii) with respect to any
Revolving Lender not listed on Schedule I hereto, the amount set forth in the
Assignment and Acceptance pursuant to which such Person became a Lender
hereunder, or (iii) if any of such Lenders has entered into one or more
Assignments and Acceptances, the amount set forth for such Lender in the
Register maintained by the Administrative Agent pursuant to Section 9.07(c) as
such Lender's "Revolving Commitment", in the case of each of the foregoing
clauses (i), (ii) and (iii), as such amount may be reduced at or prior to such
time pursuant to Section 2.04.
"REVOLVING COMMITMENT TERMINATION DATE" means the earlier of
-------------------------------------
(i) the fifth anniversary of the Closing Date and (ii) the date of termination
in whole of the Total Commitments pursuant to Section 2.04 or 7.01.
36
"REVOLVING FACILITY" means, at any time, the aggregate amount
------------------
of the Revolving Lenders' Revolving Commitments at such time.
"REVOLVING LENDER" means any Lender that has a Revolving
----------------
Commitment.
"REVOLVING LOAN" has the meaning specified in Section 2.01(c).
--------------
"REVOLVING NOTE" means a promissory note of the Borrower
--------------
payable to the order of any Revolving Lender, in substantially the form of
Exhibit VII-A hereto, evidencing the aggregate indebtedness of the Borrower to
-------------
such Lender resulting from the Revolving Loans made by such Lender.
"REVOLVING PRO RATA SHARE" means, with respect to any
------------------------
Revolving Lender at any time, a fraction the numerator of which is such
Revolving Lender's Revolving Commitment (without giving effect to any
termination thereof pursuant to Section 7.01) at such time and the denominator
of which is the amount of the total Revolving Facility (without giving effect to
any termination of Commitments pursuant to Section 7.01) at such time.
"SECURED OBLIGATIONS" has the meaning specified in the
-------------------
Security Agreement.
"SECURITIES" means any stock, shares, partnership interests,
----------
voting trust certificates, certificates of interest or participation in any
profit-sharing agreement or arrangement, options, warrants, bonds, debentures,
notes, or other evidences of indebtedness, secured or unsecured, convertible,
subordinated or otherwise, or in general any instruments commonly known as
"securities" or any certificates of interest, shares or participations in
temporary or interim certificates for the purchase or acquisition of, or any
right to subscribe to, purchase or acquire, any of the foregoing.
"SECURITY AGREEMENT" has the meaning specified in Section
------------------
4.01(k)(xiv).
"SINGLE EMPLOYER PLAN" of any Person means a single employer
--------------------
plan, as defined in Section 4001(a)(15) of ERISA, that (a) is maintained for
employees of such Person or any of its ERISA Affiliates and no Person other than
such Person and its ERISA Affiliates or (b) was so maintained and in respect of
which such Person or any of its ERISA Affiliates could have liability under
Section 4069 of ERISA in the event such plan has been or were to be terminated.
"SOLVENT" and "SOLVENCY" mean, with respect to any Person on a
------- --------
particular date, that on such date (a) the fair value of the property of such
Person is greater than the total amount of liabilities, including, without
limitation, contingent liabilities, of such Person, (b) the present fair salable
value of the assets of such Person is not less than the amount that will be
required to pay the probable liability of such Person on its debts as they
become absolute and matured, (c) such Person does not intend to, and does not
believe that it will, incur debts or liabilities beyond such Person's ability to
pay as such debts and liabilities mature and (d) such Person is not engaged in
business or a transaction, and is not about to engage in business or a
transaction, for which such Person's property would constitute an unreasonably
small capital. The amount of contingent liabilities at any time shall be
computed as the amount that, in the light of all the facts
37
and circumstances existing at such time, represents the amount that can
reasonably be expected to become an actual or matured liability.
"SPV" has the meaning specified in Section 9.07(h).
---
"STANDBY LETTER OF CREDIT" means any Letter of Credit issued
------------------------
under the Letter of Credit Subfacility, other than a Trade Letter of Credit.
"SUBORDINATED DEBT" means the Debt evidenced by the
-----------------
Subordinated Notes and any Permitted Seller Financing.
"SUBORDINATED DEBT DOCUMENTS" means the Subordinated Note
---------------------------
Indenture, the Subordinated Notes, and all other agreements, indentures and
instruments pursuant to which Subordinated Debt is issued.
"SUBORDINATED NOTE INDENTURE" means the Subordinated Note
---------------------------
Indenture dated as of February 18, 1999, between the Borrower and State Street
Bank and Trust Company of Connecticut, N.A., as trustee, as amended from time to
time, pursuant to which the Subordinated Notes are being issued.
"SUBORDINATED NOTES" means the Series A 11 1/2% Senior
------------------
Subordinated Notes due 2009 of the Borrower issued pursuant to the Subordinated
Note Indenture and the Series B 11 1/2% Senior Subordinated Notes due 2009
issued in exchange therefor pursuant to the Exchange Offer (as defined in the
Subordinated Note Indenture), in the aggregate principal amount of $135,000,000.
"SUBSIDIARY" of any Person means any corporation, partnership,
----------
limited liability company, joint venture, trust or estate of which (or in which)
more than 50% of (a) the issued and outstanding capital stock having ordinary
voting power to elect a majority of the Board of Directors of such corporation
(irrespective of whether at the time capital stock of any other class or classes
of such corporation shall or might have voting power upon the occurrence of any
contingency), (b) the interest in the capital or profits of such partnership,
limited liability company or joint venture or (c) the beneficial interest in
such trust or estate is at the time directly or indirectly owned or controlled
by such Person, by such Person and one or more of its other Subsidiaries or by
one or more of such Person's other Subsidiaries. Notwithstanding the foregoing,
the Excluded Acquisition Sub and the Excluded Melamine Subs shall not be
Subsidiaries of any Loan Party for purposes hereof or of any of the other Loan
Documents.
"SUPERMAJORITY LENDERS" means at any time Lenders owed or
---------------------
holding at least 66 2/3% of the sum of (a) the aggregate principal amount of the
Loans outstanding at such time, (b) the aggregate Letter of Credit Usage at such
time and (c) the aggregate unused Commitments under the Term Facilities plus the
----
aggregate Unused Revolving Commitments at such time, without duplication. For
purposes of this definition, the amount of the Letter of Credit Usage and the
aggregate principal amount of all outstanding Swing Line Loans shall be
considered to be owed to the Revolving Lenders ratably in accordance with their
respective Revolving Pro Rata Shares.
38
"SURVIVING DEBT" has the meaning specified in Section 4.01(g).
--------------
"SWING LINE BORROWING" means a borrowing of Swing Line Loans
--------------------
made by the Swing Line Lender.
"SWING LINE COMMITMENT" means, with respect to the Swing Line
---------------------
Lender at any time, the amount set forth opposite such Lender's name on Schedule
I hereto under the caption "Swing Line Commitment" or, if the Swing Line Lender
has entered into one or more Assignments and Acceptances with respect to the
Swing Line Commitment, the amount set forth for the Swing Line Lender in the
Register maintained by the Administrative Agent pursuant to Section 9.07(c) as
such Lender's "Swing Line Commitment", in each case as such amount may be
reduced at or prior to such time pursuant to Section 2.04.
"SWING LINE FACILITY" means, at any time, the aggregate amount
-------------------
of the Swing Line Lender's Swing Line Commitment at such time.
"SWING LINE LENDER" means CSFB and any assignee of the Swing
-----------------
Line Commitment that assumes such Swing Line Commitment in accordance with the
terms of Section 9.07.
"SWING LINE LOAN" means a Loan by the Swing Line Lender to the
---------------
Borrower pursuant to Section 2.01(d).
"SWING LINE NOTE" means a promissory note of the Borrower
---------------
payable to the order of the Swing Line Lender, in substantially the form of
Exhibit VII-D hereto, evidencing the aggregate indebtedness of the Borrower to
--------------------
such Lender under the Swing Line Facility.
"SWING LINE SUBLIMIT" means $5,000,000.
-------------------
"SYNDICATION AGENT" means DLJ Capital Funding, Inc., as
-----------------
syndication agent under this Agreement, and its successors and assigns in such
capacity.
"TAXES" means any and all present or future taxes, levies,
-----
assessments, imposts, duties, deductions, fees, withholdings or similar charges,
and all liabilities with respect thereto, excluding, in the case of each Lender
Party and the Administrative Agent, each assignee of a Lender Party, each
participant under a participation and each SPV, respectively, (a) income,
capital or franchise taxes imposed on (or measured by) its net income or capital
taxes imposed, in each case, (i) by the United States, (ii) by the jurisdiction
under the laws of which such recipient is organized or in which its principal
office is located, (iii) by any jurisdiction solely as a result of such party's
activities in or contact with such jurisdiction unrelated to the transactions
contemplated by this Agreement, or (iv) by the jurisdiction in which the lending
office of the recipient is located, and (b) any branch profits taxes imposed by
the United States or any similar tax imposed by any other jurisdiction in which
any recipient is located.
"TERM A COMMITMENT" means, with respect to any Term A Lender,
-----------------
the amount set forth opposite such Lender's name on Schedule I hereto under the
caption "Term A
39
Commitment"; provided that upon making of the Term A Loans on the Closing Date,
--------
the Term A Commitment of each Term A Lender shall thereafter be zero.
"TERM A FACILITY" means, at any time, the aggregate amount of
---------------
the Term A Loans outstanding at such time.
"TERM A LENDER" means any Lender that has a Term A Loan
-------------
outstanding.
"TERM A LOAN" has the meaning specified in Section 2.01(a).
-----------
"TERM A LOAN PAYMENT DATE" has the meaning specified in
------------------------
Section 2.03(a).
"TERM A NOTE" means a promissory note of the Borrower payable
-----------
to the order of any Term A Lender, in substantially the form of Exhibit VII-B
-------------
hereto, evidencing the indebtedness of the Borrower to such Lender resulting
from the Term A Loan made by such Lender.
"TERM A PRO RATA SHARE" means, with respect to any Term A
---------------------
Lender at any time, a fraction the numerator of which is the principal amount of
Term A Loans made by such Lender and outstanding at such time and the
denominator of which is the aggregate principal amount of Term A Loans made by
all Term A Lenders and outstanding at such time.
"TERM A TERMINATION DATE" means the earlier of (i)
-------------------------
December 31, 2003 and (ii) the date of termination in whole of the Total
Commitments pursuant to Section 2.04 or 7.01.
"TERM B COMMITMENT" means, with respect to any Term B Lender
-----------------
at any time, the amount set forth opposite such Lender's name on Schedule I
hereto under the caption "Term B Commitment"; provided that upon the making of
Term B Loans on the Closing Date, the Term B Commitment of each Term B Lender
shall thereafter be zero.
"TERM B FACILITY" means, at any time, the aggregate amount of
---------------
the Term B Loans outstanding at such time.
"TERM B LENDER" means any Lender that has a Term B Loan
-------------
outstanding.
"TERM B LOAN" has the meaning specified in Section 2.01(b).
-----------
"TERM B LOAN PAYMENT DATE" has the meaning specified in
------------------------
Section 2.03(b).
"TERM B NOTE" means a promissory note of the Borrower payable
-----------
to the order of any Term B Lender, in substantially the form of Exhibit VII-C
hereto, evidencing the indebtedness of the Borrower to such Lender resulting
from the Term B Loan made by such Lender.
"TERM B PRO RATA SHARE" means, with respect to any Term B
---------------------
Lender at any time, a fraction the numerator of which is the principal amount of
Term B Loans made by such
40
Lender and outstanding at such time and the denominator of which is the
aggregate principal amount of Term B Loans made by all Term B Lenders and
outstanding at such time.
"TERM B TERMINATION DATE" means the earlier of (i) December 31, 2005
------------------------
and (ii) the date of termination in whole of the Total Commitments pursuant to
Section 2.04 or 7.01.
"TERM BORROWING" means a borrowing consisting of simultaneous Term
--------------
Loans of the same Interest Type made by the Term Lenders.
"TERM FACILITIES" means the Term A Facility and Term B Facility,
---------------
collectively.
"TERM LENDER" means any Term A Lender or Term B Lender, and "TERM
----------- ----
LENDERS" means all such lenders collectively.
-------
"TERM LOAN" means any Term A Loan or Term B Loan, and "TERM LOANS"
----------- ------------
means all such loans collectively.
"TOTAL COMMITMENT" means, with respect to each Lender at any time, the
----------------
aggregate of such Lender's outstanding Term Loans and Revolving Commitment at
such time.
"TOTAL UTILIZATION OF REVOLVING COMMITMENTS" means, as at any date of
------------------------------------------
determination, the sum of (i) the aggregate principal amount of all outstanding
Revolving Loans (other than Revolving Loans made, but not yet applied, for the
purpose of repaying any Swing Line Loans or reimbursing the applicable Issuing
Bank for any Letter of Credit Drawing) plus (ii) the aggregate principal amount
----
of all outstanding Swing Line Loans plus (iii) the Letter of Credit Usage.
----
"TRADE LETTER OF CREDIT" means any Letter of Credit that is issued
----------------------
under the Letter of Credit Subfacility for the benefit of a supplier of
Inventory to the Borrower or any of its Domestic Subsidiaries to effect payment
for such Inventory, the conditions to drawing under which include the
presentation to the Issuing Bank of negotiable bills of lading, invoices and
related documents sufficient, in the judgment of the Issuing Bank, to create a
valid and perfected Lien on such Inventory.
"TRANSACTION FEE AGREEMENT" means the engagement letter between the
-------------------------
Borrower and Genstar Capital LLC, dated as of January 24, 1999, as in effect on
the date hereof and as thereafter amended to the extent permitted by Section
6.02(n).
"TRANSACTIONS" means, collectively, the Pioneer Acquisition, the
------------
refinancing effected pursuant to this Agreement and the other Loan Documents,
and the payment of fees and expenses in connection with the foregoing.
"TYPE" refers to the distinction between Revolving Loans, Swing Line
----
Loans, Term A Loans and Term B Loans.
"UNREIMBURSED LETTER OF CREDIT LIABILITY" means, as of any date of
---------------------------------------
determination with respect to any Letter of Credit, the aggregate amount of all
Letter of Credit
41
Drawings which have been paid by, and not reimbursed to, the Issuing Bank under
such Letter of Credit.
"UNUSED REVOLVING COMMITMENT" means, with respect to any
---------------------------
Revolving Lender at any time, (a) such Lender's Revolving Commitment at such
time, minus (b) the sum of (i) the aggregate principal amount of all Revolving
-----
Loans of such Lender outstanding at such time, plus (ii) such Lender's Revolving
----
Pro Rata Share of the aggregate Letter of Credit Obligations outstanding at such
time, plus (iii) such Lender's Revolving Pro Rata Share of the aggregate
----
principal amount of all Swing Line Loans outstanding at such time.
"UNUSED SWING LINE COMMITMENT" means, with respect to the
----------------------------
Swing Line Lender at any time, the lesser of (i) the remainder of (a) the Swing
Line Commitment at such time, minus (b) the aggregate principal amount of all
-----
Swing Line Loans outstanding at such time, and (ii) the aggregate Unused
Revolving Commitments at such time.
"VOTING EQUITY INTERESTS" means Equity Interests which are
-----------------------
ordinarily entitled to vote in the election of, as applicable, directors,
members or partners generally, whether or not the right so to vote has been
suspended by the happening of any contingency.
"WELFARE PLAN" means a welfare plan, as defined in Section 3(1) of
------------
ERISA.
"WITHDRAWAL LIABILITY" has the meaning specified in Part I of
--------------------
Subtitle E of Title IV of ERISA.
SECTION 1.02. COMPUTATION OF TIME PERIODS. In this Agreement
---------------------------
in the computation of periods of time from a specified date to a later specified
date, the word "from" means "from and including" and the words "to" and "until"
each mean "to but excluding".
SECTION 1.03. ACCOUNTING TERMS. All accounting terms not
----------------
specifically defined herein shall be construed in accordance with generally
accepted accounting principles consistent with those applied in the preparation
of the financial statements referred to in Section 5.01(f) ("GAAP").
----
SECTION 1.04. OTHER DEFINITIONAL PROVISIONS. References to
-----------------------------
Articles, Sections, subsections, Schedules and Exhibits shall be to Articles,
Sections, subsections, Schedules and Exhibits, respectively, of this Agreement
unless otherwise specified. The term "including" means including without
limitation.
ARTICLE II.
AMOUNTS AND TERMS OF THE LOANS
SECTION 2.01. THE LOANS.
---------
(A) THE TERM A LOANS. Each Term A Lender severally agrees, on the
----------------
terms and conditions hereinafter set forth, to make a single term A loan (each,
a "TERM A LOAN" and, collectively, the "TERM A LOANS") to the Borrower on the
----------- ------------
Closing Date in an amount not to
42
exceed such Lender's total Term A Commitment on such Business Day. Amounts
borrowed under this Section 2.01(a) and repaid or prepaid may not be reborrowed.
(B) THE TERM B LOANS. Each Term B Lender severally agrees, on the
----------------
terms and conditions hereinafter set forth, to make a single term B loan (each,
a "TERM B LOAN" and, collectively, the "TERM B LOANS") to the Borrower on the
----------- ------------
Closing Date in an amount not to exceed such Lender's total Term B Commitment on
such Business Day. Amounts borrowed under this Section 2.01(b) and repaid or
prepaid may not be reborrowed.
(C) REVOLVING LOANS. Each Revolving Lender severally agrees, on the
---------------
terms and conditions hereinafter set forth, to make loans (each, a "REVOLVING
---------
LOAN" and, collectively, the "REVOLVING LOANS") to the Borrower from time to
---- ---------------
time on any Business Day during the period from the Closing Date until the
Revolving Commitment Termination Date in an amount for each such Revolving Loan
not to exceed the lesser of (i) such Lender's Unused Revolving Commitment on
such Business Day (after giving effect to any repayment of Swing Line Loans made
or to be made with the proceeds thereof pursuant to a designation therefor set
forth by the Borrower in a Notice of Borrowing for such Borrowing or pursuant to
a Notice of Borrowing given by the Administrative Agent in accordance with
Section 2.02(f)) and (ii) such Lender's Revolving Pro Rata Share of the
remainder of (x) the Borrowing Base Amount as of such date minus (y) the sum of
-----
(A) the then outstanding Letter of Credit Obligations and (B) the then
outstanding Swing Line Loans; provided, however, that (1) the foregoing clause
-------- -------
(ii) shall not limit any Lender's obligations under Section 2.02(f), and (2)
except with respect to a Borrowing the proceeds of which will be applied to
repay outstanding Swing Line Loans or reimburse Letter of Credit Drawings
pursuant to a designation therefor set forth by the Borrower in a Notice of
Borrowing for such Borrowing or pursuant to a Notice of Borrowing given by the
Administrative Agent pursuant to Section 2.02(f), the Borrower shall not
request, and no Lender shall be required to make Revolving Loans in respect of,
any Borrowing if after giving effect thereto the aggregate principal amount of
all outstanding Revolving Loans would exceed the remainder of (x) the Borrowing
Base Amount at such time minus (y) the sum of (A) the then outstanding Letter of
-----
Credit Obligations and (B) the greater of the aggregate Swing Line Commitment in
effect at such time and the aggregate principal amount of all outstanding Swing
Line Loans at such time. Each Revolving Borrowing of Eurodollar Rate Loans shall
be in an aggregate amount of $1,000,000 or an integral multiple of $100,000 in
excess thereof and each Revolving Borrowing of Base Rate Loans shall be in an
aggregate amount of $500,000 or an integral multiple of $100,000 in excess
thereof. Each Revolving Borrowing shall consist of Revolving Loans made by the
Revolving Lenders ratably according to their respective Revolving Commitments.
Within the foregoing limits, the Borrower may borrow under this Section 2.01(c),
prepay pursuant to Section 2.04 and reborrow under this Section 2.01(c).
(D) SWING LINE LOANS. The Swing Line Lender agrees, on the terms and
----------------
conditions hereinafter set forth, to make loans (each, a "SWING LINE LOAN" and,
---------------
collectively, the "SWING LINE LOANS") to the Borrower from time to time on any
----------------
Business Day during the period from the Closing Date until the Revolving
Commitment Termination Date in an amount not to exceed the Unused Swing Line
Commitment on such Business Day; provided, however, that the Swing Line Lender
--------- -------
shall not make any Swing Line Loans, if after giving effect to such Swing
43
Line Loans, the aggregate principal amount of all outstanding Swing Line Loans
would exceed the remainder of (x) the Borrowing Base Amount then in effect minus
-----
(y) the sum of (A) the aggregate amount of the Letter of Credit Obligations then
outstanding, and (B) the aggregate principal amount of the Revolving Loans then
outstanding. Each Swing Line Borrowing shall consist of Base Rate Loans, shall
be in an amount equal to $500,000 or an integral multiple of $100,000 in excess
thereof (or such other amount or integral multiple as may be agreed between the
Swing Line Lender, the Administrative Agent and the Borrower), and shall consist
of Swing Line Loans made by the Swing Line Lender. Immediately upon the making
of each Swing Line Loan by the Swing Line Lender, the Swing Line Lender shall be
deemed to have sold and transferred to each Revolving Lender, and each Revolving
Lender shall be deemed to have purchased and received from the Swing Line
Lender, in each case irrevocably and without any further action by any party, an
undivided interest and participation in such Swing Line Loan and the Obligations
of the Borrower under this Agreement in respect thereof in an amount equal to
such Lender's Revolving Pro Rata Share of such Swing Line Loan, provided,
--------
however, that (i) no Lender shall be required to fund its participation in any
-------
such Swing Line Loan until demand therefor is made by the Administrative Agent
pursuant to Section 2.02(f)(ii) hereof, and (ii) no Lender shall be entitled to
share in any payments of principal or interest in respect of its participation
in any such Swing Line Loan except to the extent set forth in Section
2.02(f)(ii) hereof with respect to any such participation which has been funded
by such Lender as provided therein. Within the limits of the Unused Swing Line
Commitment in effect from time to time, the Borrower may borrow under this
Section 2.01(d), prepay pursuant to Section 2.04 and reborrow under this Section
2.01(d).
SECTION 2.02. MAKING THE LOANS.
----------------
(A) INITIAL BORROWINGS. The initial Borrowings hereunder shall be made
------------------
on the Closing Date and shall be made on notice received by the Administrative
Agent from the Borrower (pursuant to an irrevocable Notice of Borrowing) not
later than 11:00 a.m. (New York City time) (or such later time as the
Administrative Agent may agree) on the Business Day immediately preceding the
Closing Date. Such Notice of Borrowing shall be irrevocable upon receipt by the
Administrative Agent. Each Appropriate Lender shall, before 11:00 a.m. (New York
City time) on the Closing Date, make available for the account of its Applicable
Lending Office to the Administrative Agent such Lender's ratable share of such
Borrowings by depositing same day funds in the Administrative Agent's Account.
Notwithstanding any contrary provision hereof, the initial Borrowings may
consist only of Base Rate Loans.
(B) SUBSEQUENT REVOLVING BORROWINGS. Each Revolving Borrowing
-------------------------------
occurring after the Closing Date shall be made on notice received by the
Administrative Agent from the Borrower (pursuant to an irrevocable Notice of
Borrowing) not later than 11:00 a.m. (New York City time) (a) on the Business
Day prior to the date of such Borrowing if such Borrowing consists of Base Rate
Loans, and (b) on the third Business Day prior to the date of such Borrowing if
such Borrowing consists of Eurodollar Rate Loans. Each such Notice of Borrowing
shall be irrevocable upon receipt by the Administrative Agent and, in the case
of any Notice of Borrowing for Eurodollar Rate Loans, the Borrower shall
indemnify each Lender against any loss, cost or expense incurred by such Lender
as a result of any failure to fulfill on or
44
before the date specified by such Notice of Borrowing the applicable conditions
set forth in this Section 2.02 or Article IV, including, without limitation, any
loss, cost or expense incurred by reason of the liquidation or reemployment of
deposits or other funds acquired by such Lender to fund the Loan to be made by
such Lender as a part of such Borrowing when such Loan, as a result of such
failure, is not made on such date.
(C) SWING LINE BORROWINGS. Each Swing Line Borrowing shall be made on
---------------------
notice received by the Administrative Agent from the Borrower (pursuant to a
Notice of Swing Line Borrowing) not later than 11:00 a.m. (New York City time)
on the date of such Borrowing. Each such Notice of Swing Line Borrowing shall be
irrevocable upon receipt by the Administrative Agent.
(D) LOANS BY LENDERS. If the Administrative Agent receives a Notice of
----------------
Borrowing or a Notice of Swing Line Borrowing (or if the Administrative Agent
gives a Notice of Borrowing pursuant to Section 2.02(f)), the Administrative
Agent shall promptly on the Business Day prior to the date of such Borrowing or,
if such Borrowing consists of Eurodollar Rate Loans, the third Business Day
prior to the date of such Borrowing give each Appropriate Lender notice of such
Notice of Borrowing or Notice of Swing Line Borrowing. Each Appropriate Lender
shall (i) before 11:00 a.m. (New York City time) on the date of such Borrowing
in the case of any Revolving Borrowing to be made on such date, make available
for the account of its Applicable Lending Office to the Administrative Agent
such Lender's ratable portion of such Borrowing by depositing same day funds in
the Administrative Agent's Account, or (ii) before 2:00 p.m. (New York City
time) on the date of such Borrowing in the case of a Swing Line Borrowing, make
available for the account of its Applicable Lending Office to the Administrative
Agent such Borrowing by depositing same day funds in the Administrative Agent's
Account. Unless the Administrative Agent shall have received written notice from
a Revolving Lender prior to the date of any Revolving Borrowing hereunder that
such Lender will not make available to the Administrative Agent such Lender's
ratable portion of such Borrowing, the Administrative Agent may assume that such
Lender has made such ratable portion available to the Administrative Agent on
the date of such Borrowing in accordance with the terms hereof and the
Administrative Agent may, in reliance upon such assumption, but shall not be
required to, make available to or for the account of the Borrower on such date a
corresponding amount. If and to the extent that such Lender shall not have so
made such ratable portion available to the Administrative Agent and the
Administrative Agent makes such ratable portion available to the Borrower, such
Lender and the Borrower, without prejudice to any rights or remedies that the
Borrower may have against such Lender, severally agree to repay to the
Administrative Agent forthwith on demand such corresponding amount together with
interest thereon, for each day from the date such amount is made available to or
for the account of the Borrower until the date such amount is repaid to the
Administrative Agent, at (A) in the case of the Borrower, the interest rate
applicable at the time to the Loans comprising such Borrowing, and (B) in the
case of such Lender, the Federal Funds Rate. If such Lender shall pay to the
Administrative Agent such amount, such amount so paid shall constitute such
Lender's Loan as part of the relevant Borrowing for purposes of this Agreement
and, to the extent that the Borrower previously paid such amount to the
Administrative Agent, the Administrative Agent will refund to the Borrower
45
such amount so paid (it being understood that such amount so refunded shall
accrue interest only from the day on which such amount is refunded to the
Borrower), but without interest.
(E) DISBURSEMENT OF LOANS. Upon fulfillment of the applicable
---------------------
conditions set forth in Article IV (which fulfillment the Administrative Agent
may assume in the absence of actual knowledge, or notice received from the
Borrower or any Appropriate Lender, to the contrary), the Administrative Agent
will make funds for any Borrowing available to the Borrower by crediting the
Borrower's Account, subject to the Administrative Agent's receipt of funds from
-------
the Lenders, and provided that the Administrative Agent shall first make a
--------
portion of such funds equal to any unreimbursed Letter of Credit Drawing under
any Letter of Credit, and any interest accrued and unpaid thereon to and as of
such date, available to the applicable Issuing Bank for reimbursement of such
Letter of Credit Drawing and payment of such interest.
(F) SETTLEMENT OF SWING LINE LOANS. (i) The Administrative Agent may,
------------------------------
and upon request by the Swing Line Lender the Administrative Agent shall, at any
time and from time to time, give to the Revolving Lenders and the Borrower, on
behalf of the Borrower, a Notice of Borrowing for a Borrowing of Revolving Loans
which are Base Rate Loans, in each case in an amount equal to the aggregate
amount of Swing Line Loans then owing by the Borrower, and the proceeds of which
are to be used to prepay such Swing Line Loans on the date of such Borrowing.
Upon receipt of any such Notice of Borrowing, each Revolving Lender (other than
the Swing Line Lender) shall (subject to Section 2.02(f)(iv)), on or before the
time specified by the Administrative Agent (which in no event shall be earlier
than 11:00 a.m. nor later than 2:00 p.m. (New York City time) on the Business
Day following the date on which such Notice of Borrowing is given), make
available for the account of its Applicable Lending Office to the Administrative
Agent such Lender's Revolving Pro Rata Share of such Borrowing by depositing
same day funds in the Administrative Agent's Account. Notwithstanding any
contrary provision of this Agreement, (A) the proceeds of any such Borrowing
shall be distributed by the Administrative Agent to the Swing Line Lender
(subject to Section 2.02(f)(iv)) as a prepayment of all or a portion of the then
outstanding Swing Line Loans, and (B) the outstanding Swing Line Loans of the
Swing Line Lender, in each case in an amount equal to the Swing Line Lender's
Revolving Pro Rata Share of the aggregate amount of the Swing Line Loans to be
prepaid on such date, shall be deemed to be prepaid with the proceeds of a
Revolving Loan made by the Swing Line Lender and such portion of the Swing Line
Loans deemed to be so prepaid shall no longer be outstanding as Swing Line Loans
but shall be outstanding as Revolving Loans made by the Swing Line Lender.
(ii) In addition to the right of the Swing Line Lender to require
a Borrowing under Section 2.02(f)(i), the Swing Line Lender may at any time
and from time to time request (by notice to the Administrative Agent and the
Borrower) the Administrative Agent to, and upon receipt of such request the
Administrative Agent shall, make demand on each Revolving Lender for payment
of its participation in each Swing Line Loan then outstanding, and upon
receipt of any such demand each Revolving Lender shall (subject to Section
2.02(f)(iv)) promptly fund such participation by paying to the Administrative
Agent, for the account of the Swing Line Lender (subject to Section
2.02(f)(iv)), the amount of such participation in same day funds. With
respect to each
46
such participation in any Swing Line Loan which is funded by any Lender,
the Swing Line Lender shall promptly pay to the Administrative Agent, and
the Administrative Agent shall promptly pay to such Lender, in lawful money
of the United States and in the kind of funds so received, an amount equal
to such Lender's ratable share of all payments (other than payments
pursuant to Section 2.04(c)(ix)) received by the Swing Line Lender in
respect of (A) the principal of such Swing Line Loan, and (B) interest on
such Swing Line Loan for the period from and after the date on which such
participation was funded. If any payment received by any Swing Line Lender
on account of any Swing Line Loan and distributed to any Lender as a
participant under the preceding sentence is thereafter recovered from the
Swing Line Lender in connection with any bankruptcy or insolvency
proceeding relating to the Borrower or otherwise, each Lender that received
such distribution shall, upon demand by the Swing Line Lender through the
Administrative Agent, repay to the Swing Line Lender such Lender's ratable
share of the amount so recovered together with such Lender's ratable share
(according to the proportion of (1) the amount of such Lender's required
prepayment to (2) the total amount so recovered) of any interest or other
amount paid or payable by the Swing Line Lender in respect of the total
amount so recovered. The Borrower agrees that any Lender purchasing a
participation in any Swing Line Loan from the Swing Line Lender hereunder
may, to the fullest extent permitted by law, exercise all its rights of
payment with respect to such participation as fully as if such Lender were
the direct creditor of the Borrower in the amount of such participation.
(iii) Anything contained herein to the contrary notwithstanding
(but subject to Section 2.02(f)(iv)), the obligation of each Revolving
Lender to make any Revolving Loan pursuant to Section 2.02(f)(i) or to fund
its participation in any Swing Line Loans pursuant to Section 2.02(f)(ii)
shall be absolute and unconditional and shall not be subject to any
conditions set forth in Article IV hereof or otherwise affected by any
circumstance including, without limitation, (A) any set-off, counterclaim,
recoupment, defense or other right which such Lender may have against the
Swing Line Lender or any Loan Party; (B) the occurrence or continuance of a
Default or Event of Default; (C) any adverse change in the business,
condition (financial or otherwise), operations, performance, properties or
prospects of any Loan Party; (D) any breach of any Loan Document by the
Borrower, any other Loan Party or any other Lender Party; or (E) any other
circumstance, happening or event whatsoever, whether or not similar to any
of the foregoing.
(iv) Notwithstanding Section 2.02(f)(iii), if at the time that
any Revolving Lender is required to make any Revolving Loan or fund any
participation pursuant to Section 2.02(f)(i) or 2.02(f)(ii), the Borrower
would not otherwise be entitled to obtain a Borrowing as a result of the
failure of any of the conditions set forth in Article IV hereof, the
obligation of each Revolving Lender to make any such Revolving Loan or to
fund any such participation with respect to any Swing Line Loan owing to
the Swing Line Lender shall be subject to the condition that at least one
of the following is true: (A) the Swing Line Lender shall have believed in
good faith that all conditions under Article IV to the making of such Swing
Line Loan were satisfied at the time such Swing
47
Line Loan was made, or (B) such Lender shall have had actual knowledge,
by receipt of the statements required pursuant to Section 6.03 or
otherwise, that any such condition had not been satisfied and failed to
notify the Swing Line Lender and the Administrative Agent in writing
that it had no obligation to make Revolving Loans until such condition
was satisfied (which notice shall be effective as of the date of
receipt by the Swing Line Lender and the Administrative Agent), or (C)
the satisfaction of any such condition not satisfied shall have been
waived by the Required Lenders prior to or at the time such Swing Line
Loan was made. Anything contained in this Section 2.02(f) to the
contrary notwithstanding, the amount to be distributed by the
Administrative Agent to the Swing Line Lender under this Section
2.02(f) shall be reduced to the extent that any Lender shall refuse to
fund its portion of any Revolving Loan or participation with respect to
the Swing Line Lender as a result of the failure of the conditions set
forth above.
(v) The Borrower irrevocably authorizes (A) the Administrative
Agent to give any Notice of Borrowing pursuant to Section 2.02(f)(i)
(with a copy to the Borrower), (B) the Lenders to make the Revolving
Loans pursuant to such Notice of Borrowing, and (C) the Administrative
Agent to distribute the proceeds thereof as provided herein.
(G) NATURE OF LENDERS' OBLIGATIONS. The failure of any Lender to make
------------------------------
the Loan to be made by it as part of any Borrowing shall not relieve any other
Lender of its obligation, if any, hereunder to make its Loan on the date of such
Borrowing, but no Lender shall be responsible for the failure of any other
Lender to make the Loan to be made by such other Lender on the date of any
Borrowing.
SECTION 2.03. SCHEDULED REPAYMENT.
-------------------
(A) TERM A LOANS. The Borrower shall repay to each Term A Lender (in
------------
accordance with the provisions of Section 2.08(a)) the aggregate principal
amount of all Term A Loans owing to such Lender in consecutive quarterly
installments according to the amortization schedule set forth below (as the same
may be adjusted for prepayments pursuant to Section 2.04) until such principal
amount has been paid in full. Such installments (other than the last installment
owing hereunder with respect to the Term A Loans, which shall be due and payable
on the Term A Termination Date) shall be due and payable on the last Business
Day of each March, June, September and December of each year (each a "TERM A
------
LOAN PAYMENT DATE"), commencing March 31, 2000, and each such installment
-----------------
payable to each Term A Lender shall be in an amount equal to such Term A
Lender's Term A Pro Rata Share of the amount set forth below opposite the date
on which such Term A Loan Payment Date is stated to occur:
48
TERM A LOANS
TERM A LOAN PAYMENT DATE QUARTERLY INSTALLMENT
------------------------ ---------------------
March 2000 $ 562,500
June 2000 562,500
September 2000 562,500
December 2000 562,500
March 2001 843,750
June 2001 843,750
September 2001 843,750
December 2001 843,750
March 2002 1,031,250
June 2002 1,031,250
September 2002 1,031,250
December 2002 1,031,250
March 2003 1,312,500
June 2003 1,312,500
September 2003 1,312,500
December 2003 1,312,500
TOTAL $15,000,000
provided, however that the last such installment shall be in the amount
-------- -------
necessary to repay in full the aggregate unpaid principal amount of all
outstanding Term A Loans and shall, in any event, be due and payable on the Term
A Termination Date.
(B) TERM B LOANS. The Borrower shall repay to each Term B Lender (in
------------
accordance with the provisions of Section 2.08(a)) the aggregate principal
amount of all Term B Loans owing to such Lender in consecutive quarterly
installments according to the amortization schedule set forth below (as the same
may be adjusted for prepayments pursuant to Section 2.04) until such principal
amount has been paid in full. Such installments (other than the last installment
owing hereunder with respect to the Term B Loans, which shall be due and payable
on the Term B Termination Date) shall be due and payable on the last Business
Day of each March, June, September and December of each year (each a "TERM B
------
LOAN PAYMENT DATE"), commencing March 31, 1999, and each such installment
-----------------
payable to each Term B Lender shall be in an amount equal to such Term B
Lender's Term B Pro Rata Share of the amount set forth below opposite the date
on which such Term B Loan Payment Date is stated to occur:
49
TERM B LOANS
TERM B LOAN PAYMENT DATE QUARTERLY INSTALLMENT
------------------------ ---------------------
March 1999 $ 100,000
June 1999 100,000
September 1999 100,000
December 1999 100,000
March 2000 100,000
June 2000 100,000
September 2000 100,000
December 2000 100,000
March 2001 100,000
June 2001 100,000
September 2001 100,000
December 2001 100,000
March 2002 100,000
June 2002 100,000
September 2002 100,000
December 2002 100,000
March 2003 100,000
June 2003 100,000
September 2003 100,000
December 2003 100,000
March 2004 100,000
June 2004 100,000
September 2004 100,000
December 2004 100,000
March 2005 9,400,000
June 2005 9,400,000
September 2005 9,400,000
December 2005 9,400,000
TOTAL $40,000,000
provided, however that the last such installment shall be in the amount
-------- -------
necessary to repay in full the aggregate unpaid principal amount of all
outstanding Term B Loans and shall, in any event, be due and payable on the Term
B Termination Date.
(C) REVOLVING LOANS. The Borrower shall repay to each Revolving Lender
---------------
(in accordance with the provisions of Section 2.08(a)) on the Revolving
Commitment
50
Termination Date the aggregate principal amount of all Revolving Loans owing to
such Lender outstanding on the Revolving Commitment Termination Date.
(D) LETTER OF CREDIT DRAWINGS. The Borrower shall repay each Letter
-------------------------
of Credit Drawing as provided in Section 3.03.
(E) SWING LINE LOANS. The Borrower shall repay to the Swing Line
----------------
Lender (in accordance with the provisions of Section 2.08(a)) on the Revolving
Commitment Termination Date the aggregate principal amount of all Swing Line
Loans owing to such Lender outstanding on the Revolving Commitment Termination
Date.
SECTION 2.04. PREPAYMENTS; REDUCTION OF REVOLVING COMMITMENTS AND
---------------------------------------------------
SWING LINE COMMITMENT.
---------------------
(A) OPTIONAL PREPAYMENTS. The Borrower may, upon prior notice to the
--------------------
Administrative Agent (which may be given by 11:00 a.m. (New York City time) on
the date of prepayment in the case of prepayment of Swing Line Loans and which
shall be given at least one Business Day in advance in the case of prepayment of
Revolving Loans which consist of Base Rate Loans and three Business Days in
advance in the case of prepayment of any Revolving Loans which are Eurodollar
Rate Loans or any Term Loans of any Interest Type), stating the proposed date
and aggregate principal amount of the prepayment and the Type and Interest Type
of Loans to be prepaid (and if such notice is given the Borrower shall), prepay
in whole or in part the outstanding principal of Loans of such Type and Interest
Type, together with, in the case of any prepayment of Eurodollar Rate Loans,
interest thereon to the date of such prepayment on the principal amounts prepaid
(plus, in the case of prepayment of Eurodollar Rate Loans prior to the end of
the applicable Interest Period, any additional amount for which the Borrower
shall be obligated pursuant to Section 9.04(c)); provided, however, that each
-------- -------
partial prepayment of Eurodollar Rate Loans shall be in an aggregate principal
amount of $1,000,000 or an integral multiple of $100,000 in excess thereof, and
each partial prepayment of Base Rate Loans shall be in an aggregate principal
amount of $500,000 or an integral multiple of $100,000 in excess thereof (it
being understood that the amount of such prepayment shall be rounded upwards to
the nearest multiple of $100,000 after giving effect to the next sentence).
Notwithstanding anything to the contrary herein, an optional prepayment of Term
Loans under this Section 2.04(a) may only be made if a simultaneous optional
prepayment of term loans is made under the Canadian Credit Agreement, and the
aggregate amount of such prepayments is such that the Applicable US Facility
Percentage of such amount is equal to at least $500,000. Each optional
prepayment of any Term Loans under this Section 2.04(a) shall be applied to the
installments thereof in the following order of priority:
(i) subject to clause (ii) below, to the Term A Loans and Term B
Loans to the full extent thereof on a pro rata basis in direct order of
maturity (and ratably among the Term A Lenders and Term B Lenders,
respectively, as applicable); and
(ii) notwithstanding the foregoing clause (i), so long as (and to
the extent that) any Term A Loans are outstanding, the Borrower may offer
the Term B Lenders the option to, and any Term B Lender may elect to, waive
its ratable share of any
51
optional prepayment under this Section 2.04(a). In the event that any Term
B Lender elects by 2:00 p.m. (New York City time) on the day prior to the
date of prepayment to waive such right with respect to an optional
prepayment under Section 2.04(a)(i), 100% of that Term B Lender's ratable
share of such prepayment shall be applied to the prepayment of Term A Loans
ratably to the Term A Lenders in direct order of maturity. If no Term A
Loans are outstanding, such option to offer and election to waive
application of prepayments to the Term B Loans shall not be available.
(B) OPTIONAL REDUCTIONS. The Borrower shall have the right, upon at
-------------------
least five Business Days' notice to the Administrative Agent, to terminate in
whole or reduce in part the aggregate unused portion of the Revolving Facility,
with the corresponding termination in whole or ratable reduction in part of the
unused portions of the respective Revolving Commitments of the Revolving
Lenders; provided, however, that (i) each partial reduction shall be in an
-------- -------
amount of $500,000 or any integral multiple of $100,000 in excess thereof, and
(ii) the aggregate amount of the Revolving Commitments shall not be reduced
pursuant to this Section 2.04 to an amount less than the sum of (A) the
aggregate principal amount of all Revolving Loans then outstanding, plus (B) the
aggregate amount of all Letter of Credit Obligations then outstanding, plus (C)
----
the aggregate principal amount of all Swing Line Loans then outstanding.
(C) MANDATORY PREPAYMENTS AND COMMITMENT REDUCTIONS.
-----------------------------------------------
(I) PREPAYMENTS AND REDUCTIONS FROM EXCESS CASH FLOW. Within the
------------------------------------------------
earlier of five days after delivery of the Annual Financials pursuant to
Section 6.03(d) and 95 days following the end of each Fiscal Year, the
Borrower shall prepay the Term Loans and/or the Revolving Loans, and/or the
Revolving Commitments shall be permanently reduced (in each case, as and to
the extent set forth in Section 2.04(c)(xiii)), in an aggregate principal
amount equal to the product of (A) the Applicable US Facility Percentage of
the amount of the total Excess Cash Flow of the Borrower and its
Subsidiaries for such Fiscal Year and (B) the prepayment percentage set
forth below opposite the applicable Consolidated Leverage Ratio as of the
end of such Fiscal Year as set forth in the Effective Quarterly Compliance
Certificate delivered pursuant to Section 6.03(d); provided, however, if no
-------- -------
Quarterly Compliance Certificate has been delivered at the time required by
Section 6.03(d), the Consolidated Leverage Ratio shall be deemed to be
greater than 3.50:1.00 for purposes of this clause (i):
EXCESS CASH FLOW
CONSOLIDATED LEVERAGE RATIO PREPAYMENT PERCENTAGE
--------------------------- ---------------------
3.50:1.00 50%
3.00:1.00 less than 3.50:1.00 35%
less than 3.00:1.00 0%
(II) PREPAYMENTS AND REDUCTIONS FROM ASSET SALE PROCEEDS. On the
---------------------------------------------------
date of receipt by Holdings or any of its Domestic Subsidiaries of any Net
Cash Proceeds in respect of any asset sale (other than a sale in accordance
with Section 6.02(e)(i) or (ii)), the Borrower shall prepay the Term Loans
and/or the Revolving Loans, and/or the Revolving Commitments shall be
permanently reduced (in each case, as and to the extent
52
set forth in Section 2.04(c)(xiii)), in an aggregate principal amount equal
to the amount of such Net Cash Proceeds.
(III) PREPAYMENTS AND REDUCTIONS FROM INSURANCE/CONDEMNATION
------------------------------------------------------
PROCEEDS. On the date of receipt by Holdings or any of its Domestic
--------
Subsidiaries of any Insurance/Condemnation Proceeds in excess of (A)
$15,000,000 with respect to any single occurrence or event (or any series
of related occurrences or events) other than amounts in respect of
equipment described on Schedule 2.04(c)(iii), or (B) $10,000,000 with
respect to any single occurrence or event (or any series of related
occurrences or events) with respect to equipment described on Schedule
2.04(c)(iii), the Borrower shall prepay the Term Loans and/or the Revolving
Loans, and/or the Revolving Commitments shall be permanently reduced (in
each case, as and to the extent set forth in Section 2.04(c)(xiii)), in an
aggregate principal amount equal to the amount of any such
Insurance/Condemnation Proceeds.
(IV) PREPAYMENTS AND REDUCTIONS FROM DEBT SECURITIES PROCEEDS. On
--------------------------------------------------------
the date of receipt by Holdings or any of its Subsidiaries of any Net Cash
Proceeds from any sale or issuance of debt Securities by Holdings or any of
its Subsidiaries after the Closing Date (excluding any intercompany Debt
permitted hereunder), the Borrower shall prepay the Term Loans and/or the
Revolving Loans, and/or the Revolving Commitments shall be permanently
reduced (in each case, as and to the extent set forth in Section
2.04(c)(xiii)), in an aggregate principal amount equal to the Applicable US
Facility Percentage of the amount of such Net Cash Proceeds received;
provided, however, that for purposes of this clause (iv), Capital Leases
and purchase money Debt shall not be deemed to be debt Securities.
(V) PREPAYMENTS AND REDUCTIONS FROM EQUITY SECURITIES PROCEEDS.
----------------------------------------------------------
On the date of receipt by Holdings or any of its Subsidiaries of any Net
Cash Proceeds (excluding proceeds from the exercise of Holdings employee
stock options permitted hereunder, proceeds used to pay off the Domtar Note
and up to $5,000,000 in Capital Stock of Holdings issued to sellers as
Acquisition Consideration in connection with Permitted Acquisitions and
excluding the proceeds of any intercompany Investment in the Borrower or
any of its Subsidiaries permitted hereunder) from any sale or issuance of
equity Securities by Holdings or any of its Subsidiaries after the Closing
Date, the Borrower shall prepay the Term Loans and/or the Revolving Loans,
and/or the Revolving Commitments shall be permanently reduced (in each
case, as and to the extent set forth in Section 2.04(c)(xiii)), in an
aggregate principal amount equal to the Applicable US Facility Percentage
of the amount of such Net Cash Proceeds received; provided, however, that
-------- -------
(A) during any period in which the Effective Quarterly Compliance
Certificate delivered pursuant to Section 6.03(c) or (d), as applicable,
indicates that the Applicable Leverage Ratio is less than 3.0:1.0, the
prepayment and/or reduction required shall be 50% of the Applicable US
Facility Percentage of such Net Cash Proceeds, (B) if no Quarterly
Compliance Certificate has been delivered at the time required by Section
6.03(c) or (d), as applicable, the Consolidated Leverage Ratio shall be
deemed to be greater than 3.0:1.0 for purposes of this clause (v), and (C)
if, in connection with and
53
prior to the date of any such prepayment, the Borrower shall deliver an
Officer's Certificate demonstrating that after giving effect to such
prepayment the Applicable Leverage Ratio would have been (and will as of
the end of each of the next three fiscal quarters be) reduced to less than
3.0:1.0, then that portion of such prepayment that results in the reduction
of the Applicable Leverage Ratio to 3.0:1.0 shall be paid in an amount
equal to 100% of the Applicable US Facility Percentage of the Net Cash
Proceeds and any remaining portion of such Net Cash Proceeds shall be
applied to such prepayment in an amount equal to 50% of the Applicable US
Facility Percentage of such Net Cash Proceeds.
(VI) CHANGE OF CONTROL. On the date any Change of Control
-----------------
occurs, the Borrower shall prepay in full the Loans, the Revolving
Commitments shall be terminated in full and the Borrower shall cash
collateralize any outstanding Letters of Credit on terms reasonably
satisfactory to the Administrative Agent.
(VII) EXCESS LOANS. The Borrower shall from time to time prepay
------------
first the Swing Line Loans and second the Revolving Loans to the extent
----- ------
necessary so that the Total Utilization of Revolving Commitments shall not
at any time exceed either of the following: (A) the Revolving Commitments
then in effect or (B) the Borrowing Base Amount then in effect. If, at any
time, the then outstanding aggregate amount of all Swing Line Loans shall
exceed either (i) the Swing Line Commitment, or (ii) the aggregate amount
of the Revolving Commitments of the Lenders minus the sum of (A) the Letter
-----
of Credit Usage at such time, and (B) the aggregate principal amount of the
Revolving Loans then outstanding, the Borrower shall thereupon prepay, for
the account of the Swing Line Lender, the outstanding principal amount of
Swing Line Loans in an aggregate amount equal to such excess.
(VIII) CALCULATIONS; ADDITIONAL PREPAYMENTS AND REDUCTIONS.
---------------------------------------------------
Concurrently with any prepayment of the Term Loans, Revolving Loans and/or
reduction of the Revolving Commitments pursuant to clauses (i) through
(vii) above, the Borrower shall deliver to the Administrative Agent an
Officers' Certificate demonstrating the calculation in reasonable detail of
the amount of the excess Loans, Net Cash Proceeds, Insurance/Condemnation
Proceeds or Excess Cash Flow, as applicable, that gave rise to such
prepayment and/or reduction and specifying the application thereof (in
accordance with Section 2.04(c)(xiii)) to the prepayment of the Term Loans
and/or any prepayment of the Revolving Loans (to the extent Revolving Loans
will be repaid) and/or the reduction of the Revolving Commitments. In the
event that the Borrower shall subsequently determine that the actual amount
of such excess Loans, Net Cash Proceeds, Insurance/Condemnation Proceeds or
Excess Cash Flow, as applicable, was greater than the amount set forth in
such Officers' Certificate, the Borrower shall promptly make an additional
prepayment of the Term Loans and/or the Revolving Loans and/or, if
applicable, the Revolving Commitments shall be permanently reduced (in each
case, as and to the extent set forth in Section 2.04(c)(xiii)), in an
amount equal to the amount of such excess, and the Borrower shall
concurrently therewith deliver to the Administrative
54
Agent an Officers' Certificate demonstrating the derivation of the
additional amounts resulting in such excess and specifying the application
thereof as provided above.
(IX) INCOMPLETE SETTLEMENT. If any Lender shall for any reason
---------------------
fail to pay any amount payable by it (including the funding of any
participation in any Swing Line Loans), or fail to make any Revolving Loan
to be made by it, pursuant to Section 2.02(f), the Borrower shall, on
demand by the Administrative Agent, prepay the Swing Line Loans then
outstanding in an amount equal to such amount.
(X) REDUCTION OF SWING LINE COMMITMENTS. The Swing Line
-----------------------------------
Commitment shall be (i) terminated automatically and simultaneously upon
any termination in whole of the Revolving Commitments, and (ii) reduced
ratably in an aggregate amount equal to the amount by which, as a result of
any partial reduction of the Revolving Commitments of the Lenders, the
aggregate Revolving Commitments of the Lenders are reduced below the Swing
Line Sublimit.
(XI) LETTER OF CREDIT CASH COLLATERAL. If, at any time, the
--------------------------------
Letter of Credit Usage exceeds the Letter of Credit Sublimit in effect at
such time, the Borrower shall immediately pay to the Administrative Agent,
in same day funds, for deposit in the Letter of Credit Cash Collateral
Account an amount sufficient to cause the aggregate amount on deposit in
such account to equal the amount of such excess.
(XII) REDUCTION OF LETTER OF CREDIT SUBFACILITY. The Letter of
-----------------------------------------
Credit Sublimit shall be permanently reduced from time to time on the date
of each reduction in the Revolving Facility by the amount, if any, by which
the amount of the Letter of Credit Sublimit exceeds the Revolving Facility
after giving effect to such reduction of the Revolving Facility.
(XIII) APPLICATION OF MANDATORY PREPAYMENTS.
------------------------------------
(A) Except as otherwise specifically set forth in clauses
(vi), (vii) and (xi) above, all prepayments under this Section 2.04(c)
shall be applied as follows:
(1) subject to clause (2) below, each prepayment under
this Section 2.04(c) shall be applied first to the prepayment of
-----
the Term A Loans and Term B Loans to the full extent thereof on a
pro rata basis in direct order of maturity (and pro rata among the
Term A Lenders and Term B Lenders, respectively, as applicable)
and second, to prepay outstanding Revolving Loans and permanently
------
reduce the Revolving Commitments (it being understood that the
Revolving Commitments shall be reduced by the full amount of any
such required prepayment whether or not any Revolving Loans are
then outstanding); and
(2) notwithstanding the foregoing clause (1), so long
as (and to the extent that) any Term A Loans are outstanding, the
Borrower
55
may offer the Term B Lenders the option to, and any Term B Lender
may elect to, waive its ratable share of any prepayment under this
Section 2.04(c). In the event that any Term B Lender elects by
2:00 p.m. (New York City time) on the day prior to the date of
prepayment to waive such right with respect to any such prepayment
under this Section 2.04(c), 50% of that Term B Lender's ratable
share of such prepayment shall be applied to the prepayment of
Term A Loans ratably to the Term A Lenders in direct order of
maturity, and the remaining 50% of such amount shall be retained
by the Borrower. If no Term A Loans are outstanding, such option
to offer and election to waive prepayments shall not be available.
(B) Considering Term A Loans, Term B Loans and Revolving
Loans being paid separately, any prepayment thereof shall be applied
first to Base Rate Loans to the full extent thereof before application
to Eurodollar Rate Loans, in each case in a manner that minimizes the
amount of any payments required to be made by the Borrower pursuant to
9.04(c).
(C) Notwithstanding anything herein or in the Canadian
Credit Agreement to the contrary, the amount of any mandatory
prepayment of the Term B Loans under and as defined in the Canadian
Credit Agreement that would be required to be made pursuant to Section
2.04(c)(i) of the Canadian Credit Agreement except for the provisions
of Section 2.04(c)(xiii)(A)(2) of the Canadian Credit Agreement shall
be applied to prepay the Term B Loans hereunder to the extent such
Term B Loans are outstanding.
(D) INTEREST PAYABLE ON AMOUNTS PREPAID. All prepayments of Eurodollar
-----------------------------------
Rate Loans under this Section 2.04 shall be made together with accrued interest
to the date of such prepayment on the principal amount prepaid.
SECTION 2.05. INTEREST.
--------
The Borrower shall pay interest on the unpaid principal amount of each
Loan from the date of such Loan until such principal is paid in full at the
applicable rate set forth below.
(A) INTEREST ON BASE RATE LOANS. Except to the extent that the
---------------------------
Borrower shall elect to pay interest on all or any part of any Loan made or to
be made to the Borrower under Section 2.01 for any Interest Period pursuant to
subsections (b) and (c) of this Section 2.05, the Borrower shall pay interest on
the unpaid principal amount of each Loan, from the date of such Loan until such
principal amount is paid in full, (i) payable quarterly in arrears on the last
Business Day of each March, June, September and December, commencing March 31,
1999, and (ii) (A) with respect to Revolving Loans and Swing Line Loans, on the
Revolving Commitment Termination Date, (B) with respect to Term A Loans, on the
Term A Termination Date and (C) with respect to Term B Loans, on the Term B
Termination Date, in each case at a fluctuating interest rate per annum equal
(subject to Section 2.05(d)), to the sum of the Base Rate in effect
56
from time to time plus the Applicable Base Rate Margin for such Type of Loan in
----
effect from time to time.
(B) INTEREST PERIODS FOR EURODOLLAR RATE LOANS. The Borrower may,
------------------------------------------
pursuant to Section 2.05(c), elect to have the interest on the principal amount
of all or any portion of any Loans made or to be made to the Borrower under
Section 2.01, in each case ratably according to the respective outstanding
principal amounts of Loans of the same Type owing to each Lender (each such
principal amount owing to a Lender as to which such election has been made being
a "EURODOLLAR RATE LOAN" owing to such Lender) determined and payable for a
--------------------
specified period (an "INTEREST PERIOD" for such Eurodollar Rate Loan) in
---------------
accordance with Section 2.05(c); provided, however, that the Borrower may not
-------- -------
(i) make any such election with respect to any Swing Line Loans, or (ii) have
more than nine Eurodollar Rate Loans owing to any Lender outstanding at any one
time. Each Interest Period shall be one, two, three, or six months, at the
Borrower's election pursuant to Section 2.05(c); provided, however, that:
-------- -------
(i) the first day of an Interest Period for any Eurodollar Rate
Loan shall be either the last day of any then current Interest Period for
such Loan or, if there shall be no then current Interest Period for such
Loan, any Business Day;
(ii) the Borrower may not select any Interest Period that ends
after any principal repayment installment date unless, after giving effect
to such selection, the aggregate principal amount of Base Rate Loans and of
Eurodollar Rate Loans having Interest Periods that end on or prior to such
principal repayment installment date shall be at least equal to the
aggregate principal amount of Loans due and payable on or prior to such
date;
(iii) whenever the last day of any Interest Period would otherwise
occur on a day other than a Business Day, the last day of such Interest
Period shall be extended to occur on the next succeeding Business Day;
provided, however, that if such extension would cause the last day of such
-------- -------
Interest Period to occur in the next following month, the last day of such
Interest Period shall occur on the next preceding Business Day;
(iv) whenever the first day of any Interest Period occurs on a
day of the month for which there is no numerically corresponding day in the
calendar month that succeeds such initial calendar month by the number of
months equal to the number of months in such Interest Period, such Interest
Period shall end on the last Business Day of such succeeding calendar
month; and
(v) for any Interest Period of six months, the Borrower shall
pay interest on the three-month anniversary and at maturity.
(C) INTEREST ON EURODOLLAR RATE LOANS. The Borrower may from time to
---------------------------------
time, on the condition that no Default or Event of Default has occurred and is
continuing, and subject to the provisions of Sections 2.05(b) and 2.05(e), elect
to pay interest on all or any portion of any Loans of the same Type during any
Interest Period therefor at a rate per annum equal to the sum of the Eurodollar
Rate for such Interest Period for such Loans plus the
57
Applicable Eurodollar Rate Margin in effect from time to time, in a Notice of
Borrowing or Notice of Conversion/Continuation, specifying the Type and amount
of the Loans as to which such election is made (which amount shall aggregate at
least $1,000,000 or any integral multiple of $100,000 in excess thereof) and the
first day and duration of such Interest Period, which notice shall be received
by the Administrative Agent before 11:00 a.m. (New York City time) three
Business Days prior to the first day of such Interest Period. If the Borrower
has made such election for Eurodollar Rate Loans for any Interest Period, the
Borrower shall pay interest on the unpaid principal amount of such Eurodollar
Rate Loans during such Interest Period, payable in arrears on the last Business
Day of such Interest Period and, in the case of any Interest Period which is
longer than three months, on each three month anniversary of the first day of
such Interest Period, in each case at a rate equal, subject to Section 2.05(d),
to the sum of the Eurodollar Rate for such Interest Period for such Eurodollar
Rate Loans plus the Applicable Eurodollar Rate Margin for such Type of Loan in
effect from time to time during such Interest Period. On the last day of each
Interest Period for any Eurodollar Rate Loan, the unpaid principal balance
thereof shall, subject to Section 2.05(e), automatically become and bear
interest as a Eurodollar Rate Loan with an Interest Period of one month, except
to the extent that the Borrower has elected in a Notice of
Conversion/Continuation to pay interest on all or any portion of such amount for
a new Interest Period commencing on such day in accordance with this Section
2.05(c) or to convert such amount to a Base Rate Loan. Each notice by the
Borrower under this Section 2.05(c) shall be irrevocable upon receipt by the
Administrative Agent, and the Borrower shall indemnify each Lender against any
loss, cost or expense incurred by such Lender as a result of any failure to
fulfill on or before the date specified by such Notice of Borrowing or Notice of
Conversion/Continuation the applicable conditions set forth in this Section
2.05(c) or Article IV, including, without limitation, any loss, cost or expense
incurred by reason of the liquidation or reemployment of deposits or other funds
acquired by such Lender to fund any such Eurodollar Rate Loan when such
Eurodollar Rate Loan, as a result of such failure, is not made or does not
become effective.
(D) DEFAULT INTEREST. Upon the occurrence and during the continuance
----------------
of an Event of Default, the Borrower shall, at the dates set forth herein for
the payment of interest and upon demand, (i) pay interest on each then
outstanding Base Rate Loan at a rate per annum equal at all times to the rate
otherwise applicable to such Base Rate Loans plus 2.00% per annum, (ii) pay
interest on each then outstanding Eurodollar Rate Loan at a rate per annum equal
at all times to the rate otherwise applicable to such Eurodollar Rate Loan plus
2.00% per annum, and (iii) pay interest on all other amounts owing hereunder not
paid when due at a rate per annum (the "DEFAULT RATE") equal at all times to the
------------
rate otherwise applicable to Term B Loans that are Base Rate Loans plus 2.00%
----
per annum.
(E) SUSPENSION OF EURODOLLAR RATE LOANS.
-----------------------------------
(I) ILLEGALITY. Notwithstanding any other provision of this
----------
Agreement, if the introduction of or any change in or in the interpretation
of any law or regulation shall make it unlawful, or any central bank or
other governmental authority shall assert that it is unlawful, for any
Lender or its Eurodollar Lending Office to perform its obligations
hereunder to make Eurodollar Rate Loans or to continue to fund or maintain
58
Eurodollar Rate Loans hereunder, then, on notice thereof and demand
therefor by such Lender to the Borrower through the Administrative Agent,
(i) each Eurodollar Rate Loan under each Facility under which such Lender
has any outstanding Loans will automatically, upon such demand, Convert
into a Base Rate Loan and (ii) the obligation of the Appropriate Lenders to
make, or to Convert Loans into, Eurodollar Rate Loans shall be suspended
until the Administrative Agent shall notify the Borrower that such Lender
has determined that the circumstances causing such suspension no longer
exist.
(II) OTHER CIRCUMSTANCES. If, with respect to any Eurodollar Rate
-------------------
Loans of any Type, (A) the Administrative Agent shall determine in good
faith (which determination shall be conclusive) that the Eurodollar Rate
cannot be determined in accordance with the definition thereof, or (B)
Lenders owed or to be owed at least 51% of the then aggregate unpaid
principal amount thereof notify the Administrative Agent that the
Eurodollar Rate for any Interest Period for such Loans will not adequately
reflect the cost to such Lenders of making, funding or maintaining their
Eurodollar Rate Loans for such Interest Period, the Administrative Agent
shall forthwith so notify the Borrower and the Appropriate Lenders,
whereupon (i) each such Eurodollar Rate Loan will automatically, on the
last day of the then existing Interest Period therefor, Convert into a Base
Rate Loan and (ii) the obligation of the Appropriate Lenders to make, or to
Convert Loans into, Eurodollar Rate Loans shall be suspended until the
Administrative Agent shall notify the Borrower that such Lenders have
determined that the circumstances causing such suspension no longer exist.
(III) SUSPENSION ON EVENT OF DEFAULT. Without limiting any other
------------------------------
provision hereof, upon the occurrence and during the continuance of any
Event of Default, (i) each Eurodollar Rate Loan will automatically, on the
last day of the then existing Interest Period therefor, Convert into a Base
Rate Loan and (ii) the obligation of the Lenders to make, or to Convert
Loans into, Eurodollar Rate Loans shall be suspended.
(IV) LENDERS' OBLIGATION TO NOTIFY ADMINISTRATIVE AGENT. If any
--------------------------------------------------
Lender shall give notice to the Administrative Agent under Section
2.05(e)(i) or (ii) and such Lender shall thereafter determine that the
circumstances causing such notice no longer exist, such Lender shall
promptly give written notice thereof to the Administrative Agent, and the
Administrative Agent shall thereafter give notice thereof to the Borrower
and the other Lenders.
59
SECTION 2.06. FEES.
----
(A) COMMITMENT FEES. The Borrower agrees to pay to the Administrative
---------------
Agent a commitment fee on the average daily Unused Revolving Commitment of each
Revolving Lender, for the account of such Lender, from the Closing Date in the
case of each Revolving Lender that is an Initial Lender and from the effective
date specified in the Assignment and Acceptance pursuant to which it became a
Revolving Lender in the case of each other Revolving Lender, in each case until
the Revolving Commitment Termination Date, at a rate per annum equal to 0.50%,
payable quarterly in arrears on the last Business Day of each March, June,
September and December, commencing March 31, 1999, and on the Revolving
Commitment Termination Date.
(B) LETTER OF CREDIT FEES. The Borrower agrees to pay the Letter of
---------------------
Credit fees set forth in Section 3.05.
(C) OTHER FEES. The Borrower agrees to pay to the Lead Arranger and
----------
the Administrative Agent, for their own respective accounts (i) the fees in the
amounts and at the times set forth in the confidential letter dated January 4,
1999 from the Syndication Agent, the Lead Arranger and the Administrative Agent
to the Borrower and Panolam Canada, and agreed to and accepted by the Borrower
and Panolam Canada, and (ii) such other fees as may from time to time be agreed
between the Borrower and the Administrative Agent, the Syndication Agent or the
Lead Arranger.
(D) ABSOLUTE OBLIGATION. The Borrower's obligation hereunder to pay
-------------------
the fees referred to in this Section 2.06 shall be absolute and unconditional
and shall survive the making and repayment of Loans, the termination of all
Letter of Credit Obligations and the termination of this Agreement. All fees
which are due or become due pursuant to this Section 2.06 are nonrefundable.
SECTION 2.07. INCREASED COSTS, ETC.
--------------------
(A) INCREASED COSTS. If, due to either (i) the introduction of or any
---------------
change in or in the interpretation of any law or regulation or (ii) the
compliance with any guideline or request from any central bank or other
governmental authority, including without limitation, the National Association
of Insurance Commissioners (whether or not having the force of law), there shall
be any increase in the cost to any Lender Party of agreeing to make or of
making, funding or maintaining Eurodollar Rate Loans or of agreeing to Issue or
of Issuing or maintaining Letters of Credit (or of agreeing to purchase or
purchasing participations therein) or of agreeing to pay or of paying any Letter
of Credit Drawings (or of agreeing to purchase or purchasing participations
therein), then the Borrower shall from time to time, upon demand by such Lender
Party (with a copy of such demand to the Administrative Agent), pay to the
Administrative Agent for the account of such Lender Party additional amounts
sufficient to compensate such Lender Party on an after-tax basis for such
increased cost. A certificate as to the amount of such increased cost, submitted
to the Borrower by such Lender Party, shall be conclusive and binding for all
purposes, absent manifest error.
60
(B) CAPITAL REQUIREMENTS. If, due to either (i) the
--------------------
introduction of or any change in or in the interpretation of any law or
regulation or (ii) the compliance with any guideline or request from any central
bank or other governmental authority, including without limitation, the National
Association of Insurance Commissioners (whether or not having the force of law),
there shall be any increase in the amount of capital required or expected to be
maintained by such Lender Party or any corporation controlling such Lender Party
as a result of or based upon the existence of such Lender Party's commitment to
lend or to Issue or purchase participations in Letters of Credit hereunder and
other commitments of such type or the Issuance or maintenance of the Letters of
Credit (or similar contingent obligations), then, upon demand by such Lender
Party (with a copy of such demand to the Administrative Agent), the Borrower
shall pay to the Administrative Agent for the account of such Lender Party, from
time to time as specified by such Lender Party, additional amounts sufficient to
compensate such Lender Party on an after-tax basis in the light of such
circumstances, to the extent that such Lender Party reasonably determines such
increase in capital to be allocable to the existence of such Lender Party's
commitment to lend or to Issue or participate in Letters of Credit hereunder or
to the Issuance or maintenance of or participation in any Letters of Credit. A
certificate as to such amounts submitted to the Borrower by such Lender Party
shall be conclusive and binding for all purposes, absent manifest error.
(C) REPLACEMENT OF LENDER IN RESPECT OF INCREASED COSTS.
---------------------------------------------------
Within 15 days after receipt by the Borrower of written notice and demand from
any Lender Party for payment of additional amounts or increased costs as
provided in Section 2.07(a), Section 2.07(b) or Section 2.09(a), or of written
notice from any Lender under Section 2.05(e)(i) (in each case, an "AFFECTED
--------
LENDER"), Borrower may, at its option, notify the Administrative Agent and such
------
Affected Lender of its intention to replace the Affected Lender. So long as no
Default or Event of Default shall have occurred and be continuing, and so long
as such demand for such payment of additional amounts or increased costs has not
been withdrawn, the Borrower, with the consent of the Administrative Agent, may
obtain, at the Borrower's expense, a replacement Lender ("REPLACEMENT LENDER")
------------------
for the Affected Lender, which Replacement Lender must be reasonably
satisfactory to the Administrative Agent. If the Borrower obtains a Replacement
Lender within 120 days following notice of its intention to do so, the Affected
Lender must sell and assign its Loans and Commitments to such Replacement Lender
for an amount equal to the principal balance of all Loans held by the Affected
Lender and all accrued interest and fees with respect thereto through the date
of such sale, provided that the Borrower shall have reimbursed such Affected
--------
Lender for the additional amounts or increased costs that it is entitled to
receive under this Agreement through the date of such sale and assignment and
provided further that if such Affected Lender is an Issuing Bank, cash
----------------
collateral or other arrangements satisfactory to such Affected Lender shall have
been provided with respect to each outstanding Letter of Credit issued by such
Issuing Bank.
SECTION 2.08. PAYMENTS AND COMPUTATIONS.
-------------------------
(A) PAYMENTS BY BORROWER. The Borrower shall make each
--------------------
payment hereunder and under any other Loan Document to which it is a party,
irrespective of and without condition or deduction for any counterclaim,
defense, recoupment or setoff, in lawful money of
61
the United States and in same day funds delivered to the Administrative Agent
not later than 2:00 p.m. (New York City time) on the day when due by deposit of
such funds to the Administrative Agent's Account. Any payment so delivered to
the Administrative Agent after 2:00 p.m. (New York City time) on any Business
Day, or on any day which is not a Business Day, shall be deemed received by the
Administrative Agent on the next succeeding Business Day. The Administrative
Agent will promptly after receipt of each payment cause to be distributed like
funds relating to the payment of principal, interest, commitment fees or letter
of credit fees ratably to each Appropriate Lender for the account of its
Applicable Lending Office, and like funds relating to the payment of any other
amount payable to any Lender or any Issuing Bank (including payments with
respect to Letters of Credit and payments for the account of any Lender under
Section 2.07, Section 2.09 or Section 9.04(c)) to such Lender for the account of
its Applicable Lending Office or to such Issuing Bank, in each case to be
applied in accordance with, and subject to, the terms of this Agreement,
including Section 2.08(e) below. Upon its acceptance of an Assignment and
Acceptance and recording of the information contained therein in the Register
pursuant to Section 9.07(d), from and after the effective date specified in such
Assignment and Acceptance, the Administrative Agent shall make all payments
hereunder and under any other Loan Document in respect of the interest assigned
thereby to the Lender assignee thereunder, and the parties to such Assignment
and Acceptance shall make all appropriate adjustments in such payments for
periods prior to such effective date directly between themselves.
(B) COMPUTATIONS. All calculations, comparisons, measurements
------------
and determinations under this Agreement shall be made in US Dollars and all
computations of interest, fees and commissions shall be made by the
Administrative Agent on the basis of a year of 360 days, in each case for the
actual number of days (including the first day but excluding the last day)
occurring in the period for which such interest, fees or commissions are
payable; provided that if any Loan is repaid on the same day on which it is
--------
made, one day's interest shall be paid on such Loan. Each determination by the
Administrative Agent of an interest rate, fee, commission or discount rate
hereunder shall be conclusive and binding for all purposes, absent manifest
error.
(C) PAYMENTS ASSUMED. Unless the Administrative Agent shall
----------------
have received notice from the Borrower prior to the date on which any payment is
due to the Lenders or any Issuing Bank hereunder that the Borrower will not make
such payment in full, the Administrative Agent may assume that the Borrower has
made such payment in full to the Administrative Agent on such date and the
Administrative Agent may, in reliance upon such assumption, but shall not be
required to, cause to be distributed to each Lender or such Issuing Bank on such
due date an amount equal to the amount then due to such Lender or such Issuing
Bank. If and to the extent that the Borrower shall not have so made such payment
in full to the Administrative Agent, each Lender and Issuing Bank shall repay to
the Administrative Agent forthwith on demand such amount distributed to such
Lender or Issuing Bank together with interest thereon, for each day from the
date such amount is distributed to such Lender or Issuing Bank until the date
such Lender or Issuing Bank repays such amount to the Administrative Agent, at
the Federal Funds Rate.
62
(D) APPLICATION OF PAYMENTS SPECIFIED BY THE BORROWER. Except
-------------------------------------------------
as otherwise specified herein, so long as no Event of Default has occurred and
is continuing, all payments shall be applied as instructed by the Borrower
(except that, unless the Administrative Agent otherwise consents, outstanding
Swing Line Loans shall be prepaid before prepayment of any Revolving Loans) if
such instructions are received by the Administrative Agent prior to or
contemporaneously with receipt of funds therefor.
(E) APPLICATION OF PAYMENTS NOT OTHERWISE SPECIFIED. If the
-----------------------------------------------
Administrative Agent receives funds for application to the Loans or any Letter
of Credit Obligations or other Obligations of the Borrower under the Loan
Documents under circumstances for which the Loan Documents do not specify the
Loans or the Facility or the Obligations to which, or the manner in which, such
funds are to be applied, the Administrative Agent shall apply such funds in such
manner as it shall determine or as otherwise directed by the Required Lenders.
(F) PAYMENTS ON BUSINESS DAYS. Whenever any payment hereunder
-------------------------
or under any other Loan Document shall be stated to be due on a day other than a
Business Day, such payment shall be made on the next succeeding Business Day,
and such extension of time shall in such case be included in the computation of
payment of interest and commitment and other fees; provided, however, if such
-------- -------
extension would cause payment of interest on or principal of any Eurodollar Rate
Loan to be made in the next following month, such payment shall be made on the
next preceding Business Day.
(G) CERTAIN TERMS. The terms "pay", "paid" or "payment" under
-------------
this Agreement shall include prepay, prepaid or prepayment, respectively, under
this Agreement, and the term "due" under this Agreement shall include due by
reason of a mandatory prepayment (including upon an actual or deemed entry of an
order for relief with respect to any Credit Party under the United States
Bankruptcy Code or upon acceleration).
SECTION 2.09. TAXES.
-----
(A) WITHHOLDING TAXES. Except as otherwise provided in this
-----------------
Section 2.09, any and all payments by the Borrower hereunder or under the Notes
(if any) to any Lender Party or the Administrative Agent, shall be made, in
accordance with Section 2.08, free and clear of and without deduction for any
Taxes. Except as otherwise provided in this Section 2.09, if the Borrower shall
be required by law to deduct any Taxes from or in respect of any sum payable
hereunder or under any Note to any Lender Party or the Administrative Agent, (i)
the sum payable shall be increased as may be necessary so that after making all
required deductions (including deductions applicable to additional sums payable
under this Section 2.09) such Lender Party or the Administrative Agent (as the
case may be) receives an amount equal to the sum it would have received had no
such deductions been made, (ii) the Borrower shall make such deductions and
(iii) the Borrower shall pay the full amount deducted to the relevant taxation
authority or other authority in accordance with applicable law.
(B) OTHER TAXES. In addition, the Borrower shall pay any
-----------
present or future stamp, documentary, excise, property or similar taxes, charges
or levies that arise from any
63
payment made hereunder or under any other Loan Document or from the execution,
delivery or registration of, or otherwise with respect to, this Agreement or any
other Loan Document (hereinafter referred to as "OTHER TAXES").
-----------
(C) INDEMNIFICATION. Except as otherwise provided in this
---------------
Section 2.09, the Borrower shall indemnify each Lender Party and the
Administrative Agent for the full amount of Taxes and Other Taxes, and for the
full amount of Taxes and Other Taxes imposed by any jurisdiction on amounts
payable under this Section 2.09, paid by such Lender Party or the Administrative
Agent (as the case may be) and any liability (including penalties, additions to
tax, interest and expenses) arising therefrom or with respect thereto. This
indemnification shall be made within 30 days from the date such Lender Party or
the Administrative Agent (as the case may be) makes written demand therefor.
(D) EVIDENCE OF PAYMENT. Within 30 days after the date of any
-------------------
payment of Taxes, the Borrower shall furnish to the Administrative Agent, at its
address referred to in Section 8.02, the original receipt of payment thereof or
a certified copy of such receipt. In the case of any payment hereunder or under
the Notes (if any), by the Borrower through an account or branch outside the
United States or on behalf of the Borrower by a payor that is not a United
States Person, if the Borrower determines that no Taxes are payable in respect
thereof, the Borrower shall furnish, or shall cause such payor to furnish, to
the Administrative Agent, at such address, an opinion of counsel acceptable to
the Administrative Agent stating that such payment is exempt from Taxes. For
purposes of this subsection (d) and subsection (e), the terms "UNITED STATES"
-------------
and "UNITED STATES PERSON" shall have the meanings specified in Section 7701 of
--------------------
the Internal Revenue Code.
(E) FOREIGN LENDERS AND ISSUING BANKS. Each Lender, assignee
---------------------------------
of a Lender, participant under a participation and SPV organized under the laws
of a jurisdiction outside the United States shall, on or prior to the date of
its execution and delivery of this Agreement in the case of each Initial Lender,
and on the date of the Assignment and Acceptance pursuant to which it became a
Lender in the case of each other Lender, and on the date the party acquires any
interest in the Loans or Notes of a Lender in the case of any other party
referred to above, and from time to time thereafter upon the reasonable request
in writing by the Borrower or the Administrative Agent (but only so long
thereafter as such Lender or other party remains lawfully able to do so),
provide the Administrative Agent and the Borrower with (a) if such Lender is a
"bank" within the meaning of Section 881(c)(3)(A) of the Code, Internal Revenue
Service form 1001 (or W-8BEN) or 4224 (or W-8ECI), as appropriate, or any
successor form prescribed by the Internal Revenue Service, certifying that such
Lender or other party is exempt from United States withholding tax on payments
under this Agreement or the Notes (if any) or, (b) if such Lender is not a
"bank" within the meaning of Section 881(c)(3)(A) of the Code and intends to
claim exemption from U.S. federal withholding tax under Section 871(h) or 881(c)
of the Code with respect to payments of "portfolio interest", a Form W-8, or any
subsequent versions thereof or successors thereto (and, if such non-U.S. Lender
delivers a Form W-8, a certificate representing that such non-U.S. Lender is not
a bank for purposes of Section 881(c) of the Code, is not a 10% shareholder
(within the meaning of Section 871(h)(3)(B) of the Code) of the Borrower and is
not a controlled foreign corporation related to the Borrower (within the meaning
of Section 864(d)(4)
64
of the Code)), properly completed and duly executed by such non-U.S. Lender
claiming complete exemption from, or a reduced rate of, U.S. federal withholding
tax on payments of interest by the Borrower under this Agreement and the other
Loan Documents. If any form or document referred to in this Section 2.09(e)
requires the disclosure of information, other than information necessary to
compute the tax payable and information required on the date hereof by Internal
Revenue Service form 1001 (or W-8BEN) or 4224 (or W-8ECI) or other such
certificate or form that the Lender reasonably considers to be confidential, the
Lender shall give notice thereof to the Borrower and shall not be obligated to
include in such form or document such confidential information.
(F) FAILURE TO PROVIDE FORMS. For any period with respect to
------------------------
which a Lender or the Administrative Agent or other pertinent party has failed
to provide the Borrower with the appropriate form described in Section 2.09(e)
establishing an exemption from withholding tax (other than if such failure is
----- ----
due to a change in law occurring after the date on which a form originally was
required to be provided), such Lender or the Administrative Agent shall not be
entitled to any payments or amounts from the Borrower under Section 2.09(a) or
indemnification under Section 2.09(c) with respect to Taxes imposed by the
United States; provided, however, that should a Lender become subject to Taxes
-------- -------
because of its failure to deliver a form required hereunder, the Borrower shall
take such steps as such Lender or the Administrative Agent shall reasonably
request to assist such Lender or the Administrative Agent to recover such Taxes.
Further, no party shall be entitled to any payments or amounts under Section
2.09(a) or indemnification under Section 2.09(c) except as a result of a change
in law occurring after such party acquired any interest in the Loans or the
Notes. The foregoing sentence shall not apply to the extent of any payments,
amounts or indemnification that the assignor to such party was entitled at the
time of assignment or other transfer.
(G) SURVIVAL. Without prejudice to the survival of any other
--------
agreement of the Borrower hereunder, the agreements and obligations of the
Borrower contained in this Section 2.09 shall survive the payment in full of
principal and interest hereunder and under the Notes (if any).
(H) CHANGE OF LENDING OFFICE. If the Borrower is required to
------------------------
pay any additional amount to a Lender, the Administrative Agent or any taxing
authority for the account of any Lender or the Administrative Agent pursuant to
this Section 2.09, the Borrower shall have the right, upon notice to such Lender
or the Administration Agent, as applicable, to require such Lender or the
Administrative Agent, as applicable, to use reasonable efforts to designate a
different lending office for funding or booking its loan (or any loan
participation) hereunder or to assign its rights and obligations hereunder to
another of its offices, branches or Affiliates, if, in the sole judgment of such
Lender or the Administrative Agent, as applicable, such designation or
assignment (A) would eliminate or reduce amounts payable pursuant to Section
2.09, as the case may be, in the future and (B) would not cause such Lender or
the Administrative Agent, as applicable, to suffer any economic, legal or
regulatory disadvantage. With respect to the foregoing, the Borrower hereby
agrees to pay on demand all reasonable costs and expenses incurred by any Lender
or the Administrative Agent, as applicable, in connection with any such
designation or assignment.
65
SECTION 2.10. SHARING OF PAYMENTS, ETC.
------------------------
If any Lender Party shall obtain at any time any payment
(whether voluntary, involuntary, through the exercise of any right of set-off,
or otherwise) (a) on account of Obligations due and payable to such Lender Party
hereunder and under the Notes (if any) at such time in excess of its ratable
share (according to the proportion of (i) the amount of such Obligations due and
payable to such Lender Party at such time to (ii) the aggregate amount of the
Obligations due and payable to all Lender Parties hereunder and under the Notes
(if any) at such time) of payments on account of the Obligations due and payable
to all Lender Parties hereunder and under the Notes (if any) at such time
obtained by all the Lender Parties at such time or (b) on account of Obligations
owing (but not due and payable) to such Lender Party hereunder and under the
Notes (if any) at such time in excess of its ratable share (according to the
proportion of (i) the amount of such Obligations owing to such Lender Party at
such time to (ii) the aggregate amount of the Obligations owing (but not due and
payable) to all Lender Parties hereunder and under the Notes (if any) at such
time) of payments on account of the Obligations owing (but not due and payable)
to all Lender Parties hereunder and under the Notes (if any) at such time
obtained by all the Lender Parties at such time, such Lender Party shall
forthwith purchase from the other Lender Parties such participations in the
Obligations due and payable or owing to them, as the case may be, as shall be
necessary to cause such purchasing Lender Party to share the excess payment
ratably with each of them; provided, however, that if all or any portion of such
-------- -------
excess payment is thereafter recovered from such purchasing Lender Party, such
purchase from each other Lender Party shall be rescinded and such other Lender
Party shall repay to the purchasing Lender Party the purchase price to the
extent of such other Lender Party's ratable share (according to the proportion
of (i) the purchase price paid to such Lender Party to (ii) the aggregate
purchase price paid to all Lender Parties) of such recovery together with an
amount equal to such Lender Party's ratable share (according to the proportion
of (i) the amount of such other Lender Party's required repayment to (ii) the
total amount so recovered from the purchasing Lender Party) of any interest or
other amount paid or payable by the purchasing Lender Party in respect of the
total amount so recovered. The Borrower agrees that any Lender Party so
purchasing a participation from another Lender Party pursuant to this Section
2.10 may, to the fullest extent permitted by law, exercise all its rights of
payment (including the right of set-off) with respect to such participation as
fully as if such Lender Party were the direct creditor of the Borrower in the
amount of such participation.
SECTION 2.11. USE OF PROCEEDS.
---------------
(A) TERM LOANS. The proceeds of the Term Loans shall be
----------
applied by the Borrower to fund the Pioneer Acquisition Consideration payable at
the closing thereof, to refinance all existing indebtedness (except the Domtar
Note and Capital Leases) of Holdings and its Subsidiaries (including Pioneer),
including the repayment in full of all amounts outstanding under the Existing
Credit Agreement, and to pay related fees and expenses of the Transactions.
(B) REVOLVING LOANS; SWING LINE LOANS. The proceeds of
---------------------------------
Revolving Loans and of Swing Line Loans shall be available to the Borrower (and
the Borrower agrees that it shall use such proceeds) to provide working capital
for the Borrower and its Subsidiaries, to fund
66
Permitted Acquisitions by the Borrower and its Subsidiaries, to fund the payment
of earn-out amounts pursuant to Section 2(e)(v) of the Pioneer Acquisition
Agreement and, subject to the provisions of this Agreement and the other Loan
Documents, for other general corporate purposes of the Borrower and its
Subsidiaries.
SECTION 2.12. EVIDENCE OF DEBT.
----------------
(A) MAINTENANCE OF ACCOUNTS BY LENDERS. Each Lender shall
----------------------------------
maintain in accordance with its usual practice an account or accounts evidencing
the indebtedness of the Borrower to such Lender resulting from each Loan owing
to such Lender from time to time, including the amounts of principal and
interest payable and paid to such Lender from time to time hereunder.
(B) MAINTENANCE OF ACCOUNTS BY ADMINISTRATIVE AGENT. The
-----------------------------------------------
Register maintained by the Administrative Agent pursuant to Section 9.07(c)
shall include a control account, and a subsidiary account for each Lender, in
which accounts (taken together) shall be recorded (i) the date and amount of
each Borrowing made hereunder, the Type and Interest Type of the Loans
comprising such Borrowing and any Interest Period applicable thereto, (ii) the
terms of each Assignment and Acceptance delivered to and accepted by it, (iii)
the amount of any principal or interest due and payable or to become due and
payable from the Borrower to each Lender hereunder, and (iv) the amount of any
sum received by the Administrative Agent from or on behalf of the Borrower
hereunder and each Lender's share thereof. The entries made in the Register
shall be conclusive and binding for all purposes, absent manifest error.
(C) EXECUTION OF PROMISSORY NOTES BY BORROWER. The Borrower
-----------------------------------------
hereby agrees that if, in the opinion of any Lender, a promissory note or other
evidence of debt is required, appropriate or desirable to reflect or enforce the
indebtedness of the Borrower resulting from the Term Loans, Revolving Loans or
Swing Line Loans made, or to be made, by such Lender, then upon request of such
Lender, the Borrower shall promptly execute and deliver to such Lender, for each
of the Loans made or to be made by such Lender, a promissory note substantially
in the forms of Exhibit VII-A for Revolving Loans, Exhibit VII-B for Term A
------------- -------------
Loans, Exhibit VII-C for Term B Loans and Exhibit VII-D for Swing Line Loans,
------------- -------------
each payable to the order of such Lender in an amount equal to the Term Loans,
Revolving Commitment or Swing Line Commitment (as the case may be) of such
Lender.
ARTICLE III.
AMOUNTS AND TERMS OF LETTERS OF CREDIT
SECTION 3.01. THE LETTER OF CREDIT SUBFACILITY. The Borrower
--------------------------------
may request any Lender, on the terms and conditions herein set forth, to Issue,
and any such Lender may, if in its sole discretion it elects to do so, and the
Letter of Credit Bank shall, if no other Lender elects to do so, Issue Letters
of Credit for the account of the Borrower (the "LETTER OF CREDIT SUBFACILITY")
----------------------------
from time to time on any Business Day during the period after the Closing Date
until 30 days prior to the Revolving Commitment Termination Date; provided that
--------
(i) the aggregate amount for all Letters of Credit outstanding shall not exceed
at any time the lesser of (a) $4,000,000 (the "LETTER OF CREDIT SUBLIMIT") and
-------------------------
(b) the Net Borrowing Availability and
67
(ii) the amount of each such Letter of Credit to be Issued shall not exceed the
Unused Revolving Commitments of the Lenders on the Business Day of its Issuance.
No Letter of Credit shall have an expiration date (including all rights of the
Borrower or the beneficiary to require renewal) later than the earlier of (i)
the Revolving Commitment Termination Date and (ii) one year from the date of
Issuance thereof. Within the limits of the Letter of Credit Subfacility, and
subject to the limits referred to above, the Borrower may request the Issuance
of one or more Letters of Credit under this Section 3.01, repay amounts due
resulting from Letter of Credit Drawings thereunder pursuant to Section 3.03,
and request the Issuance of one or more additional Letters of Credit under this
Section 3.01.
SECTION 3.02. ISSUANCE OF LETTERS OF CREDIT.
-----------------------------
(A) NOTICE OF ISSUANCE. Each Letter of Credit shall be Issued
------------------
pursuant to a Notice of Issuance, which must be received by the Administrative
Agent and the Issuing Bank not later than 2:00 p.m. (New York City time) on the
third Business Day prior to the date of the proposed Issuance of such Letter of
Credit (or such shorter period as may be acceptable to the applicable Issuing
Bank). Each such Notice of Issuance shall specify whether such Letter of Credit
is to be a Standby Letter of Credit or a Trade Letter of Credit and shall
further specify therein the requested (i) date of such Issuance (which shall be
a Business Day), (ii) amount of such Letter of Credit, (iii) expiration date of
such Letter of Credit, (iv) name and address of the beneficiary of such Letter
of Credit, and (v) form of such Letter of Credit, and shall be accompanied by
such customary application and agreement for letter of credit of the Issuing
Bank (a "LETTER OF CREDIT AGREEMENT") as the Issuing Bank may specify to the
--------------------------
Borrower for use in connection with such requested Letter of Credit.
(B) CONDITIONS TO ISSUANCE. If (i) the requested form of such
----------------------
Letter of Credit is acceptable to the Administrative Agent and the Issuing Bank
in the reasonable discretion of each, (ii) in the case of any Issuing Bank other
than the Letter of Credit Bank, such Issuing Bank elects in its sole discretion
to Issue the requested Letter of Credit, and (iii) such Issuing Bank has not
received notice from the Administrative Agent or any Revolving Lender that the
Issuance of such Letter of Credit is not authorized because such Issuance would
not comply with the requirements of Section 3.01 or one or more of the
conditions set forth in Section 4.02 has not been satisfied, then such Issuing
Bank will, upon fulfillment of the applicable conditions set forth in Section
4.02 (which fulfillment such Issuing Bank may assume in the absence of actual
knowledge, or notice received from the Borrower, the Administrative Agent or any
Revolving Lender, to the contrary) and subject to the provisions of this Article
III, make such Letter of Credit available to the Borrower at its office referred
to in Section 9.02 or as otherwise agreed upon with the Borrower in connection
with such Issuance. In the event and to the extent that the provisions of any
Letter of Credit Agreement shall conflict with this Agreement, the provisions of
this Agreement shall govern.
(C) REPORTS BY ISSUING BANKS. Each Issuing Bank shall furnish
------------------------
to the Administrative Agent (who shall furnish a copy to each Revolving Lender)
(i) on the fifth Business Day of each month a written report summarizing
Issuance and expiration dates of Letters of Credit Issued by such Issuing Bank
during the preceding month and all Letter of Credit
68
Drawings during such month under all Letters of Credit Issued by such Issuing
Bank, and (ii) two Business Days prior to the last Business Day of each March,
June, September and December, a written report setting forth the average daily
Letter of Credit Usage during the preceding calendar quarter of all Letters of
Credit Issued by such Issuing Bank.
SECTION 3.03. DRAWING AND REIMBURSEMENT.
-------------------------
The Borrower agrees to reimburse the Issuing Bank under each
Letter of Credit, within one Business Day after it has notice of any Letter of
Credit Drawing paid by such Issuing Bank thereunder, for the principal amount of
such Letter of Credit Drawing, and shall pay to such Issuing Bank, on demand,
interest on the unreimbursed amount of such Letter of Credit Drawing at a rate
per annum equal to (a) from the date of such Letter of Credit Drawing to the
first Business Day after notice thereof has been given to the Borrower, the rate
applicable to Term B Loans that are Base Rate Loans in effect from time to time,
and (b) from and after such first Business Day, the Default Rate. If the
Borrower shall fail to so reimburse the Issuing Bank within one Business Day
after the Borrower receives notice that any such Letter of Credit Drawing has
been paid, then upon demand by the Issuing Bank, and whether or not a Default
has occurred and is continuing or any conditions set forth in Section 4.02 are
satisfied, each Revolving Lender shall purchase from such Issuing Bank, and such
Issuing Bank shall sell to each Revolving Lender, a participation in (equal to
such Lender's Revolving Pro Rata Share of) such unreimbursed Letter of Credit
Drawing as of the date of such purchase, by making available for the account of
such Issuing Bank, by deposit to the Administrative Agent's Account, in same day
funds, an amount equal to the portion of the unreimbursed amount of such Letter
of Credit Drawing to be funded by such Lender. Each Revolving Lender agrees to
purchase a participation in the amount of its Revolving Pro Rata Share of an
unreimbursed Letter of Credit Drawing on (A) the Business Day on which demand
therefor is made by the Issuing Bank that paid such Letter of Credit Drawing,
provided that notice of such demand is given not later than 2:00 p.m. (New York
--------
City time) on such Business Day, or (B) the first Business Day next succeeding
such demand if notice of such demand is given after such time. Upon any such
sale by an Issuing Bank to any Lender of a participation in an unreimbursed
Letter of Credit Drawing, such Issuing Bank represents and warrants to such
Lender that such Issuing Bank is the legal and beneficial owner of such interest
being assigned by it, but makes no other representation or warranty and assumes
no responsibility with respect to such Letter of Credit Drawing, the Loan
Documents or any Loan Party.
SECTION 3.04. OBLIGATIONS ABSOLUTE.
--------------------
The Obligations of the Borrower under this Agreement, any
Letter of Credit Agreement and any other agreement or instrument relating to any
Letter of Credit shall be unconditional and irrevocable, and shall be paid
strictly in accordance with the terms of this Agreement, such Letter of Credit
Agreement and such other agreements and instruments under all circumstances,
including, without limitation, the following circumstances (it being understood
that any such payment by the Borrower is without prejudice to, and does not
constitute a waiver of, any rights the Borrower might have or might acquire as a
result of the payment by any Issuing Bank of any draft or the reimbursement by
the Borrower thereof):
69
(a) any lack of validity or enforceability of this Agreement,
any Letter of Credit Agreement, any Letter of Credit or any other
agreement or instrument relating thereto (this Agreement and all of the
other foregoing being collectively referred to herein as the "LETTER OF
---------
CREDIT DOCUMENTS");
----------------
(b) any change in the time, manner or place of payment of, or
in any other term of, all or any of the Obligations of the Borrower in
respect of any Letter of Credit Document or any other amendment or
waiver of or any consent to departure from all or any of the Letter of
Credit Documents;
(c) the existence of any claim, set-off, defense or other
right that the Borrower or any of its Subsidiaries may have at any time
against any beneficiary or any transferee of a Letter of Credit (or any
Persons for whom any such beneficiary or any such transferee may be
acting), any Issuing Bank or any other Person, whether in connection
with the transactions contemplated by the Letter of Credit Documents or
any unrelated transaction;
(d) any statement or any other document presented under a
Letter of Credit proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being untrue or
inaccurate in any respect;
(e) payment by any Issuing Bank under a Letter of Credit
against presentation of a draft or certificate that does not strictly
comply with the terms of such Letter of Credit;
(f) any exchange, release or non-perfection of any Collateral
or other collateral, or any release or amendment or waiver of or
consent to departure from any guarantee, for all or any of the
Obligations of the Borrower in respect of the Letter of Credit
Documents; or
(g) any other circumstance or happening whatsoever, whether or
not similar to any of the foregoing, including, without limitation, any
other circumstance that might otherwise constitute a defense available
to, or a discharge of, the Borrower or a guarantor.
SECTION 3.05. LETTER OF CREDIT FEES.
---------------------
(a) The Borrower shall pay to the Administrative Agent:
(i) for the account of the Issuing Bank that Issues
a Letter of Credit, an issuance fee in an amount equal to 0.25% per
annum on the stated amount of such Letter of Credit, payable quarterly
in arrears after the Issuance thereof on the last Business Day of each
March, June, September and December, and on the Revolving Commitment
Termination Date; and
(ii) for the account of each Revolving Lender
according to its Revolving Pro Rata Share, a letter of credit fee with
respect to all Letters of Credit in an
70
amount equal to the Applicable Eurodollar Rate Margin then in effect
for Revolving Loans and calculated on the average daily Letter of
Credit Usage, payable quarterly in arrears on the last Business Day of
each March, June, September and December, commencing March 31, 1999,
and on the Revolving Commitment Termination Date.
For purposes of computing any fees under this Section 3.05(a), the determination
of the maximum amount available to be drawn under a Letter of Credit at any time
shall assume strict compliance with all conditions for drawing. Any fees paid
pursuant to this Section 3.05(a) are nonrefundable.
(b) The Borrower shall pay to each Issuing Bank, for its own
account and on demand, such other commissions, issuance fees, transfer
fees and other fees, charges and expenses in connection with the
Issuance, amendment, transfer, cancellation or administration of each
Letter of Credit as the Borrower and such Issuing Bank shall agree;
provided that in no event shall any Issuing Bank require, after giving
--------
effect to the amounts payable to it pursuant to Section 3.05(a) (in the
case of the Issuance of any Letter of Credit), more than the standard
fees, charges and expenses which it normally charges in connection with
such matters.
SECTION 3.06. USE OF LETTERS OF CREDIT. Any Letters of Credit
------------------------
Issued hereunder shall be used solely (a) to support Obligations of the Borrower
and its Subsidiaries not prohibited hereunder, and (b) for the purposes
described in the definition of "Trade Letter of Credit".
ARTICLE IV.
CONDITIONS OF LENDING
SECTION 4.01. CONDITIONS PRECEDENT TO INITIAL BORROWINGS. The
------------------------------------------
obligation of each Lender to make a Loan on the occasion of the initial
Borrowings on the Closing Date is subject to the following conditions precedent:
(a) the Lead Arranger, the Syndication Agent and the
Administrative Agent shall be satisfied with the final structure of the
Transactions and the terms and provisions of all Loan Documents and Related
Documents;
(b) the Subordinated Debt Documents (including, but not
limited to, all covenants, defaults, subordination and redemption provisions)
and the use of proceeds of the Subordinated Notes shall all be on terms and
conditions, and all such documentation shall be in form and substance,
satisfactory to the Lead Arranger, the Syndication Agent and the Administrative
Agent;
(c) the Pioneer Acquisition Agreement shall be in full force
and effect and shall not have been terminated;
(d) the Pioneer Acquisition shall have been consummated (i)
strictly in accordance with the terms of the Pioneer Acquisition Agreement,
without any waiver or amendment not consented to by the Lenders of any term,
provision or condition set forth therein,
71
(ii) in compliance with all applicable laws and (iii) for aggregate proceeds not
exceeding $160,000,000 at closing (excluding fees, expenses and other costs
relating to the Transactions totaling approximately $12,500,000) and not
requiring any additional payments other than payments not exceeding $15,000,000
in the aggregate pursuant to Section 2(e)(v) of the Pioneer Acquisition
Agreement;
(e) the Borrower shall have received gross proceeds of at
least $135,000,000 from the sale of the Subordinated Notes and $5,000,000 in the
form of a capital contribution from the sale of common stock of Holdings to
Genstar Capital and management;
(f) the Administrative Agent shall have received fully
executed originals of pay-off letters reasonably satisfactory to the
Administrative Agent confirming that all Obligations pursuant to the Existing
Credit Documentation will be repaid in full from the proceeds of the term loans
made under the Canadian Credit Agreement and the Term Loans and all Liens upon
any property of any Loan Party or any of their respective Subsidiaries in favor
of the Existing Lenders shall be terminated by the Existing Lenders immediately
upon such payment;
(g) the Lenders shall be satisfied that all Existing Debt,
other than the Domtar Note and the Capital Leases set forth on Schedule
5.01(q)(ii) (the "SURVIVING DEBT"), has been prepaid, redeemed or defeased in
--------------
full or otherwise satisfied and extinguished, that all commitments under any
Existing Debt have been terminated, and that all Liens (other than Permitted
Liens and those created pursuant to the Loan Documents and the Canadian Loan
Documents) have been released;
(h) there shall have occurred since December 31, 1997 no event
or circumstance which has had or could reasonably be expected to have a Material
Adverse Effect;
(i) there shall exist no material action, suit, investigation,
litigation or proceeding affecting any Loan Party or any of their respective
Subsidiaries pending or threatened before any court, governmental agency or
arbitrator that (i) could reasonably be expected to have a Material Adverse
Effect or (ii) purports to affect the legality, validity or enforceability of
the Pioneer Acquisition, this Agreement, any Note, any other Loan Document, any
Related Document or the consummation of the transactions contemplated hereby and
thereby;
(j) the Borrower and Panolam Canada shall have paid all
accrued fees and expenses of the Lead Arranger, the Agents and the Lenders
required to be paid on or before the Closing Date (including the accrued fees
and expenses of counsel to the Syndication Agent and the Administrative Agent
and local counsel to the Syndication Agent and the Administrative Agent);
(k) the Administrative Agent shall have received on or before
the Closing Date the following, each dated such date (unless otherwise
specified), in form and substance satisfactory to the Administrative Agent and
the Required Lenders (unless otherwise specified) and (except for the Notes, if
any) in sufficient copies for each Lender:
72
(i) the Notes to the order of each Lender, as
appropriate;
(ii) certified copies of the Certificate or
Articles of Incorporation of each Loan Party, together with a good
standing certificate from the Secretary of State (or other appropriate
authority) of its jurisdiction of incorporation and each other state in
which such Loan Party is qualified as a foreign corporation to do
business (as set forth on Schedule 4.01(k)(ii)) and, to the extent
generally available, a certificate or other evidence of good standing
as to payment of any applicable franchise or similar taxes from the
appropriate taxing authority of each of such jurisdictions, each dated
a recent date prior to the Closing Date;
(iii) bringdown good standing certificates (or the
Canadian equivalent thereof with respect to the Canadian Borrower) for
each Loan Party from the Secretary of State (or other appropriate
authority) of each Loan Party's jurisdiction of incorporation
certifying that such Loan Party is duly incorporated and in good
standing under the laws of its respective jurisdiction of incorporation
on or about the Closing Date;
(iv) copies of the Bylaws of each Loan Party,
certified as of the Closing Date by such Loan Party's corporate
secretary or an assistant secretary;
(v) copies of the resolutions of the Board of
Directors of each Loan Party, in each case (as appropriate) approving
the Pioneer Acquisition, the Transactions, this Agreement, the Notes,
each other Loan Document and each Related Document to which it is or is
to be a party, and authorizing the execution, delivery and performance
of each Loan Document and Related Document to which it is a party,
certified as of the Closing Date by the corporate secretary or an
assistant secretary of such Loan Party as being in full force and
effect without modification or amendment;
(vi) copies of all documents evidencing other
necessary corporate action (if any) in connection with the Pioneer
Acquisition, the Transactions, this Agreement, the Notes, each other
Loan Document and each Related Document;
(vii) copies of all governmental and third party
approvals (if any) necessary or advisable and set forth on Schedule
4.01(k)(vii) in connection with the Pioneer Acquisition, the
Transactions, this Agreement, the Notes, each other Loan Document, each
Related Document and the continuing operations of each of the Loan
Parties, which approvals shall have been obtained and shall be in full
force and effect, and all applicable waiting periods shall have expired
without any action being taken or threatened by any competent authority
that would restrain, prevent or otherwise impose adverse conditions on
any of the Transactions;
(viii) signature and incumbency certificates of the
officers of each Loan Party executing any Loan Document;
(ix) (A) executed originals of each of the Loan
Documents, (B) certified copies of each of the Related Documents, duly
executed by the parties thereto
73
and in each case in form and substance satisfactory to the
Administrative Agent and its counsel, together with all agreements,
instruments and other documents delivered in connection therewith, and
(C) execution and delivery of such other credit, security, guarantee
and other related documentation in connection with the Transactions as
the Administrative Agent or the Required Lenders may reasonably
request;
(x) copies of (A) the Agreement Respecting
Intellectual Property among Panolam US, Panolam Canada, the Canadian
Administrative Agent and the Administrative Agent, (B) the Patent
License Agreement between Panolam US, as licensor, and Panolam Canada,
as licensee, dated as of June 7, 1996, (C) the Trade ▇▇▇▇ License
Agreement between Panolam US, as licensor, and Panolam Canada, as
licensee, dated as of June 7, 1996, and (D) the Trade ▇▇▇▇ License
Agreement between Panolam US, as licensor, and Panolam Canada, as
licensee, dated April 14, 1997, each certified by the Secretary or
Assistant Secretary of the Borrower as of the Closing Date to be true
and complete, together with a certificate from such Secretary or
Assistant Secretary as of the Closing Date that there are no other
material agreements respecting intellectual property entered into
between any Loan Parties (other than in respect of readily available
commercial software);
(xi) a copy of the duly executed Stock Option
Agreement dated as of June 7, 1996 between Group, Genstar Capital
Partners II, L.P. and the other Parent Stockholders (as defined in such
agreement), and all amendments to the Stock Option Agreement, certified
by the Secretary or Assistant Secretary of the Borrower as of the
Closing Date to be true and complete;
(xii) a copy of each of the duly executed Genstar
Agreements, each certified by the Secretary or Assistant Secretary of
the Borrower as of the Closing Date to be true and complete and each in
form and substance reasonably satisfactory to the Administrative Agent
and the Required Lenders;
(xiii) a certificate of the Borrower and each other
Loan Party, signed on behalf of the Borrower and such other Loan Party
by its President or a Vice President and its Secretary or any Assistant
Secretary, dated as of the Closing Date (the statements made in which
certificate shall be true on and as of the Closing Date), certifying as
to (A) the absence of any amendments to the charter of the Borrower or
such other Loan Party since the date of the Secretary of State's
certificate referred to in Section 4.01(k)(ii), (B) a true and correct
copy of the bylaws of the Borrower and such other Loan Party as in
effect on the date of the initial Borrowing, (C) the due incorporation
and good standing of the Borrower and such other Loan Party as
corporations organized under the laws of their respective jurisdictions
of incorporation, and the absence of any proceeding for the dissolution
or liquidation of the Borrower or such other Loan Party, (D) the truth
of the representations and warranties contained in the Loan Documents
as though made on and as of the date of the initial Borrowing and (E)
the absence of any event occurring and continuing, or resulting from
the initial Borrowing, that constitutes a Default;
74
(xiv) a security agreement in substantially the form
of Exhibit IX (as amended from time to time in accordance with its
----------
terms, the "SECURITY AGREEMENT"), duly executed by the Borrower and
------------------
each other Credit Party, together with:
(A) certificates representing the Pledged
Shares referred to therein accompanied by undated stock powers
executed in blank and instruments evidencing the Pledged Debt
referred to therein endorsed in blank; and
(B) executed copies of proper financing
statements, in appropriate form for filing under the Code of
all jurisdictions that the Administrative Agent may deem
necessary or desirable in order to perfect and protect the
Liens created by the Security Agreement, covering the
Collateral described in the Security Agreement;
(xv) mortgages, assignment of leases and rents,
deeds of trust, trust deeds, leasehold mortgages and leasehold deeds of
trust in substantially the form of Exhibit XI and covering the
----------
properties listed on Schedule 4.01(k)(xv) (as amended from time to time
in accordance with their terms, the "MORTGAGES"), duly executed by the
---------
appropriate Credit Party, together with:
(A) evidence that counterparts of the
Mortgages have been duly recorded (or executed and delivered
in appropriate form for filing and recording) in all filing or
recording offices that the Administrative Agent may deem
necessary or desirable in order to create a valid first and
subsisting Lien on the property described therein (subject to
Permitted Liens and exceptions set forth in the applicable
Mortgage Policies) in favor of the Administrative Agent and
the Lender Parties for the benefit of the Agents and the
Lender Parties and that all filing and recording taxes and
fees have been paid or provided for;
(B) fully paid American Land Title Association
Lender's Extended Coverage title insurance policies (the
"MORTGAGE POLICIES") or commitments therefor in form and
-----------------
substance, with endorsements and in amount reasonably
acceptable to the Administrative Agent, issued, coinsured and
reinsured by title insurers acceptable to the Administrative
Agent, insuring the Mortgages to be valid first and subsisting
Liens on the property described therein, subject only to
Permitted Liens, and providing for such other affirmative
insurance (including endorsements for future advances under
the Loan Documents and for mechanics' and materialmen's Liens)
and such coinsurance and direct access reinsurance as the
Administrative Agent may reasonably deem necessary or
desirable; and
(C) such consents and agreements of lessors
and other third parties, and such estoppel letters and other
confirmations, as the Administrative Agent may deem necessary
or desirable;
75
(xvi) a guaranty in substantially the form of
Exhibit X (as amended from time to time in accordance with its terms,
---------
the "GUARANTY"), duly executed by each of the Guarantors;
--------
(xvii) pro forma Consolidated opening balance
sheets of each of the Borrower and Panolam Canada as of the Closing
Date, giving effect to the Transactions and reflecting the proposed
legal and capital structure of Holdings and its Subsidiaries, which
legal and capital structure shall be satisfactory in all respects to
the Lead Arranger, the Syndication Agent and the Administrative Agent;
(xviii) (A) the audited financial statements of
Holdings and its Subsidiaries on a Consolidated basis and of Pioneer
dated December 28, 1995, December 27, 1996, and December 26, 1997, (B)
the unaudited financial statements of Holdings and its Subsidiaries on
a Consolidated basis and of Pioneer for each quarterly period completed
subsequent to December 31, 1997, and (C) the available unaudited
financial statements of Holdings and its Subsidiaries on a Consolidated
basis and of Pioneer for each monthly period subsequent to the most
recently ended quarterly period;
(xix) the Projections in form and substance
satisfactory to the Syndication Agent and the Administrative Agent in
all respects;
(xx) a certificate of the Chief Financial Officer
of the Borrower, in form and substance satisfactory to the
Administrative Agent and the Lenders, attesting to the Solvency of each
Loan Party after giving effect to the Pioneer Acquisition and the
Transactions;
(xxi) certified copies of the environmental
reports listed on Schedule 4.01(k)(xxi);
(xxii) evidence of insurance naming the
Administrative Agent as insured and loss payee in form and substance
reasonably satisfactory to the Administrative Agent, with such
responsible and reputable insurance companies or associations, and in
such amounts and covering such risks (including but not limited to
general and other liability and business interruption), as is
satisfactory to the Administrative Agent and the Syndication Agent;
(xxiii) certified copies of each employment
agreement and other compensation arrangement with each executive
officer of any Loan Party;
(xxiv) certified copies of all Material Contracts
of each Loan Party;
(xxv) a favorable opinion of ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ &
▇▇▇▇▇▇▇▇ LLP, counsel for the Borrower, in substantially the form of
Exhibit XII hereto and as to such other matters as the Agents or any
-----------
Lender through the Administrative Agent may reasonably request, and
favorable opinions of counsel to the Borrower under the laws of each
jurisdiction in which any material portion of the Collateral is located
with respect to the
76
creation and perfection of the security interests in favor of the
Administrative Agent in such Collateral and such other matters governed
by the laws of such jurisdiction as the Agents or any Lender through
the Administrative Agent may reasonably request, in each case in form
and substance reasonably satisfactory to the Syndication Agent and the
Administrative Agent dated as of the Closing Date and setting forth
substantially the matters in the form of opinion annexed hereto as
Exhibit XII;
-----------
(xxvi) copies of (i) such opinions of counsel
delivered to the parties under the Canadian Credit Agreement, (ii) the
opinions of counsel, if any, delivered to the parties under the Pioneer
Acquisition Agreement and (iii) each opinion of counsel to the Borrower
delivered in connection with the Subordinated Debt Documents, together
with a letter from each counsel (other than counsel to Pioneer in
connection with the Pioneer Acquisition Agreement) delivering such an
opinion authorizing the Lenders to rely upon such opinion to the same
extent as though it were addressed to the Lenders;
(xxvii) such other policies of title insurance,
closing certificates, resolutions, solvency certificates and opinions
of counsel, in each case satisfactory in form and substance to the Lead
Arranger, the Syndication Agent and the Administrative Agent, as they
may reasonably deem necessary in connection with the Transactions;
(xxviii) an Intercreditor and Subordination Agreement
in substantially the form of Exhibit XVI (as amended from time to time
-----------
in accordance with its terms, the "INTERCREDITOR AGREEMENT"), duly
-----------------------
executed by the Administrative Agent, the Canadian Administrative Agent
and the Loan Parties; and
(l) The Administrative Agent shall have received the initial
Notice of Borrowing in accordance with Section 2.02(a) and a pro forma Borrowing
Base Certificate as of January 31, 1999 and such other Receivables and Inventory
reports as the Administrative Agent may reasonably request.
(m) Panolam Canada shall have received (or shall
substantially concurrently receive) the proceeds of initial Loans under the
Canadian Credit Agreement of $50,000,000, or the Administrative Agent shall
otherwise be satisfied that the closing under the Canadian Credit Agreement will
happen concurrently with closing under this Agreement.
SECTION 4.02. CONDITIONS PRECEDENT TO EACH BORROWING AND
------------------------------------------
ISSUANCE.
--------
The obligation of each Appropriate Lender to make a Loan
(other than payment against a Letter of Credit Drawing and other than a
Revolving Loan made by a Revolving Lender pursuant to Section 2.02(f)) on the
occasion of each Borrowing (including the initial Borrowing), and the right of
the Borrower to request a Swing Line Borrowing or the Issuance of a Letter of
Credit, shall be subject to the further conditions precedent that on the date of
such Borrowing or Issuance the following statements shall be true and the
Administrative Agent shall have received for the account of such Lender or such
Issuing Bank a certificate signed by a duly authorized officer of the Borrower,
dated the date of such Borrowing or Issuance, stating that (and each of the
giving of the applicable Notice of Borrowing, Notice of Swing Line Borrowing or
Notice of
77
Issuance and the acceptance by the Borrower of the proceeds of such Borrowing or
of such Letter of Credit shall constitute a representation and warranty by the
Borrower that on the date of such Borrowing or Issuance such statements are
true):
(a) the representations and warranties contained in each Loan
Document are true and correct on and as of the date of such Borrowing or
Issuance, before and after giving effect to such Borrowing or Issuance and to
the application of the proceeds therefrom, as though made on and as of such date
other than any such representations or warranties that, by their terms, are
specifically made as of a date other than the date of such Borrowing or Issuance
(which shall be true and correct as of such other date);
(b) no event or condition has occurred and is continuing, or
would result from such Borrowing or Issuance or from the application of the
proceeds therefrom, that constitutes a Default; and
(c) for each Revolving Loan or Swing Line Loan or Issuance of
any Letter of Credit, the Borrowing Base Amount exceeds the Total Utilization of
Revolving Commitments and the specific credit limits set forth in the first
sentence of Sections 2.01(c), 2.01(d) and 3.01 are not exceeded after giving
effect to such Loan or Issuance, respectively.
SECTION 4.03. DETERMINATIONS UNDER SECTION 4.01. For purposes
---------------------------------
of determining compliance with the conditions specified in Section 4.01, each
Lender shall be deemed to have consented to, approved or accepted or to be
satisfied with each document or other matter required thereunder to be consented
to or approved by or acceptable or satisfactory to the Lenders unless an officer
of the Administrative Agent responsible for the Transactions contemplated by the
Loan Documents shall have received written notice from such Lender prior to the
initial Borrowing specifying its objection thereto and such Lender shall not
have made available to the Administrative Agent such Lender's ratable portion of
such Borrowing.
ARTICLE V.
REPRESENTATIONS AND WARRANTIES
SECTION 5.01. REPRESENTATIONS AND WARRANTIES OF THE BORROWER.
----------------------------------------------
The Borrower represents and warrants as follows:
(A) INCORPORATION, QUALIFICATION, CORPORATE POWER AND
-------------------------------------------------
AUTHORITY. Each Loan Party (i) is a corporation duly organized, validly existing
---------
and good standing under the laws of the jurisdiction of its incorporation, (ii)
is duly qualified and in good standing as a foreign corporation in each other
jurisdiction in which it owns or leases property or in which the conduct of its
business requires it to so qualify or be licensed except where the failure to so
qualify or be licensed would not have a Material Adverse Effect and (iii) has
all requisite corporate power and authority to own or lease and operate its
properties and to carry on its business as now conducted and as proposed to be
conducted. All of the outstanding Capital Stock of each Loan Party has been
validly issued, is fully paid and non-assessable and, as of the date hereof, is
owned by the respective parties set forth in Schedule 5.01(b) in the amounts
specified therein free and clear of all Liens.
78
(B) CAPITAL STOCK. Set forth on Schedule 5.01(b) hereto is a
-------------
complete and accurate list, as of the date hereof, of all Loan Parties and each
of their respective Subsidiaries, showing as of the date hereof (as to each such
Loan Party and Subsidiary) the jurisdiction of its incorporation, the number of
shares of each class of Capital Stock authorized and outstanding, the percentage
of the outstanding shares of each such class owned (directly or indirectly) by
another Loan Party and the number of shares covered by all outstanding options,
warrants, rights of conversion or purchase and similar rights. All of the
outstanding Capital Stock of each Loan Party has been validly issued, is fully
paid and non-assessable and (except in the case of Holdings) is owned by another
Loan Party free and clear of all Liens, except those created by the Collateral
Documents. Each Loan Party (i) is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction of its incorporation,
(ii) is duly qualified and in good standing as a foreign corporation in each
other jurisdiction in which it owns or leases property or in which the conduct
of its business requires it to so qualify or be licensed except where the
failure to so qualify or be licensed would not have a Material Adverse Effect
and (iii) has all requisite corporate power and authority to own or lease and
operate its properties and to carry on its business as now conducted and as
proposed to be conducted.
(C) AUTHORIZATION; NO CONFLICT OR VIOLATION; COMPLIANCE WITH
--------------------------------------------------------
LAWS. The execution, delivery and performance by each Loan Party of this
----
Agreement, the Notes, each other Loan Document and each Related Document to
which it is or is to be a party, and the consummation of the Pioneer Acquisition
and the other Transactions contemplated hereby, are within such Loan Party's
corporate powers, have been duly authorized by all necessary corporate action,
and do not (i) contravene such Loan Party's charter or bylaws, (ii) violate any
law, rule, regulation (including, without limitation, Regulation X of the Board
of Governors of the Federal Reserve System), order, writ, judgment, injunction,
decree, determination or award, (iii) conflict with or result in the breach of,
or constitute a default under, any contract, loan agreement, indenture,
mortgage, deed of trust, lease or other instrument binding on or affecting any
Loan Party, any of its Subsidiaries or any of their properties or (iv) except
for the Liens created by the Collateral Documents and the Canadian Loan
Documents, result in or require the creation or imposition of any Lien upon or
with respect to any of the properties of any Loan Party. No Loan Party or any of
its Subsidiaries is in violation of any such law, rule, regulation, order, writ,
judgment, injunction, decree, determination or award or in breach of any such
contract, loan agreement, indenture, mortgage, deed of trust, lease or other
instrument, the violation or breach of which could have a Material Adverse
Effect.
(D) APPROVALS AND CONSENTS. No authorization or approval or
----------------------
other action by, and no notice to or filing with, any governmental authority or
regulatory body or any other third party is required for (i) the due execution,
delivery, recordation, filing or performance by any Loan Party of this
Agreement, the Notes, any other Loan Document or any Related Document to which
it is or is to be a party, or for the consummation of the Pioneer Acquisition or
the other Transactions contemplated hereby, (ii) the grant by any Loan Party of
the Liens granted by it pursuant to the Collateral Documents and the Canadian
Loan Documents, (iii) the perfection or maintenance of the Liens created by the
Collateral Documents and the Canadian Loan Documents (including the first or
second priority nature thereof, as applicable) or (iv) the exercise by the
Administrative Agent or any Lender of its rights under the Loan Documents or
79
the remedies in respect of the Collateral pursuant to the Collateral Documents,
except for the authorizations, approvals, actions, notices and filings listed on
Schedule 5.01(d), all of which have been duly obtained, taken, given or made and
are in full force and effect. All applicable waiting periods in connection with
the Pioneer Acquisition and the other Transactions contemplated hereby have
expired without any action having been taken by any competent authority
restraining, preventing or imposing materially adverse conditions upon the
Pioneer Acquisition or the rights of the Loan Parties freely to transfer or
otherwise dispose of, or to create any Lien on, any properties now owned or
hereafter acquired by any of them.
(E) ENFORCEABILITY. This Agreement has been, and each of the
--------------
Notes (if any), each other Loan Document and each Related Document when
delivered hereunder will have been, duly executed and delivered by each Loan
Party party thereto. This Agreement is, and each of the Notes (if any), each
other Loan Document and each Related Document when delivered hereunder will be,
the legal, valid and binding obligation of each Loan Party party thereto,
enforceable against such Loan Party in accordance with its terms.
(F) FINANCIAL STATEMENTS.
--------------------
(i) (A) The audited Consolidated balance sheets of
Holdings and its Subsidiaries as at December 31, 1996 and 1997, the
related audited Consolidated statements of operations for the period
from May 16, 1996 to December 31, 1996 and the year ended December 31,
1997, the related audited Consolidated statements of stockholders'
equity for the period from May 16, 1996 to December 31, 1996 and the
year ended December 31, 1997, and the related audited Consolidated
statements of cash flows for the period from May 16, 1996 to December
31, 1996 and the year ended December 31, 1997, accompanied by an
opinion of Coopers & ▇▇▇▇▇▇▇, independent public accountants, and (B)
the unaudited Consolidated balance sheets of Holdings and its
Subsidiaries as at September 30, 1998, the related unaudited
Consolidated statements of operations for the nine-month periods ended
September 30, 1997 and 1998, the related unaudited Consolidated
statements of stockholders' equity for the period from January 1, 1998
to September 30, 1998, and the related unaudited Consolidated
statements of cash flows for the nine-month periods ended September 30,
1997 and 1998, duly certified by the Chief Financial Officer of the
Borrower, copies of all of which have been furnished to each Lender,
fairly present, subject, in the case of said balance sheets and
statements in the foregoing clause (B), to year-end audit adjustments,
the Consolidated financial condition of Holdings and its Subsidiaries
as at such dates and the Consolidated results of the operations of
Holdings and its Subsidiaries for the periods ended on such dates, all
in accordance with GAAP applied on a consistent basis, and since
December 31, 1997, there has occurred no event or circumstance which
has had or could reasonably be expected to have a Material Adverse
Effect.
(ii) (A) The audited balance sheets of Pioneer as at
December 28, 1995, December 27, 1996 and December 26, 1997, the related
audited statements of income for the period from July 21, 1995 to
December 28, 1995 and the years ended December 27, 1996 and December
26, 1997, and the related audited statements of cash
80
flows for the period from July 21, 1995 to December 28, 1995 and the
years ended December 27, 1996 and December 26, 1997, accompanied by an
opinion of PricewaterhouseCoopers LLP, independent public accountants,
and (B) the unaudited balance sheets of Pioneer as at September 25,
1998, the related unaudited statements of income for the nine-month
periods ended September 26, 1997 and September 25, 1998, and the
related unaudited statements of cash flows for the nine-month periods
ended September 26, 1997 and September 25, 1998, duly certified by the
Chief Financial Officer of the Borrower, copies of all of which have
been furnished to each Lender, fairly present, subject, in the case of
said balance sheets and statements in the foregoing clause (B), to
year-end audit adjustments, the financial condition of Pioneer as at
such dates and the results of the operations of Pioneer for the periods
ended on such dates, all in accordance with GAAP applied on a
consistent basis, and since December 26, 1997, there has occurred no
event or circumstance which has had or could reasonably be expected to
have a Material Adverse Effect.
(iii) The Consolidated pro forma opening balance sheets of
each of the Borrower and Panolam Canada as of the Closing Date, and the
related Consolidated pro forma statements of income and cash flows of
the Borrower and Panolam Canada as of December 31, 1998 for the Fiscal
Year then ended, certified by the Chief Financial Officer of the
Borrower, copies of which have been furnished to each Lender, fairly
present the Consolidated pro forma financial condition of the Borrower
and its Domestic Subsidiaries and of Panolam Canada as at the Closing
Date and the Consolidated pro forma results of operations of the
Borrower and its Domestic Subsidiaries and of Panolam Canada for the
period ended on December 31, 1998, in each case giving effect to the
Pioneer Acquisition and the other Transactions contemplated hereby, all
in accordance with GAAP.
(iv) The Consolidated forecasted balance sheets, income
statements and cash flows statements of Holdings and its Subsidiaries
delivered to the Lenders pursuant to Section 4.01 or 5.01 were prepared
in good faith on the basis of the assumptions stated therein, which
assumptions were fair in the light of conditions existing at the time
of delivery of such forecasts, and represented, at the time of
delivery, the Borrower's best estimate of its future financial
performance.
(G) DISCLOSURE. Neither the Information Memorandum (by itself)
----------
nor any other information, exhibit or report (taken as a whole) furnished by any
Loan Party to the Lead Arranger, any Agent or any Lender in connection with the
negotiation of the Loan Documents or pursuant to the terms of the Loan Documents
contained any untrue statement of a material fact or omitted to state a material
fact necessary to make the statements made therein not misleading.
(H) LITIGATION. There is no action, suit, investigation,
----------
litigation or proceeding affecting any Loan Party, including any Environmental
Action, pending or (to its knowledge) threatened before any court, governmental
agency or arbitrator that (i) could reasonably be expected to have a Material
Adverse Effect or (ii) purports to affect the legality, validity or
81
enforceability of the Pioneer Acquisition, this Agreement, any Note, any other
Loan Document or any Related Document or the consummation of the transactions
contemplated hereby.
(I) USE OF PROCEEDS.
---------------
(i) No proceeds of any Loan will be used to acquire
any equity security of a class that is registered pursuant to Section
12 of the Exchange Act.
(ii) None of the Loan Parties are engaged in the
business of extending credit for the purpose of purchasing or carrying
Margin Stock, and no proceeds of any Loan will be used to purchase or
carry any Margin Stock or to extend credit to others for the purpose of
purchasing or carrying any Margin Stock.
(iii) Following application of the proceeds of each
Loan, not more than 25 percent of the value of the assets (either of
the Borrower only or of the Borrower and its Subsidiaries on a
Consolidated basis) subject to the provisions of Section 6.02(a) or
Section 6.02(e) or subject to any restriction contained in any
agreement or instrument between any Loan Party and any Lender or any
Affiliate of any Lender relating to Debt and within the scope of
Section 7.01(e) will be Margin Stock.
(J) PENSION PLANS.
-------------
(i) Set forth on Schedule 5.01(j) hereto is a
complete and accurate list of all Plans, Multiemployer Plans and
Welfare Plans with respect to any employees of any Loan Party.
(ii) No ERISA Event has occurred or is reasonably
expected to occur with respect to any Plan of any Loan Party or any of
its ERISA Affiliates that has resulted in or is reasonably likely to
result in liability of any Loan Party in excess, either individually or
in the aggregate with all other ERISA Events which have occurred or are
reasonably expected to occur, of $2,000,000.
(iii) Schedule B (Actuarial Information) to the 1997
annual report (Form 5500 Series) for each Plan of any Loan Party and
each Plan of each ERISA Affiliate that is not a Loan Party and that has
an Insufficiency in excess of $2,000,000, copies of which have been
filed with the Internal Revenue Service and furnished to the Lenders,
is complete and accurate and fairly presents the funding status of such
Plan, and since the date of such Schedule B there has been no material
adverse change in such funding status.
(iv) Neither any Loan Party nor any of its ERISA
Affiliates has incurred or is reasonably expected to incur any
Withdrawal Liability to any Multiemployer Plan which would, either
individually or in the aggregate with other payments of Withdrawal
Liability with respect to all Multiemployer Plans, increase the amounts
contributed or required to be contributed by the Loan Parties to such
Multiemployer Plans by the Loan Parties for the plans years of such
Multiemployer Plans
82
immediately preceding the plan year in which such Withdrawal Liability
is incurred by an amount exceeding $1,000,000.
(v) Neither any Loan Party nor any of its ERISA
Affiliates has been notified by the sponsor of a Multiemployer Plan of
any Loan Party or any of its ERISA Affiliates that such Multiemployer
Plan is in reorganization or has been terminated, within the meaning of
Title IV of ERISA, and no such Multiemployer Plan is reasonably
expected to be in reorganization or to be terminated, within the
meaning of Title IV of ERISA where the amount of liability incurred, or
that may reasonably be expected to be incurred, by the Loan Parties
with respect to such event, either individually or in the aggregate
with all other such events, would exceed $2,000,000.
(K) NO ADVERSE CONDITIONS. Neither the business nor the
---------------------
properties of any Loan Party are affected by any fire, explosion, accident,
strike, lockout or other labor dispute, drought, storm, hail, earthquake,
embargo, act of God or of the public enemy or other casualty (whether or not
covered by insurance) that could reasonably be expected to have a Material
Adverse Effect.
(L) COMPLIANCE WITH ENVIRONMENTAL LAWS.
----------------------------------
(i) Except as set forth on Schedule 5.01(l)(i), the
operations and properties of each Loan Party comply in all material
respects with all Environmental Laws, all necessary Environmental
Permits have been obtained and are in effect for the operations and
properties of each Loan Party, each Loan Party is in compliance in all
material respects with all such Environmental Permits, and no
circumstances exist that could (A) form the basis of an Environmental
Action against any Loan Party or any of its respective properties that
could have a Material Adverse Effect or (B) cause any such property to
be subject to any material restrictions on ownership, occupancy, use
or transferability under any Environmental Law.
(ii) Except as set forth on Schedule 5.01(l)(ii), as it may
be updated from time to time (but only to the extent items identified
on any such update could not reasonably be expected to have a Material
Adverse Effect), none of the properties of any Loan Party is listed or
proposed for listing on the National Priorities List under CERCLA or
on the Comprehensive Environmental Response, Compensation and
Liability Information System maintained by the Environmental
Protection Agency or any analogous state list of sites requiring
investigation or cleanup or is adjacent to any such property, and no
underground storage tanks, as such term is defined in 42 U.S.C. ss.
6991, are located on any property of any Loan Party or, to the best of
its knowledge, on any adjoining property.
(iii) Except as set forth on Schedule 5.01(l)(iii), no
Loan Party has transported or arranged for the transportation of any
Hazardous Materials to any location that is listed or proposed for
listing on the National Priorities List under CERCLA or on the
Comprehensive Environmental Response, Compensation and Liability
Information System maintained by the Environmental Protection Agency
or any analogous state list,
83
Hazardous Materials have not been generated, used, treated, handled,
stored or disposed of on, or released or transported to or from, any
property of any Loan Party or, to the best of its knowledge, any
adjoining property, except for limited quantities required in
connection with the normal operation and maintenance of such
properties and used or stored at such properties in compliance with
all Environmental Laws and Environmental Permits, and all other wastes
generated at any such properties have been disposed of in compliance
with all Environmental Laws and Environmental Permits, in each case
other than those that would have no Material Adverse Effect.
(M) TAX INFORMATION.
---------------
(i) Each Loan Party has filed, has caused to be filed or
has been included in all Federal and other material tax returns
(Federal, state, local and foreign) required to be filed and has paid
all taxes shown thereon to be due, together with applicable interest
and penalties.
(ii) Set forth on Schedule 5.01(m) hereto is a complete and
accurate list, as of the date hereof, of each taxable year of (A) the
Credit Parties (for which US Federal income tax returns have been
filed) and (B) Panolam Canada (for which Canadian Federal income tax
returns have been filed), in each case for which the expiration of the
applicable statute of limitations for assessment, reassessment or
collection has not occurred by reason of waiver, extension or
otherwise (an "OPEN YEAR").
---------
(iii) The aggregate unpaid amount, as of the date hereof,
of adjustments to the Federal income tax liability of the Credit
Parties proposed by the Internal Revenue Service with respect to Open
Years does not exceed $100,000. The aggregate unpaid amount, as of the
date hereof, of adjustments to the Canadian Federal income tax
liability of Panolam Canada proposed by Revenue Canada with respect to
Open Years does not exceed CDN$150,000. Set forth on Schedule 5.01(m)
hereto in respect of each of the Credit Parties and Panolam Canada are
complete and accurate descriptions, as of the date hereof, of each
such item that separately, for all such Open Years, together with
applicable interest and penalties, exceeds $50,000 in the case of any
of the Credit Parties, or CDN$75,000 in the case of Panolam Canada. No
issues have been raised by the Internal Revenue Service in respect of
Open Years that, in the aggregate, could have a Material Adverse
Effect.
(iv) The aggregate unpaid amount, as of the date hereof, of
adjustments to the state, local and foreign tax liability of the
Credit Parties proposed by all state, local and foreign taxing
authorities (other than amounts arising from adjustments to Federal
income tax returns) does not exceed $50,000. The aggregate unpaid
amount, as of the date hereof, of adjustments to the provincial, local
and foreign tax liability of Panolam Canada proposed by all
provincial, local and foreign taxing authorities (other than amounts
arising from adjustments to Canadian Federal income tax returns) does
not
84
exceed CDN$75,000. No issues have been raised by such taxing
authorities that, in the aggregate, could have a Material Adverse
Effect.
(v) The Pioneer Acquisition will not be taxable to Holdings
or any of its Subsidiaries or Affiliates.
(N) NO INVESTMENT COMPANY. Neither any Loan Party nor any of its
---------------------
Subsidiaries is an "investment company", or an "affiliated person" of, or
"promoter" or a "principal underwriter" for, an "investment company", as such
terms are defined in the Investment Company Act of 1940, as amended. Neither the
making of any Loans, nor the issuance of any Letters of Credit, nor the
application of the proceeds or repayment thereof by the Borrower, nor the
consummation of the other transactions contemplated hereby, will violate any
provision of such Act or any rule, regulation or order of the Securities and
Exchange Commission thereunder.
(O) SOLVENCY. Each Loan Party is, individually and together with
--------
its Subsidiaries, Solvent.
(P) ASSETS OF HOLDINGS AND ITS SUBSIDIARIES.
---------------------------------------
(i) As of the Closing Date, Holdings owns no assets other
than the Capital Stock of Group, certain deferred tax assets and other
assets with a fair market value that does not exceed $10,000; Group
owns no assets other than the Capital Stock of PII Second and other
assets with a fair market value that does not exceed $10,000; PII
Second owns no assets other than the Capital Stock of the Borrower and
other assets with a fair market value that does not exceed $10,000;
the Borrower owns no assets other than the Capital Stock of each of
Panolam US, Panolam Canada and Pioneer and other Investments in its
Subsidiaries permitted hereunder, and other assets with a fair market
value that does not exceed $10,000.
(ii) As of the Closing Date, none of Holdings, Group, PII
Second or the Borrower has engaged in any trade or business or
incurred any Debt or any other liabilities (which have not been
completely repaid or discharged), except for the Domtar Note, the
Genstar Agreements and the Obligations under this Agreement, the other
Loan Documents and the Related Documents, and in connection with its
corporate formation and maintenance.
(Q) DEBT OF HOLDINGS AND ITS SUBSIDIARIES.
-------------------------------------
(i) Set forth on Schedule 5.01(q)(i) hereto is a complete
and accurate list of all Existing Debt, showing as of the date hereof
the principal amount outstanding thereunder. There are no outstanding
letters of credit as of the Closing Date in respect of which Holdings
or any of its Subsidiaries has any financial obligations.
85
(ii) Set forth on Schedule 5.01(q)(ii) hereto is a complete
and accurate list of all Surviving Debt, showing as of the date hereof
the principal amount outstanding thereunder.
(R) DOMTAR NOTE. As of the Closing Date, the Borrower has caused
-----------
to be delivered to the Administrative Agent a complete and correct copy of the
Domtar Note (including all schedules, exhibits, amendments, supplements,
modifications, assignments and all other documents delivered pursuant thereto or
in connection therewith). All Obligations, including the Obligations to pay
principal of and interest on the Loans and the Letter of Credit Obligations, and
all Liens granted to the Administrative Agent, for the benefit of the
Administrative Agent and the Lenders, or granted to the Administrative Agent and
the Lenders, as applicable, in the Collateral constitute permitted indebtedness
and liens, respectively, under the Domtar Note. Holdings is the sole obligor
under the Domtar Note and no other Loan Party has any liability in respect of
the Domtar Note.
(S) OWNED REAL PROPERTY.
-------------------
(i) Set forth on Schedule 5.01(s) hereto is a complete and
accurate list of all real property owned by any Loan Party, showing as
of the date hereof the street address, municipality, county or other
relevant jurisdiction, province, state and record/registered owner.
Each Loan Party has good, marketable and insurable fee simple title to
such real property, free and clear of all Liens, other than Liens
created or permitted by the Loan Documents.
(ii) Set forth on Schedule 5.01(s) hereto is a complete and
accurate list of all leases of real property under which any Loan
Party is the lessee, showing as of the date hereof the street address,
municipality, county or other relevant jurisdiction, province, state,
lessor, lessee, expiration date and annual rental cost thereof. To the
best knowledge of the Borrower, each such lease is the legal, valid
and binding obligation of the lessor thereof, enforceable in
accordance with its terms.
(T) MATERIAL CONTRACTS. Set forth on Schedule 5.01(t) hereto
------------------
is a complete and accurate list of all Material Contracts of each Loan Party,
showing as of the date hereof the parties, subject matter and term thereof. Each
such Material Contract has been duly authorized, executed and delivered by all
parties thereto, has not been amended or otherwise modified, is in full force
and effect and is binding upon and enforceable against all parties thereto in
accordance with its terms, and there exists no default under any Material
Contract by any party thereto.
(U) PIONEER ACQUISITION AGREEMENT. Each of the representations
-----------------------------
and warranties in the Pioneer Acquisition Agreement is true and correct in all
material respects as of the Closing Date, in each case subject to the
qualifications set forth in the Pioneer Acquisition Agreement and the schedules
and exhibits thereto.
86
(V) INVESTMENTS. Set forth on Schedule 5.01(v) hereto is a
-----------
complete and accurate list of all Investments held by any Loan Party, showing as
of the date hereof the amount, obligor or issuer and maturity, if any, thereof.
(W) INTELLECTUAL PROPERTY. Set forth on Schedule 5.01(w) hereto
---------------------
is a complete and accurate list of all patents, patent designs, industrial
designs, trademarks, trade names, service marks and copyrights, and all
applications therefor and licenses thereof, of each Loan Party, showing as of
the date hereof the jurisdiction in which registered, the registration number,
the date of registration and the expiration date.
(X) OTHER AGREEMENTS. Schedule 5.01(x) sets forth a complete and
----------------
accurate list as of the date hereof of (i) all joint venture and partnership
agreements to which any Loan Party is a party, and (ii) all covenants not to
compete restricting any Loan Party to which any Loan Party is a party or by
which any Loan Party is bound.
(Y) YEAR 2000. Any reprogramming required to permit the proper
---------
functioning, in and following the year 2000, of (i) each Loan Party's computer
systems and (ii) equipment containing embedded microchips (including systems and
equipment supplied by others or with which any Loan Party's systems interface)
and the testing of all such systems and equipment, as so reprogrammed, will be
completed by September 30, 1999. The cost to the Loan Parties of such
reprogramming and testing of the reasonably foreseeable consequences of year
2000 to the Loan Parties (including, without limitation, reprogramming errors
and the failure of others' systems or equipment) will not result in a Default or
a Material Adverse Effect. Except for such of the reprogramming referred to in
the preceding sentence as may be necessary, each Loan Party's computer and
management information systems are and, with ordinary course upgrading and
maintenance, will continue for the term of this Agreement to be, sufficient to
permit such Loan Party to conduct its business without Material Adverse Effect.
Each Loan Party represents and warrants that it has a reasonable basis to
believe that no year 2000 problem will cause a Material Adverse Effect.
(Z) EXCLUDED MELAMINE SUBS. As of the date hereof, neither of
----------------------
the Excluded Melamine Subs owns any assets or is engaged in any trade or
business or has incurred any other liabilities which have not been completely
repaid or discharged, except for such liabilities as are required by law in
connection with its corporate formation and existence.
ARTICLE VI.
COVENANTS OF THE BORROWER
SECTION 6.01. AFFIRMATIVE COVENANTS.
---------------------
So long as any Loan or Unreimbursed Letter of Credit Liability
shall remain unpaid, any Letter of Credit shall be outstanding or any Lender
shall have any Commitment hereunder, the Borrower will, unless the Required
Lenders shall otherwise consent in writing:
87
(A) COMPLIANCE WITH LAWS, ETC. Comply, and cause Holdings and each of
-------------------------
its Subsidiaries to comply, in all material respects, with all applicable laws,
rules, regulations and orders.
(B) PAYMENT OF TAXES, ETC. Pay and discharge, and cause Holdings and
---------------------
each of its Subsidiaries to pay and discharge, before the same shall become
delinquent, (i) all taxes, assessments and governmental charges or levies
imposed upon it or upon its property and (ii) all lawful claims that, if unpaid,
might by law become a Lien upon its property; provided, however, that neither
Holdings nor any of its Subsidiaries shall be required to pay or discharge any
such tax, assessment, charge. levy or claim that is being contested in good
faith and by proper proceedings and as to which appropriate reserves are being
maintained, unless and until any material Lien resulting therefrom attaches to
its property and becomes enforceable against its other creditors.
(C) COMPLIANCE WITH ENVIRONMENTAL LAWS. Comply, and cause Holdings
----------------------------------
and each of its Subsidiaries and all lessees and other Persons occupying its
properties to comply, in all material respects, with all Environmental Laws and
Environmental Permits applicable to its operations and properties; and obtain
and renew all Environmental Permits necessary for its operations and properties.
(D) MAINTENANCE OF INSURANCE; DAMAGE TO OR DESTRUCTION OF COLLATERAL.
----------------------------------------------------------------
(i) Maintain, and cause the other Loan Parties to maintain, at
their sole cost and expense, the policies of insurance described on
Schedule 6.01(d) as in effect on the Closing Date (or equivalent
replacements thereof), in form and with insurers reasonably acceptable to
the Administrative Agent. If any Loan Party at any time or times hereafter
shall fail to obtain or maintain any of the policies of insurance required
above or to pay all premiums relating thereto, the Administrative Agent may
at any time or times thereafter obtain and maintain such policies of
insurance and pay such premiums and take any other action with respect
thereto which the Administrative Agent reasonably deems advisable. The
Administrative Agent shall have no obligation to obtain insurance for any
Loan Party or pay any premiums therefor. By doing so, the Administrative
Agent shall not be deemed to have waived any Default or Event of Default
arising from any Loan Party's failure to maintain such insurance or pay any
premiums therefor. All sums so disbursed, including reasonable attorneys'
fees, court costs and other reasonable charges related thereto, shall be
payable on demand by the Borrower to the Administrative Agent and shall be
additional Obligations hereunder secured by the Collateral.
(ii) The Administrative Agent reserves the right at any time upon
any change in any Loan Party's risk profile (including any change in the
product mix maintained by any Loan Party or any laws affecting the
potential liability of such Loan Party) to require additional forms and
limits of insurance to, in the Administrative Agent's reasonable opinion,
adequately protect both the Administrative Agent's and the
88
Lenders' interests in all or any portion of the Collateral and to ensure
that each Loan Party is protected by insurance in amounts and with coverage
customary for its industry.
(iii) In the event that any Collateral is damaged, destroyed or
lost and any insurance proceeds are payable as a result of such occurrence
and the cost of the repair, restoration or replacement is reasonably
expected to exceed $10,000,000 and the Loans are not required to be prepaid
pursuant to Section 2.04, then: (A) within 30 days after the date of such
damage, destruction or loss, the Borrower shall deliver to the
Administrative Agent, in form and substance reasonably satisfactory to the
Administrative Agent: (1) a written plan for the repair, restoration or
replacement of such Collateral, including the estimated cost of such
repair, restoration or replacement and time of completion, and (2) such
other documents and information relating to such repair, restoration or
replacement as the Administrative Agent or the Required Lenders may
reasonably request; (B) any related insurance proceeds shall be immediately
paid over to and held by the Administrative Agent in a Cash Collateral
Account (over which Administrative Agent shall have sole and exclusive
control and right of withdrawal), shall be used solely to pay the cost of
such repair, restoration or replacement and shall be disbursed in
accordance with such terms, conditions and procedures as the Administrative
Agent may reasonably require, provided that (1) the Administrative Agent
-------- ----
shall have no obligation to disburse any such amounts if an Event of
Default has occurred and is continuing, and (2) if the amount of any such
insurance proceeds received by the Administrative Agent exceeds the cost of
completing the repair, restoration or replacement, the excess may be
applied by Administrative Agent to the Obligations hereunder in such order
and manner as the Administrative Agent may determine or, at the option of
the Administrative Agent and the Required Lenders, may be released to the
Borrower.
(E) PRESERVATION OF CORPORATE EXISTENCE, ETC. Preserve and maintain,
----------------------------------------
and cause Holdings and each of its Subsidiaries to preserve and maintain, its
corporate existence, rights (charter and statutory) and franchises; provided,
--------
however, that a Loan Party may consummate any amalgamation, merger or
-------
consolidation permitted under Section 6.02(d) and, provided further, none of the
-------- -------
Loan Parties shall be required to preserve any right or franchise if the Board
of Directors of such Loan Party shall determine that the preservation thereof is
no longer desirable in the conduct of its business and that the loss thereof is
not disadvantageous in any material respect to any Loan Party or Lender Party.
(F) VISITATION RIGHTS. At any reasonable time and from time to
-----------------
time, permit the Administrative Agent or any of the Lenders or any agents or
representatives thereof, to examine and make copies of and abstracts from the
records and books of account of, and visit the properties of each Loan Party,
and to discuss the affairs, finances and accounts of each Loan Party with any of
their officers or directors and with their independent certified public
accountants.
(G) PREPARATION OF ENVIRONMENTAL REPORTS. At the request of the
------------------------------------
Administrative Agent and the Required Lenders from time to time, provide to the
Lenders within
89
90 days after such request, at the expense of the Borrower, an environmental
site assessment report for all of the Loan Parties' properties described in such
request, prepared by an environmental consulting firm acceptable to the
Administrative Agent and the Required Lenders, indicating the presence or
absence of Hazardous Materials and the estimated cost of any compliance, removal
or remedial action in connection with any Hazardous Materials on such
properties; provided that the Borrower may satisfy the foregoing obligations by
--------
providing the Administrative Agent and the Required Lenders with a copy of an
environmental site assessment report prepared by an independent environmental
consulting firm within three years prior to such request unless a Loan Party
knows or has reason to know that a new condition has occurred or that an
existing condition has materially adversely changed. Without limiting the
generality of the foregoing, if the Administrative Agent or the Required Lenders
determine at any time that a material risk exists that any such report will not
be provided within the time referred to above, the Administrative Agent or the
Required Lenders may retain an environmental consulting firm to prepare such
report at the expense of the Borrower, and the Borrower hereby grants and agrees
to cause Holdings or any Subsidiary which owns any property described in such
request to grant at the time of such request, to the Administrative Agent, the
Lenders, such firm and any agents or representatives thereof an irrevocable non-
exclusive license, subject to the rights of tenants, to enter onto their
respective properties to undertake such an assessment.
(H) APPRAISALS. The Borrower, at its own expense, shall deliver to
----------
the Administrative Agent within 60 days of written request therefor such
appraisals satisfying the requirements of any applicable laws and regulations,
concerning the value of such of the real property of any of the Loan Parties as
the Administrative Agent may request at any time to comply with such laws or
regulations, such appraisals to be conducted by an appraiser, and be in form and
substance, satisfactory to the Administrative Agent.
(I) KEEPING OF BOOKS. Keep, and cause Holdings and each of its
----------------
Subsidiaries to keep, proper books of record and account, in which full and
correct entries shall be made of all their respective financial transactions and
their respective assets and business in accordance with generally accepted
accounting principles in effect from time to time.
(J) MAINTENANCE OF PROPERTIES, ETC. Maintain and preserve, and
------------------------------
cause Holdings and each of its Subsidiaries to maintain and preserve, all of its
properties that are used or useful in the conduct of its business in good
working order and condition, ordinary wear and tear excepted.
(K) COMPLIANCE WITH TERMS OF LEASEHOLDS. (i) Make all payments
-----------------------------------
and otherwise perform all obligations in respect of all Material Leases of real
property, (ii) keep such leases in full force and effect and not allow such
leases to lapse or be terminated or any rights to renew such leases to be
forfeited or canceled, except in connection with the moving or consolidation of
facilities as determined to be in the best interest of the Borrower and its
Subsidiaries by the Board of Directors of the Borrower, (iii) notify the
Administrative Agent of any default by any party with respect to such leases and
(iv) cooperate with the Administrative Agent in all respects to cure any such
default, and in each case, cause Holdings and each of its Subsidiaries to do so.
90
(L) PERFORMANCE OF LOAN DOCUMENTS AND RELATED DOCUMENTS. Perform and
---------------------------------------------------
observe all of the terms and provisions of each Loan Document and Related
Document to be performed or observed by it, maintain each such Loan Document and
Related Document in full force and effect, enforce such Loan Document and
Related Document in accordance with its terms, take all such action to such end
as may be from time to time requested by the Administrative Agent and, upon
request of the Administrative Agent, make to each other party to each such Loan
Document and Related Document such demands and requests for information and
reports or for action as the Borrower is entitled to make under such Loan
Document or Related Document, and in each case cause Holdings and each of its
Subsidiaries to do so.
(M) PERFORMANCE OF MATERIAL CONTRACTS. Perform and observe all the
---------------------------------
terms and provisions of each Material Contract to be performed or observed by
it, maintain each such Material Contract in full force and effect, enforce each
such Material Contract in accordance with its terms, in each case, unless the
Borrower's Board of Directors determines otherwise in the best interests of the
Borrower, and take all such action to such end as may be from time to time
requested by the Administrative Agent and, upon request of the Administrative
Agent, make to each other party to each such Material Contract such demands and
requests for information and reports or for action as the Borrower is entitled
to make under such Material Contract, and in each case cause Holdings and each
of its Subsidiaries to do so.
(N) ADDITIONAL LOAN PARTIES; ADDITIONAL COLLATERAL.
----------------------------------------------
(i) Substantially concurrently with the formation or acquisition
of any Subsidiary of any Credit Party, (A) cause such Subsidiary (unless
such Subsidiary is a Foreign Subsidiary) to deliver to the Administrative
Agent a confirmation that it is a "Credit Party" and that it shall comply
with and be bound by this Agreement, the Intercreditor Agreement and the
other Loan Documents, (B) cause such Subsidiary (unless such Subsidiary is
a Foreign Subsidiary) to unconditionally guarantee all Obligations of the
Borrower hereunder and under the Notes (if any) by executing and delivering
to the Administrative Agent an amendment to the Guaranty substantially in
the form of Exhibit XIV, (C) cause such Subsidiary (unless such Subsidiary
------------
is a Foreign Subsidiary) to execute and deliver to the Administrative
Agent, an amendment to the Security Agreement, substantially in the form of
Exhibit XV (whereby such Subsidiary shall ▇▇▇▇▇ ▇ ▇▇▇▇ on those of its
----------
assets described in the Security Agreement), (D) promptly pledge to the
Administrative Agent or cause to be pledged to the Administrative Agent all
of the outstanding Capital Stock of such Subsidiary (or, if such Subsidiary
is a Foreign Subsidiary, 65% of such Capital Stock) owned by any Credit
Party to secure such Credit Party's Obligations under the Loan Documents,
(E) with respect to any real property in which a Domestic Subsidiary has an
interest, cause such Domestic Subsidiary to execute and deliver such deeds
of trust, trust deeds and mortgages ("ADDITIONAL MORTGAGES") in appropriate
--------------------
form for filing in all filing or recording offices that the Administrative
Agent may deem necessary or desirable to create a valid first and
subsisting Lien on the property described therein in favor of the
Administrative Agent for the benefit of itself and the Lender Parties, (F)
promptly take, and cause such Subsidiary (unless such Subsidiary is a
Foreign Subsidiary) and each other Credit Party to take, all
91
action necessary or (in the opinion of the Administrative Agent or the
Required Lenders) desirable to perfect and protect the Liens intended to be
created by the Collateral Documents, as amended pursuant to this Section
6.01(n), (G) promptly take, and cause such Subsidiary (unless such
Subsidiary is a Foreign Subsidiary) and each other Credit Party to take,
all action necessary or (in the opinion of the Administrative Agent or the
Required Lenders) desirable to provide such Mortgage Policies, American
Land Title Association form surveys, appraisals, environmental reports,
engineering, soils and other reports, assignments of leases and rents,
consents and agreements of lessors and other third parties, estoppel
letters and other confirmations, and evidence of insurance with respect to
any real property that becomes the subject of an Additional Mortgage, as
the Administrative Agent may deem necessary or desirable, in each case in
form and substance acceptable to the Administrative Agent, and (H) promptly
deliver to the Administrative Agent such Officers' Certificates and
opinions of counsel, if any, as the Administrative Agent or the Required
Lenders may reasonably require with respect to the foregoing (including
opinions as to enforceability and perfection of security interests).
(ii) Substantially concurrently with the formation or
acquisition of the Excluded Acquisition Sub, (A) promptly pledge to the
Administrative Agent or cause to be pledged to the Administrative Agent all
of the outstanding Capital Stock of the Excluded Acquisition Sub owned by
any Credit Party to secure such Credit Party's Obligations under the Loan
Documents, (B) promptly take, and cause such Excluded Acquisition Sub and
each other Credit Party to take, all action necessary or (in the opinion of
the Administrative Agent or the Required Lenders) desirable to perfect and
protect the Lien intended to be created by the foregoing, and (C) promptly
deliver to the Administrative Agent such opinions of counsel, if any, as
the Administrative Agent or the Required Lenders may reasonably require
with respect to the foregoing (including opinions as to enforceability and
perfection of security interests).
(iii) In addition to the foregoing, upon the acquisition by any
Credit Party on or after the date hereof of any interest in any real
property (A) the applicable Credit Party shall promptly execute and deliver
such Additional Mortgages in appropriate form for filing in all filing or
recording offices that the Administrative Agent may deem necessary or
desirable to create a valid first and subsisting Lien on such real property
in favor of the Administrative Agent for the benefit of itself and the
Lender Parties, (B) the Borrower shall promptly take, and cause each Credit
Party to take, all action necessary or (in the opinion of the
Administrative Agent or the Required Lenders) desirable to perfect and
protect the Liens intended to be created by the Additional Mortgages, (C)
the Borrower shall promptly take, and cause each Credit Party to take, all
action necessary or (in the opinion of the Administrative Agent or the
Required Lenders) desirable to provide such Mortgage Policies, American
Land Title Association form surveys, appraisals, environmental reports,
engineering, soils and other reports, assignments of leases and rents,
consents and agreements of lessors and other third parties, estoppel
letters and other confirmations, and evidence of insurance with respect to
any real property that becomes the subject of an Additional Mortgage, as
the Administrative Agent may deem necessary or desirable, in each case in
form and substance acceptable to the Administrative Agent,
92
and (D) promptly deliver to the Administrative Agent such Officers'
Certificates and opinions of counsel, if any, as the Administrative Agent
or the Required Lenders may reasonably require with respect to the
foregoing (including opinions as to enforceability and perfection of
security interests).
(O) YEAR 2000 ASSURANCES. The Borrower and each of its Subsidiaries
--------------------
shall take all action necessary and commit adequate resources to assure that
their respective computer-based and other systems are able to effectively
process data including dates before, on and after January 1, 2000 without
experiencing any year 2000 problem that could cause a Material Adverse Effect.
At the request of the Administrative Agent or any Lender, the Borrower shall use
commercially reasonable efforts to provide or cause to be provided to the
Administrative Agent or such Lender, as the case may be, with assurance and
substantiation (including, but not limited to, the results of internal or
external audit reports prepared in the ordinary course of business) reasonably
acceptable to the Administrative Agent or such Lender, as the case may be, as to
the year 2000 capability of the Borrower and its Subsidiaries and their
respective abilities to conduct their respective businesses and operations
before, on and after January 1, 2000 without experiencing a year 2000 problem
causing a Material Adverse Effect.
(P) CERTAIN POST-CLOSING MATTERS.
----------------------------
(i) Provide to the Administrative Agent within 30 days after the
Closing Date such consents and agreements of the lessor with respect to the
property located at 1111 All Pro Drive, Elkhart, Indiana (the "ELKHART
-------
PROPERTY") as the Administrative Agent may require and a Memorandum of
--------
Lease with respect to the lease relating to the Elkhart Property all in
form and substance satisfactory to the Administrative Agent.
(ii) Within 30 days after the Closing Date, provide to the
Administrative Agent amended or replacement lender's loss payable
endorsements in form and substance satisfactory to the Administrative Agent
and the Canadian Administrative Agent.
SECTION 6.02. NEGATIVE COVENANTS.
------------------
So long as any Loan or Unreimbursed Letter of Credit Liability
shall remain unpaid, any Letter of Credit shall be outstanding or any Lender
shall have any Commitment hereunder, the Borrower will not, at any time, without
the written consent of the Required Lenders or, if required under Section 9.01,
of all of the Lenders (other than any Lender which is, at such time, a
Defaulting Lender):
(A) LIENS, ETC. Create, incur, assume or suffer to exist, or permit
----------
Holdings or any of its Subsidiaries or the Excluded Acquisition Sub or either of
the Excluded Melamine Subs to create, incur, assume or suffer to exist, any Lien
on or with respect to any of its properties of any character (including, without
limitation, accounts) whether now owned or hereafter acquired, or sign or file,
or permit Holdings or any of its Subsidiaries or the Excluded Acquisition Sub or
either of the Excluded Melamine Subs to sign or file, under the Code of any
jurisdiction, a
93
financing statement that names Holdings or any of its Subsidiaries as debtor, or
sign, or permit Holdings or any of its Subsidiaries or the Excluded Acquisition
Sub or either of the Excluded Melamine Subs to sign, any security agreement
authorizing any secured party thereunder to file such financing statement, or
assign, or permit Holdings or any of its Subsidiaries or the Excluded
Acquisition Sub or either of the Excluded Melamine Subs to assign, any accounts
or other right to receive income, excluding, however, from the operation of the
--------- -------
foregoing restrictions the following:
(i) Liens created by the Loan Documents and Liens created
by the Canadian Loan Documents;
(ii) Permitted Liens;
(iii) the Liens described on Schedule 6.02(a)(iii);
(iv) purchase money Liens upon or in property
acquired or held by Holdings or any of its Subsidiaries in the ordinary
course of business to secure the purchase price of such property or to
secure Debt incurred solely for the purpose of financing the acquisition,
construction or improvement of any such property to be subject to such
Liens, or Liens existing on any such property at the time of acquisition,
or extensions, renewals or replacements of any of the foregoing for the
same or a lesser amount; provided, however, that no such Lien shall extend
-------- -------
to or cover any property other than the property being acquired,
constructed or improved, and no such extension, renewal or replacement
shall extend to or cover any property not theretofore subject to the Lien
being extended, renewed or replaced; and provided further that the
-------- -------
aggregate principal amount of the Debt secured by Liens permitted by this
clause (iv) and by clause (v) below shall not exceed $10,000,000 at any
time outstanding and that any such Debt shall not otherwise be prohibited
by the terms of the Loan Documents;
(v) Liens arising in connection with Capital Leases of
the Borrower and its Subsidiaries; provided that the aggregate principal
--------
amount of the Debt secured by Liens permitted by clause (iv) above and by
this clause (v) shall not exceed $10,000,000 at any time outstanding; and
provided further that no such Lien shall extend to or cover any Collateral;
-------- -------
(vi) the replacement, extension or renewal of any Lien
permitted by clause (iii) above upon or in the same property theretofore
subject thereto or the replacement, extension or renewal (without increase
in the amount or change in any direct or contingent obligor) of the Debt
secured thereby;
(vii) Liens arising in the ordinary course of business and
securing liabilities (but not Funded Debt) in an outstanding aggregate
amount not in excess of $300,000 at any time; and
(viii) Liens on the property of the Excluded Acquisition Sub
but only to the extent that the Debt secured by such Liens is permitted
under Section 6.02(b)(vi).
94
(B) DEBT. Create, incur, assume or suffer to exist, or permit
----
Holdings or any of its Subsidiaries or the Excluded Acquisition Sub or either of
the Excluded Melamine Subs to create, incur, assume or suffer to exist, any Debt
other than:
(i) in the case of the Borrower:
(A) Debt under the Loan Documents;
(B) Debt under the Canadian Credit Agreement
Guaranty;
(C) Subordinated Debt evidenced by the Subordinated
Notes;
(D) Permitted Seller Financing in an aggregate
principal amount at any time outstanding not to exceed
$5,000,000; and
(E) intercompany Debt owed to any Loan Party so long
as such Debt is evidenced by one or more Intercompany Notes that
have been pledged to the Administrative Agent or the Canadian
Administrative Agent pursuant to the Security Agreement or, in
the case of intercompany Debt owed to Panolam Canada or any of
its Subsidiaries, the Canadian Security Agreement; provided that
-------- ----
neither the Borrower nor any of its Subsidiaries shall repay any
interest on or principal of, or pay any other amount in respect
of, such Debt upon or following the occurrence of any Default
that is continuing.
(ii) in the case of any of the Borrower's Domestic
Subsidiaries and Panolam Canada and its Subsidiaries:
(A) intercompany Debt owed to the Borrower
or to a wholly-owned Subsidiary of the Borrower so long as such
Debt is evidenced by one or more Intercompany Notes that have
been pledged to the Administrative Agent or the Canadian
Administrative Agent pursuant to the Security Agreement or the
Canadian Security Agreement; provided that no Loan Party shall
-------- ----
repay any interest on or principal of, or pay any other amount in
respect of, such Debt (except Debt owing to the Borrower, Debt
owing to Panolam Canada by any of its Subsidiaries and debt owing
to a Domestic Subsidiary by another Domestic Subsidiary) upon or
following the occurrence of any Default that is continuing; and
(B) Debt pursuant to the Loan Documents and the
Canadian Credit Agreement Guaranty.
(iii) in the case of Panolam Canada, Debt under the
Canadian Credit Agreement.
(iv) in the case of any Parent, Debt pursuant to the
Loan Documents and the Canadian Credit Agreement Guaranty.
95
(v) in the case of any Loan Party:
(A) Debt of the Borrower or any of its Subsidiaries
secured by Liens permitted by Section 6.02(a)(iv) or (v) not to exceed
in the aggregate the amount set forth in such Section;
(B) the Surviving Debt;
(C) indorsement of negotiable instruments for deposit
or collection or similar transactions in the ordinary course of
business;
(D) Debt of the Borrower in respect of Hedge
Agreements and Debt of Panolam Canada in respect of Canadian Hedge
Agreements in an aggregate notional amount for all such Debt under
this clause (D) not to exceed $30,000,000 at any time outstanding;
(E) so long as no Default or Event of Default has occurred
that is continuing as of the date of incurrence or assumption thereof
or would result after giving effect thereto, other Debt not exceeding
$1,000,000 in the aggregate (for the Borrower and its Subsidiaries);
(vi) in the case of the Excluded Acquisition Sub:
(A) Non-Recourse Debt in an aggregate principal amount not
to exceed $60,000,000 at any time outstanding; and
(B) intercompany Debt owed to the Borrower to the extent
constituting Investments permitted under Section 6.02(f)(viii); and
(vii) in the case of any Excluded Foreign Subsidiary,
intercompany Debt to the extent constituting Investments permitted
under Section 6.02(f)(xii).
(C) SYNTHETIC LEASE OBLIGATIONS. Create, incur, assume or suffer to
---------------------------
exist, or permit Holdings or any of its Subsidiaries to create, incur, assume or
suffer to exist, any obligations as lessee for the rental or hire of real or
personal property in connection with any synthetic lease transaction.
(D) MERGERS, ETC. Merge into or consolidate with any Person or permit
------------
any Person to merge into or consolidate with it, or permit Holdings or any of
its Subsidiaries to do so, except that (i) any Domestic Subsidiary of the
Borrower that is Solvent may merge into or consolidate with any other Domestic
Subsidiary of the Borrower that is Solvent provided that the Person formed by
such merger or consolidation shall be a Domestic Subsidiary of the Borrower,
(ii) any of the Borrower's Domestic Subsidiaries that is Solvent may merge into
the Borrower, (iii) any Subsidiary of Panolam Canada that is Solvent may
amalgamate with any other Subsidiary of Panolam Canada that is Solvent, (iv) any
of Panolam Canada's Subsidiaries that is Solvent may amalgamate with Panolam
Canada, and (v) a wholly owned Subsidiary of the
▇▇
▇▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ formed primarily for the purposes of consummating a
Permitted Acquisition may, substantially contemporaneously with the consummation
of such Permitted Acquisition, be merged into or amalgamated with the Person
being acquired in such Permitted Acquisition; provided, however, that in each
-------- -------
case, immediately after giving effect thereto, no event shall occur and be
continuing that constitutes a Default and, in the case of any such merger to
which the Borrower is a party, the Borrower is the surviving corporation.
(E) SALES, ETC. OF ASSETS. Sell, lease, transfer or otherwise dispose
---------------------
of, or permit Holdings or any of its Subsidiaries to sell, lease, transfer or
otherwise dispose of, any assets or grant any option or other right to purchase,
lease or otherwise acquire any Collateral other than Inventory to be sold in the
ordinary course of its business, except (i) sales of Inventory in the ordinary
course of its business and sales of worn out or obsolete assets or trade-ins or
trade-ups on other assets the proceeds of which are substantially concurrently
applied or committed to be applied within 90 days to the purchase of replacement
assets, (ii) in a transaction authorized by Section 6.02(d), (iii) sales of
assets for cash and for fair value in an aggregate amount not to exceed
$5,000,000 in any period of 12 consecutive months and $15,000,000 in the
aggregate since the Closing Date, (iv) the sale of any asset by Holdings or by
any Subsidiary identified on Schedule 6.02(e) subject to the parameters set
forth on such Schedule, so long as, in the case of each of the foregoing clauses
(iii) and (iv), (A) the purchase price paid to Holdings or such Subsidiary for
such asset shall be no less than the fair market value of such asset at the time
of such sale, (B) the purchase price for such asset shall be paid to Holdings or
such Subsidiary solely in cash and (C) the Borrower shall, on the date of such
sale, prepay the Loans pursuant to (and to the extent required by) Section
2.04(c)(ii) in an aggregate principal amount equal to the Net Cash Proceeds
received by Holdings or such Subsidiary from the sale of such asset, (v) so long
as no Default shall occur and be continuing, the grant of any option or other
right to purchase any asset in a transaction which would be permitted under the
provisions of the preceding clause (iii) or (iv), and (vi) intercompany
transfers of assets so long as in the case of any transfer to a Foreign
Subsidiary by a Credit Party, the transferor receives at the time of such
transfer cash consideration equal to the fair market value of the assets so
transferred.
(F) INVESTMENTS IN OTHER PERSONS; ACQUISITIONS. Make or hold, or
------------------------------------------
permit Holdings or any of its Subsidiaries or the Excluded Acquisition Sub or
either of the Excluded Melamine Subs to make or hold, any Investment in any
Person, or make or permit Holdings or any of its Subsidiaries or the Excluded
Acquisition Sub or either of the Excluded Melamine Subs to make, any
Acquisition, except that:
(i) the Borrower and its Domestic Subsidiaries may hold
Investments comprised of notes payable, or (solely as a result of
reorganization proceedings referred to below) Capital Stock or other
securities issued by Receivables Debtors to the Borrower and its Domestic
Subsidiaries pursuant to negotiated agreements or reorganization
proceedings under the United States Bankruptcy Code with respect to the
settlement of such Receivables Debtor's Receivables in the ordinary course
of business;
(ii) each Loan Party may maintain its existing Investments in its
Subsidiaries as of the Closing Date and, subject to Section 6.02(b) and so
long as no
97
Default has occurred and is continuing, may make additional Investments in
any Subsidiary that is a Loan Party other than any Excluded Foreign
Subsidiary;
(iii) each Subsidiary of the Borrower may maintain its existing
Investments in the other Subsidiaries of the Borrower as of the Closing
Date and, subject to Section 6.02(b) and so long as no Default has occurred
and is continuing, may make additional Investments in any other wholly-
owned Subsidiary of the Borrower other than any Excluded Foreign
Subsidiary;
(iv) Panolam Canada may maintain its existing Investments in
the Borrower as of the Closing Date and, subject to Section 6.02(b), may
make additional Investments in the Borrower;
(v) unless an Event of Default has occurred and is continuing
and there is a Revolving Loan or Swing Line Loan outstanding, the Borrower,
its Domestic Subsidiaries and Panolam Canada may make investments in Cash
Equivalents;
(vi) so long as no Default shall have occurred and be
continuing, the Borrower and its Subsidiaries may consummate Permitted
Acquisitions (subject to Section 6.02(f)(xii) with respect to any Excluded
Foreign Subsidiary);
(vii) so long as no Default shall have occurred and be
continuing, the Borrower and its Domestic Subsidiaries may make loans and
advances described in clause (f) of the definition of "Exempted Affiliate
Transaction";
(viii) the Borrower may make an Investment of up to $5,000,000
in the Excluded Acquisition Sub;
(ix) the Borrower may maintain its existing Investments in the
Excluded Melamine Subs as of the Closing Date, but may not make any
additional Investments therein;
(x) so long as no Event of Default has occurred and is
continuing, the Excluded Acquisition Sub may consummate the Excluded
Acquisition;
(xi) Panolam Canada and its Subsidiaries may make any
Investment permitted under the Canadian Credit Agreement;
(xii) the Loan Parties may make Investments in Excluded Foreign
Subsidiaries in an aggregate amount for all such Investments made after the
Closing Date, including such Investments pursuant to Section 6.02(f)(vi),
not to exceed $5,000,000; and
(xiii) so long as no Event of Default shall have occurred and be
continuing, the Borrower may make other Investments not exceeding $500,000
in the aggregate at any time outstanding.
98
(G) DIVIDENDS, ETC. Declare or pay any dividends, purchase, redeem,
--------------
retire, defease or otherwise acquire for value any Capital Stock of any Loan
Party or any warrants, rights or options to acquire such Capital Stock, now or
hereafter outstanding, or permit Group or any of its Subsidiaries to do so or
permit Group or any of its Subsidiaries to return any capital to any of their
stockholders as such, make any distribution of assets, Capital Stock, warrants,
rights, options, obligations or securities to any of their stockholders as such
or issue or sell any capital stock or any warrants, rights or options to acquire
such Capital Stock, or permit Group or any of its Subsidiaries to purchase,
redeem, retire, defease or otherwise acquire for value any Capital Stock of
Holdings or any of its Subsidiaries or any warrants, rights or options to
acquire such Capital Stock or to issue or sell any Capital Stock or any
warrants, rights or options to acquire such Capital Stock, except that the
Borrower's Subsidiaries may declare and deliver cash dividends to the Borrower,
and so long as no Default shall have occurred and be continuing:
(i) The Borrower and its Subsidiaries may declare and deliver
dividends and distributions payable only in common stock of the Borrower or
such Subsidiary, as applicable;
(ii) the Borrower and Panolam Canada may pay cash dividends to
their respective Parents (and their respective Parents may, in turn, pay
cash dividends to their respective Parents) in amounts necessary to pay
(and only substantially concurrently with payment of) (A) fees payable by
Holdings pursuant to the Genstar Agreements as and when due, and (B) income
taxes attributable to the business of Holdings and its Subsidiaries (but
not attributable to the Excluded Acquisition Sub, except to the extent of
any cash dividend actually received by the Borrower from the Excluded
Acquisition Sub for such purposes) the necessary fees and expenses to
maintain Holdings', Group's and PII Second's corporate existence, the
reasonable costs of their directors' and officers' insurance and their
legal and accounting fees to the extent such fees related to legal and
accounting services provided directly to them by entities that are not
Affiliates of the Borrower; and
(iii) the Borrower and Panolam Canada may pay cash dividends to
their respective Parents (and their respective Parents may, in turn, pay
cash dividends to their respective Parents) in amounts necessary to fund
(A) repurchases of Capital Stock of Holdings from employees or former
employees of Holdings or any of its Subsidiaries upon such employees
ceasing to be employees of Holdings or any Loan Party, up to an aggregate
maximum amount for all such repurchases on or after the date hereof of
$3,000,000 and (B) amounts necessary to repay (and only substantially
concurrently with payment of) the Domtar Note in accordance with Section
6.02(k).
(H) CHANGE IN NATURE OF BUSINESS. (i) Make, or permit Holdings or any
----------------------------
of its Subsidiaries to make, any material change in the nature of its business
as carried on at the date hereof or permit the Excluded Acquisition Sub to
engage in any business materially different from the business of Holdings and
its Subsidiaries; or (ii) permit any Parent to engage in any trade or business,
or own any assets or incur any Debt or Obligations, except the Domtar Note
99
owing by Holdings, the obligations under the Genstar Agreements or such other
Debt or Obligations as are otherwise specifically permitted under this
Agreement.
(I) CHARTER AMENDMENTS. Except as could not reasonably be expected to
------------------
adversely affect any Lender Party, amend, or permit Holdings or any of its
Subsidiaries to amend, its certificate of incorporation or bylaws.
(J) ACCOUNTING CHANGES. Make or permit, or permit Holdings or any of
------------------
its Subsidiaries to make or permit, any change in accounting policies or
reporting practices, except as required by generally accepted accounting
principles.
(K) PREPAYMENTS, ETC. OF DEBT. (i) Prepay, redeem, purchase, defease
-----------------
or otherwise satisfy prior to the scheduled maturity thereof in any manner any
Debt other than (A) the prepayment of the Loans in accordance with the terms of
this Agreement, and (B) regularly scheduled or required repayments or
redemptions of Surviving Debt, (ii) make any payment in violation of any
subordination terms of any Debt, (iii) amend, modify or change in any manner any
term or condition of any Surviving Debt or Subordinated Debt, except in any
manner that does not adversely affect any of the Loans, the Obligations, the
Collateral, any Loan Document or any Lender Party, provided that under no
--------
circumstances shall any modification to subordination provisions be permitted,
or (iv) permit Holdings or any of its Subsidiaries to do any of the foregoing
other than (A) to prepay any Debt payable to the Borrower or, subject to Section
6.02(b), Panolam Canada, (B) the payment by the Borrower and its Subsidiaries of
interest on and principal of Debt under Intercompany Notes issued in accordance
with Section 6.02(b), (C) the prepayment by Panolam Canada of loans under the
Canadian Credit Agreement in accordance with the terms thereof, and (D) payment
or prepayment of all or any portion of the Domtar Note (including interest)
provided that the Borrower demonstrates pro forma compliance with the financial
covenants in Section 6.04 (as set forth in an Officers' Certificate setting
forth the calculations thereof and delivered to the Administrative Agent at
least three Business Days in advance of making such payment) and provided that
no Default or Event of Default exists or would result therefrom.
(L) AMENDMENT, ETC. OF RELATED DOCUMENTS. Except as otherwise
------------------------------------
provided in the Intercreditor Agreement with respect to the Canadian Loan
Documents, cancel or terminate any Related Document or consent to or accept any
cancellation or termination thereof, amend, modify or change in any manner any
term or condition of any Related Document or give any consent, waiver or
approval thereunder, waive any default under or any breach of any term or
condition of any Related Document, agree in any manner to any other amendment,
modification or change of any term or condition of any Related Document or take
any other action in connection with any Related Document that would impair the
value of the interest or rights of any Loan Party thereunder or that would
impair the rights or interests of the Administrative Agent or any Lender Party,
or permit Holdings or any of its Subsidiaries to do any of the foregoing.
(M) AMENDMENT, ETC. OF MATERIAL CONTRACTS. Cancel or terminate any
-------------------------------------
Material Contract or consent to or accept any cancellation or termination
thereof, amend or
100
otherwise modify any Material Contract or give any consent, waiver or approval
thereunder, waive any default under or breach of any Material Contract, agree in
any manner to any other amendment, modification or change of any term or
condition of any Material Contract or take any other action in connection with
any Material Contract that would impair the value of the interest or rights of
any Loan Party thereunder or that would impair the interest or rights of the
Administrative Agent or any Lender Party, or permit Holdings or any of its
Subsidiaries to do any of the foregoing, in each case except as determined by
the Borrower's management to be in the best interests of the Borrower.
(N) AMENDMENT, ETC. OF DOMTAR NOTE AND GENSTAR AGREEMENTSS. (i)
------------------------------------------------------
Permit Holdings to amend or modify the Domtar Note (or any indenture or
agreement in connection therewith) in any manner that has the effect of: (A)
increasing the interest rate on the Debt thereunder (other than pursuant to its
terms as in effect on the date hereof); (B) changing the dates upon which
payments of principal or interest are due on the Debt thereunder other than to
extend such dates; (C) changing any default or event of default other than to
delete or make less restrictive any default provision therein, or add any
covenant with respect to the Debt thereunder; (D) changing the redemption or
prepayment provisions of the Debt thereunder other than to extend the date
therefor or to reduce the premiums payable in connection therewith; (E) granting
any security or collateral to secure payment of the Debt thereunder; or (F)
changing or amending any other term if such change or amendment would increase
any monetary obligation or materially increase any other obligation of the
obligor or confer additional material rights to the holder of such Debt in a
manner adverse to any Loan Party, the Administrative Agent or any Lender Party.
(ii) Amend or modify, or permit Panolam US or Panolam Canada to amend
or modify, any Genstar Agreement in any manner that has the effect of: (A)
increasing any fees payable thereunder; (B) changing the dates upon which
payments are dufe thereunder (other than extend time for payment); (C) granting
any security or collateral to secure payments thereunder; (D) changing or
amending any subordination provisions thereof; or (E) changing or amending any
other term if such change or amendment of such other term would increase any
monetary obligation or materially increase any other obligation of the obligor
or confer additional material rights to the holder of such Debt in a manner
adverse to any Loan Party, the Administrative Agent or any Lender Party.
(O) PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES. Enter into, or
-------------------------------------------
permit Holdings or any of its Subsidiaries to enter into, any agreement,
instrument or other document which directly or indirectly prohibits or restricts
in any manner, or would have the effect of prohibiting or restricting in any
manner, the ability of any of the Borrower's Subsidiaries to (i) pay dividends
or make any other distributions in respect of its Capital Stock or any other
Equity Interest or participation in its profits owned by the Borrower or any of
its Subsidiaries, or pay or repay any Debt owed to the Borrower or any of its
Subsidiaries, (ii) make loans or advances to the Borrower, or (iii) transfer any
of its properties or assets to the Borrower or any of its Subsidiaries, in each
case except for Permitted Restrictions. Notwithstanding the foregoing, (x)
customary provisions restricting subletting or assignment of any lease entered
into in the ordinary course of business consistent with industry practice shall
not in and of themselves be
101
considered a restriction on the ability of the applicable Subsidiary to transfer
such agreement or assets, as the case may be, and (y) any asset subject to a
Lien which is not prohibited to exist with respect to such asset pursuant to
this Agreement may be subject to restrictions on the transfer or disposition
thereof pursuant to such Lien.
(P) NEGATIVE PLEDGE. Enter into or suffer to exist, or permit
---------------
Holdings or any of its Subsidiaries to enter into or suffer to exist, any
agreement prohibiting or conditioning the creation or assumption of any Lien
upon any of its property or assets other than (i) in favor of the Administrative
Agent and the Lender Parties, (ii) in favor of the Canadian Administrative Agent
and the Canadian Lenders pursuant to the terms of the Canadian Loan Documents,
(iii) pursuant to the Subordinated Note Indenture or (iv) in connection with (A)
any Surviving Debt and any Debt outstanding on the date a Subsidiary first
becomes a Subsidiary or (B) any Debt permitted by Section 6.02(b)(v)(A) hereof,
provided that the prohibition in this clause (B) extends only to the assets
-------- ----
subject to such Liens.
(Q) PARTNERSHIPS. Become a general partner in any general or limited
------------
partnership, or permit Holdings or any of its Subsidiaries to do so, other than
any Subsidiary of the Borrower the sole assets of which consist of its interest
in such a partnership.
(R) TRANSACTIONS WITH AFFILIATES. Enter into any transaction,
----------------------------
including, without limitation, any purchase, sale, lease or exchange of property
or the rendering of any service, with any Affiliate unless such transaction is
(i) otherwise permitted under this Agreement, (ii) in the ordinary course of the
applicable Loan Party's business and (iii) upon fair and reasonable terms no
less favorable to any Loan Party than it would obtain in a comparable arm's
length transaction with a Person that is not an Affiliate; provided that, (x)
-------- ----
each such transaction involving consideration to either party in excess of
$1,000,000, is disclosed in advance to the Administrative Agent and,
concurrently with such disclosure, the Borrower delivers to the Administrative
Agent an Officer's Certificate addressed and delivered to the Administrative
Agent and the Lenders certifying that such affiliate transaction has been
approved by a majority of the members of the Board of Directors of the Borrower
that are disinterested in such transaction, if any, (y) each such transaction
involving consideration to either party in excess of $5,000,000, shall in
addition require that the Borrower, prior to the consummation thereof, obtain
and provide to the Administrative Agent and the Lenders a written favorable
opinion as to the fairness of such transaction to the Borrower from a financial
point of view from an independent investment banking firm of national reputation
or, if pertaining to a matter for which such investment banking firms do not
customarily render such opinions, an appraisal or valuation firm of national
reputation, and (z) all such transactions existing as of the date hereof are
described on Schedule 6.02(r). Notwithstanding the foregoing:
(i) nothing contained in this Section 6.02(r) shall be deemed to
prohibit any Exempted Affiliate Transaction except that, notwithstanding
any contrary provision hereof, no payment of fees under any Genstar
Agreement may be made by any Loan Party if a Default has occurred and is
continuing; and
102
(ii) Debt payable by Holdings to Domtar Industries Inc. under the
Domtar Note may be set off against Domtar's liabilities to Panolam Canada
under the Asset Purchase Agreement dated February 15, 1996 between Panolam
Canada and Domtar, as amended.
(S) EXCLUDED MELAMINE SUBS. Any contrary provision of this Agreement
----------------------
or any other Loan Document notwithstanding, the Borrower shall not and shall not
permit Holdings or any of its Subsidiaries to (i) sell, contribute or otherwise
transfer any assets to or for the benefit of either of the Excluded Melamine
Subs or (ii) permit either of the Excluded Melamine Subs to have any assets or
liabilities (other than liabilities required by law in connection with the
maintenance of its corporate existence) or to engage in any business activities.
SECTION 6.03. REPORTING REQUIREMENTS.
----------------------
So long as any Loan or Unreimbursed Letter of Credit Liability shall
remain unpaid, any Letter of Credit shall be outstanding or any Lender shall
have any Commitment hereunder, the Borrower will, unless the Required Lenders
shall otherwise consent in writing, furnish to the Administrative Agent and the
Lenders:
(A) DEFAULT NOTICE. As soon as possible and in any event within two
--------------
days after the actual knowledge of the occurrence of each Default continuing on
the date of such statement, a statement of the Chief Financial Officer of the
Borrower setting forth details of such Default and the action that the Borrower
has taken and proposes to take with respect thereto.
(B) MONTHLY FINANCIALS. As soon as available and in any event within
------------------
45 days after the end of each Fiscal Month, financial information regarding the
Borrower and its Subsidiaries, certified by the Chief Financial Officer of the
Borrower (or, if the Borrower does not have a Chief Financial Officer, its
Treasurer or Director of Finance), consisting of Consolidated and consolidating
(i) unaudited balance sheets as of the close of such Fiscal Month and the
related statements of income and cash flow for that portion of the Fiscal Year
ending as of the close of such Fiscal Month and (ii) unaudited statements of
income and cash flows for such Fiscal Month, setting forth in comparative form
the figures for the corresponding period in the prior year for such Fiscal Year,
all prepared in accordance with GAAP (subject to normal year-end adjustments and
except for the Projections). Such financial information shall be accompanied by
a Compliance Certificate, which shall include a certification that such
financial information presents fairly in accordance with GAAP (subject to normal
year-end adjustments) the financial position and results of operations of the
Borrower and its Subsidiaries, on a Consolidated and consolidating basis, in
each case as at the end of such month and for the period then ended.
(C) QUARTERLY FINANCIALS. As soon as available and in any event
--------------------
within 45 days after the end of each of the first three quarters of each Fiscal
Year of the Borrower: (i) Consolidated and consolidating balance sheets of the
Borrower and its Subsidiaries as of the end of such quarter and Consolidated and
consolidating statements of income and cash flows of the Borrower and its
Subsidiaries for the period commencing at the end of the previous Fiscal Year
and ending with the end of such quarter, setting forth in each case in
comparative form the
103
corresponding figures for the corresponding period of the preceding Fiscal Year,
all in reasonable detail; (ii) a Quarterly Compliance Certificate; (iii) a
summary of the outstanding balance of all Intercompany Notes as of the last day
of that fiscal quarter; and (iv) an accounts payable report for the Borrower and
each of its Subsidiaries setting out the aging of their respective total
outstanding balances of accounts payable as of the end of such fiscal quarter.
(D) ANNUAL FINANCIALS. As soon as available and in any event within
-----------------
(i) 90 days after the Closing Date, audited financial statements for the
Borrower and its Subsidiaries and for Pioneer, on a Consolidated and
consolidating basis (as applicable, and recognizing that the consolidating
financial statements will not be audited), consisting of balance sheets as at
December 31, 1998 and the related statements of operations, income,
stockholders' equity and cash flows and (ii) 90 days after the end of each
Fiscal Year (commencing with the 1999 Fiscal Year), audited financial statements
for the Borrower and its Subsidiaries on a Consolidated and consolidating basis
(recognizing that the consolidating financial statements will not be audited),
consisting of balance sheets and statements of operations, income, stockholders'
equity and cash flows, setting forth in comparative form in each case the
figures for the previous Fiscal Year, which financial statements referred to in
clauses (i) and (ii) shall be prepared in accordance with GAAP, certified
without qualification, by an independent certified public accounting firm of
national standing or otherwise acceptable to the Administrative Agent. The
financial statements required by clause (ii) above shall be accompanied by (A) a
Quarterly Compliance Certificate, (ii) a letter from such accounting firm to the
effect that, in connection with their audit examination, nothing has come to
their attention during such audit examination to cause them to believe that a
Default or Event of Default has occurred (or specifying those Defaults and
Events of Default that they became aware of), it being understood that such
audit examination extended only to accounting matters and that no special
investigation was made with respect to the existence of Defaults or Events of
Default, provided that such letter can be obtained without any additional cost
to any Loan Party, and (iii) the annual letters to such accountants (to the
extent not subject to attorney-client privilege) in connection with their audit
examination detailing contingent liabilities and material litigation matters.
Requirements to provide audited financial information hereunder with respect to
the Borrower and its Subsidiaries on a Consolidated basis may be satisfied by
providing the same financial information for Holdings and its Subsidiaries on a
Consolidated basis so long as the requisite adjustments for such alternate
presentation are clearly shown therein in a manner satisfactory in form and
substance to the Administrative Agent and the Required Lenders.
(E) ANNUAL OPERATING PLAN. As soon as available and in any event no
---------------------
later than 60 days after the end of each Fiscal Year (except that this Section
6.03(e) shall not be applicable following the consummation of an Initial Public
Equity Offering), an annual operating plan for the Borrower and its
Subsidiaries, approved by the Board of Directors of the Borrower, for the
following year, which will include a statement of all of the material
assumptions on which such plan is based, will include monthly balance sheets and
a monthly budget for the following year and will integrate sales, gross profits,
operating expenses, operating profit, cash flow forecasts and Borrowing
availability forecasts, all prepared on a Consolidated and business unit basis
and in similar detail as that on which operating results are reported (and in
the case of cash flow forecasts, representing management's good faith estimates
of future financial performance
104
based on historical performance), and including plans for personnel, Capital
Expenditures and facilities.
(F) ERISA EVENTS. Promptly and in any event within 30 days after any
------------
Loan Party or any of its ERISA Affiliates knows or has reason to know that any
ERISA Event with respect to any Loan Party or any of its ERISA Affiliates has
occurred, a statement of the Chief Financial Officer of the Borrower describing
such ERISA Event and the action, if any, that such Loan Party or such ERISA
Affiliate has taken and proposes to take with respect thereto; provided that no
notice shall be required under this Section 6.03(f) for any ERISA Event unless
such ERISA Event has resulted in or is reasonably likely to result in liability
of any Loan Party in excess, either individually or in the aggregate with all
other ERISA Events which have occurred or are reasonably expected to occur, of
$2,000,000.
(G) PLAN TERMINATIONS. Promptly and in any event within ten Business
-----------------
Days after receipt thereof by any Loan Party or any of its ERISA Affiliates,
copies of each notice from the PBGC stating its intention to terminate any Plan
of any Loan Party or any of its ERISA Affiliates or to have a trustee appointed
to administer any such Plan, provided that, with respect to the Plan of an ERISA
Affiliate that is not a Loan Party, such notice shall not be required if it is
reasonably anticipated that such action will not result in liability of a Loan
Party in excess of $2,000,000.
(H) PLAN ANNUAL REPORTS. Promptly and in any event within 30 days
-------------------
after the filing thereof with the Internal Revenue Service, copies of each
Schedule B (Actuarial Information) to the annual report (Form 5500 Series) with
respect to (i) each Plan of each Loan Party and (ii) each Plan of each ERISA
Affiliate that is not a Loan Party if such Plan has an Insufficiency in excess
of $2,000,000.
(I) MULTIEMPLOYER PLAN NOTICES. Promptly and in any event within ten
--------------------------
Business Days after receipt thereof by any Loan Party or any of its ERISA
Affiliates from the sponsor of a Multiemployer Plan of any Loan Party or any of
its ERISA Affiliates, copies of each notice concerning (i) the imposition of
Withdrawal Liability in excess of $1,000,000 by any such Multiemployer Plan,
(ii) the reorganization or termination, within the meaning of Title IV of ERISA,
of any such Multiemployer Plan or (iii) the amount of liability incurred, or
that may be incurred, by such Loan Party or any of its ERISA Affiliates in
connection with any event described in clause (i) or (ii) if such amount exceeds
$1,000,000; provided that with respect to any notice received by an ERISA
-------- ----
Affiliate that is not a Loan Party it is reasonably anticipated that such action
may result in liability of a Loan Party in excess of $2,000,000.
(J) LITIGATION. Promptly after learning of the commencement thereof,
----------
notice of all actions, suits, investigations, litigation and proceedings before
any court or governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, affecting any Loan Party of the type
described in Section 5.01(h), and promptly after the occurrence thereof, notice
of any adverse change in the status or the financial effect on any Loan Party of
any litigation required to be disclosed under this Section 6.03(j).
(K) SECURITIES REPORTS. Promptly after the sending or filing thereof,
------------------
copies of
105
all (i) proxy statements, financial statements and reports that any Loan Party
sends to its stockholders, and (ii) regular, periodic and special reports, and
all registration statements, that any Loan Party files with the Securities and
Exchange Commission or any governmental authority that may be substituted
therefor, or with any national securities exchange.
(L) CREDITOR REPORTS. Promptly after the furnishing thereof, copies
----------------
of any statement or report furnished to any other holder of the securities of
any Loan Party pursuant to the terms of any indenture, loan or credit or similar
agreement and not otherwise required to be furnished to the Lenders pursuant to
any other clause of this Section 6.03.
(M) AGREEMENT NOTICES. Promptly upon receipt thereof, copies of all
-----------------
default and other material notices, requests and other documents received by any
Loan Party under or pursuant to any Related Document or Material Contract and,
from time to time upon request by the Administrative Agent, such information and
reports regarding the Related Documents and the Material Contracts as the
Administrative Agent may reasonably request.
(N) ENVIRONMENTAL CONDITIONS. Promptly after the occurrence thereof,
------------------------
notice of any condition or occurrence on any property of any Loan Party that
results in a material noncompliance by any Loan Party with any Environmental Law
or Environmental Permit or could (i) form the basis of an Environmental Action
against any Loan Party or such property that could have a Material Adverse
Effect or (ii) cause any such property to be subject to any material
restrictions on ownership, occupancy, use or transferability under any
Environmental Law; provided that notices need be given for any condition set
forth on Schedule 5.01(l)(i), 5.01(l)(ii) or 5.01(l)(iii) only to the extent
that such condition has materially or adversely changed.
(O) COLLATERAL REPORTS. From and after the Closing Date and until the
------------------
last to occur of (i) the Revolving Commitment Termination Date, (ii) the Term A
Termination Date and (iii) the Term B Termination Date, deliver to the
Administrative Agent and/or the Lenders, as required, the various Collateral
Reports (including Borrowing Base Certificates) at the times, to the Persons and
in the manner set forth in Schedule II.
(P) OTHER INFORMATION. Such other information respecting the
-----------------
business, condition (financial or otherwise), operations, performance,
properties or prospects of any Loan Party as the Administrative Agent or any
Lender through the Administrative Agent may from time to time reasonably
request.
SECTION 6.04. FINANCIAL COVENANTS. So long as any Loan or Unreimbursed
-------------------
Letter of Credit Liability shall remain unpaid, any Letter of Credit shall be
outstanding or any Lender shall have any Commitment hereunder, unless the
Required Lenders otherwise consent in writing:
(A) MAXIMUM CONSOLIDATED LEVERAGE RATIO. At all times from and after
-----------------------------------
the Closing Date, the Borrower shall maintain a Consolidated Leverage Ratio for
the Borrower and its Subsidiaries below the levels specified for the periods
indicated, which ratio shall be tested as of the last day of each fiscal quarter
ending during any period indicated below (commencing June 30, 1999):
106
MAXIMUM CONSOLIDATED
PERIOD LEVERAGE RATIO
----------- --------------------
Closing Date through and including September 30, 1999 5.00:1.0
October 1, 1999 through and including December 31, 1999 4.80:1.0
January 1, 2000 through and including March 31, 2000 4.65:1.0
April 1, 2000 through and including June 30, 2000 4.50:1.0
July 1, 2000 through and including September 30, 2000 4.35:1.0
October 1, 2000 through and including December 31, 2000 4.15:1.0
January 1, 2001 through and including March 31, 2001 4.00:1.0
April 1, 2001 through and including June 30, 2001 3.85:1.0
July 1, 2001 through and including September 30, 2001 3.70:1.0
October 1, 2001 through and including September 30, 2002 3.50:1.0
October 1, 2002 through and including September 30, 2003 3.25:1.0
October 1, 2003 and thereafter 3.00:1.0
(B) MINIMUM FIXED CHARGE COVERAGE RATIO. At all times from and after
-----------------------------------
the Closing Date, the Borrower shall maintain a ratio of (i) Consolidated EBITDA
of the Borrower and its Subsidiaries for the four fiscal quarter period ending
on the last day of the applicable fiscal quarter to (ii) Consolidated Fixed
Charges for such period, above the levels specified for the periods indicated,
which ratio shall be tested as of the last day of each fiscal quarter ending
during any period indicated below (commencing June 30, 1999):
MINIMUM FIXED CHARGE COVERAGE
PERIOD RATIO
-------------- -----------------------------
Closing Date through and including December 31, 1999 1.000:1.0
January 1, 2000 through and including March 31, 2000 1.025:1.0
April 1, 2000 through and including June 30, 2000 1.050:1.0
July 1, 2000 through and including September 30, 2000 1.075:1.0
October 1, 2000 through and including December 31, 2001 1.100:1.0
January 1, 2002 and thereafter 1.150:1.0
107
(C) MINIMUM INTEREST COVERAGE RATIO. At all times from and after the
-------------------------------
Closing Date, the Borrower shall maintain a ratio of (i) Consolidated EBITDA of
the Borrower and its Subsidiaries for the four fiscal quarter period ending on
the last day of the applicable fiscal quarter to (ii) Consolidated Interest
Expense, above the levels specified for the periods indicated, which ratio shall
be tested as of the last day of each fiscal quarter ending during any period
indicated below (commencing June 30, 1999):
MINIMUM INTEREST
PERIOD COVERAGE RATIO
------------- ------------------
Closing Date through and including September 30, 1999 1.90:1.0
October 1, 1999 through and including March 31, 2000 2.00:1.0
April 1, 2000 through and including June 30, 2000 2.10:1.0
July 1, 2000 through and including September 30, 2000 2.20:1.0
October 1, 2000 through and including March 31, 2001 2.25:1.0
April 1, 2001 through and including June 30, 2001 2.35:1.0
July 1, 2001 through and including September 30, 2001 2.45:1.0
October 1, 2001 through and including September 30, 2002 2.50:1.0
October 1, 2002 through and including September 30, 2003 2.75:1.0
October 1, 2003 and thereafter 3.00:1.0
(D) CAPITAL EXPENDITURES. The Borrower and its Subsidiaries shall not
--------------------
make any Capital Expenditures that would cause the aggregate amount of all
Capital Expenditures made by the Borrower and its Subsidiaries (including, with
respect to Pioneer (and each other Loan Party), any Capital Expenditures made on
or after January 1, 1999 but excluding any Capital Expenditures consisting of
purchases or trade-ins of replacement assets pursuant to Section 6.02(e)(i) to
the extent of the proceeds received on the asset sold or traded) in any Fiscal
Year set forth below to exceed the amount set forth below for such period (the
"BASE AMOUNT") plus up to 50% of the unused Base Amount of Capital Expenditures,
----------- ----
if any, from the prior Fiscal Year:
BASE AMOUNT OF
FISCAL YEAR MAXIMUM CAPITAL EXPENDITURES
----------- ----------------------------
1999 $23,000,000
2000 16,000,000
2001 and thereafter 12,000,000
(e) Minimum Consolidated EBITDA. At all times from and after June 30,
---------------------------
1999, the Borrower and its Domestic Subsidiaries shall not permit Consolidated
EBITDA for any period of four consecutive fiscal quarters ending on or after
June 30, 1999 to be less than $20,000,000.
ARTICLE VII.
EVENTS OF DEFAULT
SECTION 7.01. EVENTS OF DEFAULT. If any of the following events
-----------------
("EVENTS OF DEFAULT") shall occur and be continuing:
-------------------
108
(a) (i) the Borrower shall fail to pay any principal of any Loan when
the same becomes due and payable, or (ii) the Borrower shall fail to pay
any interest on any Loan within three Business Days after the same becomes
due and payable, or (iii) any Credit Party shall fail to make any other
payment under any Loan Document within three Business Days after the same
becomes due and payable; or
(b) any representation or warranty made by any Loan Party (or any of
its officers) under or in connection with any Loan Document shall prove to
have been materially incorrect in any respect when made; or
(c) the Borrower shall fail to perform or observe any term, covenant
or agreement contained in Section 6.01(e), (f), or (o), 6.02, 6.03 (other
than 6.03(h)) or 6.04; or
(d) any Loan Party shall fail to perform any other term, covenant or
agreement contained in any Loan Document on its part to be performed or
observed if such failure shall remain unremedied for 15 days after written
notice thereof shall have been given to the Borrower by the Administrative
Agent or any Lender Party; or
(e) any Loan Party shall fail to pay any principal of, premium or
interest on or any other amount payable in respect of any Debt of such Loan
Party that is outstanding in a principal amount of at least $2,000,000 in
the aggregate (but excluding the Domtar Note and Debt outstanding
hereunder) when the same becomes due and payable (whether by scheduled
maturity, required prepayment, acceleration, demand or otherwise), and such
failure shall continue after the applicable grace period, if any, specified
in the agreement or instrument relating to such Debt; or any other event
shall occur or condition shall exist under any agreement or instrument
relating to any such Debt and shall continue after the applicable grace
period, if any, specified in such agreement or instrument, if the effect of
such event or condition is to accelerate, or to permit the acceleration of,
the maturity of such Debt or otherwise to cause, or to permit the holder
thereof to cause, such Debt to mature; or any such Debt shall be declared
to be due and payable or required to be prepaid or redeemed (other than by
a regularly scheduled required prepayment or redemption), purchased or
defeased, or an offer to prepay, redeem, purchase or defease such Debt
shall be required to be made, in each case prior to the stated maturity
thereof; or
(f) any Event of Default (as such term is defined in the Canadian
Credit Agreement) shall occur and be continuing (and has not been waived)
under the Canadian Credit Agreement; or
(g) any Loan Party shall generally not pay its debts as such debts
become due, or shall otherwise become insolvent, or shall admit in writing
its inability to pay its debts generally, or shall make a general
assignment for the benefit of creditors; or any proceeding shall be
instituted by or against any Loan Party seeking to adjudicate it a bankrupt
or insolvent, or seeking liquidation, winding up, dissolution, suspension
of general operations, reorganization, arrangement, adjustment, protection,
relief, or
109
composition of or stay of enforcement against it or its debts
under any law relating to bankruptcy, insolvency or reorganization or
relief of debtors, or seeking the entry of an order for relief or the
appointment of a receiver, interim receiver, receiver and manager, trustee,
or other similar official for it or for any substantial part of its
property and, in the case of any such proceeding instituted against it (but
not instituted by it) that is being diligently contested by it in good
faith, either such proceeding shall remain undismissed or unstayed for a
period of 30 days or any of the actions sought in such proceeding
(including, without limitation, the entry of an order for relief against,
or the appointment of a receiver, interim receiver, receiver and manager,
trustee, custodian or other similar official for, it or any substantial
part of its property) shall occur; or any Loan Party shall take any
corporate action to authorize any of the actions set forth above in this
subsection (g); or
(h) any judgment or order for the payment of money in excess of
$2,000,000 shall be rendered against any Loan Party and either (i)
enforcement proceedings shall have been commenced by any creditor upon such
judgment or order or (ii) there shall be any period of 10 consecutive days
during which a stay of enforcement of such judgment or order, by reason of
a pending appeal or otherwise, shall not be in effect; or
(i) any final non-monetary and non-appealable judgment or order shall
be rendered against any Loan Party that could reasonably be expected to
have a Material Adverse Effect; or
(j) any provision of any Loan Document after delivery thereof
pursuant to Section 4.01 shall for any reason cease to be valid and binding
on or enforceable against any Loan Party party to it, or any such Loan
Party shall so state in writing; or
(k) any Collateral Document after delivery thereof pursuant to
Section 4.01 shall for any reason (other than pursuant to the terms
thereof) cease to create a valid and perfected first priority Lien on the
Collateral, purported to be covered thereby or otherwise become materially
impaired; or
(l) any ERISA Event shall have occurred with respect to a Plan of any
Loan Party or any of its ERISA Affiliates and the liability of the Loan
Parties with respect to such ERISA Event exceeds or could reasonably be
expected to exceed, either individually or in the aggregate with the
liability of the Loan Parties for all other ERISA Events which have
occurred or are reasonably expected to occur, $2,000,000; or
(m) any Loan Party or any of its ERISA Affiliates shall have been
notified by the sponsor of a Multiemployer Plan of any Loan Party or any of
its ERISA Affiliates that it has incurred Withdrawal Liability to such
Multiemployer Plan which would, either individually or in the aggregate
with other payments of Withdrawal Liability by the Loan Parties with
respect to all Multiemployer Plans, increase the amounts contributed by the
Loan Parties to such Multiemployer Plans for the plan years of such
Multiemployer Plans immediately preceding the plan year in which such
Withdrawal Liability is incurred by an amount exceeding $1,000,000; or
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(n) any Loan Party or any of its ERISA Affiliates shall have been
notified by the sponsor of a Multiemployer Plan of any Loan Party or any of
its ERISA Affiliates that such Multiemployer Plan is in reorganization or
is being terminated, within the meaning of Title IV of ERISA, and as a
result of such reorganization or termination the aggregate annual
contributions of the Loan Parties to all Multiemployer Plans that are then
in reorganization or being terminated have been or will be increased over
the amounts contributed by the Loan Parties to such Multiemployer Plans for
the plan years of such Multiemployer Plans immediately preceding the plan
year in which such reorganization or termination occurs by an amount
exceeding $1,000,000; or
(o) a Change of Control shall have occurred; or
(p) any Guarantor shall fail to comply with the provisions of Section 7(b)
of the Guaranty;
then, and in any such event, the Administrative Agent (i) shall at the request,
or may with the consent, of the Required Lenders, by notice to the Borrower,
declare the obligation of each Appropriate Lender to make Loans and of any
Issuing Bank to issue Letters of Credit to be terminated, whereupon the same
shall forthwith terminate, and (ii) shall at the request, or may with the
consent, of the Required Lenders, by notice to the Borrower, declare the Loans,
all interest thereon and all other amounts payable under this Agreement and the
other Loan Documents to be forthwith due and payable, whereupon the Loans, all
such interest and all such amounts shall become and be forthwith due and
payable, without presentment, demand, protest or further notice of any kind, all
of which are hereby expressly waived by the Borrower; provided, however, that in
-------- -------
the event of an actual or deemed entry of an order for relief with respect to
any Loan Party under the United States Bankruptcy Code, (x) the obligation of
each Lender to make Loans and of each Issuing Bank to issue Letters of Credit
shall automatically be terminated and (y) the Loans, all such interest and all
such amounts shall automatically become and be due and payable, without
presentment, demand, protest or any notice of any kind, all of which are hereby
expressly waived by the Borrower.
SECTION 7.02. ACTIONS IN RESPECT OF THE LETTERS OF CREDIT UPON
------------------------------------------------
DEFAULT. If any Event of Default shall have occurred and be continuing, the
-------
Administrative Agent shall at the request, or may with the consent of the
Required Lenders, irrespective of whether it is taking any of the actions
described in Section 7.01 or otherwise, make demand upon the Borrower to, and
forthwith upon such demand the Borrower will, pay to the Administrative Agent
for the benefit of the Lender Parties in same day funds at the Administrative
Agent's office designated in such demand, for deposit in the Letter of Credit
Cash Collateral Account an amount equal to the total Letter of Credit Usage then
outstanding (and the Borrower hereby grants to the Administrative Agent, for the
ratable benefit of the Administrative Agent and each Lender Party, a continuing
security interest in all amounts at any time on deposit in the Letter of Credit
Cash Collateral Account to secure all Letter of Credit Obligations from time to
time outstanding). If at any time the Administrative Agent determines that any
funds held in the Letter of Credit Cash Collateral Account are subject to any
right or claim of any Person other than the Administrative Agent and the Lender
Parties or that the total amount of such funds is less than the total Letter of
Credit
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Usage, the Borrower will, forthwith upon demand by the Administrative Agent, pay
to the Administrative Agent, as additional funds to be deposited and held in the
Letter of Credit Cash Collateral Account, an amount equal to the excess of (a)
such Letter of Credit Usage over (b) the total amount of funds, if any, then
held in the Letter of Credit Cash Collateral Account that the Administrative
Agent determines to be free and clear of any such right and claim.
ARTICLE VIII.
THE ADMINISTRATIVE AGENT
SECTION 8.01. AUTHORIZATION AND ACTION. Each Lender Party hereby
------------------------
appoints and authorizes the Administrative Agent to take such action as agent on
its behalf and to exercise such powers and discretion under this Agreement and
the other Loan Documents as are delegated to the Administrative Agent by the
terms hereof and thereof, together with such powers and discretion as are
reasonably incidental thereto, including, without limitation, to execute and
enter into on behalf of the Lender Parties the Intercreditor Agreement and the
Collateral Documents (and each Lender Party hereby agrees to be bound by the
terms of such Intercreditor Agreement and Collateral Documents). As to any
matters not expressly provided for by the Loan Documents (including, without
limitation, enforcement or collection of the Notes, if any), the Administrative
Agent shall not be required to exercise any discretion or take any action, but
shall be required to act or to refrain from acting (and shall be fully protected
in so acting or refraining from acting) upon the instructions of the Required
Lenders or such other number of Lender Parties as may be expressly required by
any Loan Document, and such instructions shall be binding upon all Lender
Parties and all holders of Notes, if any; provided, however, that the
-------- -------
Administrative Agent shall not be required to take any action that exposes the
Administrative Agent to personal liability or that is contrary to this Agreement
or applicable law. The Administrative Agent agrees to give to each Lender prompt
notice of each notice given to it by the Borrower pursuant to the terms of this
Agreement.
SECTION 8.02. ADMINISTRATIVE AGENT'S RELIANCE, ETC. Neither the
------------------------------------
Administrative Agent nor any of its directors, officers, agents or employees
shall be liable for any action taken or omitted to be taken by it or them under
or in connection with the Loan Documents, except for its or their own gross
negligence or willful misconduct. Without limitation of the generality of the
foregoing, the Administrative Agent: (i) may treat the payee of any Note as the
holder thereof until the Administrative Agent receives and accepts an Assignment
and Acceptance entered into by the Lender that is the payee of such Note, as
assignor, and an Eligible Assignee, as assignee, as provided in Section 9.07;
(ii) may consult with legal counsel (including counsel for any Loan Party),
independent public accountants and other experts selected by it and shall not be
liable for any action taken or omitted to be taken in good faith by it in
accordance with the advice of such counsel, accountants or experts; (iii) makes
no warranty or representation to any Lender Party and shall not be responsible
to any Lender Party for any statements, warranties or representations made in or
in connection with the Loan Documents; (iv) shall not have any duty to ascertain
or to inquire as to the performance or observance of any of the terms, covenants
or conditions of any Loan Document on the part of any Loan Party or to inspect
the property (including the books and records) of any Loan Party; (v) shall not
be responsible to any Lender for the due execution, legality, validity,
enforceability,
112
genuineness, sufficiency or value of any Loan Document or any other instrument
or document furnished pursuant hereto; (vi) shall incur no liability under or in
respect of any Loan Document by acting upon any notice, consent, certificate or
other instrument or writing (which may be by telegram, telecopy, cable or telex)
believed by it to be genuine and signed or sent by the proper party or parties;
and (vii) shall incur no liability as a result of any determination whether the
transactions contemplated by the Loan Documents constitute a "highly leveraged
transaction" within the meaning of the interpretations issued by the Comptroller
of the Currency, the Federal Deposit Insurance Corporation and the Board of
Governors of the Federal Reserve System.
SECTION 8.03. AGENTS AND AFFILIATES. With respect to its Commitments
---------------------
and the Loans made by it, any Letters of Credit Issued by it and any Notes
issued to it, each Agent shall have the same rights and powers under the Loan
Documents as any other Lender Party and may exercise the same as though it were
not an Agent; and the terms "Lender" or "Lenders" and "Lender Party" or "Lender
Parties" shall, unless otherwise expressly indicated, include each Agent in its
individual capacity. Each Agent and its affiliates may accept deposits from,
lend money to, act as trustee under indentures of, accept investment banking
engagements from and generally engage in any kind of business with, any Loan
Party, any of its Subsidiaries and any Person who may do business with or own
securities of any Loan Party or any such Subsidiary, all as if such Agent were
not an Agent and without any duty to account therefor to the Lender Parties.
SECTION 8.04. LENDER CREDIT DECISION. Each Lender acknowledges that it
----------------------
has, independently and without reliance upon any Agent or any other Lender and
based on the financial statements referred to in Section 4.01 and such other
documents and information as it has deemed appropriate, made its own credit
analysis and decision to enter into this Agreement. Each Lender also
acknowledges that it will, independently and without reliance upon any Agent or
any other Lender and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under this Agreement.
SECTION 8.05. INDEMNIFICATION. Each Lender severally agrees to
---------------
indemnify the Agents and the Lead Arranger (to the extent not promptly
reimbursed by the Borrower) from and against such Lender's ratable share of any
and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or nature
whatsoever that may be imposed on, incurred by, or asserted against such Agents
or the Lead Arranger or any of them in any way relating to or arising out of the
Loan Documents or any action taken or omitted by the Agents or the Lead Arranger
or any of them under the Loan Documents; provided, however, that no Lender shall
-------- -------
be liable to any such Person for any portion of such liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements resulting from such Person's gross negligence or willful
misconduct. Without limitation of the foregoing, each Lender agrees to reimburse
the applicable Agent or Lead Arranger, as the case may be, promptly upon demand
for its ratable share of any costs and expenses payable by the Borrower under
Section 9.04, to the extent that such Agent or the Lead Arranger, as the case
may be, is not promptly reimbursed for such costs and expenses by the Borrower.
For purposes of this Section 8.05, the Lenders' respective ratable shares of any
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amount shall be determined, at any time, according to the sum of (a) the
aggregate principal amount of the Loans (other than unreimbursed Letter of
Credit Drawings) outstanding at such time and owing to the respective Lenders,
(b) their respective Revolving Pro Rata Shares of the aggregate Letter of Credit
Obligations outstanding at such time, plus (c) their respective Unused Revolving
----
Commitments at such time. In the event that any defaulted Loan shall be owing by
any Defaulting Lender at any time, such Lender's Commitment with respect to the
Facility under which such defaulted Loan was required to have been made shall be
considered to be unused for purposes of this Section 8.05 to the extent of the
amount of such defaulted Loan. The failure of any Lender to reimburse the
Administrative Agent promptly upon demand for its ratable share of any amount
required to be paid by the Lenders to the Agent or the Lead Arranger, as the
case may be, as provided herein shall not relieve any other Lender of its
obligation hereunder to reimburse any Agent or the Lead Arranger, as the case
may be, for its ratable share of such amount, but no Lender shall be responsible
for the failure of any other Lender to reimburse the Administrative Agent, the
Lead Arranger or the Syndication Agent, as the case may be, for such other
Lender's ratable share of such amount.
SECTION 8.06. SUCCESSOR ADMINISTRATIVE AGENTS. The Administrative
-------------------------------
Agent may resign at any time by giving written notice thereof to the Lender
Parties and the Borrower and may be removed at any time with or without cause by
the Required Lenders. Upon any such resignation or removal, the Required Lenders
shall have the right to appoint a successor Administrative Agent. If no
successor Administrative Agent shall have been so appointed by the Required
Lenders, and shall have accepted such appointment, within 30 days after the
retiring Administrative Agent's giving of notice of resignation or the Required
Lenders' removal of the retiring Administrative Agent, then the retiring
Administrative Agent may, on behalf of the Lenders, appoint a successor
Administrative Agent, which shall be a commercial bank having a combined capital
and surplus of at least $250,000,000. Upon the acceptance of any appointment as
Administrative Agent hereunder by a successor Administrative Agent and upon the
execution and filing or recording of such financing statements, or amendments
thereto, and such amendments or supplements to the Mortgages, and such other
instruments or notices, as may be necessary or desirable, or as the Required
Lenders may request, in order to continue the perfection of the Liens granted or
purported to be granted by the Collateral Documents, such successor
Administrative Agent shall succeed to and become vested with all the rights,
powers, discretion, privileges and duties of the retiring Administrative Agent,
and the retiring Administrative Agent shall be discharged from its duties and
obligations under the Loan Documents. After any retiring Administrative Agent's
resignation or removal hereunder as Administrative Agent, the provisions of this
Article VIII shall inure to its benefit as to any actions taken or omitted to be
taken by it while it was Administrative Agent under this Agreement. The fees
payable by the Borrower to a successor Administrative Agent shall be the same as
those payable to its predecessor unless otherwise agreed upon between the
Borrower and such successor.
SECTION 8.07. DOCUMENTATION AGENT. Notwithstanding anything herein to
-------------------
the contrary, the Documentation Agent has no rights or obligations in such
capacity under any of the Loan Documents.
114
SECTION 8.08. MINISTERIAL ACTS. The duties of the Administrative Agent
----------------
and the Syndication Agent shall be ministerial and administrative in nature, and
the Administrative Agent and the Syndication Agent shall not have, by reason of
this Agreement or any of the other Loan Documents, a fiduciary relationship with
any Lender Party (or any participant, Affiliate, Approved Fund or SPV of any
Lender Party).
ARTICLE IX.
MISCELLANEOUS
SECTION 9.01. AMENDMENTS, ETC.; RELEASE OF COLLATERAL. (a) Except as
---------------------------------------
otherwise provided in the Intercreditor Agreement, no amendment or waiver of any
provision of this Agreement, any Notes or any other Loan Document, nor consent
to any departure by the Borrower therefrom, shall in any event be effective
unless the same shall be in writing and signed by the Required Lenders (and, in
the case of any such amendment, the Borrower), and then such waiver or consent
shall be effective only in the specific instance and for the specific purpose
for which given; provided, however, that notwithstanding the foregoing or any
-------- -------
contrary provision of the Intercreditor Agreement, (i) no amendment, waiver or
consent shall, unless in writing and signed by all the Lenders (other than any
Lender which is, at such time, a Defaulting Lender), do any of the following at
any time: (A) change the percentage of the Commitments or of the aggregate
unpaid principal amount of any Loans or Notes, or the number of Lenders, that
shall be required for the Lenders or any of them to take any action hereunder or
under the Intercreditor Agreement, or change the definition of Required Lenders
or Supermajority Lenders, or (B) amend this Section 9.01, or (C) release all or
substantially all of the Collateral or (D) release any Guarantor from its
obligations under the Guaranty, (ii) no amendment, waiver or consent shall,
unless in writing and signed by the Required Lenders and each Lender that has an
outstanding Loan or Commitment under the Facility affected by such amendment,
waiver or consent, (A) increase the Commitments of such Lender or subject such
Lender to any additional obligations, (B) reduce the principal of, or interest
on, any Loans made or Notes held by such Lender or any fees or other amounts
payable hereunder to such Lender or (C) postpone any date fixed for any payment
of principal of, or interest on, any Loans made or Notes held by such Lender or
any fees or other amounts payable hereunder to such Lender, (iii) no amendment,
waiver or consent shall, unless in writing and signed by the Supermajority
Lenders, increase the advance rate percentages set forth in the definition of
the Borrowing Base Amount or make less restrictive the definition of Eligible
Receivables or Eligible Inventory, and (iv) no amendment, waiver or consent
shall, unless in writing and signed by the Supermajority Lenders and each Lender
that has an outstanding Loan or Commitment under the Facility affected by such
amendment, waiver or consent, change the order of application of any prepayment
set forth in Section 2.04 in any manner that materially affects such Lender (it
being expressly understood that other provisions of Section 2.04, including
those providing for and requiring prepayments, may be waived or amended by the
Supermajority Lenders); provided further that no amendment, waiver or consent
-------- -------
shall, unless in writing and signed by the Swing Line Lender or each Issuing
Bank, as the case may be, in addition to the Lenders required above to take such
action, affect the rights or obligations of the Swing Line Lenders or of the
Issuing Banks, as the case may be, under this Agreement; and provided further
-------- -------
that no amendment, waiver or consent shall, unless in writing and signed by the
Administrative Agent in addition to the Lenders required above to
115
take such action, affect the rights or duties of the Administrative Agent under
this Agreement or any Note.
(b) So long as no Default under Section 7.01(a) or 7.01(g) and no
Event of Default has occurred and is continuing: upon the request of the
Borrower, and without the consent of the Lenders or the Required Lenders, the
Administrative Agent is authorized to (i) release from the Lien of any
Collateral Document any item or items of Collateral comprising less than all or
substantially all of the Collateral at the time of such release (and, if such
Collateral consists of all of the Borrower's or any of its Subsidiaries'
interest in any Guarantor, to simultaneously release such Guarantor from its
obligations under the Guaranty and the Collateral Documents) and (ii) execute
any documents or instruments reasonably requested by the Borrower (as determined
by the Administrative Agent) in connection therewith, but in each case only if
(x) such release is requested in conjunction with the consummation of any sale
or other disposition of such Collateral by the Borrower or any of its
Subsidiaries (or the creation of any Lien) that is not prohibited by this
Agreement, and (y) the Borrower has delivered to the Administrative Agent an
Officer's Certificate certifying that no Default under Section 7.01(a) or
7.01(g) or Event of Default has occurred and is continuing and that such sale or
other disposition (or such creation of a Lien) is not prohibited by this
Agreement.
SECTION 9.02. NOTICES, ETC. Except as otherwise expressly provided
------------
herein, all notices and other communications provided for hereunder shall be in
writing (including telegraphic, telecopy, telex or cable communication) and
mailed, telegraphed, telecopied, telexed, cabled or delivered as follows:
If to the Borrower: Panolam Industries International, Inc.
▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: President
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
If to any Initial Lender: At its address for notices specified on
its signature page hereto, or if not so
specified, at its Domestic Lending Office
specified opposite its name on Schedule
I hereto
If to any other Lender: At its address for notices specified in the
Assignment and Acceptance pursuant to which
it became a Lender, or if an address for
notices is not specified, at its Domestic
Lending Office specified in such Assignment
and Acceptance
If to the Administrative Agent: Credit Suisse First Boston
▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
116
Attention: Syndications Agency
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
or, as to each party, at such other address as shall be designated by such party
in a written notice to the other parties (or, in the case of any Lender, as
designated in a notice to the Borrower and the Administrative Agent). All such
notices and communications shall, when mailed, telegraphed, telecopied, telexed
or cabled, be effective when deposited in the mails, delivered to the telegraph
company, transmitted by telecopier, confirmed by telex answerback or delivered
to the cable company, respectively, except that notices and communications to
the Administrative Agent pursuant to Article II, III, IV or VIII shall not be
effective until received by the Administrative Agent.
SECTION 9.03. NO WAIVER, REMEDIES. No failure on the part of any
-------------------
Lender Party or the Administrative Agent to exercise, and no delay in
exercising, any right hereunder, under any Note or under any other Loan Document
shall operate as a waiver thereof, nor shall any single or partial exercise of
any such right preclude any other or further exercise thereof or the exercise of
any other right. The remedies herein provided are cumulative and not exclusive
of any remedies provided by law.
SECTION 9.04. COSTS AND EXPENSES.
------------------
(a) The Borrower agrees to pay on demand (i) all reasonable costs and
expenses of the Administrative Agent, the Lead Arranger and the Syndication
Agent in connection with the preparation, execution, delivery,
administration, modification and amendment of the Loan Documents
(including, without limitation, (A) all due diligence, transportation,
computer, duplication, appraisal, audit, insurance, consultant, search,
filing and recording fees and expenses and (B) the reasonable fees and
expenses of counsel for the Administrative Agent, the Lead Arranger and the
Syndication Agent with respect thereto, with respect to advising the
Administrative Agent, the Lead Arranger and the Syndication Agent as to
their respective rights and responsibilities, or the perfection, protection
or preservation of rights or interests, under the Loan Documents, with
respect to negotiations with any Loan Party or with other creditors of any
Loan Party or any of its Subsidiaries arising out of any Default or any
events or circumstances that may give rise to a Default and with respect to
presenting claims in or otherwise participating in or monitoring any
bankruptcy, insolvency or other similar proceeding involving creditors'
rights generally and any proceeding ancillary thereto) and (ii) all costs
and expenses of the Administrative Agent, the Lead Arranger, the
Syndication Agent, each Lender and each Issuing Bank in connection with the
enforcement of the Loan Documents, whether in any action, suit or
litigation, any bankruptcy, insolvency or other similar proceeding
affecting creditors' rights generally or otherwise (including, without
limitation, the reasonable fees and expenses of counsel for the
Administrative Agent, the Lead Arranger, the Syndication Agent and each
Lender with respect thereto).
(b) The Borrower agrees to indemnify and hold harmless the
Administrative Agent, the Lead Arranger, the Syndication Agent, each
Lender, each Issuing Bank and
117
each of their Affiliates and their officers, directors, employees, agents,
trustees, investment advisors and other advisors (each, an "INDEMNIFIED
-----------
PARTY") from and against any and all claims, damages, losses, liabilities
-----
and expenses (including, without limitation, reasonable fees and expenses
of counsel) that may be incurred by or asserted or awarded against any
Indemnified Party, in each case arising out of or in connection with or by
reason of, or in connection with the preparation for a defense of, any
investigation, litigation or proceeding arising out of, related to or in
connection with (i) this Agreement or any other Loan Document, the actual
or proposed use of the proceeds of any Loan or of any Letter of Credit
issued hereunder or any of the transactions contemplated hereby or by the
other Loan Documents, or (ii) any acquisition or proposed acquisition
(including, without limitation, the Pioneer Acquisition and any of the
other transactions contemplated hereby) by any Loan Party or any of their
respective Affiliates of all or any portion of the stock or substantially
all the assets of Holdings or any of its Subsidiaries or (iii) the actual
or alleged presence of Hazardous Materials on any property of any Loan
Party or any of its Subsidiaries or any Environmental Action relating in
any way to any Loan Party or any of its Subsidiaries, in each case whether
or not such investigation, litigation or proceeding is brought by any Loan
Party, its directors, shareholders or creditors or an Indemnified Party or
any Indemnified Party is otherwise a party thereto and whether or not the
transactions contemplated hereby are consummated, except to the extent such
claim, damage, loss, liability or expense is found in a final,
nonappealable judgment by a court of competent jurisdiction to have
resulted from such Indemnified Party's gross negligence or willful
misconduct. The Borrower also agrees not to assert any claim against any
Agent, the Lead Arranger, any Lender Party, any of their respective
affiliates, or any of their respective directors, officers, employees,
attorneys and agents, on any theory of liability, for special, indirect,
consequential or punitive damages arising out of or otherwise relating to
any of the transactions contemplated herein or in any other Loan Document
or the actual or proposed use of the proceeds of the Loans or the Letters
of Credit.
(c) If any payment of principal of, or Conversion of, any Eurodollar
Rate Loan is made by the Borrower to or for the account of a Lender other
than on the last day of the Interest Period for such Loan, as a result of a
payment or conversion pursuant to Section 2.05, acceleration of the
maturity of any Loans pursuant to Section 7.01 or for any other reason, or
by an Eligible Assignee to a Lender other than on the last day of the
Interest Period for such Loan upon an assignment of rights and obligations
under this Agreement pursuant to Section 9.07 as a result of a demand by
the Borrower pursuant to Section 2.07(c), the Borrower shall, upon demand
by such Lender (with a copy of such demand to the Administrative Agent),
pay to the Administrative Agent for the account of such Lender any amounts
required to compensate such Lender for any additional losses, costs or
expenses that it may reasonably incur as a result of such payment,
including, without limitation, any loss, cost or expense incurred by reason
of the liquidation or reemployment of deposits or other funds acquired by
any Lender to fund or maintain such Loan.
118
(d) If any Credit Party fails to pay when due any costs, expenses or
other amounts payable by it under any Loan Document, including, without
limitation, fees and expenses of counsel and indemnities, such amount may
be paid on behalf of such Credit Party by the Administrative Agent or any
Lender, in its sole discretion and the Borrower shall reimburse the
Administrative Agent or such Lender on demand for any amounts so paid with
interest thereon at the Default Rate from the date of such payment until so
reimbursed.
SECTION 9.05. RIGHT OF SET-OFF. Upon (a) the occurrence and during the
----------------
continuance of any Event of Default and (b) the making of the request or the
granting of the consent specified by Section 7.01 above to authorize the
Administrative Agent to declare any Loans due and payable pursuant to the
provisions of Section 7.01, each Lender Party and each of its Affiliates are
hereby authorized at any time and from time to time, to the fullest extent
permitted by law, to set off and otherwise apply any and all deposits (general
or special, time or demand, provisional or final) at any time held and other
indebtedness at any time owing by such Lender Party or such Affiliate to or for
the credit or the account of the Borrower against any and all of the Obligations
of the Borrower now or hereafter existing under this Agreement and any Note or
Notes held by such Lender, irrespective of whether such Lender shall have made
any demand under this Agreement or such Note or Notes and although such
obligations may be unmatured. Each Lender Party agrees promptly to notify the
Borrower after any such set-off and application; provided, however, that the
-------- -------
failure to give such notice shall not affect the validity of such set-off and
application. The rights of each Lender Party and its Affiliates under this
Section are in addition to other rights and remedies (including, without
limitation, other rights of set-off) that such Lender Party and its Affiliates
may have.
SECTION 9.06. BINDING EFFECT. This Agreement shall become effective
--------------
when it shall have been executed by the Borrower and the Administrative Agent
and when the Administrative Agent shall have been notified by each Lender that
such Lender has executed it and thereafter shall be binding upon and inure to
the benefit of the Borrower, each Agent and each Lender Party and their
respective successors and assigns, except that the Borrower shall not have the
right to assign its rights hereunder or any interest herein without the prior
written consent of the Lenders.
SECTION 9.07. ASSIGNMENTS AND PARTICIPATIONS
------------------------------
(a) Each Lender may assign to one or more banks or other entities all
or a portion of its rights and obligations under this Agreement (including,
without limitation, all or a portion of its Commitment or Commitments, the
Loans owing to it and any Note or Notes held by it); provided, however,
-------- -------
that (i) each such assignment shall be of a uniform, and not a varying,
percentage of all rights and obligations under and in respect of (A) all of
the Facilities, (B) the Revolving Facility and the Term A Facility, or (C)
the Term B Facility, (ii) except in the case of an assignment to a Person
that, immediately prior to such assignment, was a Lender or Affiliate or
Approved Fund of a Lender or an assignment of all of a Lender's rights and
obligations under this Agreement or in respect of any Facility, the amount
of the Commitments and/or Loans of the assigning Lender
119
being assigned pursuant to each such assignment (determined as of the date
of the Assignment and Acceptance with respect to such assignment) shall in
no event be less than $1,000,000, and shall be in integral multiples of
$100,000 in excess thereof, (iii) each such assignment shall be to an
Eligible Assignee or to an Affiliate or Approved Fund of the assignor, (iv)
except for any assignments by the Administrative Agent and any assignments
to another Lender or an Affiliate, SPV or Approved Fund of the assigning
Lender or of any other Lender, each assignment shall require the written
consent of (A) the Administrative Agent and (B) unless a Default or Event
of Default has occurred and is continuing, the Borrower, such consent in
each case not to be unreasonably withheld or delayed, and (v) the parties
to each such assignment shall execute and deliver to the Administrative
Agent, for its acceptance and recording in the Register, an Assignment and
Acceptance, together with any Note or Notes subject to such assignment and
a processing and recordation fee of $3,500; provided, however, that no such
-------- -------
fee shall be payable in the case of an assignment to an Affiliate, SPV or
Approved Fund of the assigning Lender; and provided further that, in the
-------- -------
case of contemporaneous assignments by a Lender to more than one fund
managed by the same investment advisor (which funds are not then Lenders
hereunder), only a single such $3,500 fee shall be payable for all such
contemporaneous assignments. Upon such execution, delivery, acceptance and
recording, from and after the effective date specified in such Assignment
and Acceptance, (x) the assignee thereunder shall be a party hereto and, to
the extent that rights and obligations hereunder have been assigned to it
pursuant to such Assignment and Acceptance, have (in addition to any such
rights and obligations theretofore held by it) the rights and obligations
of a Lender hereunder and (y) the Lender assignor thereunder shall, to the
extent that rights and obligations hereunder have been assigned by it
pursuant to such Assignment and Acceptance, relinquish its rights and be
released from its obligations under this Agreement (and, in the case of an
Assignment and Acceptance covering all or the remaining portion of an
assigning Lender's rights and obligations under this Agreement, such Lender
shall cease to be a party hereto).
(b) By executing and delivering an Assignment and Acceptance, the
Lender assignor thereunder and the assignee thereunder confirm to and agree
with each other and the other parties hereto as follows: (i) other than as
provided in such Assignment and Acceptance, such assigning Lender makes no
representation or warranty and assumes no responsibility with respect to
any statements, warranties or representations made in or in connection with
this Agreement or any other Loan Document or the execution, legality,
validity, enforceability, genuineness, sufficiency or value of, or the
perfection or priority of any Lien or security interest created or
purported to be created under or in connection with, this Agreement or any
other Loan Document or any other instrument or document furnished pursuant
hereto or thereto; (ii) such assigning Lender makes no representation or
warranty and assumes no responsibility with respect to the financial
condition of the Borrower or any other Loan Party or the performance or
observance by any Loan Party of any of its obligations under any Loan
Document or any other instrument or document furnished pursuant thereto;
(iii) such assignee confirms that it has received a copy of this Agreement,
together with copies of the financial statements referred to in Section
4.01 and such other documents and information as it has deemed appropriate
to make its own
120
credit analysis and decision to enter into such Assignment and Acceptance;
(iv) such assignee will, independently and without reliance upon any Agent,
such assigning Lender or any other Lender Party and based on such documents
and information as it shall deem appropriate at the time, continue to make
its own credit decisions in taking or not taking action under this
Agreement; (v) such assignee confirms that it is an Eligible Assignee; (vi)
such assignee appoints and authorizes the Administrative Agent to take such
action as agent on its behalf and to exercise such powers and discretion
under the Loan Documents as are delegated to the Administrative Agent by
the terms hereof, together with such powers and discretion as are
reasonably incidental thereto; and (vii) such assignee agrees that it will
perform in accordance with their terms all of the obligations which by the
terms of this Agreement are required to be performed by it as a Lender or
Issuing Bank, as the case may be, and shall be bound by the terms of the
Intercreditor Agreement.
(c) The Administrative Agent shall maintain at its address referred
to in Section 9.02 a copy of each Assignment and Acceptance delivered to
and accepted by it and a register for the recordation of the names and
addresses of the Lenders and the Commitment under each Facility of, and
principal amount of the Loans owing under each Facility to, each Lender
from time to time (the "REGISTER"). The entries in the Register shall be
--------
conclusive and binding for all purposes, absent manifest error, and the
Borrower, the Administrative Agent and the Lender Parties may treat each
Person whose name is recorded in the Register as a Lender hereunder for all
purposes of this Agreement. The Register shall be available for inspection
by the Borrower or any Lender Party at any reasonable time and from time to
time upon reasonable prior notice.
(d) Upon its receipt of an Assignment and Acceptance executed by an
assigning Lender and an assignee, together with any Note or Notes subject
to such assignment, the Administrative Agent shall, if such Assignment and
Acceptance has been completed and is in substantially the form of Exhibit I
---------
hereto, (i) accept such Assignment and Acceptance, (ii) record the
information contained therein in the Register and (iii) give prompt notice
thereof to the Borrower. Within five (5) Business Days after its receipt of
notice of such assignment and a request for new Notes in favor of such
assignee, the Borrower, at its own expense, shall execute and deliver to
the Administrative Agent in exchange for the surrendered Note or Notes a
new Note to the order of such Eligible Assignee in an amount equal to the
Loans and/or Commitments, as applicable, assumed by it under a Facility
pursuant to such Assignment and Acceptance and, if the assigning Lender has
retained any Loans and/or Commitments hereunder under such Facility, a new
Note to the order of the assigning Lender in an amount equal to such Loans
and/or Commitments, as applicable, retained by it hereunder. Such new Note
or Notes shall be in an aggregate principal amount equal to the aggregate
principal amount of such surrendered Note or Notes, shall be dated the
effective date of such Assignment and Acceptance and shall otherwise be in
substantially the form of Exhibits VII-A, VII-B, VII-C and VII-D, as
---------------------------- ------
applicable.
121
(e) Each Lender may sell participations in or to all or a portion of
its rights and obligations under this Agreement (including, without
limitation, all or a portion of its Commitments, the Loans owing to it and
any Note or Notes held by it); provided, however, that (i) such Lender's
-------- -------
obligations under this Agreement (including, without limitation, its
Commitments) shall remain unchanged, (ii) such Lender shall remain solely
responsible to the other parties hereto for the performance of such
obligations, (iii) such Lender shall remain the holder of any such Note for
all purposes of this Agreement, (iv) the Borrower, the Administrative Agent
and the other Lender Parties shall continue to deal solely and directly
with such Lender in connection with such Lender's rights and obligations
under this Agreement and (v) no participant under any such participation
shall have any right to approve any amendment or waiver of any provision of
any Loan Document, or any consent to any departure by any Loan Party
therefrom, except to the extent that such amendment, waiver or consent
would reduce the principal of, or interest on, any Loans or any fees or
other amounts payable hereunder, in each case to the extent subject to such
participation, postpone any date fixed for any payment of principal of, or
interest on, any Loans or any fees or other amounts payable hereunder, in
each case to the extent subject to such participation, or release all or
substantially all of the Collateral; provided further that participants
-------- -------
shall have the same rights and benefits as Lenders under Section 2.07 but
only to the extent that the Lender from which such participation is
acquired would have had such rights and benefits.
(f) Any Lender may, in connection with any assignment or
participation or proposed assignment or participation pursuant to this
Section 9.07, disclose to the assignee or participant or proposed assignee
or participant, any information relating to any Loan Party furnished to
such Lender by or on behalf of any Loan Party; provided, however, that,
-------- -------
prior to any such disclosure, the assignee or participant or proposed
assignee or participant shall agree to preserve the confidentiality of any
Confidential Information received by it from such Lender.
(g) Notwithstanding any other provision set forth in this Agreement,
any Lender may at any time create a security interest in all or any portion
of its rights under this Agreement (including, without limitation, the
Loans owing to it and any Note or Notes held by it) in favor of any Federal
Reserve Bank in accordance with Regulation A of the Board of Governors of
the Federal Reserve System.
(h) Notwithstanding anything to the contrary contained herein, any
Lender (a "GRANTING LENDER") may grant to a special purpose funding vehicle
---------------
(an "SPV"), identified as such in writing from time to time by the Granting
---
Lender to the Administrative Agent and the Borrower, the option to provide
to the Borrower all or any part of any Loan that such Granting Lender would
otherwise be obligated to make to the Borrower pursuant to this Agreement;
provided that (i) nothing herein shall constitute a commitment by any SPV
-------- ----
to make any Loan, and (ii) if an SPV elects not to exercise such option or
otherwise fails to provide all or any part of such Loan, the Granting
Lender shall be obligated to make such Loan pursuant to the terms hereof.
The making of a Loan by an SPV hereunder shall utilize the Commitment
availability of the Granting Lender to
122
the same extent, and as if, such Loan were made by such Granting Lender.
Each party hereto hereby agrees that no SPV shall be liable for any
indemnity or similar payment obligation under this Agreement (all liability
for which shall remain with the Granting Lender). In furtherance of the
foregoing, each party hereto hereby agrees (which agreement shall survive
the termination of this Agreement) that, prior to the date that is one year
and one day after the payment in full of all outstanding commercial paper
or other senior indebtedness of any SPV, it will not institute against, or
join any other person in instituting against, such SPV any bankruptcy,
reorganization, arrangement, insolvency or liquidation proceedings under
the laws of the United States or any State thereof. In addition,
notwithstanding anything to the contrary contained in this Section 9.07(h),
any SPV may (i) with notice to, but without the prior written consent of,
the Borrower and the Administrative Agent and without paying any processing
fee therefor, assign all or a portion of its interests in any Loans to the
Granting Lender or to any financial institutions (consented to by the
Borrower and the Administrative Agent) providing liquidity and/or credit
support to or for the account of such SPV to support the funding or
maintenance of Loans and (ii) disclose on a confidential basis any non-
public information relating to its Loans to any rating agency, commercial
paper dealer or provider of any surety, guarantee or credit or liquidity
enhancement to such SPV. To the extent that an SPV assumes a Commitment
and/or makes a Loan on behalf of a Granting Lender, such SPV shall be
deemed a "Lender" for all purposes hereunder and under the other Loan
Documents and shall be entitled to the same rights and benefits as such
Granting Lender hereunder. This Section 9.07(h) may not be amended without
the written consent of the SPV.
SECTION 9.08. GOVERNING LAW; JURISDICTION; WAIVER OF JURY TRIAL, ETC.
------------------------------------------------------
(a) This Agreement and the Notes (if any) shall be governed by, and
construed in accordance with, the laws of the State of New York.
(b) THE BORROWER HEREBY IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR
ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVE JURISDICTION OF ANY NEW YORK
STATE COURT OR FEDERAL COURT OF THE UNITED STATES OF AMERICA SITTING IN NEW
YORK CITY, AND ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OF THE OTHER
LOAN DOCUMENTS TO WHICH IT IS OR IS TO BE A PARTY, OR FOR RECOGNITION OR
ENFORCEMENT OF ANY JUDGMENT, AND THE BORROWER HEREBY IRREVOCABLY AND
UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION ANY
OTHER ON OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH NEW YORK
STATE COURT OR, TO THE EXTENT PERMITTED BY LAW, IN SUCH FEDERAL COURT. THE
BORROWER AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING
SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON
THE JUDGMENT OR IN ANY OTHER
123
MANNER PROVIDED BY LAW. NOTHING IN THIS AGREEMENT SHALL AFFECT ANY RIGHT
THAT ANY PARTY MAY OTHERWISE HAVE TO BRING ANY ACTION OR PROCEEDING
RELATING TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS TO WHICH IT
IS OR IS TO BE A PARTY IN THE COURTS OF ANY JURISDICTION.
(c) THE BORROWER IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE
FULLEST EXTENT IT MAY LEGALLY AND EFFECTIVELY DO SO, ANY OBJECTION THAT IT
MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUIT, ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OF THE OTHER
LOAN DOCUMENTS TO WHICH IT IS OR IS TO BE A PARTY IN ANY NEW YORK STATE OR
FEDERAL COURT. THE BORROWER HEREBY IRREVOCABLY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY LAW, THE DEFENSE OF AN INCONVENIENT FORUM TO THE
MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY SUCH COURT.
SECTION 9.09. EXECUTION IN COUNTERPARTS. This Agreement may be
-------------------------
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the same
agreement. Delivery of an executed counterpart of a signature page to this
Agreement by telecopier shall be effective as delivery of a manually executed
counterpart of this Agreement.
SECTION 9.10. NO LIABILITY OF THE ISSUING BANKS. The Borrower assumes
---------------------------------
all risks of the acts or omissions of any beneficiary or transferee of any
Letter of Credit with respect to its use of such Letter of Credit. Neither any
Issuing Bank nor any of its officers or directors shall be liable or responsible
for: (a) the use that may be made of any Letter of Credit or any acts or
omissions of any beneficiary or transferee in connection therewith; (b) the
validity, sufficiency or genuineness of documents, or of any endorsement
thereon, even if such documents should prove to be in any or all respects
invalid, insufficient, fraudulent or forged; (c) payment by such Issuing Bank
against presentation of documents that do not comply with the terms of a Letter
of Credit, including failure of any documents to bear any reference or adequate
reference to the Letter of Credit; or (d) any other circumstances whatsoever in
making or failing to make payment under any Letter of Credit, except that the
------
Borrower and each Lender shall have a claim against such Issuing Bank, and such
Issuing Bank shall be liable to the Borrower and each Lender, to the extent of
any direct, but not consequential, damages suffered by the Borrower or such
Lender that the Borrower or such Lender proves were caused by (i) such Issuing
Bank's willful misconduct or gross negligence in determining whether documents
presented under any Letter of Credit comply with the terms of the Letter of
Credit or (ii) such Issuing Bank's willful failure to make lawful payment under
a Letter of Credit after the presentation to it of a draft and certificates
strictly complying with the terms and conditions of the Letter of Credit. In
furtherance and not in limitation of the foregoing, such Issuing Bank may accept
documents that
124
appear on their face to be in order, without responsibility for further
investigation, regardless of any notice or information to the contrary.
SECTION 9.11. CONFIDENTIALITY. Neither any Agent nor any Lender Party
---------------
shall disclose any Confidential Information to any Person without the consent of
the Borrower, other than (a) to such Agent's or such Lender Party's Affiliates
or Approved Funds and their officers, directors, employees, agents and advisors
and to actual or prospective Eligible Assignees and participants, and then only
on a confidential basis, (b) as required by any law, rule or regulation or
judicial process, (c) as requested or required by any state, federal or foreign
authority or examiner regulating the activities of such Lender Party or (d) in
connection with customary filings with the National Association of Insurance
Commissioners.
SECTION 9.12. WAIVER OF JURY TRIAL. EACH OF THE BORROWER, THE
--------------------
ADMINISTRATIVE AGENT, EACH OTHER AGENT, THE ISSUING BANKS AND THE LENDERS HEREBY
IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR
RELATING TO ANY OF THE LOAN DOCUMENTS, THE LOANS, ANY LETTER OF CREDIT OR THE
ACTIONS OF ANY AGENT OR ANY LENDER PARTY IN THE NEGOTIATION, ADMINISTRATION,
PERFORMANCE OR ENFORCEMENT THEREOF.
125
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers thereunto duly authorized, as of the
date first above written.
PANOLAM INDUSTRIES INTERNATIONAL, INC.,
as Borrower
By:______________________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
President and Chief Executive Officer
By: _____________________________________
▇▇▇▇ ▇. ▇▇▇▇▇▇
Director of Finance and Secretary
▇-▇
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇.,
as an Initial Lender and as Syndication
Agent
By: /S/ [ILLEGIBLE SIGNATURE]
---------------------------------------
Title: _________________________________
S-2
CREDIT SUISSE FIRST BOSTON,
as an Initial Lender and as
Administrative Agent
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
---------------------------------
Title: __________________________
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇
---------------------------------
Title:___________________________
S-3
ROYAL BANK OF CANADA,
as an Initial Lender and as Documentation
Agent
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇
----------------------------------------
Title:____________________________________
ADDRESS FOR NOTICES:
Royal Bank of Canada
Grand Cayman (North America No.1) Branch
c/o New York Branch
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
WITH A COPY TO:
Royal Bank of Canada
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
S-4
Initial Lenders
---------------
ABN AMRO BANK N.V., as an Initial Lender
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------------------
Title: _______________________________
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
-------------------------------------
Title: _______________________________
ADDRESSES FOR NOTICES:
ABN AMRO Bank N.V.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇ ▇▇▇▇▇▇▇, Credit Administration
WITH A COPY TO:
ABN AMRO Bank N.V.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇-▇
COMERICA BANK, as an Initial Lender
By: /s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------------------
Title: _____________________________
S-6
KEY CORPORATE CAPITAL INC., as an
Initial Lender
By: /s/ [ILLEGIBLE SIGNATURE]
--------------------------------
Title: __________________________
S-7
U.S. BANK NATIONAL ASSOCIATION, as an
Initial Lender
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇
-----------------------------------
Title: _____________________________
ADDRESS FOR NOTICES:
National Corporate Banking Division
U.S. Bank National Association
▇▇▇ ▇.▇. ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
Relationship Manager: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Vice President
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
S-8
EXHIBIT I
FORM OF ASSIGNMENT AND ACCEPTANCE
Reference is made to the Credit Agreement, dated as February 18, 1999
(as amended, amended and restated, supplemented or otherwise modified from time
to time, the "Credit Agreement," the terms defined therein being used herein as
----------------
therein defined), among PANOLAM INDUSTRIES INTERNATIONAL, INC., a Delaware
corporation (the "Borrower"), the financial institutions and other entities
--------
party thereto as Lenders, DLJ CAPITAL FUNDING, INC., for itself as an Initial
Lender and as Syndication Agent, CREDIT SUISSE FIRST BOSTON, for itself as an
Initial Lender and as Administrative Agent, and ROYAL BANK OF CANADA, for itself
as an Initial Lender and as Documentation Agent.
The "Assignor" and the "Assignee" referred to on Schedule 1 hereto
agree as follows :
1. The Assignor hereby sells and assigns to the Assignee, and the
Assignee hereby purchases and assumes from the Assignor, an interest in and to
the Assignor's rights and obligations under the Credit Agreement as of the date
hereof equal to the percentage interest specified on Schedule 1 hereto of all
outstanding rights and obligations under the Credit Agreement Facility or
Facilities specified on Schedule 1 hereto. After giving effect to such sale and
assignment, the Assignee's Commitments and the amount of the Loans owing to the
Assignee will be as set forth on Schedule 1 hereto.
2. The Assignor (i) represents and warrants that it is the legal and
beneficial owner of the interest being assigned by it hereunder and that such
interest is free and clear of any adverse claim; (ii) makes no representation or
warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with the Loan Documents
or the execution, legality, validity, enforceability, genuineness, sufficiency
or value of, or the perfection or priority of any lien or security interest
created or purported to be created under or in connection with, the Loan
Documents or any other instrument or document furnished pursuant thereto; and
(iii) makes no representation or warranty and assumes no responsibility with
respect to the financial condition of any Loan Party or the performance or
observance by any Loan Party of any of its obligations under any Loan Document
or any other instrument or document furnished pursuant thereto; and (iv)
attaches the Note or Notes (if any) held by the Assignor and, to the extent that
the Assignee has separately requested a Note or Notes payable to its order,
requests on behalf of the Assignee that the Administrative Agent exchange such
Note or Notes for a new Note or Notes payable to the order of the Assignee in an
amount equal to the Commitments and/or Loans assumed by the Assignee pursuant
hereto or new Notes payable to the order of the Assignee in an amount equal to
the Commitments and/or Loans assumed by the Assignee pursuant hereto and to the
order of the Assignor in an amount equal to the Commitments and/or Loans
retained by the Assignor under the Credit Agreement, respectively, as specified
on Schedule 1 hereto.
3. The Assignee (i) confirms that it has received a copy of the
Credit Agreement, together with copies of the financial statements referred to
in Section 5.01(f) thereof
I-1
and such other documents and information as it has deemed appropriate to make
its own credit analysis and decision to enter into this Assignment and
Acceptance; (ii) agrees that it will, independently and without reliance upon
the Administrative Agent, the Assignor or any other Lender and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit decisions in taking or not taking action under the Credit
Agreement; (iii) confirms that it is an Eligible Assignee; (iv) appoints and
authorizes the Administrative Agent to take such action as agent on its behalf
and to exercise such powers and discretion under the Credit Agreement and the
other Loan Documents (including, without limitation, under the Intercreditor
Agreement and the Collateral Documents) as are delegated to the Administrative
Agent by the terms thereof, together with such powers and discretion as are
reasonably incidental thereto, and without limiting the foregoing, the Assignee
expressly agrees to be bound by the terms of the Intercreditor Agreement and the
Collateral Documents; (v) agrees that it will perform in accordance with their
terms all of the obligations that by the terms of the Credit Agreement are
required to be performed by it as a Lender and, if applicable, as an Issuing
Bank; and (vi) attaches any U.S. Internal Revenue Service forms required under
Section 2.09 of the Credit Agreement.
4. Following the execution of this Assignment and Acceptance, it will
be delivered to the Administrative Agent for acceptance and recording by the
Administrative Agent. The effective date for this Assignment and Acceptance (the
"Effective Date") shall be the date of acceptance hereof by the Administrative
--------------
Agent, unless otherwise specified on Schedule 1 hereto.
5. Upon such acceptance and recording by the Administrative Agent and
payment of the purchase price separately agreed between the Assignor and the
Assignee, as of the Effective Date, (i) the Assignee shall be a party to the
Credit Agreement and, to the extent provided in this Assignment and Acceptance,
have (in addition to any such rights and obligations theretofore held by it) the
rights and obligations of a Lender and, if applicable, an Issuing Bank
thereunder, and (ii) the Assignor shall, to the extent provided in this
Assignment and Acceptance, relinquish its rights and be released from its
obligations under the Credit Agreement.
6. Upon such acceptance and recording by the Administrative Agent and
payment of the purchase price separately agreed between the Assignor and the
Assignee, from and after the Effective Date, the Administrative Agent shall make
all payments under the Credit Agreement and the Notes in respect of the interest
assigned hereby (including, without limitation, all payments of principal,
interest and commitment fees with respect thereto) to the Assignee. The Assignor
and Assignee shall make all appropriate adjustments in payments under the Credit
Agreement and the Notes for periods prior to the Effective Date directly between
themselves.
7. This Assignment and Acceptance shall be governed by, and construed
in accordance with, the laws of the State of New York.
8. This Assignment and Acceptance may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement. Delivery of an executed
counterpart of Schedule 1 to this Assignment
1-2
and Acceptance by telecopier shall be effective as delivery of a manually
executed counterpart of this Assignment and Acceptance.
I-3
IN WITNESS WHEREOF, the Assignor and the Assignee have caused this
Assignment and Acceptance to be executed by their officers thereunto duly
authorized as of the date specified thereon.
[NAME OF ASSIGNOR], as Assignor
By________________________________
Title:
Dated:____________________________
[NAME OF ASSIGNEE], as Assignee
By________________________________
Title:
Dated:____________________________
Domestic Lending Office:
Eurodollar Lending Office:
I-4
Accepted and Approved this________
day of_____________, _____________
CREDIT SUISSE FIRST BOSTON,
as Administrative Agent
By________________________________
Title:
[Approved this_____day
of_______________, _______________
PANOLAM INDUSTRIES INTERNATIONAL, INC.
By________________________________
Title:]
I-5
SCHEDULE 1
to
ASSIGNMENT AND ACCEPTANCE
1. BORROWER: Panolam Industries International,
---------
Inc., a Delaware corporation
2. NAME AND ▇▇▇▇ OF CREDIT AGREEMENT: Credit Agreement dated as of
---------------------------------
February 18, 1999, and entered into
among the Borrower, the financial
institutions and other entities
party thereto as Lenders, DLJ
Capital Funding, Inc, for itself as
an Initial Lender and as
Syndication Agent, Credit Suisse
First Boston, for itself as an
Initial Lender and as
Administrative Agent, and Royal
Bank of Canada, for itself as an
Initial Lender and as Documentation
Agent.
3. ASSIGNMENT DATE: _____________________
---------------
4. AMOUNTS (AS OF ASSIGNMENT DATE):
-------------------------------
Revolving Facility Term A Facility Term B Facility
------------------ --------------- ---------------
(including outstanding
Swing Line and Letter of
Credit Participations)
a. Total Commitments of All $________ $_________ $_________
Lenders
b. Amount of Assignor's $________ $_________ $_________
Commitment as of Assignment
Date
c. Amount of Assignor's $________ $_________ $_________
Share of Loans and
Participations Outstanding
as of Assignment Date
d. Percentage Interest (of ____% ____% ____%
Total Commitments (or
outstanding Loans. if there
are no outstanding
Commitments) of All
Lenders) Assigned to
Assignee
e. Assignee's Total $________ $_________ $_________
Commitment
f. Amount of Outstanding $________ $_________ $_________
Loans and Participations
Assigned to Assignee
Term B Facility
I-6
g. Assignor's Retained ____% ____% ____%
Commitment Percentage
(or, if there are no
outstanding Commitments
under such Facility, the
percentage of outstanding
Loans of such Type
retained by Assignor)
h. Assignor's Retained $________ $_________ $_________
Commitment
i. Amount of Outstanding $________ $_________ $_________
Loans and Participations
Retained by Assignor
5. Effective Date: (if other than date of ___________________
--------------
acceptance by Administrative Agent)
I-7
EXHIBIT II
FORM OF NOTICE OF BORROWING
[Date]
Credit Suite First Boston, as Administrative Agent
for the Lenders party
to the Credit Agreement
referred to below
▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn. Syndications Agency
PANOLAM INDUSTRIES INTERNATIONAL, INC.
Ladies and Gentlemen:
The undersigned, PANOLAM INDUSTRIES INTERNATIONAL INC., refers to the
Credit Agreement, dated as of February 18, 1999 (as amended, supplemented,
amended and restated or otherwise modified from time to time, the "Credit
------
Agreement," the terms defined therein being used herein as therein defined),
---------
among the undersigned, the financial institutions and other entities party
thereto as Lenders, DLJ CAPITAL FUNDING, INC., for itself as an Initial Lender
and as Syndication Agent, CREDIT SUISSE FIRST BOSTON, for itself as an Initial
Lender and as Administrative Agent, and ROYAL BANK OF CANADA, for itself as an
Initial Lender and as Documentation Agent, and hereby gives you notice,
irrevocably, pursuant to Section 2.02 of the Credit Agreement, that the
undersigned hereby requests [Term A Loans] [Term B Loans][Revolving Loans] under
the Credit Agreement, and in that connection sets forth below the information
relating to such Borrowing (the "Proposed Borrowing"):
------------------
(i) The Business Day of the Proposed Borrowing is __________, ___.
(ii) The Type of Loans comprising the Proposed Borrowing is [Term A
Loans][Term B Loans) [Revolving Loans].
(iii) The aggregate amount of the Proposed Borrowing is $_________.
(iv) The Interest Type of Loans comprising the Proposed Borrowing is
[Base Rate Loans][Eurodollar Rate Loans].
[(v) The initial Interest Period for each Eurodollar Rate Loan made
as part of the Proposed Borrowing is [one][two][three][six] month[s].]
II-1
The undersigned hereby certifies that the following statements are
true on the date hereof and will be true on the date of the Proposed Borrowing:
(A) the representations and warranties contained in each Loan
Document are correct, before and after giving effect to the Proposed
Borrowing and to the application of the proceeds therefrom, as though made
on and as of such date other than any such representations or warranties
that, by their terms, are specifically made as of a date other than the
date of the Proposed Borrowing (which are true and correct as of such other
date);
(B) no event has occurred and is continuing, or would result
from such Proposed Borrowing or from the application of the proceeds
therefrom, that constitutes or would constitute a Default or an Event of
Default; and
(C) after giving effect to the Proposed Borrowing, the Borrowing
Base Amount and the Revolving Commitments then in effect each exceed the
Total Utilization of Revolving Commitments.
Very truly yours,
PANOLAM INDUSTRIES
INTERNATIONAL, INC.
By:________________________________
Title:
II-2
EXHIBIT III
FORM OF NOTICE OF CONVERSION/CONTINUATION
[Date]
Credit Suisse First Boston, as Administrative Agent
for the Lenders party
to the Credit Agreement
referred to below
▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: Syndications Agency
PANOLAM INDUSTRIES INTERNATIONAL, INC.
Ladies and Gentlemen:
The undersigned, PANOLAM INDUSTRIES INTERNATIONAL INC., refers to the
Credit Agreement, dated as of February 18, l999 (as amended, supplemented,
amended and restated or otherwise modified from time to time, the "Credit
------
Agreement," the terms defined therein being used herein as therein defined),
---------
among the undersigned, the financial institutions and other entities party
thereto as Lenders, DLJ CAPITAL FUNDING, INC., for itself as an Initial Lender
and as Syndication Agent, CREDIT SUISSE FIRST BOSTON, for itself as an Initial
Lender and as Administrative Agent, and ROYAL BANK OF CANADA, for itself as an
Initial Lender and as Documentation Agent, and hereby gives you notice,
irrevocably, pursuant to Section 2.05(c) of the Credit Agreement that the
undersigned hereby requests [a Conversion under the Credit Agreement (the
"Proposed Conversion") of $_______ in principal amount of presently outstanding
-------------------
[Term A][Term B][Revolving] Loans that are [Base Rate][Eurodollar Rate] Loans
[with an initial Interest Period ending ______ ___, ______ ] to [Base
Rate][Eurodollar Rate] Loans on, ] [a Continuation under the Credit Agreement
(the "Proposed Continuation") as Eurodollar Rate Loans of $________ in principal
---------------------
amount of presently outstanding [Term A][Term B][Revolving] Loans that are
Eurodollar Rate Loans with an Interest Period ending ________ __ _____ The
Interest Period for such Eurodollar Rate Loans is requested to be a
[one][two][three][six]month period ending on _________ __, ____].
III-1
The undersigned hereby certifies that the following statements are
true on the date hereof and will be true on the date of the Proposed
[Conversion][Continuation]:
(A) the representations and warranties contained in each Loan
Document are correct, before and after giving effect to the Proposed
[Conversion] [Continuation], as though made on and as of such date other
than any such representations or warranties that, by their terms, are
specifically made as of a date other than the date of the Proposed
[Conversion] [Continuation] (which are true and correct as of such other
date); and
(B) no event has occurred and is continuing, or would result
from such Proposed [Continuation](Conversion] that constitutes or would
constitute a Default or an Event of Default.
Very truly yours,
PANOLAM INDUSTRY
INTERNATIONAL, INC.
By:________________________________
Title:
III-2
EXHIBIT IV
FORM OF NOTICE OF ISSUANCE
[Date]
Credit Suisse First Boston, as Administrative Agent
for the Lenders party
to the Credit Agreement
referred to below
▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: Syndications Agency
[Name and address of
Issuing Bank
Attention: ______________]
PANOLAM INDUSTRIES INTERNATIONAL, INC.
Ladies and Gentlemen:
The undersigned, PANOLAM INDUSTRIES INTERNATIONAL INC., refers to the
Credit Agreement, dated as of February 18, 1999 (as amended, supplemented,
amended and restated or otherwise modified from time to time, the "Credit
------
Agreement," the terms defined therein being used herein as therein defined),
---------
among the undersigned, the financial institutions and other entities party
thereto as Lenders, DLJ CAPITAL FUNDING, INC., for itself as an Initial Lender
and as Syndication Agent, CREDIT SUISSE FIRST BOSTON, for itself as an Initial
Lender and as Administrative Agent, and ROYAL BANK OF CANADA, for itself as an
Initial Lender and as Documentation Agent, and hereby gives you notice, pursuant
to Section 3.02 of the Credit Agreement that the undersigned hereby requests the
issuance of a Letter of Credit under the Credit Agreement, and in that
connection sets forth below the information relating to such issuance (the
"Proposed Issuance"):
-----------------
(i) The requested Business Day of the Proposed Issuance is _____
__, ____.
(ii) The requested available amount of such Letter of Credit is
$_____ __, ____.
(iii) The requested expiration date of such Letter of Credit is
_____ __, ____.
IV-1
(iv) The name and address of the beneficiary of such requested Letter
of Credit is as follows:
_____________________________
_____________________________
_____________________________
(v) The requested form of such Letter of Credit and a copy of the
Letter of Credit Agreement are attached hereto as Schedule 1.
The undersigned hereby certifies that the following statements are
true on the date hereof and will be true on the date of the Proposed Issuance:
(A) the representations and warranties contained in each Loan
Document are correct on and as of the date of the Proposed Issuance, before
and after giving effect to the Proposed Issuance requested hereby, as
though made on and as of such date, other than any such representations and
warranties that, by their terms, are specifically made as of a date other
than the date of the Proposed Issuance (which are true and correct as of
such other date);
(B) no event has occurred and is continuing, or would result
from the Proposed Issuance requested hereby, that constitutes or would
constitute a Default or an Event of Default; and
(C) after giving effect to the Proposed Issuance, (i) the
aggregate amount for all Letters of Credit outstanding under the Credit
Agreement does not exceed the lesser of (a) $4,000,000 and (b) the Net
Borrowing Availability, and (ii) the amount of such Letter of Credit does
not exceed the Unused Revolving Commitments of the Lenders on the Business
Day of the Proposed Issuance.
Very truly yours,
PANOLAM INDUSTRIES
INTERNATIONAL, INC.
By:________________________________
Title:
IV-2
EXHIBIT V
FORM OF NOTICE OF SWING LINE BORROWING
[Date]
Credit Suisse First Boston, as Administrative Agent
for the Lenders party
to the Credit Agreement
referred to below
▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: Syndications Agency
PANOLAM INDUSTRIES INTERNATIONAL, INC.
Ladies and Gentlemen:
The undersigned, Panolam Industries International, Inc., refers to the
Credit Agreement, dated as of February 18, l999 (as amended, supplemented,
amended and restated or otherwise modified from time to time, the "Credit
------
Agreement," the terms defined therein being used herein as therein defined),
---------
among the undersigned, the financial institutions and other entities party
thereto as Lenders, DLJ CAPITAL FUNDING, INC., for itself as an Initial Lender
and as Syndication Agent, CREDIT SUISSE FIRST BOSTON, for itself as an Initial
Lender and as Administrative Agent, ROYAL BANK OF CANADA, for itself as an
Initial Lender and as documentation agent, and hereby gives you notice
irrevocably, pursuant to Section 2.02(c) of the Credit Agreement that the
undersigned hereby requests a Swing Line Borrowing under the Credit Agreement,
and in that connection sets forth below the information relating to such
Borrowing (the "Proposed Swing Line Borrowing"):
-----------------------------
(i) The Business Day of the Proposed Swing Line Borrowing is ________
___, ____.
(ii) The amount of the Proposed Swing Line Borrowing is $____________.
V-1
The undersigned hereby certifies that the following statements are
true on the date hereof and will be true on the date of the Proposed Swing Line
Borrowing:
(A) the representations and warranties contained in each Loan
Document are correct, before and after giving effect to the Proposed Swing
Line Borrowing and to the application of the proceeds therefrom, as though
made on and as of such date other than any such representations or
warranties that, by their terms, are specifically made as of a date other
than the date of the Proposed Swing Line Borrowing (which are true and
correct as of such other date);
(B) no event has occurred and is continuing, or would result
from such Proposed Swing Line Borrowing or from the application of the
proceeds therefrom, that constitutes or would constitute a Default or an
Event of Default; and
(C) after giving effect to the Proposed Swing Line Borrowing,
the aggregate principal amount of all outstanding Swing Line Loans will not
exceed the remainder of (x) the Borrowing Base Amount then in effect minus
-----
(y) the sum of (A) the aggregate amount of the Letter of Credit Obligations
then outstanding, and (B) the aggregate principal amount of the Revolving
Loans then outstanding.
Very truly yours,
PANOLAM INDUSTRIES
INTERNATIONAL, INC.
By:________________________________
Title:
V-2
EXHIBIT VI
FORM OF BORROWING BASE
CERTIFICATE
In connection with the Credit Agreement by and among PANOLAM
INDUSTRIES INTERNATIONAL, INC. (the "Borrower"), the financial institutions and
--------
other entities party thereto as Lenders, DLJ Capital Funding, Inc., for itself
as an Initial Lender and as Syndication Agent, Credit Suisse First Boston, for
itself as an Initial Lender and as Administrative Agent, and Royal Bank of
Canada, for itself as an Initial Lender and as Documentation Agent (as amended,
supplemented amended and restated or otherwise modified from time to time, the
"Credit Agreement"), dated as of February 18, 1999, I, [NAME OF OFFICER], in my
----------------
capacity as [Chief Financial Officer] [Treasurer] [Director of Finance] of the
Borrower, hereby certify that I am the duly elected and acting [Chief Financial
Officer] [Treasurer][Director of Finance] of the Borrower and that.
1. All information and each calculation set forth in the
attached Schedule 1 is, and all supporting documentation and reports attached
hereto as Schedule 2 are, to the best of my knowledge, true, correct and
complete in all material respects as of the date hereof.
2. All information and each calculation set forth in the
attached Borrowing Base Certificate is based on the most recent financial
statements of the Borrower delivered pursuant to Section 6.03(b), (c) or (d) of
the Credit Agreement (except that, in the event that this Borrowing Base
Certificate is delivered more than 40 days after the end of the most recently
ended fiscal quarter of the Borrower, such Schedule 1 sets forth the Borrower's
Eligible Receivables and Eligible Inventory as of the last day of the most
recently ended fiscal month of the Borrower), and a balance sheet of the
Borrower and its Subsidiaries as of the last day of such fiscal month, which has
been prepared in accordance with GAAP (subject to year end audit adjustments) is
attached hereto as Schedule 3.
3. During the most recent fiscal quarter of the Borrower,
[more than $1,000,000] [$1,000,000 or less] of the Collateral at any one time
was being warehoused and/or processed at locations not owned or leased by any of
the Credit Parties.
Unless otherwise defined herein, all terms used herein shall
have the meanings ascribed to them in the Credit Agreement.
Executed this ____ day PANOLAM INDUSTRIES INTERNATIONAL,
of ____________,_______ INC
By: ________________________________
VI-1
EXHIBIT VII-A
FORM OF REVOLVING NOTE
$[______________] Dated: ____________
FOR VALUE RECEIVED, the undersigned, PANOLAM INDUSTRIES INTERNATIONAL,
INC., a Delaware corporation (the "Borrower"), HEREBY PROMISES TO PAY to the
--------
order of [NAME OF LENDER] (the "Lender") for the account of its Applicable
------
Lending Office (as defined in the Credit Agreement referred to below) the
aggregate principal amount of the Revolving Loans (as defined below) owing to
the Lender by the Borrower pursuant to the Credit Agreement (as defined below)
on the Revolving Commitment Termination Date (as defined in the Credit
Agreement).
The Borrower promises to pay interest on the unpaid principal amount
of each Revolving Loan from the date of such Revolving Loan until such principal
amount is paid in full, at such interest rates, and at such times, as are
specified in the Credit Agreement.
Both principal and interest are payable in lawful money of the United
States of America in same day funds to the Lender in accordance with the
provisions of Section 2.08 of the Credit Agreement. Each Revolving Loan owing to
the Lender by the Borrower and the maturity thereof, and all payments made on
account of principal thereof, shall be recorded by the Lender and, prior to any
transfer hereof, endorsed on the grid attached hereto, which is part of this
Revolving Note; provided, however, that any failure to make such endorsement on
-------- -------
such grid shall in no way alter, impair or limit the Borrower's obligations
hereunder.
This Revolving Note is one of the Revolving Notes referred to in, and
is entitled to the benefits of, the Credit Agreement dated as of February 18,
1999 (as the same may be amended, amended and restated, supplemented or
otherwise modified from time to time, the "Credit Agreement") among the
----------------
Borrower, the financial institutions and other entities party thereto as
Lenders, DLJ Capital Funding, Inc., for itself as an Initial Lender and as
Syndication Agent, Credit Suite First Boston, for itself as an Initial Lender
and as Administrative Agent, and Royal Bank of Canada, for itself as an Initial
Lender and as Documentation Agent. The Credit Agreement, among other things, (i)
provides for the making of loans (the "Revolving Loans") by the Lender to the
---------------
Borrower from time to time in an aggregate principal amount not to exceed at any
time outstanding the U.S. dollar amount first above mentioned, the indebtedness
of the Borrower resulting from each such Revolving Loan being evidenced by this
Revolving Note, and (ii) contains provisions for acceleration of the maturity
hereof upon the happening of certain stated events and also for prepayments on
account of principal hereof prior to the maturity hereof upon the terms and
conditions therein specified.
The Borrower and any endorser of this Revolving Note hereby waive
presentment, demand, protest and notice of any kind. No failure to exercise, and
no delay in exercising, any rights hereunder on the part of the holder hereof
shall operate as a waiver of such rights.
VII-A-1
THIS REVOLVING NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK.
PANOLAM INDUSTRIES
INTERNATIONAL, INC.
By:____________________________
Title:
VII-A-2
REVOLVING LOANS AND PAYMENTS OF PRINCIPAL
================================================================================
Date Amount of Revolving Amount of Principal Unpaid Principal Notation
Loan Paid or Prepaid Balance Made By
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VII-A-3
EXHIBIT VII-B
FORM OF TERM A NOTE
$[__________] Dated: ___________
FOR VALUE RECEIVED, the undersigned, PANOLAM INDUSTRIES INTERNATIONAL,
INC., a Delaware corporation (the "Borrower"), HEREBY PROMISES TO PAY to the
--------
order of [NAME OF LENDER] (the "Lender") for the account of its Applicable
------
Lending Office (as defined in the Credit Agreement referred to below) the
principal amount of the Term A Loan (as defined below) owing to the Lender by
the Borrower pursuant to the Credit Agreement (as defined below) in consecutive
quarterly installments according to the amortization schedule set forth in
Section 2.03(a) of the Credit Agreement until such principal amount has been
paid in full with the last such installment owing under the Credit Agreement to
be paid on the Term A Termination Date (as defined in the Credit Agreement).
The Borrower promises to pay interest on the unpaid principal amount
of the Term A Loan from the date of the Term A Loan until such principal amount
is paid in full, at such interest rates, and at such times, as are specified in
the Credit Agreement.
Both principal and interest are payable in lawful money of the United
States of America in same day funds to the Lender in accordance with the
provisions of Section 2.08 of the Credit Agreement.
This Term A Note is one of the Term A Notes referred to in, and is
entitled to the benefits of, the Credit Agreement dated as of February 18, 1999
(as the same may be amended, amended and restated, supplemented or otherwise
modified from time to time, the "Credit Agreement") among the Borrower, the
----------------
financial institutions and other entities party thereto as Lenders, DLJ Capital
Funding, Inc., for itself as an Initial Lender and as Syndication Agent, Credit
Suisse First Boston, for itself as an Initial Lender and as Administrative
Agent, and Royal Bank of Canada, for itself as an Initial Lender as
Documentation Agent. The Cat Agreement, among other things, (i) provides for a
single Term A Loan by the Lender to the Borrower on the Closing Date (as defined
in the Credit Agreement) in principal amount equal to the U.S. dollar amount
first above mentioned, the indebtedness of the Borrower resulting from such Term
A Loan being evidenced by this Term A Note, and (ii) contains provisions for
acceleration of the maturity hereof upon the happening of certain stated events
and a)so for prepayments on account of principal hereof prior to the maturity
hereof upon the terms and conditions therein specified.
The Borrower and any endorser of this Term A Note hereby waive
presentment, demand, protest and notice of any kind. No failure to exercise, and
no delay in exercising, any rights hereunder on the part of the holder hereof
shall operate as a waiver of such rights.
VII-B-1
THIS TERM A NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK.
PANOLAM INDUSTRIES
INTERNATIONAL, INC.
By:____________________________________
Title:
▇▇▇-▇-▇
▇▇▇▇▇▇▇ ▇▇▇-▇
▇▇▇▇ ▇▇ ▇▇▇▇ ▇ NOTE
$[___________] Dated:______________
FOR VALUE RECEIVED, the undersigned, PANOLAM INDUSTRIES INTERNATIONAL,
INC., a Delaware corporation (the "Borrower"), HEREBY PROMISES TO PAY to the
--------
order of [NAME OF LENDER] (the "Lender") for the account of its Applicable
------
Lending Office (as defined in the Credit Agreement referred to below) the
principal amount of the Term B Loan (as defined below) owing to the Lender by
the Borrower pursuant to the Credit Agreement (as defined below) in consecutive
quarterly installments according to the amortization schedule set forth in
Section 2.03(b) of the Credit Agreement until such principal amount has been
paid in full with the last such installment owing under the Credit Agreement to
be paid on the Term B Termination Date (as defined in the Credit Agreement).
The Borrower promises to pay interest on the unpaid principal amount
of the Term B Loan from the date of the Term B Loan until such principal amount
is paid in full, at such interest rates, and at such times, as are specified in
the Credit Agreement.
Both principal and interest are payable in lawful money of the United
States of America in same day funds to the Lender in accordance with the
provisions of Section 2.08 of the Credit Agreement.
This Term B Note is one of the Term B Notes referred to in, and is
entitled to the benefits of, the Credit Agreement dated as of February 18, 1999
(as the same may be amended, amended and restated, supplemented or otherwise
modified from time to time, the "Credit Agreement") among the Borrower, the
----------------
financial institutions and other entities party thereto as Lenders, DLJ Capital
Funding, Inc., for itself as an Initial Lender and as Syndication Agent, Credit
Suisse First Boston, for itself as an Initial Lender and as Administrative
Agent, and Royal Bank of Canada, for itself as an Initial Lender and as
Documentation Agent, The Credit Agreement, among other things, (i) provides for
a single Term 8 Loan by the Lender to the Barrier on the Closing Date (as
defined in such Credit Agreement) in principal amount equal to the U.S. dollar
amount first above mentioned, the indebtedness of the Borrower resulting from
such Term B Loan being evidenced by this Term B Note, and (ii) contains
provisions for acceleration of the maturity hereof upon the happening of certain
stated events and also for prepayments on account of principal hereof prior to
the maturity hereof upon the terms and conditions therein specified.
The Borrower and any endorser of this Term B Note hereby waive
presentment, demand, protest and notice of any kind. No failure to exercise, and
no delay in exercising, any rights hereunder on the part of the holder hereof
shall operate as a waiver of such rights.
VII-C-1
THIS TERM B NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK.
PANOLAM INDUSTRIES
INTERNATIONAL, INC,
By:____________________________
Title:
VII-C-2
EXHIBIT VII-D
FORM OF SWING LINE NOTE
$[___________] Dated:____________
FOR VALUE RECEIVED, the undersigned, PANOLAM INDUSTRIES INTERNATIONAL,
INC., a Delaware corporation (the "BOrrower"), HEREBY PROMISES TO PAY to the
--------
order of [NAME OF LENDER] (the "Lender") for the account of its Applicable
------
Lending Office {as defined in the Credit Agreement referred to below) the
aggregate principal amount of the Swing Line Loans (as defined below) owing to
the Lender by the Borrower pursuant to the Credit Agreement (as defined below)
on the Revolving Commitment Termination Date (as defined in the Credit
Agreement).
The Borrower promises to pay interest on the unpaid principal amount
of each Swing Line Loan from the date of such Swing Line Loan until such
principal amount is paid in full, at such interest rates, and at such times, as
are specified in the Credit Agreement.
Both principal and interest are payable in lawful money of the United
States of America in same day funds to the Lender in accordance with the
provisions of Section 2.08 of the Credit Agreement. Each Swing Line Loan owing
to the Lender by the Borrower and the maturity thereof, and all payments made on
account of principal thereof, shall be recorded by the Lender and, prior to any
transfer hereof, endorsed on the grid attached hereto, which is part of this
Swing Line Note; provided, however, that any failure to make such endorsement on
-------- -------
such grid shall in no way alter, impair or limit the Borrower's obligations
hereunder.
This Swing Line Note is one of the Swing Line Notes referred to in,
and is entitled to the benefits of, the Credit Agreement dated as of February
18, 1999 (as the same may be amended, supplemented, amended and restated or
otherwise modified from time to time, the "Credit Agreement") among the
----------------
Borrower, the financial institutions and other entities party thereto as
Lenders, DLJ Capital Funding, Inc., for itself as an Initial Lender and as
Syndication Agent, Credit Suisse First Boston, for itself as an Initial Lender
and as Administrative Agent, and Royal Bank of Canada, for itself as an Initial
Lender and as Documentation Agent. The Credit Agreement, among other things, (i)
provides for the making of Swing Line Loans by the Lender to the Borrower from
time to time in an aggregate principal amount not to exceed at any time
outstanding the U.S. dollar amount first above mentioned, the indebtedness of
the Borrower resulting from each such Swing Line Loan being evidenced by this
Swing Line Note, and (ii) contains provisions for acceleration of the maturity
hereof upon the happening of certain stated events and also for prepayments on
account of principal hereof prior to the maturity hereof upon the terms and
conditions therein specified.
The Borrower and any endorser of this Swing Line Note hereby waive
presentment, demand, protest and notice of any kind. No failure to exercise. and
no delay in exercising, any rights hereunder on the part of the holder hereof
shall operate as a waiver of such rights.
VII-D-1
THIS SWING LINE NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK.
PANOLAM INDUSTRIES
INTERNATIONAL, INC.
By:________________________
Title:
VII-D-2
SWING LINE LOANS AND PAYMENTS OF PRINCIPAL
==============================================================================================================
Date Amount of Swing Amount of Principal Unpaid Principal Notation
Line Loan Paid or Prepaid Balance Made By
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VII-D-3
EXHIBIT VIII
FORM OF COMPLIANCE CERTIFICATE /
QUARTERLY COMPLIANCE CERTIFICATE
[Date]
Credit Suisse First Boston, as Administrative Agent
for the Leaders party
to the Credit Agreement
referred to below
▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: Syndications Agency
RE: COMPLIANCE CERTIFICATE
This certificate is given fin accordance with Section
6.03[(b)][(c)][(d)] of the Credit Agreement] [pursuant to a Permitted
Acquisition under the Credit Agreement], dated as of February 18, 1999 (as
amended, amended and restated, supplemented or otherwise modified from time to
time, the "Credit Agreement," the terms defined therein being used herein as
----------------
therein defined), among PANOLAM INDUSTRIES INTERNATIONAL, INC., a Delaware
corporation (the "Borrower"), the financial institutions and other entities
--------
party thereto as Lenders, DLJ CAPITAL FUNDING, INC., for itself as an Initial
Lender and as Syndication Agent, CREDIT SUISSE FIRST BOSTON, for itself as an
Initial Lender and as Administrative Agent, and ROYAL BANK OF CANADA, for itself
as an Initial Leader and as Documentation Agent. The undersigned hereby
certifies that:
(a) I am the [Chief Executive Officer] [Treasurer] [Director of Finance]
of the Borrower,
(b) I have reviewed the financial statements attached hereto as Schedule 1
and delivered with this Certificate [in accordance with Section
6.03[(b)][(c)][(d)] of the Credit Agreement] [in connection with a
Permitted Acquisition], and such financial statements truthfully,
accurately, and completely resent the financial condition of the
Borrower and its Subsidiaries in all material respects as of the dates
of such financial statements;
(c) All financial information provided has been prepared in accordance
with GAAP, and such information presents fairly, in accordance with
GAAP, (subject to normal year-end adjustments) the financial position
and results of operations of the Borrower and its Subsidiaries, on a
Consolidated and consolidating basis, in each case as at the end of
the relevant period and for the period then ended;
VIII-I
(d) I have reviewed the terms of the Credit Agreement and have made, or
have caused to be made under my supervision, a review in reasonable
detail of the transactions and financial condition of the Borrower and
its Subsidiaries during the accounting period covered by the financial
statements delivered herewith, and such review [has not disclosed and
I do not otherwise know of the existence, during or at the end of such
accounting period or as of the date hereof, of any condition or event
that constitutes a Default or an Event of Default] [has disclosed or I
otherwise know of the existence, during or at the end of such
accounting period or as of the date hereof, of one or more conditions
or events that constitute Default(s) or Event(s) of Default and I have
attached hereto as Schedule 2 a detailed description of the nature and
period of existence thereof and the action the Borrower has taken
and/or proposes to take with respect thereto]; and
[(e) [Except as disclosed in paragraph (d) above and on Schedule 2 attached
hereto,) the Borrower is in compliance with the financial covenants
contained in Section 6.04 of the Credit Agreement, as detailed and
computed on Schedule [2][3] attached hereto, and such calculations are
true, correct and complete in all respects.]
The foregoing certifications and the Schedules delivered with this
Certificate in support hereof are made and delivered this day of
PANOLAM INDUSTRIES
INTERNATIONAL, INC.
By:________________________________
Title:
VIII-2
SCHEDULE 1
----------
Financial Statements
--------------------
See attached.
VIII-3
[SCHEDULE 2]
[Defaults / Events of Default]
------------------------------
[Nature of Default/ Period of Action Taken or
Event of Default Existence Proposed to Be Taken)
---------------- --------- ---------------------
VIII-4
SCHEDULE [2][3]
[TO BE INCLUDED WITH
QUARTERLY COMPLIANCE CERTIFICATE]
Compliance with Financial Covenants
-----------------------------------
--------------------------------------------------------
Quarterly Compliance Calculations for Fiscal
Quarter Ended:___________ (the "Compliance Period")'
--------------------------------------------------------
A. Maximum Consolidated Leverage Ratio. Consolidated Leverage Ratio of the
-----------------------------------
Borrower and its Subsidiaries as of the last day of the Compliance Period:
1. Consolidated Total Debt (as of the last day of the
Compliance Period) $__________
2. Calculation of Consolidated EBITDA as defined
in the Credit Agreement (far the period ending on
the last day of the Compliance Period) $__________
a. Consolidated Net Income $__________
b. Minus the following, without duplication, and to the
-----
extent otherwise included or not otherwise deductible
(as applicable) in determining Consolidated Net
Income in accordance with GAAP: $__________
(i) Income tax credits $__________
(ii) Interest income $__________
(iii) Gain from extraordinary items $__________
(iv) Aggregate net gain during such period arising
from the sale, exchange or other disposition of
capital assets (including any fixed assets, all
inventory sold in conjunction with the
disposition of fixed assets and all
securities) $__________
(v) Other non-cash gains which have been added in
determining Consolidated Net Income $__________
(vi) Fees paid under any Genstar Agreement $__________
____________________
* For periods of less than four consecutive quarters, annualization factor used
in calculations:_______.
VIII-5
c. Plus the following, without duplication, and to the
----
extent deducted or not otherwise included (as
applicable) in determining Consolidated Net Income
in accordance with GAAP:
(i) Provision for income taxes $__________
(ii) Consolidated Interest Expense $__________
(iii) Loss from extraordinary items $__________
(iv) Non-cash charges (including
depreciation and amortization) $__________
(v) Amortized debt discount $__________
(vi) Aggregate net loss arising from the sale,
exchange or other disposition of capital
assets (including any fixed assets, all
inventory sold in conjunction with the
disposition of fixed assets and all
securities) $__________
(vii) For the periods indicated on Schedule 1.0l(a)
to the Credit Agreement, the amounts indicated
on such Schedule 1.01(a) relating to historical
restructuring charges $__________
(viii) Applicable Restructuring Costs $__________
(ix) Business interruption insurance proceeds
actually received $__________
3. Consolidated EBITDA $__________
(sum of items in A.2)
4. Actual Consolidated Leverage Ratio __________
(A.1 divided by A.3)
5. Maximum Consolidated Leverage Ratio
under Section 6.04(a) of the Credit Agreement __________
B. Minimum Fixed Charge Coverage Ratio. Fixed Charge Coverage Ratio on a
-----------------------------------
consolidated basis of Borrower and its Subsidiaries for the period ending
on the last day of the Compliance Period:
1. Consolidated EBITDA $__________
(from A.3)
2. Consolidated Fixed Charges (as of the last day of the $__________
Compliance Period)
3. Actual Fixed Charge Coverage Ratio __________
(B.1 divided by B.2)
VIII-6
4. Minimum Fixed Charge Coverage Ratio under Section
6.04(b) of the Credit Agreement __________
C. Minimum Interest Coverage Ratio. Interest Coverage Ratio on a consolidated
-------------------------------
basis of the Borrower and its Subsidiaries for the period ending on the
last day of the Compliance Period:
1. Consolidated EBITDA $__________
(from A.3)
2. Consolidated Interest Expense (as of the last day of $__________
the Compliance Period)
3. Actual Interest Coverage Ratio
(C.1 divided by C.2) __________
4 Minimum Interest Coverage Ratio
under Section 6.04(c) of the Credit Agreement __________
D. Capital Expenditures. Capital Expenditures of the Borrower and it
--------------------
Subsidiaries on a consolidated basis for the Fiscal Year ended _______ (the
"Fiscal Year"):
1. Calculation of Maximum Capital Expenditures
a. Base Amount of Maximum Capital Expenditures
from Section 6.04(d) of the Credit Agreement $__________
b Plus 50% of the unused Base Amount of Capital
Expenditures from the prior Fiscal Year $__________
2. Maximum Capital Expenditures (D.1.a+ D.l.b) $__________
3. Actual Capital Expenditures during the Fiscal Year $__________
VIII-7
EXHIBIT X
FORM OF GUARANTY
This GUARANTY dated as of February 18, 1999 (as amended, amended and
restated, supplemented or otherwise modified from time to time, this "Guaranty")
--------
is made by PANOLAM INDUSTRIES HOLDINGS, INC., a Delaware corporation
("Holdings"), PANOLAM GROUP, INC., a Delaware corporation ("Group"), and PII
-------- -----
SECOND, INC., a Delaware corporation ("PII Second" and together with Holdings
----------
and Group, the "Parent Guatantors"), and PANOLAM INDUSTRIES, INC., a Delaware
-----------------
corporation ("Panolam US"), and PIONEER PLASTICS CORPORATION, a Delaware
----------
corporation ("Pioneer" and together with Panolam US, the "Subsidiary
------- ----------
Guarantors"), in favor of the financial institutions from time to time party to
----------
the Credit Agreement referred to below as the Agents and Lender Parties (such
Agents and Lender Parties are each referred to individually herein as a
"Guaranteed Party "and are collectively referred to herein as the "Guaranteed
---------------- ----------
Parties"). Each of the Parent Guarantors and the Subsidies Guarantors, together
-------
with any future direct or indirect parent or subsidiary of the Borrower (as
hereinafter defined) that agrees to be bound by the terms hereof, is referred to
as a "Guarantor" and such entities collectively are referred to as the
---------
"Guarantors."
----------
PRELIMINARY STATEMENT
PANOLAM INDUSTRIES INTERNATIONAL, INC., a Delaware corporation (the
"Borrower"), has entered into a Credit Agreement dated as of February 18, 1999
--------
with the financial institutions from time to time party thereto as Lenders, DLJ
CAPITAL FUNDING, INC., for itself as an Initial Lender and as Syndication Agent,
CREDIT SUISSE FIRST BOSTON, for itself as an Initial Lender and as
Administrative Agent (in such capacity, together with any successor appointed
pursuant to Article VIII of such Credit Agreement, the "Administrative Agent"),
--------------------
and ROYAL BANK OF CANADA, for itself as an Initial Lender and as Documentation
Agent (said agreement. as it may hereafter be amended, amended and restated,
supplemented or otherwise modified from time to time, being the "Credit
------
Agreement," the terms defined therein and not otherwise defined herein being
---------
used herein as therein defined). Each Parent Guarantor owns, as of the date
hereof, directly or indirectly, 100% of the capital stock of the Borrower. Each
Subsidiary Guarantor is a wholly owned Subsidiary of the Borrower. Each
Guarantor wi1l derive substantial direct and indirect benefit from the
transactions contemplated by the Credit Agreement. It is a condition precedent
to the making of Loans and the issuance of Letters of Credit by the Agents and
Lender Parties under the Credit Agreement that each Guarantor shall have
executed and delivered this Guaranty.
NOW, THEREFORE, in consideration of the premises and in order to
induce the Lenders to make the Loans and the Issuing Banks to issue Letters of
Credit under the Credit Agreement from time to time, each Guarantor hereby
agrees as follows:
X-1
Section 1. Guaranty; Limitation of Liability.
---------------------------------
(a) Each Guarantor hereby unconditionally and irrevocably guarantees,
on a joint and several basis, the punctual payment when due, whether at stated
maturity, by acceleration or otherwise, of all Obligations of the Borrower now
or hereafter existing under the Loan Documents, whether for principal
(including, without limitation, reimbursement of, and providing cash collateral
for, amounts drawn or available to be drawn under Letters of Credit), interest,
fees, expenses or otherwise (such Obligations being the "Guaranteed Obligations"
----------------------
and agrees to pay any and all expenses (including counsel fees and expenses)
incurred by the Administrative Agent or any other Guaranteed Party in enforcing
any rights under this Guaranty. Without limiting the generality of the
foregoing, each Guarantor's liability shall extend to all) amounts that
constitute part of the Guaranteed Obligations and would be owed by the Borrower
to the Administrative Agent or any other Guaranteed Party under the Loan
Documents but for the fact that they are unenforceable or not allowable due to
the existence of a bankruptcy, reorganization or similar proceeding.
(b) Any provision of this Guaranty to the contrary notwithstanding,
the liability of each Subsidiary Guarantor under this Guaranty shall be limited
to such maximum aggregate amount as would not render such Subsidies Guarantor's
obligations hereunder subject to avoidance as a fraudulent transfer or
conveyance under Section 548 of Title 11 of the United States Code or any
applicable provisions of any state or foreign law having similar effect.
Section 2. Guaranty Absolute.
-----------------
Each Guarantor guarantees that the Guaranteed Obligations will be paid
strictly in accordance with the terms of the Loan Documents, regardless of any
law, regulation or order now or hereafter in effect in any jurisdiction
affecting any of such terms or the rights of the Administrative Agent or any
other Guaranteed Party with respect thereto, The Obligations of each Guarantor
under this Guaranty are independent of the Guaranteed Obligations or any other
Obligations of any other Credit Party under the Loan Documents, and a separate
action or actions may be brought and prosecuted against each Guarantor to
enforce this Guaranty, irrespective. of whether any action is brought against
the Borrower or any other Credit Party or whether the Borrower or any other
Credit Party is joined in any such action or actions. The liability of each
Guarantor under this Guaranty is joint and several and shall be irrevocable,
absolute and unconditional irrespective of, and each Guarantor hereby
irrevocably waives any defenses it may now or hereafter have in any way relating
to, any or all of the following:
(a) any lack of validity or enforceability of any Loan Document or
any agreement or instrument relating thereto;
(b) any change in the time, manner or place of payment of, or many
other term of, all or any of the Guaranteed Obligations or any other
Obligations of any other Credit Party under the Loan Documents, or any
other amendment or waiver of or any consent to departure from any Loan
Document, including, without limitation, any
X-2
increase in the Guaranteed Obligations resulting from the extension of
additional credit to the Borrower or any of its Subsidiaries or otherwise;
(c) any taking, exchange, release or non-perfection of any
Collateral, or any taking, release or amendment or waiver of or consent to
departure from any other guaranty, for all or any of the Guaranteed
Obligations;
(d) any manner of application of collateral, or proceeds thereof, to
all or any of the Guaranteed Obligations, or any manner of sale or other
disposition of any collateral for all or any of the Guaranteed Obligations
or any other Obligations of any other Credit Party under the Loan Documents
or any other assets of the Borrower or any of its Subsidiaries;
(e) any change, restructuring or termination of the corporate
structure or existence of the Borrower or any of its Subsidiaries;
(f) any failure of any Guaranteed Party to disclose to the Borrower
or any Guarantor any information relating to the financial condition,
operations, properties or prospects of any other Credit Party now or in the
future known to any Guaranteed Party (each Guarantor hereby waiving any
duty on the part of the Guaranteed Parties to disclose such information);
or
(g) any other circumstance including, without limitation, any statute
of limitations) or any existence of or reliance on any representation by
the Administrative Agent or any other Guaranteed Party that might otherwise
constitute a defense available to, or a discharge of, the Borrower, any
Guarantor or any other guarantor or surety.
This Guaranty shall continue to be effective or be reinstated, as the case may
be, if at any time any payment of any of the Guaranteed Obligations is rescinded
or must otherwise be returned by any Guaranteed Party or any other Person upon
the insolvency, bankruptcy or reorganization of the Borrower or any other Credit
Party or otherwise, all as though such payment had not been made,
Section 3. Waivers and Acknowledgements.
----------------------------
(a) Each Guarantor hereby waives promptness, diligence, notice of
acceptance and any other notice with respect to any of the Guaranteed
Obligations and this Guaranty and any requirements that the Administrative Agent
or any other Guaranteed Party protect, secure, perfect or insure any Lien or any
property subject thereto or exhaust any right or take any action against the
Borrower or any other Person or any collateral.
(b) Each Guarantor hereby waives any right to revoke this Guaranty
and acknowledges that this Guaranty is continuing in nature and applies to all
Guaranteed Obligations, whether existing now or in the future.
X-3
Term B Termination Date shall have occurred and (iv) all Letters of Credit and
Bank Hedge Agreements shall have expired or been terminated, the Administrative
Agent and the other Guaranteed Parties will, at such Guarantor's request and
expense, execute and deliver to such Guarantor appropriate documents, without
recourse and without representation or warranty, necessary to evidence the
transfer by subrogation to such Guarantor of an interest in the Guaranteed
Obligations resulting from such payment by such Guarantor.
(b) Each Guarantor hereby agrees that any indebtedness of the
Borrower now or hereafter owing to such Guarantor (the " Subordinated Debt") is
-----------------
hereby subordinated to all of the Guaranteed Obligations and all other amounts
payable under this Guaranty and to all amounts payable in respect of the
Subordinated Notes (the "Subordinated Note Obligations"), whether heretofore,
-----------------------------
now or hereafter created, and that without the prior consent of the
Administrative Agent, the Subordinated Debt shall not be paid in whole or in
part until the Guaranteed Obligations and all other amounts payable under this
Guaranty and all Subordinated Note Obligations have been paid in full, all
Letters of Credit and Bank Hedge Agreements shall have expired or been
terminated, and the Credit Agreement has been terminated and is of no further
force or effect, except that payments of principal and interest on the
Subordinated Debt shall be permitted so long as no Default shall have occurred
and be continuing, Each Guarantor agrees that it will not accept any payment of
or on account of any Subordinated Debt at any time in contravention of the
foregoing. At the request of the Administrative Agent, following the occurrence
and during the continuance of an Event of Default, each Guarantor hereby agrees
to direct the Borrower to pay to the Administrative Agent, for the account of
the Administrative Agent and the other Guaranteed Parties, all or an part of the
Subordinated Debt and any amount so paid to the Administrative Agent shall be
applied to payment of the Guaranteed Obligations and all other amounts payable
under this Guaranty, Each payment on the Subordinated Debt received in violation
of any of the provisions hereof shall be deemed to have been received in trust
for the Administrative Agent and shall be paid over to the Administrative Agent
immediately on account of the Guaranteed Obligations, but without otherwise
affecting in any manner any Guarantor's liability under any of the provisions of
this Guaranty. Each Guarantor agrees to file all claims against the Borrower in
any bankruptcy or other proceeding in which the filing of claims is required by
law in respect of any Subordinated Debt, and the Administrative Agent shall be
entitled to all of such Guarantor's rights thereunder. If for any reason any
Guarantor fails to file such claim at least 30 days prior to the last date on
which such claim should be filed, the Administrative Agent, as such Guarantor's
attorney-in-fact, is hereby authorized to do so in such Guarantor's name or, in
the Administrative Agent's discretion, to assign such claim to and cause proof
of claim to be filed in the name of the Administrative Agent or its nominee. In
all such cases, whether in reorganization, bankruptcy or otherwise, the Person
or Persons authorized to pay such claim shall pay to the Administrative Agent,
for the account of the Administrative Agent and the other Guaranteed Parties,
the full amount payable on the claim in the proceeding, and, to the full extent
necessary for that purpose, each Guarantor hereby assigns to the Administrative
Agent, for the account of the Administrative Agent and the other Guaranteed
Parties, all of such Guarantor's rights to any payments or distributions to
which such Guarantor otherwise would be entitled. If the amount so paid is
greater than such Guarantor's liability hereunder, the Administrative Agent will
pay the excess amount to the party entitled
X-5
thereto. In addition, each Guarantor hereby appoints the Administrative Agent as
its attorney-in-fact to exercise all of such Guarantor's voting rights in
connection with any bankruptcy proceeding or any plan for the reorganization of
the Borrower.
(c) In order to provide for just and equitable contribution among the
Guarantors, the Guarantors agree, inter se, that in the event any payment or
----- --
distribution is made by any Guarantor (a "Funding Guarantor") under this
-----------------
Guaranty, such Funding Guarantor shall be entitled to a contribution from all
other Guarantors in a pro rata amount based on the Adjusted Net Assets (as
--- ----
hereinafter defined) of each Guarantor (including the Funding Guarantor) for all
payments, damages and expenses incurred by that Funding Guarantor in discharging
the Guaranteed Obligations or any other Guarantor's Obligations with respect to
this Guaranty. "Adjusted Net Assets" of any Guarantor at any date means the
-------------------
lesser of (a) the amount by which the fair value of the property of such
Guarantor exceeds the total amount of liabilities (including, without
limitation, contingent liabilities, but excluding liabilities of such Guarantor
under this Guaranty) of such Guarantor at such date, and (b) the amount by which
the present fair salable value of the assets of such Guarantor at such date
exceeds the amount that will be required to pay the probable liability of such
Guarantor on its debts (after giving effect to all contingent liabilities, but
excluding liabilities of such Guarantor under this Guaranty) as they become
absolute and matured.
Section 5. Payments Free and Clear of Taxes Etc.
------------------------------------
(a) Except as otherwise provided in this Section 5, any and all
payments made by any Guarantor hereunder shall be made, in accordance with
Section 2,09 of the Credit Agreement, free and clear of and without deduction
for any Taxes. Except as otherwise provided in this Section 5, if any Guarantor
shall be required by law to deduct any Taxes from or in respect of any sum
payable hereunder to the Administrative Agent or any other Guaranteed Party, (i)
the sum payable shall be increased as may be necessary so that after making all
required deductions (including deductions applicable to additional sums payable
under this Section) the Administrative Agent or such other Guaranteed Party (as
the case may be) receives an amount equal to the sum it would have received had
no such deductions been made, (ii) such Guarantor shall make such deductions and
(iii) such Guarantor shall pay the full amount deducted to the relevant taxation
authority or other authority in accordance with applicable law.
(b) In addition, each Guarantor agrees to pay any present or future
Other Taxes.
(c) Except as otherwise provided in this Section 5, each Guarantor
will indemnify the Administrative Agent and each other Guaranteed Party for the
full amount of Taxes and Other Taxes, and for the full amount of Taxes imposed
by any jurisdiction on amounts payable under this Section 5 paid by the
Administrative Agent or such other Guaranteed Party (as the case may be) and any
liability (including penalties, additions to tax, interest and expenses) arising
therefrom or with respect thereto. This indemnification shall be made within 30
days
X-6
from the date the Administrative Agent or such other Guaranteed Party (as the
case may be) makes written demand therefor.
(d) Within 30 days after the date of any payment of Taxes by or on
behalf of any Guarantor, such Guarantor will furnish to the Administrative
Agent, at its address referred to in the Credit Agreement, the original receipt
of payment thereof or a certified copy of such receipt. In the case of any
payment hereunder by or on behalf of any Guarantor through an account or branch
outside the United States or an behalf of any Guarantor by a payor that is not a
United States person, if such Guarantor determines that no Taxes are payable in
respect thereof, such Guarantor shall furnish, or shall cause such payor to
furnish, to the Administrative Agent, at such address, an opinion of counsel
acceptable to the Administrative Agent stating that such payment is exempt from
Taxes, For purposes of this Section 5(d) and Section 5(e), the terms "United
------
States" and "United States Person" shall have the meanings specified in Section
------ --------------------
7701 of the Internal Revenue Code.
(e) Upon the reasonable request in writing of any Guarantor, each
Guaranteed Party organized under the laws of a jurisdiction outside the United
States shall, on or prior to the date of its execution and delivery of the
Credit Agreement in the case of each Initial Lender, and on the date of the
Assignment and Acceptance pursuant to which it became a Guaranteed Party in the
case of each other Guaranteed Party, and from time to time thereafter upon the
reasonable request in writing by any Guarantor or the Administrative Agent (but
only so long thereafter as such Guaranteed Party remains lawfully able to do
so), provide the Administrative Agent and such Guarantor with Internal Revenue
Service form 1001 (or W-8BEN) or 4224 (or W-8ECI), as appropriate, or any
successor form prescribed by the Internal Revenue Service, certifying that such
Guaranteed Party is exempt from United States withholding tax on payments under
the Credit Agreement, the Notes (if any) and this Guaranty. If any form or
document referred to in this Section 5(a) requires the disclosure of
information, other than information necessary to compute the tax payable and
information required on the date hereof by Internal Revenue Service form 1001
(or W-8BEN) or 4224 (or W-8ECI), that the Guaranteed Party reasonably considers
to be confidential, the Guaranteed Party shall give notice therefore to such
Guarantor and shall not be obligated to include in such form or document such
confidential information.
(f) For any period with respect to which a Guaranteed Party has
failed to provide such Guarantor with the appropriate form described in Section
5(e) establishing an exemption from withholding tax (other than if such failure
is due to a change in law occurring after the date on which a form originally
was required to be provided), such Guaranteed Party shall not be entitled to
any payments or amounts from such Guarantor under Section 5(a) or
indemnification under Section 5(c) with respect to Taxes imposed by the United
States; provided, however, that should a Guaranteed Party become subject to
-----------------
Taxes because of its failure to deliver a four. required hereunder, such
Guarantor shall take such steps as such Guaranteed Party shall reasonably
request to assist such Guaranteed Party to recover such Taxes. Further, no
party shall be entitled to any payments or amounts under Section 5(a) or
indemnification under Section S(c) except as a result of a change in law
occurring after such party acquired any interest in the Loans or the Notes. The
foregoing sentence shall not apply to the extent of any payments, amounts or
X-7
indemnification that the assignor to such party was entitled at the time of
assignment or other transfer.
(g) Without prejudice to the survival of any other agreement of any
Guarantor hereunder or under any other Loan Document, the agreements and
obligations of each Guarantor contained in this Section 5 shall survive the
payment in full of the Guaranteed Obligations and all other amounts payable
under this Guaranty.
(h) If a Guarantor is required to pay any additional amount to a
Guaranteed Party or any taxing authority for the account of any Guaranteed Party
pursuant to this Section 5, such Guarantor shall have the right, upon reasonable
notice to the Guaranteed Party, to require such Guaranteed Party to use
reasonable efforts to designate a different lending office for funding or
booking its loan (or any loan participation) under the Credit Agreement or to
assign its rights and obligations hereunder to another of its offices, branches
or Affiliates, if, in the sole judgment of such Guaranteed Party, such
designation or assignment (A) would eliminate or reduce amounts payable pursuant
to Section 5, as the case may be, in the future and (B) would not cause such
Guaranteed Party to suffer any economic, legal or regulatory disadvantage. With
respect to the foregoing, each Guarantor hereby agrees to pay on demand all
reasonable costs and expenses incurred by any Guaranteed Party in connection
with any such designation or assignment.
Section 6. Representations and Warranties.
------------------------------
Each Guarantor hereby represents and warrants as follows:
(a) Such Guarantor (i) is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation, (ii) is duly qualified and in good standing as a foreign
corporation in each other jurisdiction in which it owns or leases property or in
which the conduct of its business requires it to so qualify or be licensed
except where the failure to so qualify or be licensed would not have a Material
Adverse Effect and (iii) has all requisite corporate power and authority to own
or lease and operate its properties and to carry on its business as now
conducted and as proposed to be conducted.
(b) The execution, delivery and performance by such Guarantor of this
Guaranty and each other Loan Document to which it is or is to be a party, and
the consummation of the transactions contemplated hereby and thereby, are within
such Guarantor's corporate powers, have been duly authorized by all necessary
corporate action, and do not (i) contravene such Guarantor's charter or by-laws,
(ii) violate any law, rule, regulation (including, without limitation,
Regulation X of the Board of Governors of the Federal Reserve System), order,
writ, Judgment, injunction, decree, determination or award, (iii) conflict with
or result in the breach of, or constitute a default under, any contract, loan
agreement, indenture, mortgage, deed of trust, lease or other instrument binding
on or affecting such Guarantor, any of its Subsidiaries or any of their
properties or (iv) except for the Liens created by the Collateral Documents,
result in or requite the creation or imposition of any Lien upon or with respect
to any of the properties of such Guarantor or any of its Subsidiaries.
X-8
(c) No authorization or approval or other action by, and no notice to
or filing with, any governmental authority or regulatory body or any other third
party is required for (i) the due execution, delivery, recordation, filing or
performance by such Guarantor of this Guaranty or any other Loan Document to
which it is or is to be a party, or for the consummation of the transactions
contemplated hereby and thereby, (ii) the grant by any Credit Party of the Liens
granted by it pursuant to the Collateral Documents, (iii) the perfection or
maintenance of the Liens created by the Collateral Documents (including the
first priority nature thereof) or (iv) the exercise by the Administrative Agent
or any other Agent or Lender Party of its rights under the Loan Documents or the
remedies in respect of the Collateral pursuant to the Collateral Documents.
(d) This Guaranty has been, and each of the other Loan Documents to
which such Guarantor is a party have been, duly executed and delivered by such
Guarantor and constitute the legal, valid and binding obligation of such
Guarantor, enforceable against such Guarantor in accordance with their
respective terms.
(e) There are no conditions precedent to the effectiveness of this
Guaranty that have not been satisfied or waived.
(f) Such Guarantor has, independently and without reliance upon the
Administrative Agent or any other Guaranteed Party and based on such documents
and information as it has deemed appropriate, made its own credit analysis and
decision to enter into this Guaranty, and such Guarantor has established
adequate means of obtaining from any other Credit Parties on a continuing basis
information pertaining to, and is now and on a continuing basis will be
completely familiar with, the financial condition, operations, properties and
prospects of such other Credit Parties.
Section 7. Covenants.
---------
(a) So long as any part of the Guaranteed Obligations shall remain
unpaid or any Lender shall have any Commitment, each Guarantor agrees that if,
under the terms of the Credit Agreement, the Borrower is required to cause such
Guarantor or any of such Guarantor's Subsidiaries to take, or to refrain from
taking, any action, or to comply with any requirements, obligations, limitations
or restrictions contained therein, in each case whether individually or together
with any other Credit Parties, such Guarantor shall, and shall cause each of its
Subsidiaries to, take or refrain from taking (as the case may be) any such
action and comply with all such requirements, obligations, limitations and
restrictions.
(b) Upon issuance of any Equity Interests by Holdings (other than (i)
the issuance of stock options issued to management and other employees of
Holdings and its Subsidiaries in the ordinary course of business and the
issuance of Capital Stock of Holdings upon the exercise of such options, (ii)
Equity Interests issued as Acquisition Consideration to the extent permitted
under the Credit Agreement or (iii) Equity Interests used to repay the Domtar
X-9
Note), Holdings shall contribute the Net Cash Proceeds of such issuance to the
Borrower as a Capital Contribution substantially concurrently with the issuance
of such Equity Interests.
Section 8. Amendments Etc.
--------------
(a) No amendment or waiver of any provision of this Guaranty and no
consent to any departure by any Guarantor therefrom shall in any event be
effective unless the same shall be in writing and signed by the Administrative
Agent (with the consent or at the direction of the Required Lenders except as
otherwise provided in this Section 8 and except as otherwise provided in the
Credit Agreement or the Intercreditor Agreement), in the case of any such
amendment by each Guarantor (except as set forth in Section 8(b), and then such
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given; provided, however, that no amendment, waiver
-------- -------
or consent shall, unless in writing and signed by all of the Lenders (or by the
Administrative Agent with the consent or at the direction of all of the
Lenders), (i) further reduce or limit the liability of any Guarantor hereunder,
(ii) postpone any date fixed fir payment hereunder or xiii) change the number or
percentage of Lenders required to take any action hereunder.
(b) Upon the execution and delivery to the Administrative Agent by
any Person of an Amendment to Guaranty in substantially the form of Exhibit XIV
to the Credit Agreement (each, an "Amendment To Guaranty"), which Amendment to
---------------------
Guaranty need not be executed by any other Guarantor, and the acceptance thereof
by the Administrative Agent, such Person shall be and become a Guarantor
hereunder, and each reference in this Guaranty to a "Guarantor" shall include
such Person and each reference in any other Loan Document to a `Guarantor,"
"Credit Party" or a "Loan Party" shall include such Person.
Section 9. Notices, Etc.
------------
All notices and other communications provided for hereunder shall be
in writing (including telegraphic, telecopy or telex communication) and mailed,
telegraphed, telecopied, telexed or delivered to it, if to any Guarantor,
addressed to it at its address set forth on the applicable signature page hereto
or set forth in the Amendment to Guaranty pursuant to which such Guarantor
became a Guarantor, if to the Administrative Agent or any Guaranteed Party, at
its address specified in the Credit Agreement, or as to any party at such other
address as shall be designated by such party in a written notice to each other
party. All such notices and other communications shall, when, mailed,
telegraphed, telecopied or telexed, be effective when deposited in the mails,
delivered to the telegraph company, transmitted by telecopier or confirmed by
telex answerback, respectively.
Section 10. No Waiver: Remedies.
-------------------
No failure on the part of the Administrative Agent or any other
Guaranteed Party to exercise, and no delay in exercising, any right hereunder
shall operate as a waiver therefore shall any single or partial exercise of any
right hereunder preclude any other or further exercise
X-10
thereof or the exercise of any other right. The remedies herein provided are
cumulative and not exclusive of any remedies provided by law.
Section 11. Right of Set-off.
----------------
Upon (a) the occurrence and during the continuance of any Event of
Default and (b) the making of the request or the granting of the consent
specified by Section 7.01 of the Credit Agreement to authorize the
Administrative Agent to declare the Loans due and payable pursuant to the
provisions of such Section 7.01, each Guaranteed Party and each of its
respective Affiliates is hereby authorized, by each Guarantor, at any time and
from time to time, to the fullest extent permitted by law, to set off and apply
any and all deposits (general or special, time or demand, provisional or final)
at any time held and other indebtedness at any time owing by such Guaranteed
Party or such Affiliate to for the credit or the account of such Guarantor
against any and all of the Obligations of such Guarantor now or hereafter
existing under this Guaranty, whether or not such Guaranteed Party shall have
made any demand under this Guaranty and although such Obligations may be
unmatured. Each Guaranteed Party agrees promptly to notify the applicable
Guarantor after any such set-off and application; provided, however, that the
-------- -------
failure to give such notice shall not affect the validity of such set-off and
application. The rights of each Guaranteed Party and its respective Affiliates
under this Section are in addition to other rights and remedies (including,
without limitation, other rights of set-off) that such Guaranteed Party and its
respective Affiliates may have.
Section 12. Indemnification.
----------------
Without limiting any other Obligations of any Guarantor or remedies of
the Guaranteed Parties under this Guaranty, each Guarantor shall, to the fullest
extent permitted by law, indemnify, defend and save and hold harmless each
Guaranteed Party from and against, and shall pay on demand, any and all losses,
liabilities, damages, costs, expenses and charges (including the fees and
disbursements of such Guaranteed Party's legal counsel) suffered or incurred by
such Guaranteed Party as a result of any failure of any Guaranteed Obligations
to be the legal, valid and binding obligations of the Borrower enforceable
against the Borrower in accordance with their terms; provided, however, that no
-------- -------
Guarantor shall be liable to a Guaranteed Party for losses directly caused by
such Guaranteed Party's willful misconduct or gross negligence.
Section 13. Continuing Guaranty: Assignments under the Credit
-------------------------------------------------
Agreement.
---------
This Guaranty is a continuing guaranty and shall (a) remain in full
force and effect until the later of the payment in full in cash of the
Guaranteed Obligations and all other amounts payable under this Guaranty and the
last to occur of (i) the Revolving Commitment Termination Date, (ii) the Term A
Termination Date, (iii) the Term B Termination Date and (iv) the expiration or
termination of all Letters of Credit and Bank Hedge Agreements, (b) be binding
upon each Guarantor, its successors and assigns and (c) inure to the benefit of
and be enforceable by the Administrative Agent and the other Guaranteed Parties
and their successors, transferees
X-11
and assigns. Without limiting the generality of the foregoing clause (c), any
Guaranteed Party may assign or otherwise transfer all or any portion of its
rights and obligations under the Credit Agreement(including, without )imitation,
all or any portion of its Commitments, the Loans owing to it and any Note or
Notes held by it) to any ether Person, and such other Person shall thereupon
become vested with all the benefits in respect thereof granted to such
Guaranteed Party herein or otherwise, in each case as and to the extent provided
in Section 9.07 of the Credit Agreement.
Section 14. Governing Law; Jurisdiction; Waiver of Jury Trial, Etc.
------------------------------------------------------
(a) THIS GUARANTY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK.
(b) EACH GUARANTOR HEREBY IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR
ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVE JURISDICTION OF ANY NEW YORK STATE
COURT OR FEDERAL COURT OF THE UNITED STATES OF AMERICA SITTING IN NEW YORK CITY,
A%) ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION OR PROCEEDING ARISING
OUT OF OR RELATING TO THIS GUARANTY OR ANY OF THE OTHER LOAN DOCUMENTS TO WHICH
IT IS OR IS TO BE A PARTY, OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT,
AND EACH GUARANTOR HEREBY IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS
IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY
SUCH NEW YORK STATE COURT OR, TO THE EXTENT PERMITTED BY LAW, IN SUCH FEDERAL
COURT, EACH GUARANTOR AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR
PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY
SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. NOTHING IN THIS
GUARANTY SHALL AFFECT ANY RIGHT THAT ANY PARTY MAY OTHERWISE HAVE TO BRING ANY
ACTION OR PROCEEDING RELATING TO THIS GUARANTY OR ANY OF THE OTHER LOAN
DOCUMENTS TO WHICH IT IS OR IS TO BE A PARTY IN THE COURTS OF ANY JURISDICTION.
(c) EACH GUARANTOR IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE
FULLEST EXTENT IT MAY LEGALLY AND EFFECTIVELY DO SO, ANY OBJECTION THAT IT MAY
NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUIT, ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS GUARANTY OR ANY OF THE OTHER LOAN DOCUMENTS
TO WHICH IT IS OR IS TO BE A PARTY IN ANY NEW YORK STATE OR FEDERAL COURT. EACH
GUARANTOR HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, THE
X-12
DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING
IN ANY SUCH COURT.
(d) EACH GUARANTOR AND EACH GUARANTEED PARTY HEREBY IRREVOCABLY WAIVES
ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER
BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO ANY OF THE
LOAN DOCUMENTS, THE TRANSACTIONS CONTEMPLATED THEREBY OR THE ACTIONS OF THE
ADMINISTRATIVE AGENT OR ANY OTHER GUARANTEED PARTY IN THE NEGOTIATION,
ADMINISTRATION, PERFORMANCE OR ENFORCEMENT THEREOF.
(Remainder of page intentionally blank. Signature pages follow.)
X-13
IN WITNESS WHEREOF, each Guarantor has caused this Guaranty to be duly
executed and delivered by its officer thereunto duly authorized as of the date
first above written.
PANOLAM INDUSTRIES HOLDINGS, INC.,
a Delaware corporation
By:_________________________________
Title:
Address for Notice:
▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
PANOLAM GROUP, INC.,
a Delaware corporation
By:_________________________________
Title:
Address for Notice:
▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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PII SECOND, INC.,
a Delaware corporation
By:_________________________________
Title:
Address for Notice:
▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
PANOLAM INDUSTRIES, INC.,
a Delaware corporation
By:_________________________________
Title:
Address for Notice:
▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
X-15
PIONEER PLASTIC CORPORATION,
a Delaware corporation
By:_________________________________
Name:
Title:
Address for Notice:
▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
X-16
EXHIBIT XI
FORM OF DEED OF TRUST (MORTGAGE) /
LEASEHOLD DEED OF TRUST (MORTGAGE)
(Subject to such changes as may be satisfactory to the Administrative
Agent for mortgage forms, leasehold forms and local law issues)
Recording at the Request of and
when Recorded Mail Original to:
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇
DEED OF TRUST AND ASSIGNMENT OF RENTS,
LEASES AND LEASEHOLD INTERESTS
THIS DEED OF TRUST AND ASSIGNMENT OF RENTS, LEASES AND LEASEHOLD
INTERESTS (hereafter, as amended, modified, replaced, consolidated and extended,
the "Deed Of Trust") is made and entered into as of February 18, 1999 by and
-------------
among [PANOLAM INDUSTRIES, INC.] [PIONEER PLASTICS CORPORATION J, a Delaware
corporation ("Grantor"), [________], as trustee ("Trustee"), and CREDIT SUISSE
------- -------
FIRST BOSTON, as Administrative Agent ("Beneficiary").
-----------
Recitals
--------
A. Panolam Industries [International, inc.] [Ltd.] (the "Borrower")
--------
and Beneficiary are parties to that certain Credit Agreement, dated as of
February 18, 1999, among Borrower, Beneficiary, DLJ Capital Funding, Inc., as
Syndication Agent, Royal Bank of Canada, as Documentation Agent, and the other
financial institutions named therein as lenders (as the same may be amended,
restated, supplemented or otherwise Modified from time to time, the "Credit
------
Agreement"), under which Borrower will borrow Loans and will be afforded certain
---------
other financial accommodations. Unless otherwise defined herein, all capitalized
terms are used in this Deed of Trust as they are defined in the Credit
Agreement.
B. Pursuant to that certain Guaranty (as it may be amended,
supplemented or otherwise modified from time to time, the "Guaranty") of even
--------
date herewith, the Grantor has guaranteed all obligations of the Borrower under
the Credit Agreement.
XI-1
C. It is a condition precedent: to the making of Loans and issuance of
Letters of Credit by the Lender Parties under the Credit Agreement that the
obligations of Grantor under the Guaranty be secured by liens and security
interests covering certain property of Grantor, In connection therewith,
Beneficiary has required that, and Grantor has agreed to, execute and deliver
this Deed of Trust.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, and in order to secure all of the obligations of
Grantor under the Guaranty and the other Loan Documents (collectively with the
obligations set forth herein, the "Obligations"), Grantor. Trustee and
-----------
Beneficiary agree as follows:
ARTICLE I - CONVEYANCE IN TRUST
1.01 Conveyance in Trust. Grantor does hereby convey to Trustee in
-------------------
trust, with power of sale, all of Grantor's right, title and interest in and to
all of the following property (collectively, the "Trust Property") subject only
--------------
to Permitted Liens under the Credit Agreement:
(a) the real property described in Exhibit "A" attached hereto and
by this reference incorporated herein, including, with out limitation, all air
rights with respect thereto (the "Land");
----
(b) any and all buildings and all other improvements now on, or
hereafter constructed on, the Land, and all fixtures now or hereafter affixed
to, placed upon or used in connection with the Trust Property;
(c) any and all lands, fixtures, structures, improvements, tenements
and hereditaments of whatever kind or description and wherever situated, now
owned by, or at any time hereafter acquired by or for, Grantor and contiguous or
appurtenant to the Land, and all other things of whatsoever kind and in any way
or at any time belonging or appurtenant to, or used in connection with, any of
the other Trust Property;
(d) any and all leases and leasehold rights now held or hereafter
acquired by Grantor for use in connection with or belonging or appertaining to
any of Grantor's real property now or hereafter subject to the lien of this Deed
of Trust;
(e) any and all additions, betterments and improvements hereafter
acquired or constructed upon or in connection with any other property, real or
personal, now or at any time hereafter subject to the lien of this Deed of
Trust; and
(f) any and all rights, powers, franchises, privileges, immunities,
permits and licenses now or hereafter owned or possessed by Grantor that now or
at any time hereafter may be necessary far, or appurtenant to, the use,
operation, management, maintenance, renewal, alteration or improvement of any of
the other Trust Property.
XI-2
This Deed of Trust is given for the purpose of securing in such order
of priority as Beneficiary may elect, the indebtedness and obligations described
in Section 1.03 hereof.
------------
1.02 Status of Title. Grantor has good right to mortgage and convey
---------------
the Trust Property to Trustee and Beneficiary and will warrant and defend the
sane to Trustee, Beneficiary and their respective successors and assigns against
the lawful claims and demands of all persons except with respect to Permitted
Encumbrances. Grantor agrees to protect, preserve and defend Trustee's and
Beneficiary's interests in the Trust Property and tide thereto; to appear and
defend this Deed of Trust in any action or proceeding affecting or purporting to
affect the Trust Property, the lien or security interest of this Deed of Trust
thereon, or any of the rights of Trustee or Beneficiary hereunder, and to pay
all costs and expenses incurred by Trustee or Beneficiary in or in connection
with any such action or proceeding, including reasonable attorneys' fees, at
trial and on appeal, whether or not any such action or proceeding progresses to
judgment and whether or not brought by or against Trustee or Beneficiary,
Beneficiary shall be reimbursed for any such costs and expenses in accordance
with the provisions of this Deed of Trust and the other Loan Documents. Trustee
or Beneficiary, after notice to Grantor, may, but shall not be under any
obligation to, appear or intervene in any such action or proceeding and retain
counsel therein and defend the same or otherwise take such action therein as it
be advised and may settle or compromise the same and, in that behalf and for any
of such purposes, may expend and advance such sums of money as it reasonably may
deem necessary, and shall be reimbursed therefor in accordance with the
provisions of this Deed of Trust and the other Loan Documents.
1.03 Obligations Secured. This Deed of Trust is made in trust,
-------------------
however, for the purpose of securing all of the Obligations. Grantor shall pay
and perform the Obligations at the times and places and in the manner specified
in the Loan Documents. This Deed of Trust shall secure unpaid balances of all
loans and other such extensions of credit made after this Deed of Trust is
recorded pursuant to the Loan Documents. All future advances will have the same
priority as the original advance. Any agreement thereafter made by Grantor and
Beneficiary pursuant to this Deed of Trust shall be superior to the rights of
the holder of any intervening lien or encumbrance to the extent allowed by law.
1.04 After-Acquired Property. if Grantor hereafter acquires (a) any
-----------------------
property that is of the kind or nature described in Section 1.0. hereof and is
-----------
or is intended to become a part thereof, or (b) an interest in any of the Trust
Property greater than the interest now held, then such property or interest
shall, immediately upon such acquisition, become subject to the lien of this
Deed of Trust as fully and complete) and with the same effect as though now
owned by Grantor and specifically described herein, without need for the
delivery and/or recording of a supplement to this Deed of Trust or any other
instrument: but nevertheless Grantor shall from time to time, if requested by
Trustee or Beneficiary, execute and deliver any and all such further assurances,
conveyances and assignments thereof as Trustee or Beneficiary may reasonably
require for the purpose of expressly and specifically subjecting to the lien of
this Deed of Trust any and all such property or interest.
XI-3
ARTICLE II - COVENANTS CONCERNING THE TRUST PROPERTY
2.01 Taxes and Governmental Impositions.
----------------------------------
(a) Payment. Grantor will pay, or cause to be paid, promptly, when
-------
and as due, and, upon written request from Trustee or Beneficiary, will promptly
exhibit to Beneficiary receipts for the payment of, a)1 taxes, assessments,
charges, fees, fines and impositions of every nature whatsoever charged,
imposed, levied or assessed or to be charged, imposed, levied or assessed upon
or against the Trust Property or any part thereof, or upon the interest of
Trustee or Beneficiary in the Trust Property, as well as all income taxes,
assessments and other governmental charges lawfully levied and imposed by the
United States or any state, county, municipality or other taxing authority in
respect of the Trust Property or any part thereof or any charge that, if unpaid,
would or could become a lien or charge upon the Trust Property, or any part
thereof (collectively, the "Impositions").
-----------
(b) Contests. Grantor shall have the right before any delinquency
--------
occurs to contest or object to the amount or validity of any such Imposition by
appropriate legal proceedings, but such right shall not be deemed or construed
in any way as relieving, modifying or extending Grantor's covenant to pay any
such Imposition at the time and in the manner provided in Section 2.01(a)
---------------
hereof, unless Grantor has given prior written notice to Beneficiary of
Grantor's intent so to contest or object to an Imposition, and unless: (i) the
legal proceedings shall operate conclusively to prevent the sale of the Trust
Property, or any part thereof, to satisfy such Impositions prior to final
determination of such proceedings; or (ii) Grantor shall furnish a good and
sufficient bond or surety in the amount of the Impositions that are being
contested plus any interest and penalty that may be imposed thereon and that
could become a lien against the Trust Property and in a manner to stay or
prevent the sale, or other security reasonably satisfactory to Beneficiary; or
(iii) Grantor shall have provided a good and sufficient undertaking as may be
required or permitted by law to accomplish a stay of such proceedings; or (iv)
Grantor shall have paid such Impositions under protest and is suing to recover
any refunds thereof. Subject to the foregoing, and if Beneficiary shall so
request, within sixty days after the date when an Imposition is due and payable,
Grantor shall deliver to Beneficiary evidence reasonably acceptable to
Beneficiary showing the payment of such Imposition.
(c) Payment by Beneficiary. Beneficiary shall have the right, after
----------------------
demand to Grantor, to pay any Imposition after the date such Imposition shall
have become due, unless Grantor shall be contesting such Imposition pursuant to
Section 2.01(b) hereof, and to add to the Obligations the amount so paid,
---------------
together with interest thereon from the date of such payment at the Default Rate
of interest applicable under the Credit Agreement, and nothing herein contained
shall affect such right and such remedy, Any sums paid by Beneficiary in
discharge of any Impositions shall be (i) a future advance hereunder and a lien
on the Trust Property secured hereby prior to any right or title to, interest
in, or claim upon the Trust Property subordinate to the lien of this Deed of
Trust, and (ii) payable on demand.
XI-4
(d) No Credit. Grantor shall not claim, demand or be entitled to
---------
receive any credit or credits towards the satisfaction of this Deed of Trust or
on any interest payable thereon for any taxes assessed against the Trust
Property or any part thereof, and shall not claim any deduction from the taxable
value of the Trust Property by reason of this Deed of Trust.
2.02 Mechanic's and Other Liens. Grantor will not suffer any
--------------------------
mechanic's, laborer's, materialmen's, statutory or other lien or any security
interest or encumbrance to be created or to remain outstanding (other than
Permitted Encumbrances).
2.03 Utilities. Grantor will pay, or cause to be paid, when due any
---------
charges for utilities, whether public or private, with respect to the Trust
Property or any part thereof.
2.04 Insurance.
---------
(a) Maintenance. Grantor will obtain and maintain insurance with
-----------
respect to the Trust Property in accordance with the provisions of the Credit
Agreement and the other Loan Documents. From and after the entry of judgment of
foreclosure, all rights and powers of Beneficiary to settle or participate in
the settlement of losses under policies of insurance or to hold and disburse or
otherwise control use of insurance proceeds shall continue in Beneficiary as
judgment creditor or mortgagee until confirmation of sale.
(b) Proceeds. If the Trust Property is materially damaged or
--------
destroyed, Grantor shall give prompt notice thereof to Benefice and all
insurance proceeds shall be delivered or applied in accordance with the
provisions of the Credit Agreement and the other Loan Documents.
2.05 Condemnation. If all or any part of the Trust Property shall be
------------
damaged, diminished in value or taken through condemnation proceedings, or if a
consent settlement is entered, or a transfer is made under threat of such
proceedings, either temporarily or permanently, then any and all compensation,
awards and other payments or relief therefor to which Grantor is entitled shall
be applied in accordance with the provisions of the Credit Agreement and the
other Loan Documents.
2.06 Care of the Trust Property.
--------------------------
(a) Preservation and Maintenance. Grantor will preserve and maintain
----------------------------
the Trust Property in good condition and repair, will not commit or suffer any
waste thereof, and will keep the same in a clean, orderly and attractive
condition, making or causing to be made from time to time all needful or proper
replacements, repairs and renewals. Grantor will not abandon or leave the Trust
Property unprotected, unguarded, vacant or deserted. Grantor will not do or
suffer to be done anything that will materially increase the risk of fire or
other hazard to the Trust Property or any part thereof or take or omit to take
any action that will cause an increase in Beneficiary's fire insurance premiums.
XI-5
(b) Notice of Damage. If the Trust Property or any part thereof is
----------------
materially damaged by fire or any other cause, Grantor will give prompt written
notice thereof to Beneficiary.
(c) Right to Inspect. Beneficiary or its representative is hereby
----------------
authorized, with reasonable advance notice to Grantor, to enter upon and inspect
the Trust Property at any time during normal business hours.
(d) Repair and Replacement. If all or any part of the Trust Property
----------------------
shall be damaged by fire or other casualty or condemnation, Grantor will
promptly restore the Trust Property to the equivalent of its condition
immediately before the occurrence of such casualty or condemnation.
ARTICLE III - ASSIGNMENT OF RENTS AND LEASES
3.01 Assignment of Rents and Leases. As additional consideration for
------------------------------
the Obligations, Grantor hereby absolutely assigns and transfers to Beneficiary
the following:
(a) all leases or subleases (if any) written or oral, now in
existence or hereafter arising and all agreements far the use and occupancy of
all or any portion of the Trust Property (the "Leases");
------
(b) any and all guaranties of the obligations of the tenants (the
"Tenants") under any of such Leases; and
-------
(c) the immediate and continuing right to collect and receive all of
the rents, income, receipts, revenues, issues and profits no due or that may
become due or to which Grantor may now or shall hereafter (whether during any
applicable period of redemption or otherwise) become entitled or may demand or
claim, arising or issuing from or out of the Leases, or from or out of the Trust
Property or any part thereof (collectively, the "Rents").
-----
3.02 Grantor's Limited License. Provided that no Event of Default
-------------------------
exists, Grantor shall have the right under a license granted hereby and
Beneficiary hereby grants to Grantor a license to collect, but not more than one
month in advance, all of the Rents arising from or out of the Leases or any
renewals or extensions thereof, or from or out of the Trust Property or any part
thereof, but only as trustee for the benefit of Beneficiary. Grantor shall apply
the Rents so collected first to payment of any and all amounts due and payable
under the Loan Documents. Thereafter, so long as no Event of Default exists and
no event has occurred that with notice, or lapse or time or both would
constitute an Event of Default, Grantor may use the Rents in any manner not
inconsistent with the Loan Documents. The license granted hereby shall be
revoked automatically upon the occurrence of an Event of Default.
3.03 Limitation. The acceptance by Beneficiary of the assignment
----------
provided in this Article III, together with all of the rights, powers,
privileges and authority created in this
XI-6
Article III or elsewhere in this Deed of Trust. shall not, prior to entry upon
-----------
and taking possession of the Trust Property by Beneficiary be deemed or
construed to constitute Beneficiary a "mortgagee in possession" nor thereafter
or at any time or in any event obligate Beneficiary to appear in or defend any
action or proceeding relating to the Leases, the Rents or the Trust Property or
to take any action hereunder or to expend any money or incur any expenses or
perform or discharge any obligation or responsibility for any security deposits
or other deposits delivered to Grantor by any Tenant and not assigned and
delivered to Beneficial, nor shall Beneficiary be liable in any way for any
injury or damage to person or property sustained by any person or persons, firm
or corporation in or about the Trust Property.
ARTICLE IV - DEFAULT AND REMEDIES
4.01 Events of Default. Each of the following shall constitute an
-----------------
Event of Default ("Event of Default"):
----------------
(a) Loan Documents. The occurrence of any Event of Default under, and
--------------
as defined in, any of the Loan Documents, including without limitation, the
Credit Agreement, which are incorporated herein by this reference.
(b) Other Defaults. The failure of Grantor to perform in any material
--------------
respect any covenant or agreement hereunder if such failure (i) would not, with
the giving of notice or the lapse of time or both, constitute an Event of
Default under Section 4.01(a) hereof and (ii) is not cured within 30 days after
---------------
such failure occurs.
4.02 Performance of Defaulted Acts. From and after the occurrence of
-----------------------------
an Event of Default, Beneficiary may, but need not, make any payment or perform
any act herein required of Grantor in any form and manner deemed expedient,
including, without limitation, making full or partial payments of principal or
interest on prior encumbrances, if any, and purchasing, discharging,
compromising or settling any tax lien or other prior lien or title or claim
thereof, or redeeming from any tax sale or forfeiture affecting the Trust
Property or contesting any tax or assessment. All moneys paid for any of the
purposes herein authorized and all expenses paid or incurred in connection
therewith, including reasonable attorneys' fees, shall be included among the
Obligations and shall be due and payable upon demand and with interest hereon
from the date of such payment or expense at the Default Rate. Inaction of
Beneficiary shall never be considered as a waiver of any right accruing to it
hereunder on account of any default on the part of Grantor. Beneficiary, making
any payment hereby authorized relating to taxes or assessments, may do so
according to any ▇▇▇▇, statement or estimate procured from the appropriate
public office without inquiry into the accuracy of such ▇▇▇▇, statement or
estimate or into the validity of any tax, assessment, sale, forfeiture, tax lien
or title or claim thereof.
4.03 Foreclosure. When the Obligations shall become due whether by
-----------
acceleration or otherwise, Trustee shall have the right to foreclosure, in
either case in accordance with applicable law. If this Deed of Trust is
foreclosed by judicial procedure, Beneficiary will be entitled to a judgment
which will provide that if the foreclosure sale proceeds are insufficient to
XI-7
satisfy the judgment, execution may issue for any amount by which the unpaid
balance of the obligations secured by this Deed of Trust exceeds the net sale
proceeds payable to Beneficiary, In the event of any foreclosure sale or
trustee's sale, to the extent permitted by applicable law, there shall be
allowed and included as part of the foreclosed indebtedness all expenditures and
expenses that may be paid or incurred by or on behalf of Beneficiary and/or
Trustee, as applicable, for court costs, fees of masters in chancery, reasonable
attorneys' fees (including charges for inside counsel), appraiser's fees,
outlays for documentary and expert evidence, stenographers' charges, publication
costs and costs (which may be estimated as to items to be expended after entry
of the decree of procuring all such abstracts of title, title searches and
examinations, title insurance policies, Torrens certificates, and similar data
and assurances with respect to title as Beneficiary or Trustee, as applicable,
may deem to be reasonably necessary either to prosecute such suit or to evidence
to the holder at any foreclosure or trustee's sale the true conditions of the
title to or the value of the Trust Property. All expenditures and expenses of
the nature Mentioned in this Section 4.03 shall become additional Obligations
------------
and shall be immediately due and payable, with interest thereon at the Default
Rate applicable under the Credit Agreement from and after an Event of Default
from and after the date when paid or incurred by Beneficiary or Trustee, as
applicable, in connection with (a) any proceeding, including probate and
bankruptcy proceeding.;, to which Beneficiary or Trustee, as applicable, shall
be a party, either as plaintiff, claimant i r defendant, by reason of this Deed
of Trust or any of the Obligations; or (b) preparations for the commencement of
any suit for the foreclosure hereof after accrual of such right to foreclose
whether or not actually commenced; or (c) preparations for the defense of any
threatened suit or proceedings that might affect the Trust Property, whether or
not actually commenced.
4.04 Trustee's Sale.
--------------
(a) Should Beneficiary elect to sell the Trust Property which is real
property pursuant to the power of sale granted hereby, upon such election,
Beneficiary or Trustee shall give such notice of an Event of Default and
election to sell as may then be required by low. Thereafter, upon the expiration
of such time end the giving and filing of such notice of sale as may then be
required by law, Trustee, at the time and place specified by the notice of sale,
shall sell such Trust Property or any portion thereof specified by Beneficiary,
at public auction to the highest bidder for cash in lawful money of the United
States, subject, however, to the provisions of Section 4.05 hereof. Trustee may,
------------
and upon request of Beneficiary shall, from time to time postpone the sale by
public announcement thereof at the time and place notified therefor. If the
Trust Property consists of several lots or parcels, Beneficiary may elect to
sell the Trust Property either as a whole or in separate lots or parcels, If
Beneficiary elects to sell in separate lots or parcels, Beneficiary may
designate the order in which such lets or parcels shall be offered for sale or
sold. Any person, including Grantor, Trustee or Beneficiary, may purchase at the
sale. To the extent permitted by law, upon any sale, Beneficiary shall execute
end deliver to the purchaser or purchasers a deed or deeds conveying the
property so sold, but without any covenant or warranty whatsoever, express or
implied, whereupon such purchaser or purchasers shall be let into immediate
possession.
XI-8
(b) In the event of a sale or other disposition of the Trust
Property, or any part thereof, and the execution of a deed or other conveyance
pursuant thereto, the recitals therein of any facts, such as an Event of
Default, the giving of notice of such Event of Default and notice of sale,
demand that such sale should be made, postponement of sale, terms of sale, sale,
purchase, payments of purchase money, and any other fact affecting the
regularity or validity of such sale or disposition shall be conclusive proof of
the truth of such facts; and any such deed or conveyance shall be conclusive
against all persons as to such facts recited therein.
4.05 Foreclosure Purchase. upon any sale of the Trust Property,
--------------------
whether made under a power of sale herein granted or pursuant to judicial
proceedings, if the obligee under the Obligations is a purchaser at such sale,
it shall be entitled to use and apply all or any portion of the amounts then
secured hereby for or in settlement or payment of a!1 or any portion of the
purchase price of the property purchased, and in such case, this Deed of Trust
and documents evidencing expenditures secured hereby shall be presented to the
person conducting the sale in order that the amount of said indebtedness so used
or applied may be credited thereon as having been paid.
4.06 Application of Proceeds of Foreclosure or Trustee's Sale. The
--------------------------------------------------------
proceeds of any foreclosure sale of the Trust Property shall be distributed and
applied in the following order or priority: first, on account of all costs and
expenses incident to the foreclosure proceedings, including all such items as
are mentioned in Sections 4.03 and 4.04 hereof; second, all other items that
------------- ----
under the terms hereof constitute Obligations in accordance with the Credit
Agreement or the other Loan Documents; and third, any excess to Grantor, its
successors and assigns, as their rights may appear.
4.07 Possession. Upon the occurrence of an Event of Default,
----------
Beneficiary shall, at its option, have the right, acting through its agents or
attorneys, to enter upon and take possession of the Trust Property, expel and
remove any persons, goods, or chattels, occupying or upon the same, and to
collect or receive all the rents, issues and profits thereof, and to manage and
control the same, and to lease the same c.' any part thereof from time to time,
and, after deducting all reasonable attorney's fees, and all reasonable expenses
incurred in the protection, care, maintenance, management and operatic i of the
Trust Property, apply the remaining net income upon the Obligations or upon any
deficiency decree entered in any foreclosure proceedings.
4.08 Appointment of Receiver. Upon the occurrence of an Event of
-----------------------
Default, Beneficiary shall have the right to be placed in possession of the
Trust Property or at its request to have a receiver appointed, and such
receiver, or Beneficiary, if and when placed in possession, shall have, in
addition to any other powers provided in this Deed of Trust, all rights, powers,
immunities, and duties as provided by applicable law.
4.09 Rights Cumulative. No remedy or right of Beneficiary or Trustee
-----------------
shall be exclusive of, but each such remedy or right shall be in addition to,
every other remedy or right new or hereafter existing at law or in equity. No
delay in the exercise or omission to exercise of
XI-9
any remedy or right accruing on any default shall impair any such remedy or
right or be construed to be a waiver of any such default or an acquiescence
therein, nor shall it affect any subsequent default of the same or a different
nature. Every such remedy or right may be exercised concurrently or
independently, and when and as often as may be deemed expedient by Beneficiary
or Trustee, as applicable. Grantor agrees that without affecting the liability
of any person for payment of the Obligations or affecting the lien of this Deed
of Trust upon the Trust Property or any part thereof Beneficiary may at any time
and from time to time, on request of Grantor, without notice to any person
liable for payment of any Obligations, extend the time or agree to alter the
terms of payment of such indebtedness. Acceptance by Beneficiary of any payment
in an amount less than the amount then due on the Obligations shall be deemed an
acceptance en account only, and the failure to pay the entire amount then due
shall continue to be an Event of Default. At any time thereafter and until the
entire amount then due on the debt has been paid, Beneficiary shall be entitled
to exercise all rights conferred upon it in this Deed of True upon the
occurrence of an Event of Default.
4.10 Protective Advances. All advances, disbursements and expenditures
-------------------
made or incurred by Beneficiary or Trustee before and during a foreclosure, and
before and after judgment of foreclosure, and at any time prior to judicial or
nonjudicial sale, and, where applicable, after sale, and during the pendency of
any related proceedings, for the following purposes, in addition to those
otherwise authorized by this Deed of Trust or by applicable law (collectively
"Protective Advances"), shall have the benefit of all provisions of applicable
-------------------
law and, to the extent permitted thereby, those provisions referred to below:
(a) all advances by Trustee or Beneficiary in accordance with the
terms of this Deed of Trust to: (i) preserve, maintain, repair, restore or
rebuild the improvements upon the Trust Property; (ii) preserve the lien of this
Deed of Trust or the priority hereof; or (iii) enforce this Deed of Trust;
(b) payments by Trustee or Beneficiary of: (i) principal, interest or
other obligations in accordance with the terms of any senior mortgage or other
prior lien or encumbrance on the Trust Property; (ii) real estate taxes and
assessments, general and special and other taxes and assessments of any kind or
nature whatsoever that are assessed or imposed upon the Trust Property or any
part thereof; (iii) other obligations authorized by this Deed of Trust; or (iv)
with court approval, any other amounts in connection with other liens,
encumbrances or interests reasonably necessary to preserve the status of title
to the Trust Property;
(c) advances by Beneficiary in settlement or compromise of any claims
asserted by claimants under senior mortgages or any other prior liens;
(d) reasonable attorneys' fees and ether costs incurred: (i) in
connection with the judicial or nonjudicial foreclosure of this Deed of Trust;
(ii) in connection with any action, suit or proceeding brought by or against
Beneficiary for the enforcement of this Deed of Trust or arising from the
interest of Beneficiary hereunder; o- (iii) in preparation for or in connection
with
XI-10
the commencement, prosecution or defense of any other action related to this
Deed of Trust or the Trust Property;
(e) Trustee's and Beneficiary's fees and costs, including reasonable
attorneys' fees, arising between the entry of judgment of foreclosure and the
confirmation hearing;
(f) expenses deductible from proceeds of sale;
(g) expenses incurred and expenditures made by Beneficiary for any
one or more of the following: (i) premiums for casualty and liability insurance
paid by Beneficiary whether or not Beneficiary or a receiver is in possession,
if reasonably required, in reasonable amounts, and all renewals thereof; (ii)
repair or restoration of damage or destruction in excess of available insurance
proceeds or condemnation awards; (iii) payments deemed by Beneficiary to be
required for the benefit of the Trust Property or required to be made by the
owner of the Trust Property under any grant or declaration of easement, easement
agreement, agreement with any adjoining land owners or instruments creating
covenants or restrictions for the benefit of or affecting the Trust Property;
and (iv) shared or common expense assessments payable to any association or
corporation in which the owner of the Trust Property is a member in any way
affecting the Trust Property.
All Protective Advances shall be additional Obligations secured by
this Deed of Trust, and shall become immediately due and payable upon demand and
with interest thereon from the date of the advance until paid at the Default
Rate. This Deed of Trust shall be a lien for all Protective Advances as to
subsequent purchasers and judgment creditors from the time this Deed of Trust is
recorded.
All Protective Advances shall, except to the extent, if any, that any
of the same is clearly contrary to or inconsistent with the applicable
provisions of law, apply to and be included in:
(a) any determination of the amount of indebtedness secured by this
Deed of Trust at any time;
(b) the indebtedness found due and owing to Beneficiary in the
judgment of foreclosure and any subsequent supplemental judgments, orders,
adjudications or finding by the court of any additional indebtedness becoming
due after such entry of judgment, it being agreed that in any foreclosure
judgment, the court may reserve jurisdiction for such purpose;
(c) if right of redemption has not been waived by this Deed of Trust,
computation of amounts required to redeem;
(d) determination of amounts deductible from sale proceeds;
XI-11
(e) application of income in the hands of any receiver or mortgagee
in possession; and
(f) computation of any deficiency judgment pursuant to applicable
law.
4.11 Environmental Matters.
---------------------
(a) Compliance. Grantor shall comply in all material respects with
all local, state, and federal environmental laws, ordinances, rules,
regulations, and requirements (collectively, "Environmental Laws"). If Grantor
------------------
fails to so comply, after notice to Grantor and a reasonable opportunity to
comply, and if such failure by Grantor would constitute an Event of Default,
Beneficiary may (without limiting any other rights and remedies of Beneficiary)
protect its secured interest by causing the Trust Property to so comply at
Grantor's expense. Any amounts expended by Beneficiary to cause the Trust
Property to comply with Environmental Laws shall be paid by Grantor to
Beneficiary on demand, with interest on all such amounts expended from the date
of the expenditure until paid at the Default Rate.
(b) Hazardous Substances.
--------------------
(i) "Hazardous Substances" shall mean: (A) those substances included
--------------------
within the definitions of hazardous substances, hazardous materials, toxic
substances, or solid waste in CERCLA, RCRA, the Hazardous Materials
Transportation Act (49 U.S.C. Sections 1801 et seg.), or any other federal,
-- ---
state, or local laws, and in the regulations promulgated pursuant to said laws;
(B) those substances listed in the United States Department of Transportation
Table (49 C.F.R. 172.101 and amendments) or by the Environmental Protection
Agency (or any successor agency) as hazardous substances (40 C.F.R. Part 302 and
amendments); (C) such other substances, materials, and wastes that are or that
become regulated under Environmental Laws; and (D) any material, waste, or
substance that is (1) petroleum, (2) friable asbestos, (3) polychlorinated
biphenyls, (4) designated as a hazardous substance pursuant to Section 311 of
the Clean Water Act (33 U.S.C. Sections 1251 et seq.) or listed pursuant to
-- ---
Section 307 of the Clean Water Act (33 U.S.C. 1317); (5) flammable explosives;
or (6) radioactive materials.
(ii) Grantor shall promptly remove and clean up, or otherwise deal
with, any Hazardous Substances if any Environmental Laws so require except to
the extent that the failure to remove, clean up or otherwise deal with such
Hazardous Substances would not reasonably be expected to have a material adverse
effect upon the Trust Property. If Grantor fails to so comply after notice and a
reasonable opportunity to comply, Beneficiary may either declare this Deed of
Trust to be in default or protect its security interest by causing such
Hazardous Substances to be remediated to levels that are minimally acceptable to
all applicable regulators or agencies having jurisdiction over the Trust
Property at Grantor's expense.
(iii) Grantor shall keep the Trust Property free of (A) any Hazardous
Substances, if any Environmental Laws so require except to the extent that the
existence of such
XI-12
Hazardous Substances, would not reasonably be expected to have a material
adverse effect upon the Trust Property, and (B) any lien imposed pursuant to
any Environmental Laws.
(iv) Grantor shall notify Beneficiary immediately of Grantor's
discovery of (A) the presence or release of any Hazardous Substance
("Contamination") on the Trust Property or any property so situated as to pose a
-------------
material risk that such Hazardous Substance may spread onto the Trust Property
("Adjacent Property") and/or (B) any past or present material violation of any
-----------------
Environmental Law on the Trust Property or any Adjacent Property.
(v) Grantor unconditionally assigns, transfers, and sets over to
Beneficiary all of Grantor's claims and rights to the payment of damages that
may arise from (A) any Contamination on the Trust Property caused by the spread
of such Contamination from any Adjacent Property and/or (B) the violation of any
Environmental Law on any Adjacent Property (the "Assigned Environmental
----------------------
Rights"). Until the occurrence of an Event of Default, Grantor shall (without
------
limiting any other rights and remedies of Beneficiary) have the right to receive
such payments. If an Event of Default has occurred and is continuing,
Beneficiary shall have the right to elect either of the following options (which
election Beneficiary may change from time to time):
1. Beneficiary may proceed against the owner of such
Adjacent Property (or the receiver, trustee, custodian, or other
party) in Grantor's name or in Beneficiary's name as agent for
Grantor. Grantor agrees to cooperate with Beneficiary in such
action and shall execute any and all documents required in
furtherance of such action; or
2. At Beneficiary's option, Grantor may proceed in
Grantor's and Beneficiary's behalf in which event Beneficiary may
participate in any such proceedings and Grantor from time to time
shall deliver to Beneficiary all instruments that Beneficiary
requests or may require to permit such participation (provided
that if the original of any such instrument need not be delivered
to Beneficiary in order to permit such participation, Grantor may
deliver to Beneficiary a copy of the same).
However, Beneficiary shall not initiate such a proceeding, nor
involve itself in such an already existing proceeding, unless Grantor shall have
failed to proceed on Grantor's and Beneficiary's behalf promptly upon receiving
notice from Beneficiary to do so, Grantor shall, at its expense, diligently
prosecute any such proceedings, deliver to Beneficiary copies of all papers
served in connection with any such proceedings, and consult and cooperate with
Beneficiary and its respective attorneys and agents in carrying on the prosecute
on of any such proceedings, Grantor shall not settle any such proceeding without
Beneficiary's consent, which consent shall not be unreasonably withheld, This
assignment constitutes a present, irrevocable, and unconditional assignment of
the foregoing claims, rights, and remedies, and shall continue in effect until
the Obligations have been satisfied in full. Any amounts that Beneficiary
receives as damages arising out of any Contamination of the Trust Property or
the violation of any
XI-13
Environmental) Law on any Adjacent. Property shall be applied first to
Beneficial's costs and expenses incurred in connection with the exercise of the
Assigned Environmental Rights.
(c) Asbestos. Grantor shall not install nor permit to be installed on
--------
or in the Trust Property friable asbestos or any substance containing asbestos
and deemed hazardous by federal or state regulations respecting such material,
and with respect to any such material currently present on or in the Trust
Property shall promptly either (A) remove any material that such regulations
deem hazardous and require to be removed or (B) otherwise comply with such
federal and state regulations, at Grantor's expense. If Grantor shall fail to so
remove or otherwise comply, Beneficiary may, after notice to Grantor and a
reasonable opportunity to comply, do whatever is necessary to eliminate such
substances from the Trust Property to the extent required by applicable law or
otherwise comply with the applicable law, regulation, or order and the costs
thereof, together with interest thereon from the date of such payment at the
Default Rate, shall be added to the Obligations secured by this Deed of Trust.
Grantor shall give Beneficiary and its agent;, and employees access to the Trust
Property to remove, remediate, encapsulate or otherwise treat such asbestos or
substances. Grantor shall defend, indemnify and save Beneficiary harmless from
all costs and expenses (including consequential damages) asserted or proven
against Beneficiary by any party, as a result of the presence of such
substances, and any required removal or compliance with regulations. The
foregoing indemnification shall survive repayment of the Obligations.
(d) Environmental Inspections. Beneficiary may, at any time after the
-------------------------
occurrence of an Event of Default, enter the Trust Property to ascertain its
environmental condition and in so doing may sample building materials, take soil
samples, test borings and otherwise inspect the Trust Property. The costs and
expenses paid or incurred by Beneficiary in connection with such inspections and
activities shall be reimbursed by Grantor and shall constitute additional
Obligations secured by this Deed of Trust.
4.12 Multiple Collateral.
-------------------
(a) No recovery of any judgment by Beneficiary and no levy of an
execution under any judgment upon the Trust Property or upon any property of
Grantor encumbered by any other Loan Document shall affect in any manner or to
any extent the lien of this Deed of Trust upon the Trust Property or any part
thereof, or any liens, rights, powers and remedies of Beneficiary shall continue
unimpaired.
(b) Grantor agrees that it shall not at any time insist upon, plead,
seek or in any manner whatever claim or take any benefit or advantage of a
judgment, declaration or a determination that:
(i) the Trust Property or any other property of Grantor
encumbered by a Loan Document represents, on an individual basis, an
allocable portion of the then outstanding aggregate principal amount of the
Obligations;
XI-14
(ii) a surplus results from an action taken by Beneficiary
against the Trust Property or any other property of Grantor encumbered by a
Loan Document to recover the Obligations or any portion there of, unless
the Obligations have been satisfied and paid in full;
(iii) The lien of this Deed of Trust or of any other Loan
Document has been released, unless the Obligation have been satisfied and
paid in full;
(iv) a deficiency judgment with respect to any action taken by
Trustee or Beneficiary against the Trust Property or any other property of
Grantor encumbered by a Loan Document extinguishes all or any portion of
the remaining Obligations, or precludes Trustee or Beneficiary from
proceeding against the Trust Property or to satisfy such remaining
Obligations; or
(v) Beneficiary's commencement, prosecution, or taking to
judgment of any action (including, without limitation, Beneficiary's
acceptance of a deed in lieu of foreclosure) or Beneficiary's application
for or use of any remedy (including, without ! imitation, the appointment
of a receiver for the Trust Property or any other property of Grantor
encumbered by a Loan Document) against the Trust Property or any other
property of Grantor encumbered by a Loan Document precludes or bars
Beneficiary (under a "single action" rule, "security first" rule or similar
------------- --------------
rule) from commencing, prosecuting or taking to judgment any other action
or applying for or using any remedy against the Trust Property or any other
property of Grantor encumbered by a Loan Document.
(c) Beneficiary may, at its option, in such order, and utilizing such
combinations of remedies with respect to the Trust Property and the other
property of Grantor encumbered by a Loan Document as Beneficiary shall so elect,
pursue its remedies against (i) the Trust Property, individually, or any other
property of Gator encumbered by a Loan Document, individually, (ii) the Trust
Property and any combination of the other property of Grantor encumbered by a
Loan Document, (iii) the trust Property and all of the other property of Grantor
encumbered by a Loan Document or (iv) alt or any combination of the other
property of Grantor encumbered by a Loan Document, in separate proceedings or in
one proceeding in any order which Beneficiary deems appropriate.
ARTICLE V - GENERAL PROVISIONS
5.01 Release. Beneficiary shall cause the release of the lien hereof
-------
in accordance with the terms of the Loan Documents. Beneficiary shall have no
obligation to record any release or other instrument. All reconveyance fees and
costs shall be paid by Grantor.
5.02 Grantor. This Deed of Trust and all provisions here of, shall
-------
extend to and be binding upon Grantor and all persons claiming under or through
Grantor and shall inure to the benefit of the Beneficiary's successors and
assign: and any successor and assigns of any party
XI-15
holding any interest in any of the Obligations, as applicable. Whenever in this
Deed of, Trust there is reference made to any of the parties hereto, such
reference shall be deemed to include, wherever applicable, a reference to the
heirs, executors and administrators or successors and assigns (as the case may
be) of Grantor and Beneficiary. Grantor's successors and assigns shall include,
without limitation, a receiver, trustee or debtor-in-possession of or for
Grantor.
5.03 Waiver of Rights. To the extent permitted by applicable law,
----------------
Grantor waives and will not avail itself of any appraisement, valuation, stay,
moratorium, extension or exemption laws now existing or hereafter enacted and
waives any right to have the property comprising the Trust Property marshaled
upon any foreclosure and agrees that upon a foreclosure the Trust Property may
be sold as an entirety.
5.04 Additional Documents. Grantor agrees that upon request of
--------------------
Beneficiary it will from time to time execute, acknowledge and deliver all such
additional instruments and further assurances of title and will do or cause to
be done all such further acts and things as may be reasonably necessary fully to
effectuate the intent of this Deed of Trust.
5.05 Notices. All notices and other communications under this Deed of
-------
Trust shall be in writing, except as otherwise provided in this Deed of Trust. A
notice, if in writing, shall be considered as properly given if given in
accordance with the provisions of the Credit Agreement.
5.06 Governing Law. This Deed of Trust, the debts and obligations
-------------
secured hereunder, and all other obligations and agreements of the parties
hereunder, shall be governed by and construed in accordance with the laws of the
State of New York, subject only to those laws of the State of [_] that of
necessity must apply to methods of foreclosure directly affecting interests in
the Trust Property.
5.07 Time of Essence. Time is of the essence of this Deed of Trust and
---------------
of every part hereof of which time is an element.
5.08 Severability. If any one or more of the provisions contained
------------
herein shall for any reason be held to be invalid, illegal or uneaforceable in
any respect, such illegality or unenforceability shall, at the option of
Beneficiary, not affect any other provision hereof, but this Deed of Trust shall
be construed as if such invalid, illegal or unenforceable provision had never
been contained herein.
5.09 Attorney's Fees. In the event suit or action is instituted in
---------------
connection with or to enforce any of the terms of this Deed of Trust or the
Credit Agreement, the prevailing party shall be entitled to recover its
reasonable attorneys' fees (including charges for inside counsel) in bankruptcy
proceedings, at trial, on any appeal, and on any petition for review, in
addition to all other sums provided herein or by law.
XI-16
5.10 Future Advances. Beneficiary and the other Lender Parties may
---------------
make advances pursuant to and subject to the terms of the Credit Agreement, and
the parties hereby acknowledge and intend that all such advances, including
future advances whenever hereafter made, shall be a lien from the time this Deed
of Trust is recorded.
5.1l Incorporation of Credit Agreement. The terms of the Credit
---------------------------------
Agreement are incorporated by reference herein as though set forth in full
detail, In the event of any conflict between the terms and provisions of this
Deed of Trust and the Credit Agreement, the terms and provisions of the Credit
Agreement shall control.
[Signature page follows.]
XI-17
IN WITNESS WHEREOF, Grantor has duly executed and delivered this Deed
of Trust as of the day and year first above written.
[PANOLAM INDUSTRIES, INC.]
[PIONEER PLASTICS CORPORATION], a
Delaware corporation
By:____________________
Name:__________________
Title:_________________
XI-18
STATE OF __________)
) SS.
COCKY OF___________)
BEFORE ME, a Notary Public, in and for said county and state, personally
appeared above-named [PANOLAM INDUSTRIES, INC.] [PIONEER PLASTICS CORPORATION],
a Delaware corporation, by _______________, its ______________ who acknowledge
that he/she did sign the foregoing instrument and that the same is his/her free
act and deed and the free act and deed of said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal at
___________ this ____ day of ____________, 1999.
Notary Public
XI-19
EXHIBIT A
[Legal Description]
[to be provided by Grantor]
XI-20
EXHIBIT XII
FORM OF OPINION OF BORROWER'S COUNSEL
XII
PROVIDED WITH CLOSING SETS
EXHIBIT XIII-A
FORM OF
INTERCOMPANY SUBORDINATED DEMAND PROMISSORY NOTE
Note Number:____ Dated: February 18, 1999
FOR VALUE RECEIVED, each Loan Party which is a party to this subordinated
promissory note (the "Promissory Note") promises to pay to the order of such
---------------
other Loan Party as makes loans to such Loan Party (each Loan Party which
borrows money pursuant to this Promissory Note is referred to herein as a
"Payor" and each Loan Party which makes loans pursuant to this Promissory Note
-----
is referred to herein as a "Payee"), on demand, in lawful money of the United
-----
States of America, in immediately available funds and at the appropriate office
of the Payee, the aggregate unpaid principal amount of all loans and advances
heretofore and hereafter made by such. Payee to such Payor and any other Debt
now or hereafter owing by such Payor to such Payee as shown either on Schedule A
attached hereto (and any continuation thereof) or in the books and records of
such Payee, Capitalized terms used herein but not otherwise defined herein shall
have the meanings ascribed such terms in the Credit Agreement, dated as of
February 18, 1999 (as amended, restated, supplemented or otherwise modified from
time to time, the "Credit Agreement"), among Panolam Industries International,
----------------
Inc., as Borrower (the "US Borrower"), each financial institution from time to
-----------
time party thereto (together with its successors and permitted assigns pursuant
to Section 9.07 of the Credit Agreement, a "Lender Party"), DLJ Capital Funding,
------------
Inc., as initial Lender and as syndication agent, Credit Suisse First Boston, as
en initial Lender and as administrative agent (in such capacity, together with
any successor administrative agent appointed pursuant to Section 8.06 of the
Credit Agreement, the "Administrative Agent"), and Royal Bank of Canada, as an
--------------------
initial lender and as documentation agent, Notwithstanding any contrary
provision of this Promissory Note, this Promissory Note shall not evidence any
Designated Intercompany Indebtedness (as hereinafter defined) or any Specified
Intercompany Debt (as hereinafter defined). For purposes hereof, (i) the term
"Designated Intercompany Indebtedness" means (A) indebtedness in respect of any
------------------------------------
loan made directly or indirectly by Panolam Industries Ltd, (the "Canadian
--------
Borrower") or any of its Subsidiaries to the US Borrower or any of its Domestic
--------
Subsidiaries, and (B) indebtedness in respect of any loan made directly or
indirectly by the US Borrower or any of its Domestic Subsidiaries to any of
their respective Domestic Subsidiaries or the US Borrower with the proceeds of a
loan made by the Canadian Borrower or any of its Subsidiaries to the US Borrower
or any of its Domestic Subsidiaries, and (ii) the term "Specified Intercompany
----------------------
Debt" means the debt evidenced by that certain promissory note of even date
----
herewith executed by the Canadian Borrower in favor of the US Borrower in the
principal amount of $10,594,374.90.
The unpaid principal amount hereof from time to time outstanding shall bear
interest at a rate equal to the rate as may be agreed upon from time to time by
the relevant Payor and Payee or, at the Administrative Agent's option after the
occurrence and during the continuance of an Event of Default, at the Default
Rate, Interest shall be due and payable on the
XIII-A-1
last day of each month commencing after the date hereof or at such other times
as may be agreed upon from time to time by the relevant Payor and Payee. Upon
demand for payment of any principal amount hereof, accrued but unpaid interest
on such principal amount shall also be due and payable. Interest shall be paid
in lawful money of the United States of America and in immediately available
funds. Interest shall be computed for the actual number of days elapsed on the
basis of a year consisting of 365 or 366 days, as the case may be,
Interest payable hereunder may be subject to applicable withholding taxes or
other deductions required by law, and the Payee shall not be entitled to
indemnification in respect of any such withholding or deduction.
The Payor may repay all or any part of the principal amount hereof prior to
maturity without notice or penalty.
Each Payor and any endorser of this Promissory Note hereby waives presentment,
demand, protest and notice of any kind. No failure to exercise, and no delay in
exercising, any rights hereunder on the part of the holder hereof shall operate
as a waiver of such rights.
This Promissory Note has been pledged by each Payee (i) to the
Administrative Agent, for the benefit of the Administrative Agent and the Lender
Parties, as security for such Payee's Obligations, if any, under the Credit
Agreement, the Guaranty and the other Loan Documents to which such Payee is a
party, and (ii) to the Canadian Administrative Agent, for the benefit of the
Canadian Administrative Agent and the Lender Parties under and as defined in the
Canadian Credit Agreement (the "Canadian Lenders"), as security for such Payee's
----------------
Obligations, if any, under the Canadian Credit Agreement, the Canadian Credit
Agreement Guarantee and the other Canadian Loan Documents to which such Payee is
a party, in each case pursuant to the terms of the Security Agreement, Each
Payor acknowledges and agrees that the Acting Administrative Agent under the
Security Agreement may exercise all the rights of the Payees under this
Promissory Note and will no; be subject to any abatement, reduction, recoupment,
defense, setoff or counterclaim available to such Payor.
Each Payee agrees that any and all claims of such Payee against the US
Borrower, or against any of its properties, shall be subordinate and subject in
right of payment to the prior performance and payment, in full and in
immediately available funds, of all Obligations of the US Borrower under the
Loan Documents (the "US Obligations"), all Obligations of the US Borrower under
--------------
the Canadian Loan Documents (the "Canadian Obligations") and all Obligations of
--------------------
the US Borrower under the Subordinated Notes (the "Subordinated Note
-----------------
Obligations" and, together with the US Obligations and the Canadian Obligations,
-----------
the "Senior Obligations") and termination of the Commitments under and as
------------------
defined in the US Credit Agreement and the Canadian Credit Agreement; provided,
--------
that the US Borrower (and each other Payor) may make payments to the applicable
Payees at any times or times when no Default has occurred and is continuing.
If all or any part of the assets of any Payor, or the proceeds thereof, are
subject to any distribution, division or application to the creditors of any
Payor, whether partial or complete, voluntary or involuntary, and whether by
reason of liquidation, bankruptcy,
XIII-A-2
arrangement, receivership, assignment for the benefit of creditors or any other
action or proceeding, or if the business of any Payor is dissolved or if (except
as expressly permitted by the Credit Agreement) substantially all of the assets
of any Payor are sold, then, and in any such event, any payment or distribution
of any kind or character, either in cash, securities or other investment
property or any other property whatsoever, which shall be payable or deliverable
upon or with respect to any Debt of such Payor to any Payee ("Payor
-----
Indebtedness") shall be paid or delivered directly to the Acting Administrative
------------
Agent under the Security Agreement for application to the US Obligations and the
Canadian Obligations in accordance with the terms of the Intercreditor
Agreement, until the later of the date on which such Obligations shall have
first been fully performed and paid in immediately available funds and the
Commitments under and as defined in the US Credit Agreement and the Canadian
Credit Agreement shall have been terminated. Each Payee irrevocably authorizes
and empowers the Acting Administrative Agent under the Security Agreement to
demand, ▇▇▇ for, collect and receive every such payment or distribution and give
acquittance therefor and to make and present for and on behalf of such Payee
such proofs of claim and take such other action, in the Acting Administrative
Agent's own name or in the name of such Payee or otherwise, as the Acting
Administrative Agent may deem necessary or advisable for the enforcement of this
Promissory Note. The Acting Administrative Agent under the Security Agreement
may vote such proofs of claim in any such proceeding, receive and collect any
and all dividends or other payments or disbursements made on Payor Indebtedness
in whatever form the same may be paid or issued and apply the same on account of
the US Obligations and the Canadian Obligations in accordance with the terms of
the Intercreditor Agreement. Each Payee agrees that until the US Obligations and
the Canadian Obligations in accordance with the terms of the Intercreditor
Agreement have been performed and paid in full in immediately available funds
and the Commitments under and as defined in the US Credit Agreement and the
Canadian Credit Agreement have been terminated, such Payee will not (i) assign
or transfer to any Person (other than as provided in the Security Agreement and
in the Intercreditor Agreement) any claim such Payee has or may have against any
Payor, (ii) discount or extend the time for payment of any Payor Indebtedness,
or (iii) otherwise amend, modify, supplement or waive any prevision of this
Promissory Note.
THE VALIDITY, INTERPRETATION AND ENFORCEMENT OF THIS PROMISSORY NOTE AND
ANY DISPUTE ARISING OUT OF OR IN CONNECTION WITH THIS PROMISSORY NOTE, WHETHER
SOUNDING IN CONTRACT, TORT, EQUITY OR OTHERWISE, SHALL BE GOVERNED BY THE
INTERNAL LAWS (AS OPPOSED TO THE CONFLICTS OF LAWS PROVISIONS OTHER THAN THOSE
CONTAINED IN NEW YORK GENERAL OBLIGATIONS LAW SECTION 5-1401) AND DECISIONS OF
THE STATE OF NEW YORK.
From time to time after the date hereof, additional Subsidiaries of the
Loan Parties may become parties hereto by executing a counterpart signature page
to this Promissory Note (such additional Subsidiaries, each, an "Additional
----------
Payor"). Upon delivery of such counterpart signature page to the Payees, notice
-----
of which is hereby waived by the other Payors, each Additional Payor shall be a
Payor and shall be as fully a party hereto as if such Additional Payor were an
original signatory hereof. Each Payor expressly agrees that its obligations
arising hereunder shall not be affected or diminished by the addition or release
of any other Payor hereunder, This Promissory Note shall be fully effective as
to any Payor that is or becomes a
XIII-A-3
IN WITNESS WHEREOF, each Payor has caused this Subordinated Demand
Promissory Note to be executed and delivered by its proper and duly authorized
officer as of the date set forth above.
PANOLAM INDUSTRIES INTERNATIONAL, INC.
By:__________________________________
Name:
Title:
PANOLAM INDUSTRIES LTD.
By:__________________________________
Name:
Title:
PANOLAM INDUSTRIES HOLDINGS, INC.
By:__________________________________
Name:
Title:
PANOLAM GROUP, INC.
By:__________________________________
Name:
Title:
PII SECOND, INC.
By:__________________________________
Name:
Title:
XIII-A-4
PANOLAM INDUSTRIES, INC.
By:__________________________________
Name:
Title:
PIONEER PLASTIC CORPORATION
By:__________________________________
Name:
Title:
XIII-A-5
SCHEDULE A
----------
TRANSACTIONS
ON
INTERCOMPANY SUBORDINATED DEMAND PROMISSORY NOTE
================================================================================
Outstanding
Amount of Principal
Amount of Principal Balance from
Advance Paid Payor to Payee Notation
Date Name of Payor Name of Payee This Date This Date This Date Made By
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XIII-A-6
ENDORSEMENT
FOR VALUE RECEIVED, each of the undersigned does hereby sell, assign and
transfer to ____________________________________ all of its right, title and
interest in and to the Intercompany Subordinated Demand Promissory Note dated
February 18, 1999 (the "Promissory Note", made by Panolam Industries Holdings,
---------------
Inc, ("Holdings"), and each other Subsidiary of Holdings or any other Person
--------
that becomes a party thereto, and payable to the undersigned. This endorsement
is intended to be attached to the Promissory Note and, when so attached, shall
constitute an endorsement thereof.
The initial undersigned shall be the Loan Parties party to the Credit
Agreement on the date hereof. From time to time after the date hereof,
additional Subsidiaries of the Loan Parties may become parties to the Promissory
Note (each, an "Additional Payee") and a signatory to this endorsement by
----------------
executing a counterpart signature page to the Promissory Note and to this
endorsement. Upon delivery of such counterpart signature pages to the Payors,
notice of which is hereby waived by the other Payees, each Additional Payee
shall be a Payee and shall be as fully a Payee under the Promissory Note and a
signatory to this endorsement as if such Additional Payee were an original Payee
under the Promissory Note and an original signatory hereof. Each Payee expressly
agrees that its obligations arising under the Promissory Note and hereunder
shall not be affected or diminished by the addition or release of any other
Payee under the Promissory Note or hereunder. This endorsement shall be fully
effective as to any Payee that is or becomes a signatory hereto regardless of
whether any other Person becomes or fails to become or ceases to be a Payee to
the Promissory Note or hereunder,
Dated: ________________
PANOLAM INDUSTRIES INTERNATIONAL,
INC
By:__________________________
Name:
Title:
XIII-A-7
PANOLAM INDUSTRIES LTD.
By:_____________________________
Name:
Title:
PANOLAM INDUSTRIES HOLDINGS, INC.
By:_____________________________
Name:
Title:
PANOLAM GROUP, INC.
By:_____________________________
Name:
Title:
PII SECOND, INC.
By:_____________________________
Name:
Title:
PANOLAM INDUSTRIES, INC.
By:_____________________________
Name:
Title:
PIONEER PLASTIC CORPORATION
By:_____________________________
Name:
Title:
XIII-A-8
EXHIBIT XIII-B
FORM OF
INTERCOMPANY PROMISSORY NOTE
$10,594,374.90 Dated: February 18, 1999
FOR VALUE RECEIVED, Panolam Industries Ltd. (the "Payor") promises
-----
to pay to the order of Panolam Industries International, Inc. (the "Payee") on
-----
demand, in lawful money of the United States of America, in immediately
available funds and at the appropriate office of the Payee, the principal amount
of Ten Million Five Hundred Ninety Four Thousand Three Hundred Seventy Four
Dollars and Ninety Cents ($l0,594,374.90). Capitalized terms used in this
intercompany promissory note (this "Promissory Note") but not otherwise defined
---------------
herein shall have the meanings ascribed to such terms in the Credit Agreement,
dated as of February 18, 1999 (as amended, restated, supplemented or otherwise
modified from time to time, the "Credit Agreement"), among Panolam Industries
----------------
International, Inc., as Borrower, each financial institution from time to time
party thereto, DLJ Capital Funding, Inc., for itself as an initial Lender and as
syndication agent, Credit Suisse First Boston, for itself as an initial Lender
and as administrative agent (in such capacity, together with any successor
administrative agent appointed pursuant to Section 8.06 of the Credit Agreement,
the "Administrative Agent"), and Royal Bank of Canada, for itself as an initial
--------------------
Lender and as documentation agent.
The unpaid principal amount hereof shall mature on the earliest of
(i) demand, (ii) February 18, 2009 or (iii) such earlier date as the Payee's
$135,000,000 11 1/2% Senior Subordinated Notes due 2009 shall mature pursuant to
the terms of the Subordinated Note Indenture relating thereto. The Payor may
repay all or any part of the principal amount hereof prior to maturity without
notice or penalty.
This Promissory Note shall bear interest at a rate of 11 1/2% per
annum on the unpaid principal amount from the date hereof through maturity.
Interest shall be due and payable semiannually in cash in arrears en each
February 15 and August 15, commencing August 15, l999. Upon demand for payment
of any principal amount hereof and at maturity, accrued but unpaid interest an
such principal amount shall also be due and payable, Interest shall be paid in
lawful money of the United States of America and in immediately available funds.
Interest shall be computed on the basis of a 360-day year consisting of twelve
30-day months.
Interest payable hereunder may be subject to applicable
withholding taxes or other deductions required by law, and the Payee shall not
be entitled to indemnification in respect of any such withholding or deduction.
The Payor hereby waives presentment, demand, protest and notice
of any kind. No failure to exercise, and no delay in exercising, any rights
hereunder on the part of the holder hereof shall operate as a waiver of such
rights.
XIII-B-I
This Promissory Note has been pledged by the Payee (i) to the
Administrative Agent, for the benefit of the Administrative Agent and the Lender
Parties, as security for the Payee's Obligations under the Credit Agreement and
the other Loan Documents to which it is a party, and (ii) to the Canadian
Administrative Agent, for the benefit of the Canadian Administrative Agent and
the Lender Parties under and as defined in the Canadian Credit Agreement (the
"Canadian Lenders"), as security for the Payee's obligations under the Canadian
----------------
Credit Agreement, the Canadian Credit Agreement Guarantee and the other Canadian
Loan Documents to which the Payee is a party, in each case pursuant to the terms
of the Security Agreement. The Payor acknowledges and agrees that, to the extent
permitted under the Security Agreement, the Acting Administrative Agent under
the Security Agreement may exercise all the rights of the Payee under this
Promissory Note and will not be subject to any abatement, reduction, recoupment,
defense, setoff or counterclaim available to the Payor.
If all or any part of the assets of the Payor, or the proceeds
thereof, are subject to any distribution, division or application to the
creditors of the Payor, whether partial or complete, voluntary or involuntary,
and whether by reason of liquidation, bankruptcy, arrangement, receivership,
assignment for the benefit of creditors or any other action or proceeding, or if
the business of the Payor is dissolved or if substantially all of the assets of
the Payor are sold, then, and in any such event, any payment or distribution of
any kind or character, either in cash, securities or other investment property
or any other property whatsoever, which shall be payable or deliverable upon or
with respect to any Debt of the Payor to the Payee hereunder (the "Payor
-----
Indebtedness") shall be paid or delivered directly to the Acting Administrative
------------
Agent under the Security Agreement for application to the US Obligations and the
Canadian Obligations (each as defined in the Security Agreement) in accordance
with the terms of the Intercreditor Agreement, until the later of the date on
which such Obligations shall have first been fully performed and paid in
immediately available funds and the Commitments under and as defined in the
Credit Agreement and the Canadian Credit Agreement shall have been terminated.
The Payee irrevocably authorizes and empowers the Acting Administrative Agent
under the Security Agreement, and subject to the terms thereof, to demand, ▇▇▇
for, collect and receive every such payment or distribution and give acquittance
therefor and to make and present for and on behalf of the Payee such proofs of
claim and take such other action, in the Acting Administrative Agent's own name
or in the name of the Payee or otherwise, as the Acting Administrative Agent may
deem necessary or advisable for the enforcement of this Promissory Note. The
Acting Administrative Agent under the Security Agreement may vote such proofs of
claim in any such proceeding, receive and collect any and all dividends or other
payments or disbursements made on Payor Indebtedness in whatever form the same
may be paid or issued and apply the same on account of the US Obligations and
the Canadian Obligations in accordance with the terms of the Intercreditor
Agreement. The Payee agrees that until the US Obligations and the Canadian
Obligations in accordance with the terms of the Intercreditor Agreement have
been performed and paid in full in immediately available funds and the
Commitments under and as defined in each of the US Credit Agreement and the
Canadian Credit Agreement have been terminated, the Payee will not (i) assign or
transfer to any Person (other than as provided in the Security Agreement and in
the Intercreditor Agreement) any claim the Payee has or may have against the
Payor, (ii) discount or extend the time for payment of any Payor Indebtedness,
or (iii) otherwise amend, modify, supplement or waive any provision of this
Promissory Note.
XIII-B-2
THE VALIDITY, INTERPRETATION AND ENFORCEMENT OF THIS PROMISSORY
NOTE AND ANY DISPUTE ARISING OUT OF OR IN CONNECTION WITH THIS PROMISSORY NOTE,
WHETHER SOUNDING IN CONTRACT, TORT, EQUITY OR OTHERWISE, SHALL BE GOVERNED BY
THE INTERNAL LAWS (AS OPPOSED TO THE CONFLICTS OF LAWS PROVISIONS OTHER THAN
THOSE CONTAINED IN NEW YORK GENERAL OBLIGATIONS LAW SECTION 5-1401) AND
DECISIONS OF THE STATE OF NEW YORK.
[Signature Page Follows]
XIII-B-3
IN WITNESS WHEREOF, the Payor has caused this Promissory Note to be
executed and delivered by its proper and duly authorized officer as of the date
set forth above.
PANOLAM INDUSTRIES LTD.
By:____________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Assistant Vice President
XIII-B-4
ENDORSEMENT
FOR VALUE RECEIVED, the undersigned does hereby sell, assign and
transfer to
_________________________________________
all of its right, title and interest in and to the Intercompany Promissory Note
dated February 18, 1999 (the "Promissory Note"), made by Panolam Industries Ltd.
---------------
("Payor"), and payable to the undersigned. This endorsement is intended to be
-----
attached to the Promissory Note and, when so attached, shall constitute an
endorsement thereof.
Dated:______________
PANOLAM INDUSTRIES INTERNATIONAL, INC.
By:__________________________
Name:
Title:
XIII-B-5
EXHIBIT XIV
FORM OF AMENDMENT TO GUARANTY
This Amendment to Guaranty (this "Amendment"), dated as of
---------
[_______], [_____], relates to the Guaranty dated as of February 18, 1999, as
amended, amended and restated, modified and supplemented to date (as so amended,
amended and restated, supplemented or modified, the "Guaranty"), among PANOLAM
--------
INDUSTRIES HOLDINGS, INC., a Delaware corporation, PANOLAM GROUP, INC., a
Delaware corporation. PII SECOND, INC., a Delaware corporation, PANOLAM
INDUSTRIES, INC a Delaware corporation, and PIONEER PLASTICS CORPORATION, a
Delaware corporation (collectively, the "Guarantors"), in favor of Credit Suisse
----------
First Boston, as Administrative Agent (in such capacity, together with any
successor appointed pursuant to Article VIII of the Credit Agreement referred to
below, the "Administrative Agent"), and the other Guaranteed Parties (as defined
--------------------
in the Guaranty).
In compliance with Section 6.01(n) of the Credit Agreement dated as
of February 18, 1999 (as amended, amended and restated, supplemented or
otherwise modified from time to time, the "Credit Agreement") among the
----------------
Borrower, the Administrative Agent and the other financial institutions party
thereto as agents and lenders, and in conjunction with the execution of the
Amendment to Security Agreement dated of even date herewith, [NAME OF
SUBSIDIARY], a [________] corporation (the "Additional Guarantor"), hereby
--------------------
agrees as follows (capitalized terms used but not otherwise defined herein shall
have the meanings assigned to such terms in the Credit Agreement):
1. Amendment. The Guaranty is hereby amended to add as a
---------
Guarantor thereunder the Additional Guarantor.
2. Representations and Warranties. The Additional
------------------------------
Guarantor represents and warrants to the Administrative Agent and the ether
Guaranteed Parties that each of the representations and warranties of a
Guarantor contained in the Guaranty is hereby made by the Additional Guarantor
and is true and correct as to the Additional Guarantor as of the date hereof.
3. Additional Guarantor as Guarantor. The Additional Guarantor (a)
---------------------------------
assumes all of the obligations and liabilities of a Guarantor under the
Guaranty, (b) makes all of the waivers and acknowledgments of a Guarantor under
the Guaranty, (c) agrees to be bound by the Guaranty as if the Additional
Guarantor were an original party to the Guaranty, and (d) shall be a Guarantor,
a Credit Party and a Loan Party for all purposes under the Loan Documents.
4. Effectiveness. This Amendment shall become effective as of
-------------
the date hereof upon the execution hereof by the Additional Guarantor and
delivery hereof to, and acceptance hereof by, the Administrative Agent.
5. Governing Law. This Amendment shall be governed by, and
-------------
construed in accordance with, the laws of the State of New York.
XIV-1
[ADDITIONAL GUARANTOR]
By:_________________________
Title:
Notice Address:
_____________________________
_____________________________
Telecopier:________
Telephone:_________
Attention:___________________
ACCEPTED:
CREDIT SUISSE FIRST BOSTON,
as Administrative Agent
By:________________________
Title:
XIV-2
EXHIBIT XV
FORM OF AMENDMENT TO SECURITY AGREEMENT
This Amendment to Security Agreement (the "Amendment"), dated as of
---------
_________, _____, relates to the Security Agreement dated as of February 18,
1999 as amended, amended and restated, modified and supplemented to date (as so
amended, amended and restated, supplemented and modified, the "Agreement")
---------
executed by PANOLAM INDUSTRIES INTERNATIONAL, INC a Delaware corporation with
an office at ▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (the "Borrower"),
--------
PANOLAM INDUSTRIES HOLDINGS, INC., a Delaware corporation with an office at ▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ("Holdings"), PANOLAM GROUP, INC a
--------
Delaware corporation with an office at ▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ("Group"), PII SECOND, INC., a Delaware corporation with an office at 20
-----
Progress Drive, Shelton, Connecticut 06484 ("PII Second"), PANOLAM INDUSTRIES,
----------
INC., a Delaware corporation with an office at ▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ("Panolam US"), PIONEER PLASTICS CORPORATION, a Delaware
----------
corporation with an office at ▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
("Pioneer"), and any future direct or indirect parent or subsidiary, if any, of
-------
the Borrower that would become a party to the Agreement as an additional
Grantor (as defined below), in favor of and for the benefit of CREDIT SUISSE
FIRST BOSTON, as administrative agent (in such capacity, together with any
successor in such capacity, the "Administrative Agent") for the Lender Parties
--------------------
(as defined in the Credit Agreement) that were or may thereafter become party
to the Credit Agreement (as hereinafter defined). Holdings, Group and PII
Second are each referred to herein as a "Parent Grantor" and collectively as
--------------
the "Parent Grantors." Panolam US and Pioneer are each referred to herein as a
---------------
"Subsidiary Grantor" and collectively as the "Subsidiary Grantors." The
------------------ -------------------
Borrower, the Parent Grantors, the Subsidiary Grantors and any other Person
agreeing to be bound hereby as a Grantor are each individually referred to
herein as a "Grantor" and collectively as the "Grantors."
------- --------
In compliance with Section 6.0l(n) of the Credit Agreement dated as
of February 18, 1999 (as amended, amended and restated, supplemented or
otherwise modified from time to time, the "Credit Agreement," the terms defined
----------------
therein and not otherwise defined herein being used herein as therein defined)
among the Borrower, the Administrative Agent, DLJ Capital Funding, Inc., as
syndication agent, Royal Bank of Canada, as documentation agent, and the
financial institutions and other entities party thereto as Lenders, and in
conjunction with the execution of the Amendment to Guaranty dated of even date
herewith, [NAME OF SUBSIDIARY] (the "Additional Grantor") and the Administrative
------------------
Agent hereby agree as follows:
1. Amendment. The Agreement is hereby amended to add as a party
---------
and, more specifically, as a Grantor thereunder, the Additional Grantor.
2. Representations and Warranties. The Additional Grantor
------------------------------
represents and warrants to the Administrative Agent and the other Secured
Parties that each of the representations and warranties of a Subsidiary Grantor
contained in the Agreement is hereby
XV-1
made by the Additional Grantor and is true and correct as to the Additional
Grantor. All capital stock owned or otherwise held by the Additional Grantor in
each Subsidiary, if any, of the Additional Grantor is set forth on the
supplement to Schedule I to the Agreement attached hereto.
3. Grant of Security Interest. As security for the payment of the
--------------------------
Secured Obligations, the Additional Grantor hereby assigns to the Administrative
Agent for the ratable benefit of the Administrative Agent and the other Secured
Parties, and grants to the Administrative Agent for the ratable benefit of the
Administrative Agent and the other Secured Parties a continuing and first
priority security interest in, all of such Additional Grantor's right, title and
interest in and to the Collateral (as defined in the Agreement), whether now or
hereafter existing or owned by such Additional Grantor or in which such
Additional Grantor now owns or hereafter acquires an interest and wherever the
same may be located.
4. Schedule Supplements. The Additional Grantor has attached
--------------------
hereto supplements to Schedules I through VI to the Agreement, and the
Additional Grantor hereby certifies that such supplements have been prepared by
the Additional Grantor in substantially the form of the Schedules to the
Agreement and are accurate and complete as of the date first above written.
5. Assumption of Rights, Obligations and Liabilities. The
-------------------------------------------------
Additional Grantor assumes all of the rights, obligations and liabilities of a
Grantor under the Agreement and agrees to be bound thereby as if the Additional
Grantor were an original party to the Agreement.
6. Effectiveness. This Amendment shall become effective on the
-------------
date hereof upon the execution hereof by the Additional Grantor and the
Administrative Agent and delivery hereof to the Administrative Agent.
7. Governing Law. This Amendment shall be governed by, and
-------------
construed in accordance with, the laws of the State of New York.
[ADDITIONAL GRANTOR]
By:__________________________
Title:
Notice Address:
_____________________________
_____________________________
Telecopier:________
Telephone:_________
Attention:___________________
XV-2
ACCEPTED:
CREDIT SUISSE FIRST BOSTON,
as Administrative Agent
By:_________________________
Title:
XV-3
STATE OF____________)
)
COUNTY OF___________)
On _____________, before me, _____________, a Notary Public in and for said
state, personally appeared _____________, personally known to me (or proved to
me on the basis of satisfactory evidence) to be the person whose name is
subscribed to the within instrument and acknowledged to me that he executed the
same in his authorized capacity, and that by his signature on the instrument the
person, or the entity upon behalf of which the person acted, executed the
instrument.
WITNESS my hand and official seal.
________________________________________
Notary Public in and for said State
XV-4
EXHIBIT XVI
FORM OF
INTERCREDITOR AND SUBORDINATION AGREEMENT
INTERCREDITOR AND SUBORDINATION AGREEMENT, dated as of February 18, 1999,
is entered into by and among PANOLAM INDUSTRIES INTERNATIONAL, INC., a Delaware
corporation (together with its successors and assigns, the "Us Borrower"),
-----------
PANOLAM INDUSTRIES LTD., a corporation organized pursuant to the Business
Corporations Act (Ontario) (together with its successors and assigns, the
" Canadian Borrower " and, together with the US Borrower, the "Borrowers"), each
----------------- ---------
of the other Credit Parties (under and as defined in the US Credit Agreement (as
hereinafter defined)) from time to time party to the US Loan Documents (as
hereinafter defined) (such other Credit Parties, together with the US Borrower,
the "Us Loan Parties"), each of the other Loan Parties (under and as defined in
---------------
the Canadian Credit Agreement (as hereinafter defined)) from time to time party
to the Canadian Loan Documents (as hereinafter defined) (such other Loan
Parties, together with the Canadian Borrower, the "Canadian Loan Parties"; the
---------------------
US Loan Parties and the Canadian Loan Parties are collectively referred to
herein as the "Loan Parties"), CREDIT SUISSE FIRST BOSTON, as administrative
------------
agent (together with its successors and assigns in such capacity, the "Us
--
Administrative Agent") for the Lender Parties (under and as defined in the US
--------------------
Credit Agreement, such Lender Parties being referred to herein as the "Us
--
Lenders") party to the US Credit Agreement, and CREDIT SUISSE FIRST BOSTON
-------
CANADA, as administrative agent (together with its successors and assigns in
such capacity, the "Canadian Administrative Agent" and, together with the US
-----------------------------
Administrative Agent, the "Administrative Agents") for the Lender Parties (under
---------------------
and as defined in the Canadian Credit Agreement, such Lender Parties being
referred to herein as the "Canadian Lenders") party to the Canadian Credit
----------------
Agreement.
RECITALS
WHEREAS, pursuant to the US Guaranty (as hereinafter defined), the US Loan
Parties (other than the US Borrower) have guaranteed, on a senior basis, the
payment and performance of the obligations of the US Borrower under the US
Credit Agreement and the other US Loan Documents to which the US Borrower is a
party;
WHEREAS, pursuant to the US Security Agreement (as hereinafter defined) and
the US Mortgages (as hereinafter defined), the US Loan Parties have agreed to
grant (i) in favor of the US Administrative Agent (A) first priority Liens in
substantially all of their assets, properties and revenues (other than any
Designated Intercompany Indebtedness and the Panolam Canada Stock (each as
hereinafter defined)), and (B) second priority Hens in the Designated
Intercompany Indebtedness of the US Borrower and the US Borrower's Domestic
Subsidiaries and in 65% of the Panolam Canada Stock, in each case to secure the
obligations of such US Loan Parties under the US Loan Documents, and (ii) in
favor of the Canadian Administrative Agent (A) first priority Liens in the
Designated Intercompany Indebtedness and the Panolam Canada Stock and (B) second
priority Liens on all such other assets, properties and revenues, in each case
to secure the obligations of the Canadian Loan Parties under the Canadian Loan
Documents;
XVI-1
WHEREAS, the parties hereto have agreed that the payment and performance of
the US Obligations shall not be secured by a security interest or any other
Lien in favor of the US Administrative Agent or otherwise in any of the
Canadian Assets (as hereinafter defined);
WHEREAS, pursuant to the Canadian Guaranty (as hereinafter defined), the US
Loan Parties have guaranteed, on a subordinated basis, the payment and
performance of the obligations of the Canadian Borrower under the Canadian
Credit Agreement and the other Canadian Loan Documents to which the Canadian
Borrower is a party, which subordinated guarantees shall be subordinated to the
prior payment in full of the obligations of such US Loan Parties under the US
Loan Documents;
WHEREAS, pursuant to the Canadian Security Agreement (as hereinafter
defined) and the Canadian Mortgages (as hereinafter defined), the Canadian Loan
Parties have agreed to grant in favor of the Canadian Administrative Agent first
priority Liens in the Canadian Assets to secure the obligations of such Loan
Parties under the Canadian Loan Documents; and
WHEREAS, it is a condition precedent to the making of US Loans (as
hereinafter defined) under the US Credit Agreement and the making of Canadian
Loans (as hereinafter defined) under the Canadian Credit Agreement that the
parties hereto shall have entered into this Agreement;
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Definitions.
-----------
(a) Unless otherwise defined or specified herein, terms defined in the US
Credit Agreement and used herein shall have the meanings given to them in the US
Credit Agreement.
(b) The following terms shall have the following meanings:
"Agreement" means this Intercreditor and Subordination Agreement, as the same
---------
may be amended, amended and restated, supplemented or otherwise modified from
time to time.
"Canadian Assets" means any and all property of the Canadian Borrower and its
---------------
Subsidiaries from time to time (including, without limitation, any Designated
Intercompany Indebtedness owing to the Canadian Borrower or any of its
Subsidiaries).
"Canadian Bank Hedge Agreement" means a Bank Hedge Agreement as
------------------------------
defined in the Canadian Credit Agreement.
"Canadian Collateral" means the Canadian Assets, the Panolam Canada Stock and
-------------------
the Designated Intercompany Indebtedness; provided, however, that the Panolam
Canada Stock and the Designated Intercompany Indebtedness described under clause
(ii) of the definition thereof
XVI-2
shall constitute Canadian Collateral only so long as any Canadian Obligations
remain outstanding or any commitment of any Canadian Lender under the Canadian
Loan Documents exists.
"Canadian Credit Agreement" means the Credit Agreement, dated as of February
-------------------------
18, 1999, among the Canadian Borrower, the other Loan Parties (as defined
therein), the Canadian Administrative Agent and the Lenders party thereto from
time to time, as the same may be amended, amended and restated, supplemented or
otherwise modified from time to time, including, without limitation, amendments,
modifications, supplements and restatements thereof giving effect to increases,
renewals, extensions, refundings, deferrals, restructurings, replacements or
refinancings of, or additions to, the arrangements provided in such Credit
Agreement (whether provided by the original Canadian Administrative Agent and
Canadian Lenders under such Credit Agreement or a successor or different
Canadian Administrative Agent or other Canadian Lenders).
"Canadian Guaranty" means the Canadian Credit Agreement Guaranty, as defined
-----------------
in the US Credit Agreement.
"Canadian Insolvency Proceeding" means any bankruptcy, insolvency or
------------------------------
enforcement proceeding by or against the Canadian Borrower or any of its
Subsidiaries or with respect to the Canadian Collateral, including without
limitation (i) an assignment for the benefit of creditors, the filing of a
petition, the making of a proposal, or the filing of a notice of intention to
make a proposal, (ii) any proceeding under the Companies' Creditors Arrangement
Act (Canada) or the Winding-up and Restructuring Act (Canada) or the United
States Bankruptcy Code, (iii) any private, court or public proceeding wherein
Canadian Assets shall be attached, seized, levied upon or subjected to
execution, garnishment, distress or any other similar process, or came within
the possession of any receiver, trustee, custodian, liquidator, administrator,
sequestrator, sheriff, bailiff or assignee for the benefit of creditors, (iv)
any proceeding involving the liquidation, winding-up, dissolution or suspension
of the operations of the Canadian Borrower or any of its Subsidiaries, (v) any
proceeding seeking the appointment of a trustee, interim receiver, receiver,
receiver and manager, liquidator, administrator, custodian, sequestrator, agent
or other similar official for the Canadian Borrower or any of its Subsidiaries,
or for all or a substantial part of the Canadian Assets, or (vi) the enforcement
of security over all or a substantial part of the Canadian Assets.
"Canadian Lenders" has the meaning set forth in the introduction to this
----------------
Agreement.
"Canadian Loan Documents" means the Canadian Credit Agreement, the Canadian
-----------------------
Guaranty and the other Loan Documents as defined in the Canadian Credit
Agreement.
"Canadian Loans" means the loans made, and the issuance of or participation in
--------------
Swing Line Loans (as defined in the Canadian Credit Agreement) and letters of
credit, by the Canadian Lenders pursuant to the Canadian Credit Agreement.
XVI-3
"Canadian Mortgages" means the Mortgages and Additional Mortgages (each as
------------------
defined in the Canadian Credit Agreement) of the Canadian Borrower and its
Subsidiaries on properties located in Canada.
"Canadian Notes" means the promissory notes (if any) of the Canadian Borrower
--------------
outstanding from time to time pursuant to the Canadian Credit Agreement.
"Canadian Obligations" means the unpaid principal of and interest on the
--------------------
Canadian Loans and the Canadian Notes (if any) and all other obligations and
liabilities of the Canadian Loan Parties to the Canadian Administrative Agent
and the Canadian Lenders (including, without limitation, interest accruing at
the then applicable rate provided in the Canadian Credit Agreement after the
maturity of the Canadian Loans and interest accruing at the then applicable rate
provided in the Canadian Credit Agreement after the filing of any petition in
bankruptcy, or the commencement of any insolvency, reorganization or like
proceeding, relating to any Loan Party, whether or not a claim for post-filing
or post-petition interest is allowed in such proceeding), whether direct or
indirect, absolute or contingent, due or to become due, or now existing or
hereafter incurred, which may arise under, out of, or in connection with, the
Canadian Credit Agreement, the Canadian Notes (if any), this Agreement, the
Canadian Guaranty, any other Canadian Loan Document or any other document made,
delivered or given in connection therewith, in each case whether on account of
principal, interest, reimbursement obligations, fees, indemnities, costs,
expenses or otherwise (including, without limitation, all fees and disbursements
of counsel to the Canadian Administrative Agent or to Canadian Lenders that are
required to be paid by any Canadian Loan Party pursuant to the terms of the
Canadian Credit Agreement, the Canadian Guaranty or any other Canadian Loan
Document).
"Canadian Security Agreement" means the Security Agreement executed by the
---------------------------
Canadian Borrower pursuant to Section 4.01(k)(xiv) of the Canadian Credit
Agreement, as the same may be amended, amended and restated, supplemented or
otherwise modified from time to be.
"Canadian Security Documents" means the Security Agreement, the US Security
---------------------------
Agreement, the Canadian Mortgages, the US Mortgages and all documents and
instruments, now existing or hereafter arising, which create or purport to
create a security interest in property (whether real, personal or otherwise) to
secure payment or performance of the Canadian Obligations, including, without
limitation, the Collateral Documents (as defined in the Canadian Credit
Agreement).
"Credit Agreements" means the US Credit Agreement and the Canadian Credit
-----------------
Agreement.
"Designated Intercompany Indebtedness" means (i) indebtedness in respect of
any loan made directly or indirectly by the Canadian Borrower or any of its
Subsidiaries to the US Borrower or any of its Domestic Subsidiaries, and (ii)
indebtedness in respect of any loan made directly or indirectly by the US
Borrower or any of its Domestic Subsidiaries to any of their respective Domestic
Subsidiaries or the US Borrower with the proceeds of a loan made by the
XVI-4
Canadian Borrower or any of its Subsidiaries to the US Borrower or any of its
Domestic Subsidiaries.
"Insolvency Event" means the occurrence of an Event of Default under Section
----------------
7.01(g) of the US Credit Agreement or Section 7.01(g) of the Canadian Credit
Agreement.
"Panolam Canada Stock" means the capital stock of the Canadian Borrower from
--------------------
time to time outstanding.
"Security Documents" means the US Security Documents and the Canadian Security
------------------
Documents.
"US Bank Hedge Agreement" means a Bank Hedge Agreement as defined in the US
-----------------------
Credit Agreement.
"US Collateral" means any and all property from time to time subject to
-------------
security interests to secure payment or performance of the US Obligations.
"US Credit Agreement" means the Credit Agreement, dated as of February 18,
-------------------
1999, among the US Borrower, the US Administrative Agent, the US Syndication
Agent and the Lenders party thereto from time to time, as such Credit Agreement
may be amended, modified or supplemented from time to time, including, without
limitation, amendments, modifications, supplements and restatements thereof
giving effect to increases, renewals, extensions, refundings, deferrals,
restructurings, replacements or refinancings of, or additions to, the
arrangements provided in such Credit Agreement (whether provided by the original
US Administrative Agent, US Syndication Agent and US Lenders under such Credit
Agreement or a successor or different US Administrative Agent, US Syndication
Agent or other US Lenders).
"US Guaranty" means the Guaranty as defined in the US Credit Agreement.
-----------
"US Insolvency Proceeding" means any bankruptcy, insolvency or enforcement
------------------------
proceeding by or against the US Borrower or any of its Domestic Subsidiaries or
with respect to the US Collateral, including without limitation (i) an
assignment for the benefit of creditors, the filing of a petition, the making of
a proposal, or the filing of a notice of intention to make a proposal, (ii) any
proceeding under the Companies' Creditors Arrangement Act (Canada), the Winding-
up and Restructuring Act (Canada) or the United States Bankruptcy Code, (iii)
any private, court or public proceeding wherein US Collateral shall be attached,
seized, levied upon or subjected to execution, garnishment, distress or any
other similar process, or come within the possession of any receiver, trustee,
custodian, liquidator, administrator, sequestrator, sheriff, bailiff or assignee
for the benefit of creditors, (iv) any proceeding involving the liquidation,
winding-up, dissolution or suspension of the operations of the US Borrower or
any of its Domestic Subsidiaries, (v) any proceeding seeking the appointment of
a trustee, interim receiver, receiver, receiver and manager, liquidator,
administrator, custodian, sequestrator, agent or other similar official for the
US Borrower or any of its Domestic Subsidiaries, or for all or a substantial
part of the US Collateral, or (vi) the enforcement of security over all or a
substantial part of the US Collateral.
XVI-5
"US Lenders" has the meaning set forth in the introduction to this Agreement.
----------
"US Loan Documents" means the US Credit Agreement, the US Guaranty and the
-----------------
other Loan Documents as defined in the US Credit Agreement.
"US Loans" means the loans made, and the issuance of or participation in Swing
--------
Line Loans (as defined in the US Credit Agreement) and letters of credit, by the
US Lenders to the US Borrower pursuant to the US Credit Agreement.
"US Mortgages" means (i) the Mortgages and Additional Mortgages, each as
------------
defined in the US Credit Agreement, on properties of the US Borrower and its
Domestic Subsidiaries located in the United States and (ii) the Mortgages and
Additional Mortgages, each as defined in the Canadian Credit Agreement, on
properties of the US Borrower and its Domestic Subsidiaries located in the
United States.
"US Notes" means the promissory notes (if any) of the US Borrower outstanding
--------
from time to time under the US Credit Agreement.
"US Obligations" means the unpaid principal of and interest on the US Loans
--------------
and the US Notes (if any) and all other obligations and liabilities of the US
Loan Parties (as defined in the US Credit Agreement) to the US Administrative
Agent, the US Syndication Agent and the US Lenders (including, without
limitation, interest accruing at the then applicable rate provided in the US
Credit Agreement after the maturity of the US Loans and interest accruing at the
then applicable rate provided in the US Credit Agreement after the filing of any
petition in bankruptcy, or the commencement of any insolvency, reorganization or
like proceeding, relating to any Loan Party, whether or not a claim for post-
filing or post-petition interest is allowed in such proceeding), whether direct
or indirect, absolute or contingent, due or to become due, or now existing or
hereafter incurred, which may arise under, out of, or in connection with, the US
Credit Agreement, the US Notes (if any), this Agreement, the US Guaranty, the
other US Loan Documents or any other document made, delivered or given in
connection therewith, in each case whether on account of principal, interest,
reimbursement obligations, fees, indemnities, costs, expenses or otherwise
(including, without limitation, all fees and disbursements of counsel to the US
Administrative Agent, to the US Syndication Agent or to the US Lenders that are
required to be paid by any US Loan Party pursuant to the terms of the US Credit
Agreement, the US Guaranty or any other US Loan Document).
"US Security Agreement" means the Security Agreement as defined in the US
---------------------
Credit Agreement.
"US Security Documents" means the US Security Agreement, the US Mortgages and
---------------------
all other documents and instruments, now existing or hereafter arising, which
create or purport to create a security interest in property (whether real,
personal or otherwise) to secure payment or performance of the US Obligations,
including, without limitation, the Collateral Documents (as defined in the US
Credit Agreement).
XVI-6
"US Syndication Agent" means DLJ Capital Funding, Inc., as syndication agent
--------------------
under the US Credit Agreement, and its successors and assigns in such capacity.
(c) The words "hereof," "herein" and "hereunder" and words of similar import
when used in this Agreement shall refer to this Agreement as a whole and not to
any particular provision of this Agreement, and section and paragraph references
are to this Agreement unless otherwise specified.
(d) The meanings given to terms defined herein shall be equally applicable
to both the singular and plural forms of such terms.
(e) The expressions "prior payment in full," "payment in full," "paid in
full" and any other similar terms or phrases when used herein with respect to
the US Obligations or the Canadian Obligations shall mean the payment in full,
in immediately available funds, of all of the US Obligations or the Canadian
Obligations, as applicable.
(f) As used herein, the term "security interest" shall mean any security
interest, charge, mortgage, pledge, hypothecation, lien or other encumbrance.
2. Subordination.
-------------
(a) Each Loan Party, the US Administrative Agent, on behalf of itself and
the US Lenders, and the Canadian Administrative Agent, on behalf of itself and
the Canadian Lenders, agree that:
(1) subject to Section 2(a)(3) below, no holder of Canadian Obligations
shall have any claim to all or any part of the US Collateral on a parity with or
prior to the claim of the US Obligations, and the Canadian Obligations shall be
secured by the US Collateral only on a basis subordinated to the claims of the
holders of US Obligations as set forth herein;
(2) no part of the US Obligations and no holder thereof shall have any
claim to all or any part of the Canadian Assets (it being understood that,
subject to Section 2(a)(3) below, this clause (2) shall not in any manner limit
or restrict any rights arising pursuant to or as a result of the US
Administrative Agent's Lien on 65% of the Panolam Canada Stock or on any
Designated Intercompany Indebtedness (described in clause (ii) of the definition
thereof) constituting US Collateral);
(3) no holder of US Obligations shall have any claim to all or any part
of any Designated Intercompany Indebtedness or the Panolam Canada Stock on a
parity with or prior to the claim of the Canadian Obligations and the US
Obligations shall be secured by the Designated Intercompany Indebtedness and the
Panolam Canada Stock only on a basis subordinated to the claims of the holders
of Canadian Obligations as set forth herein;
(4) unless and until the US Obligations have been paid in full, all
Letters of Credit issued under the US Credit Agreement have expired or been
terminated and the Commitments under the US Credit Agreement have been
terminated, without the express prior written consent of the US Administrative
Agent, neither the Canadian Administrative Agent nor
XVI-7
any Canadian Lender (in such capacity) will, except to the extent necessary in
connection with the exercise of rights and remedies in respect of the Panolam
Canada Stock or any Designated Intercompany Indebtedness, take, demand or
receive from any US Loan Party, and no US Loan Party will make, give or permit,
directly or indirectly, by set-off, redemption, purchase or in any other manner,
any payment of the whole or any part of the Canadian Obligations, including,
without !imitation, under the Canadian Guaranty or any other guaranty (including
any Guaranty as defined in the Canadian Credit Agreement) or letter of credit or
similar credit support facility to support payment of the Canadian Obligations
(for the avoidance of doubt, the foregoing shall not prohibit transactions
permitted under Sections 6.02(b), (e), (f), (g) and (r) of each of the Credit
Agreements); and
(5) unless and until the Canadian Obligations have been paid in full,
ail Letters of Credit issued under the Canadian Credit Agreement have expired or
been terminated and the Commitments (as defined in the Canadian Credit
Agreement) under the Canadian Credit Agreement have been terminated, without the
express prior written consent of the Canadian Administrative Agent, neither the
US Administrative Agent nor any US Lender (in such capacity) will take, demand
or receive from the Canadian Borrower or any of its Subsidiaries, and neither
the Canadian Borrower nor any of its Subsidiaries will make, give or permit,
directly or indirectly, by set-off, redemption, purchase or in any other manner,
any payment of the whole or any part of the US Obligations (for the avoidance of
doubt, the foregoing shall not prohibit transactions permitted under Sections
6.02(b), (e), (f), (g) and (r) of each of the Credit Agreements).
(b) If any payment or distribution, whether consisting of money,
property, securities or otherwise, is collected or received by the Canadian
Administrative Agent or any Canadian Lender in respect of the Canadian
Obligations, except (1) payments in respect of Canadian Collateral and (2) other
payments not prohibited at the time of payment by the terms of Section 2(a)(4)
above, the Canadian Administrative Agent or such Canadian Lender forthwith shall
deliver the same to the US Administrative Agent for the account of the US
Lenders, in the form received, duly indorsed to the US Administrative Agent, if
required, to be applied to the payment or prepayment of the US Obligations until
the US Obligations are paid in full. Until so delivered, such payment or
distribution shall be held in trust by the Canadian Administrative Agent or such
Canadian Lender, as applicable, as the property and for the benefit of the US
Lenders, segregated from other funds and property held by the Canadian
Administrative Agent or such Canadian Lender, as applicable.
(c) If any payment or distribution, whether consisting of money,
property, securities or otherwise, is collected or received by the US
Administrative Agent or any US Lender in respect of the US Obligations, except
(1) payments in respect of US Collateral (other than Canadian Collateral which
constitutes US Collateral) and (2) other payments not prohibited at the time of
payment by the terms of Section 2(a)(5) above, the US Administrative Agent or
such US Lender forthwith shall deliver the same to the Canadian Administrative
Agent for the account of the Canadian Lenders, in the form received, duly
indorsed to the Canadian Administrative Agent, if required, to be applied to the
payment or prepayment of the Canadian Obligations until the Canadian Obligations
are paid in full. Until so delivered, such payment or distribution shall be held
in trust by the US Administrative Agent or such US Lender, as applicable, as the
property
XVI-8
and for the benefit of the Canadian Lenders, segregated from other funds and
property held by the US Administrative Agent or such US Lender, as applicable.
3. Rights in US Collateral and Canadian Collateral. Notwithstanding
-----------------------------------------------
anything to the contrary contained in the US Credit Agreement, any US Security
Document, any other US Loan Document, the Canadian Credit Agreement, any
Canadian Security Document or any other Canadian Loan Document and irrespective
of:
(a) the time, order or method of attachment or perfection of the security
interests created by any US Security Document or any Canadian Security Document,
(b) the time or order of filing or recording of financing statements,
fixture filings or other documents filed or recorded to perfect security
interests in any US Collateral or Canadian Collateral,
(c) anything contained in any filing or agreement to which the US
Administrative Agent, the Canadian Administrative Agent, any US Lender or any
Canadian Lender now or hereafter may be a party, and
(d) the rules for determining priority under the Uniform Commercial Code
as in effect in any jurisdiction, the Personal Property Security Act of any
jurisdiction or any other law governing the relative priorities of secured
creditors,
(i) any security interest in any US Collateral securing the US Obligations
(other than Canadian Collateral which constitutes US Collateral) has and shall
have priority, to the extent of any unpaid US Obligations, over any security
interest in such US Collateral securing the Canadian Obligations, (ii) any
security interest in the Designated Intercompany Indebtedness and the Panolam
Canada Stock securing the Canadian Obligations has and shall have priority, to
the extent of any unpaid Canadian Obligations, over any security interest in the
Designated Intercompany Indebtedness and the Panolam Canada Stock securing the
US Obligations, and (iii) the payment and performance of the US Obligations
shall not be secured pursuant to the Security Documents or otherwise by a
security interest in favor of the US Administrative Agent, the US Lenders or
otherwise in any of the Canadian Assets.
4. Exercise of Rights in US Collateral and Application of Proceeds with
--------------------------------------------------------------------
Respect to the US Collateral.
----------------------------
(a) So long as the US Obligations have not been paid in full, any Letter
of Credit issued under the US Credit Agreement has not expired or been
terminated or the Commitments and other obligations of the US Lenders under the
US Loan Documents have not teen terminated, whether or not any event or
proceeding described in the definition of "Insolvency Event" has been commenced
by or against any Loan Party,
(1) neither the Canadian Administrative Agent nor any Canadian
Lender (in such capacity) will (A) exercise or seek to exercise any rights or
remedies with respect to any US Collateral except the Panolam Canada Stock and
any Designated Intercompany Indebtedness constituting US Collateral and except
for ministerial acts necessary to preserve claims or
XVI-9
(B) institute any action or proceeding with respect to such rights or remedies,
including without limitation, any action of foreclosure with respect to any US
Collateral except the Panolam Canada Stock and any Designated Intercompany
Indebtedness constituting US Collateral or (C) contest, protest or object to any
foreclosure proceeding or action with respect to any US Collateral except the
Panolam Canada Stock and any Designated Intercompany Indebtedness constituting
US Collateral brought by the US Administrative Agent or any US Lender or any
other exercise by the US Administrative Agent or any US Lender of any rights and
remedies under any US Loan Documents or applicable law; and
(2) the US Administrative Agent and the US Lenders shall have the
exclusive right to enforce rights and exercise remedies with respect to the US
Collateral except the Panolam Canada Stock and any Designated Intercompany
Indebtedness constituting US Collateral.
(b) In exercising rights and remedies with respect to the US Collateral
except the Panolam Canada Stock and any Designated Intercompany Indebtedness
constituting US Collateral, the US Administrative Agent and the US Lenders may
enforce the provisions of the US Security Documents relating to the US
Collateral except the Panolam Canada Stock and any Designated Intercompany
Indebtedness constituting US Collateral and exercise remedies thereunder and
under any other US Loan Documents, all in such order and in such manner as they
may determine in the exercise of their sole business judgment. Such rights of
exercise and enforcement shall include, without limitation, the rights to sell
or otherwise dispose of US Collateral except the Panolam Canada Stock and any
Designated Intercompany Indebtedness constituting US Collateral, to incur
expenses in connection with such sale or disposition and to exercise all the
rights and remedies of a secured lender under the Uniform Commercial Code, the
Personal Property Security Act of any jurisdiction or other like law of any
applicable jurisdiction.
(c) Subject to Section 4(f), when all US Obligations have been paid in
full, any Letter of Credit issued under the US Credit Agreement has not expired
or been terminated and all Commitments and other obligations of the US Lenders
under the US Loan Documents have been terminated, the Canadian Administrative
Agent and the Canadian Lenders shall have the right to enforce the provisions of
the US Security Documents relating to US Collateral and exercise remedies
thereunder.
(d) Subject to Section 4(f), any money, property or securities realized
upon the sale, disposition or other realization by the US Administrative Agent
upon all or any part of the US Collateral, shall be applied by the US
Administrative Agent in the following order:
(1) First, to the payment in full of all costs and expenses
-----
(including, without limitation, attorneys' fees and disbursements) paid or
incurred by the US Administrative Agent or the US Lenders in connection with
such realization on the US Collateral or the protection of their rights and
interests therein;
(2) Second, to the payment or prepayment in full of all US
------
Obligations (including any obligation to provide cash collateral) in such order
as the US Administrative Agent may elect in its sole discretion;
XVI-10
(3) Third, to the payment or prepayment in full of all Canadian
-----
Obligations (including any obligation to provide cash collateral) which are
secured by such US Collateral; and
(4) Fourth, to pay to the US Borrower, or its representative or as a
------
court of competent jurisdiction may direct, any surplus then remaining.
(e) Subject to Section 4(f), the US Administrative Agent's and the US
Lenders' rights with respect to the US Collateral include the right, subject to
the provisions of Section 11, to release any or all of the US Collateral from
the Lien of any US Security Document in connection with the sale of such US
Collateral, notwithstanding that the net proceeds of any such sale may not be
used to pay or permanently prepay any US Obligations or Canadian Obligations. If
the US Administrative Agent or the US Lenders shall determine, in connection
with any sale of US Collateral, that the release of the Lien of any Security
Document on such US Collateral in connection with such sale is necessary or
advisable, the Canadian Administrative Agent and the Canadian Lenders shall
execute such release documents and instruments and shall take such further
actions as the US Administrative Agent shall reasonably request, all at the US
Borrower's expense. The Canadian Administrative Agent, on behalf of itself and
each Canadian Lender, hereby irrevocably constitutes and appoints the US
Administrative Agent and any officer of the US Administrative Agent as its true
and lawful attorney-in-fact with full irrevocable power and authority in the
place and stead of the Canadian Administrative Agent and each Canadian Lender
and in the name of the Canadian Administrative Agent and each Canadian Lender or
in the US Administrative Agent's own name, from time to time in the US
Administrative Agent's discretion, for the purpose of carrying out the terms of
this paragraph, to take any and all appropriate action and to execute any and
all documents and instruments which may be necessary or desirable to accomplish
the purposes of this paragraph, including, without limitation, any termination
statements, financing change statements, financing statements, endorsements,
assignments or other instruments of transfer or release. The Canadian
Administrative Agent, on behalf of itself and each Canadian Lender, hereby
ratifies, without liability, all that said attorneys shall lawfully do or cause
to be done pursuant to the power of attorney granted in this paragraph.
(f) Notwithstanding any other provision of this Section 4, Sections 4(c),
(d) and (e) shall not apply to the Panolam Canada Stock or any Designated
Intercompany Indebtedness constituting US Collateral, which shall instead be
subject to Section 5.
5. Exercise of Rights and Application of Proceeds with Respect to the
------------------------------------------------------------------
Canadian Collateral.
-------------------
(a) So long as the Canadian Obligations have not been paid in full, any
Letter of Credit issued under the Canadian Credit Agreement has not expired or
been terminated or the Commitments and other obligations of the Canadian Lenders
under the Canadian Loan Documents have not been terminated, whether or not any
event or proceeding described in the definition of "Insolvency Event" has been
commenced by or against any Loan Party,
(1) neither the US Administrative Agent nor any US Lender (in such
capacity) will (A) exercise or seek to exercise any rights or exercise any
remedies with respect to any
XVI-11
Canadian Collateral except for ministerial acts necessary to preserve claims or
(B) institute any action or proceeding with respect to such rights or remedies,
including without limitation, any action of foreclosure with respect to any
Canadian Collateral or (C) contest, protest or object to any foreclosure
proceeding or action with respect to any Canadian Collateral brought by the
Canadian Administrative Agent, the Canadian Lenders or any receiver, receiver-
manager, manager or other person exercising similar power appointed by or at the
request of the Canadian Administrative Agent or the Canadian Lenders
("Receiver") or any other exercise by the Canadian Administrative Agent or the
--------
Canadian Lenders or any Receiver of any rights and remedies under any Canadian
Loan Documents or applicable law; and
(2) the Canadian Administrative Agent, the Canadian Lenders and any
Receiver shall have the exclusive right to enforce rights and exercise remedies
with respect to the Canadian Collateral.
(b) In exercising rights and remedies with respect to the Canadian
Collateral, the Canadian Administrative Agent, the Canadian Lenders and any
Receiver may enforce the provisions of the Canadian Security Documents relating
to Canadian Collateral and exercise remedies thereunder and under any other
Canadian Loan Documents, all in such order and in such manner as they may
determine in the exercise of their sole business judgment. Such rights of
exercise and enforcement shall include, without limitation, the rights to sell
or otherwise dispose of Canadian Collateral, to incur expenses in connection
with such sale or disposition and to exercise all the rights and remedies of a
secured lender under the Uniform Commercial Code, the Personal Property Security
Act of any jurisdiction or other like law of any applicable jurisdiction.
(c) When all Canadian Obligations have been paid in full, each Letter of
Credit issued under the Canadian Credit Agreement has expired or been terminated
and the Commitments and other obligations of the Canadian Lenders under the
Canadian Loan Documents have been terminated, the US Administrative Agent and
the US Lenders shall have the right to enforce the provisions of the US Security
Documents to the extent of any Liens on assets then or previously constituting
Canadian Collateral (other than Canadian Assets) and exercise remedies
thereunder.
(d) Any money, property or securities realized upon the sale, disposition
or other realization by the Canadian Administrative Agent upon all or any part
of the Canadian Collateral shall be applied by the Canadian Administrative Agent
in the following order:
(1) First, to the payment in full of all costs and expenses
-----
(including, without limitation, attorneys' fees and disbursements) paid or
incurred by the Canadian Administrative Agent or the Canadian Lenders in
connection with such realization on the Canadian Collateral or the protection of
their rights and interests therein;
(2) Second, to the payment or prepayment in full of all Canadian
------
Obligations (including any obligation to provide cash collateral) in such order
as the Canadian Administrative Agent may elect in its sole discretion;
XVI-12
(3) Third, to the payment or prepayment in full of all US Obligations
-----
(including any obligation to provide cash collateral) which are secured by such
Canadian Collateral; and
(4) Fourth, to pay to the Canadian Borrower, or its representative or
------
as a court of competent jurisdiction may direct, any surplus then remaining;
provided, however, that, notwithstanding anything to the contrary in this
-------- -------
paragraph, any money, property or securities realized upon the sale, disposition
or other realization by the Canadian Administrative Agent upon all or any part
of the Canadian Assets, shall be applied by the Canadian Administrative Agent in
the order set forth in clauses (1), (2) and (4) above without regard to the
provisions of clause (3) thereof.
(e) The Canadian Administrative Agent's and the Canadian Lenders' rights
with respect to the Canadian Collateral include the right, subject to the
provisions of Section 11, to release any or all of the Canadian Collateral from
the Lien of any Canadian Security Document in connection with the sale of such
Canadian Collateral, notwithstanding that the net proceeds of any such sale may
not be used to pay or permanently prepay any Canadian Obligations or US
Obligations. If the Canadian Administrative Agent or the Canadian Lenders shall
determine, in connection with any sale of Canadian Collateral, that the release
of the Lien of any US Security Document on such Canadian Collateral in
connection with such sale is necessary or advisable, the US Administrative Agent
and the US Lenders shall execute such release documents and instruments and
shall take such further actions as the Canadian Administrative Agent shall
reasonably request, all at the Canadian Borrower's expense. The US
Administrative Agent, on behalf of itself and each US Lender, hereby irrevocably
constitutes and appoints the Canadian Administrative Agent and any officer of
the Canadian Administrative Agent and any Receiver as its true and lawful
attorney-in-fact with full irrevocable power and authority in the place and
stead of the US Administrative Agent and each US Lender and in the name of the
US Administrative Agent and each US Lender or in the Canadian Administrative
Agent's own name, from time to time in the Canadian Administrative Agent's
discretion, for the purpose of carrying out the terms of this paragraph, to take
any and all appropriate action and to execute any and all documents and
instruments which may be necessary or desirable to accomplish the purposes of
this paragraph, including, without limitation, any termination statements,
financing change statements, financing statements, endorsements, assignments or
other instruments of transfer or release. The US Administrative Agent, on behalf
of itself and each US Lender, hereby ratifies, without liability, all that said
attorneys shall lawfully do or cause to be done pursuant to the power of
attorney granted in this paragraph.
6. Consents of Canadian Administrative Agent and Canadian Lenders.
--------------------------------------------------------------
(a) The Canadian Administrative Agent, on behalf of itself and each
Canadian Lender, consents and agrees that, without the necessity of any
reservation of rights against the Canadian Administrative Agent or any Canadian
Lender, and without notice to or further assent by the Canadian Administrative
Agent or any Canadian Lender (subject, however, to Section 11):
XVI-13
(1) any demand for payment of any US Obligation made by the US
Administrative Agent or any US Lender may be rescinded in whole or in part by
the US Administrative Agent or any such US Lender, and any US Obligation may be
continued, and the US Obligations, or the liability of any Loan Party or any
guarantor or any other party upon or for any part thereof, or any collateral
security or guarantee therefor or right of offset with respect thereto, or any
obligation or liability of any Loan Party or any other party under the US Credit
Agreement or any other agreement, may, from time to time, in whole or in part,
be renewed, extended, modified, accelerated, compromised, waived, surrendered,
or released by the US Administrative Agent or any US Lender; and
(2) the US Credit Agreement, the US Notes (if any) and any other US
Loan Document may be amended, modified, supplemented or terminated, in whole or
in part, as the US Administrative Agent or any US Lender may deem advisable from
time to time, and any collateral security (other than any Canadian Collateral)
at any time held by the US Administrative Agent or any US Lender for the payment
of any of the US Obligations may be sold, exchanged, waived, surrendered or
released, in each case all without notice to or further assent by the Canadian
Administrative Agent or by any Canadian Lender, which will remain bound under
this Agreement, and all without impairing, abridging, releasing or affecting the
subordination provided for herein.
(b) The Canadian Administrative Agent, an behalf of each Canadian Lender,
waives any and all notice of the creation, renewal, extension or accrual of any
of the US Obligations and notice of or proof of reliance by the US Lenders upon
this Agreement. The US Obligations, and any of them, shall be deemed
conclusively to have been created, contracted or incurred in reliance upon this
Agreement, and all dealings between the US Borrower and the US Lenders shall be
deemed to have been consummated in reliance upon this Agreement. The Canadian
Administrative Agent, on behalf of each Canadian Lender, acknowledges and agrees
that the US Lenders have relied upon the subordination provided for herein in
entering into the US Credit Agreement and in making funds and letters of credit
available to the US Borrower thereunder and in entering into any US Bank Hedge
Agreement. The Canadian Administrative Agent, on behalf of itself and each
Canadian Lender, waives notice of or proof of reliance on this Agreement and
protest, demand for payment and notice of default.
7. Consents of US Administrative Agent and US Lenders.
--------------------------------------------------
(a) The US Administrative Agent, on behalf of each US Lender, consents and
agrees that, without the necessity of any reservation of rights against the US
Administrative Agent or any US Lender, and without notice to or further assent
by the US Administrative Agent or any US Lender (subject, however, to Section
11):
(1) any demand for payment of any Canadian Obligation made by the
Canadian Administrative Agent or any Canadian Lender may be rescinded in whole
or in part by the Canadian Administrative Agent or any such Canadian Lender, and
any Canadian Obligation may be continued, and the Canadian Obligations, or the
liability of any Loan Party or any guarantor or any other party upon or for any
part thereof, or any collateral security or guarantee therefor or right of
offset with respect thereto, or any obligation or liability of any Loan Party or
XVI-14
any other party under the Canadian Credit Agreement or any other agreement, may,
from time to time, in whole or in part, be renewed, extended, modified,
accelerated, compromised, waived, surrendered, or released by the Canadian
Administrative Agent or any Canadian Lender; and
(2) the Canadian Credit Agreement, the Canadian Notes (if any) and
any other Canadian Loan Document may be amended, modified, supplemented or
terminated, in whole or in part, as the Canadian Administrative Agent or any
Canadian Lender may deem advisable from time to time, and any collateral
security (other than any US Collateral but excluding from US Collateral for the
purposes of this clause (2), Panolam Canada Stock and any Designated
Intercompany Indebtedness constituting US Collateral) at any time held by the
Canadian Administrative Agent or any Canadian Lender for the payment of any of
the Canadian Obligations may be sold, exchanged, waived, surrendered or
released, in each case all without notice to or further assent by the US
Administrative Agent or by any US Lender, which will remain bound under this
Agreement, and all without impairing, abridging, releasing or affecting the
subordination provided for herein.
(b) The US Administrative Agent, on behalf of each US Lender, waives
any and all notice of the creation, renewal, extension or accrual of any of the
Canadian Obligations and notice of or proof of reliance by the Canadian Lenders
upon this Agreement. The Canadian Obligations, and any of them, shall be deemed
conclusively to have been created, contracted or incurred in reliance upon this
Agreement, and all dealings between the Canadian Borrower and the Canadian
Lenders shall be deemed to have been consummated in reliance upon this
Agreement. The US Administrative Agent, on behalf of each US Lender,
acknowledges and agrees that the Canadian Lenders have relied upon the
subordination provided for herein in entering into the Canadian Credit Agreement
and in making funds and letters of credit available to the Canadian Borrower
thereunder and in entering into any Canadian Bank Hedge Agreement. The US
Administrative Agent, an behalf of itself and each US Lender waives, notice of
or proof of reliance on this Agreement and protest, demand for payment and
notice of default.
8. Negative Covenants of the Canadian Administrative Agent on behalf of
--------------------------------------------------------------------
the Canadian Lenders.
--------------------
So long as any of the US Obligations shall remain outstanding, neither
the Canadian Administrative Agent nor any Canadian Lender shall, without the
prior written consent of the US Administrative Agent.
(a) permit any of the Canadian Loan Documents to be amended, amended and
restated, modified or otherwise supplemented except as provided in Section 11;
or
(b) commence, or join with any creditors other than the US Lenders in
commencing, any US Insolvency Proceeding with respect to the US Borrower or any
of its Domestic Subsidiaries or any other proceeding referred to in the
definition of "Insolvency Event" with respect to the US Borrower or any of its
Domestic Subsidiaries.
XVI-15
9. Negative Covenants of the US Administrative Agent on behalf of the US
---------------------------------------------------------------------
Lenders.
-------
So long as any of the Canadian Obligations shall remain outstanding,
neither the US Administrative Agent nor any US Lender shall, without the prior
written consent of the Canadian Administrative Agent:
(a) permit any of the US Loan Documents to be amended, amended and
restated, modified or otherwise supplemented except as provided in Section 11;
or
(b) commence, or join with any creditors other than the Canadian Lenders
in commencing, any Canadian Insolvency Proceeding with respect to the Canadian
Borrower or any of its Subsidiaries or any other proceeding referred to in the
definition of "Insolvency Event" with respect to the Canadian Borrower or any of
its Subsidiaries.
10. US and Canadian Obligations Unconditional.
-----------------------------------------
All rights and interests and all agreements and obligations of the
parties hereunder shall remain in full force and effect irrespective of:
(a) any lack of validity or enforceability of any US Security Document,
any other US Loan Document or any Canadian Security Document or any other
Canadian Loan Document;
(b) any change in the time, manner or place of payment of, or in any other
term of, all or any of the US Obligations or the Canadian Obligations, or any
amendment or waiver or other modification, whether by course of conduct or
otherwise, of the terms of the US Credit Agreement, any US Security Document,
any other US Loan Documents or the Canadian Credit Agreement, any Canadian
Security Documents or any other Canadian Loan Documents;
(c) any exchange, release or nonperfection of any security interest in any
US Collateral or Canadian Collateral, or any release, amendment, waiver or other
modification, whether in writing or by course of conduct or otherwise, of all or
any of the US Obligations or the Canadian Obligations or any guarantee for any
thereof; or
(d) any other circumstances which otherwise might constitute a defense
available to, or a discharge of, any Loan Party in respect of the US Obligations
or the Canadian Obligations, or of any Canadian Lender, the Canadian Borrower,
any US Lender or the US Borrower in respect of this Agreement.
11. Voting.
------
(a) Notwithstanding any contrary provision of the US Credit Agreement
or any other US Loan Document or the Canadian Credit Agreement or any other
Canadian Loan Document (but subject to Section 1l(b) hereof):
(i) (A) any amendment or waiver of any provision of, and any consent
to departure from the provisions of, any US Loan Document that would, but
for the
XVI-16
provisions of this Section 11, require the approval of the Required Lenders
under and as defined in the US Credit Agreement, and (B) any amendment or
waiver of any provision of any Canadian Loan Document that would, but for
the provisions of this Section 11, require the approval of the Required
Lenders under and as defined in the Canadian Credit Agreement may be made
(and may only be made) with the approval of, and shall be effective if the
same shall be in writing and signed by, US Lenders and Canadian Lenders
owed or holding greater than 50% of the sum of (x) the aggregate principal
amount of US Loans outstanding under the US Credit Agreement and Canadian
Loans outstanding under the Canadian Credit Agreement at such time, (y) the
aggregate Letter of Credit Usage (as defined in each such Credit Agreement)
under the US Credit Agreement and the Canadian Credit Agreement at such
time, and (z) the aggregate Unused Revolving Commitments (as defined in
each such Credit Agreement) under the US Credit Agreement and the Canadian
Credit Agreement at such time the "Combined Required Lenders");
-------------------------
(ii) any amendment or waiver of any provision of, and any consent to
departure from the provisions of, any US Loan Document or any Canadian Loan
Document that would, pursuant to the terms of the US Credit Agreement or
the Canadian Credit Agreement, respectively, require the approval of all
Lenders or the Supermajority Lenders under such Credit Agreement or of any
specific Lender, Agent or Issuing Bank under such Credit Agreement, shall
require the approval of all such Lenders, the Supermajority Lenders or each
such Lender, Agent or Issuing Bank, as the case may be, in addition to the
Combined Required Lenders;
(iii) any amendment or waiver of any provision of, and any consent to
departure from the provisions of, Section 9.01{a) of either Credit
Agreement or this Section 11 shall require the approval of each
Administrative Agent, each US Lender and each Canadian Lender;
(iv) any amendment or waiver of any provision of, and any consent to
departure from the provisions of, this Agreement (or any definition in any
US Loan Document or Canadian Loan Document that would have a substantive
effect on any provision of this Agreement) shall require the approval of
the Canadian Administrative Agent and the Required Lenders under and as
defined in the Canadian Credit Agreement and the US Administrative Agent
and the Required Lenders under and as defined in the US Credit Agreement
(or, in each case, such greater percentage of Lenders or such additional
Lenders as may be required under the foregoing provisions of this Section
11(a));
(v) notwithstanding any contrary provision hereof, any amendment or
waiver of any provision of, and any consent to departure from the
provisions of any US Loan Document that would have the effect of releasing
any US Collateral (except as expressly provided in the US Loan Documents)
shall require the approval of the Required Lenders under and as defined in
the US Credit Agreement in addition to the Combined Required Lenders
(except that (A) a release of all or substantially all US Collateral shall
require the approval of all US Lenders as set forth in Section 9.01 of the
US Credit Agreement, and
XVI-17
(B) the provisions of Section 6.02(e)(iii) of the US Credit Agreement may
be amended or waived to permit the sale of assets with a fair value in
excess of $5,000,000 in any period of 12 consecutive months (but not to
exceed $15,000,000 since the Closing Date) with the approval only of the
Combined Required Lenders); and
(vi) notwithstanding any contrary provision hereof, any amendment or
waiver of any provision of, and any consent to departure from the
provisions of any Canadian Loan Document that would have the effect of
releasing any Canadian Collateral (except as expressly provided in the
Canadian Loan Documents) shall require the approval of the Required Lenders
under and as defined in the Canadian Credit Agreement in addition to the
Combined Required Lenders (except that a release of all or substantially
all Canadian Collateral shall require the approval of all Canadian Lenders
as set forth in Section 9.01 of the Canadian Credit Agreement, and (B) the
provisions of Section 6.02(e)(iii) of the Canadian Credit Agreement may be
amended or waived to permit the sale of assets with a fair value in excess
of $5,000,000 in any period of 12 consecutive months (but not to exceed
$15,000,000 since the Closing Date) with the approval only of the Combined
Required Lenders).
(b) Notwithstanding any contrary provision hereof (including Section
11(a)) or of any US Loan Document or Canadian Loan Document, (i) at any lime
when an Event of Default under and as defined in the US Loan Documents has
occurred and is continuing and has not been waived pursuant to Section 11(a),
the Required Lenders (as defined in the US Credit Agreement) shall have the sole
authority to direct the US Administrative Agent (including in its capacity as
Acting Administrative Agent under and as defined in the US Security Agreement)
with respect to any actions under Section 7.01 or 7.02 of the US Credit
Agreement and any actions under the Security Documents relating to the US
Collateral (other than the Panolam Canada Stock and Designated Intercompany
Indebtedness constituting US Collateral), (ii) at any time when an Event of
Default under and as defined in the Canadian Loan Documents has occurred and is
continuing and has not been waived pursuant to Section 11(a), the Required
Lenders (as defined in the Canadian Credit Agreement) shall have the sole
authority to direct the Canadian Administrative Agent and the Acting
Administrative Agent under the US Security Agreement with respect to any actions
under Section 7.01 or 7.02 of the Canadian Credit Agreement and with respect to
any actions relating to the Canadian Collateral.
12. No Representation by Parties.
----------------------------
Neither the Canadian Administrative Agent nor the US Administrative
Agent has made or hereby or otherwise makes to any other party hereto or to any
US Lender or Canadian Lender, any representations or warranties, express, or
implied, nor does any such party assume any liability to any other party or to
any US Lender or Canadian Lender with respect to: (a) the financial or other
condition of obligors under any instruments of guarantee with respect to the US
Obligations or the Canadian Obligations, (b) the enforceability, validity, value
or collectibility of the US Obligations or the Canadian Obligations, any
collateral therefor, or any guarantee or security which may have been or may be
granted in connection with any of the US Obligations or the Canadian Obligations
or (c) any Loan Party's title or right to transfer any collateral or security.
XVI-18
13. Insolvency Proceedings.
----------------------
The provisions of this Agreement shall continue in full force and
effect notwithstanding the occurrence of any event contemplated under the
definition of "Insolvency Event."
14. Further Assurances.
------------------
The parties hereto, at their own expense (except as otherwise
expressly provided herein or in either Credit Agreement) and at any time and
from time to time, upon the written request of the US Administrative Agent or
the Canadian Administrative Agent will promptly and duly execute and deliver
such further instruments and documents and take such further actions as the US
Administrative Agent or the Canadian Administrative Agent reasonably may request
for the purposes of obtaining or preserving the full benefits of this Agreement
and of the rights and powers herein granted.
15. Miscellaneous.
-------------
(a) The US Administrative Agent hereby appoints the Canadian
Administrative Agent as the agent of the US Administrative Agent for purposes of
holding (and perfecting any security interest in) any collateral in which the US
Administrative Agent has any interest and which is in the possession of the
Canadian Administrative Agent. The Canadian Administrative Agent hereby appoints
the US Administrative Agent as the agent of the Canadian Administrative Agent
for purposes of holding (and perfecting any security interest in) any collateral
in which the Canadian Administrative Agent has any interest and which is in the
possession of the US Administrative Agent.
(b) Notwithstanding any contrary provision hereof, the Canadian
Administrative Agent shall, to the extent that the Canadian Administrative Agent
reasonably determines necessary in connection with the exercise of any remedies
in respect of any Canadian Collateral, be entitled to exercise its rights under
(A) the Agreement Respecting Intellectual Property among the US Borrower, the
Canadian Borrower, the Canadian Administrative Agent and the US Administrative
Agent, (B) the Patent License Agreement between the US Borrower, as licensor,
and the Canadian Borrower, as licensee, dated as of June 7, 1996, (C) the Trade
▇▇▇▇ License Agreement between the US Borrower, as licensor, and the Canadian
Borrower, as licensee, dated as of June 7, 1996, and (D) the Trade ▇▇▇▇ License
Agreement between the US Borrower, as licensor, and the Canadian Borrower, as
licensee, dated April 14, 1997, and the Canadian Administrative Agent shall have
the right to use, without charge, any intellectual property of any US Loan Party
not covered by the Agreement Respecting Intellectual Property as of the date
hereof in connection with the exercise of any remedies in respect of any
Canadian Collateral.
(c) The US Administrative Agent agrees (i) to notify the Canadian
Administrative Agent of the occurrence of any Event of Default under the US
Credit Agreement of which the US Administrative Agent has actual knowledge (but
the US Administrative Agent shall have no liability whatsoever for failing to so
notify the Canadian Administrative Agent),
XVI-19
and (ii) upon the request of the Canadian Administrative Agent, to provide to
the Canadian Administrative Agent at the US Borrower's expense, such information
regarding the US Collateral as may be reasonably requested by the Canadian
Administrative Agent to the extent such information is readily available to the
US Administrative Agent.
(d) The Canadian Administrative Agent agrees (i) to notify the US
Administrative Agent of the occurrence of any Event of Default under the
Canadian Credit Agreement of which the Canadian Administrative Agent has actual
knowledge (but the Canadian Administrative Agent shall have no liability
whatsoever for failing to so notify the US Administrative Agent), and (ii) upon
the request of the US Administrative Agent, to provide to the US Administrative
Agent at the Canadian Borrower's expense, such information regarding the
Canadian Collateral as may be reasonably requested by the US Administrative
Agent to the extent such information is readily available to the Canadian
Administrative Agent.
16. Provisions Define Relative Rights.
---------------------------------
This Agreement is intended solely for the purpose of defining the
relative rights of the US Administrative Agent and the US Lenders on the one
hand and the Canadian Administrative Agent and the Canadian Lenders on the
other, and no other Person shall have any right, benefit or other interest under
this Agreement and nothing in this Agreement shall relieve any Loan Party from
its obligations under any US Loan Document or Canadian Loan Document.
17. Powers Coupled With An Interest.
-------------------------------
All powers, authorizations and agencies contained in this Agreement
are coupled with an interest and are irrevocable until the later of the date on
which (i) the US Obligations are paid in full, all Letters of Credit issued
under the US Credit Agreement have expired or been terminated and all
Commitments and other obligations of the US Lenders under the US Loan Documents
are terminated, and (ii) the Canadian Obligations are paid in full, all Liters
of Credit issued under the Canadian Credit Agreement have expired or been
terminated and the Commitments and other obligations of the Canadian Lenders
under the Canadian Loan Documents are terminated.
18. Authority of the Administrative Agents.
--------------------------------------
The Loan Parties, the Canadian Administrative Agent, on behalf of
itself and the Canadian Lenders, and the US Administrative Agent, on behalf of
itself and the US Lenders, acknowledge that the rights and responsibilities of
each Administrative Agent under this Agreement with aspect to any action taken
by such Administrative Agent or the exercise or nonexercise by such
Administrative Agent of any option, request, judgment or other right or remedy
provided for herein or resulting or arising out of this Agreement shall, as
between the US Administrative Agent and the US Lenders, be governed by the US
Credit Agreement and by such other agreements with respect thereto as may exist
from time to time among them, and as between the Canadian Administrative Agent
and the Canadian Lenders, be governed by the Canadian Credit Agreement and by
such other agreements with respect thereto as may exist from time to time among
them.
XVI-20
19. Notices.
-------
All notices, requests and demands to or upon any party hereto to be
effective shall be given or made in accordance with the requirements of Section
9.02 of the US Credit Agreement or Section 9.02 of the Canadian Credit
Agreement, as applicable. Any party may change its addresses and transmission
numbers for notices by notice in the manner provided in such Sections.
20. Counterparts.
------------
This Agreement may be executed by one or more of the parties on any
number of separate counterparts, and all of said counterparts taken together
shall be deemed to constitute one and the same instrument.
21. Severability.
------------
Any provision of this Agreement which is prohibited or unenforceable
in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent
of such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
22. No Waiver: Remedies Cumulative.
------------------------------
(a) No failure to exercise, nor any delay in exercising, on the part of
the US Administrative Agent, the Canadian Administrative Agent, any US Lender or
any Canadian Lender, any right, power or privilege hereunder shall operate as a
waiver thereof. No single or partial exercise of any right, power or privilege
hereunder shall preclude any other or further exercise thereof or the exercise
of any other right, power or privilege.
(b) The rights and remedies herein provided are cumulative, may be
exercised singly or concurrently and are not exclusive of any other rights or
remedies provided by law.
23. Section Headings.
----------------
The section headings used in this Agreement are for convenience of
reference only and are not to affect the construction hereof or be taken into
consideration in the interpretation hereof.
24. Successors and Assigns.
----------------------
(a) This Agreement shall be binding upon the successors and assigns of the
parties hereto and each future holder of the US Obligations or Canadian
Obligations and shall inure to the benefit of the US Administrative Agent, the
US Lenders, the Canadian Administrative Agent and the Canadian Lenders and their
respective successors and assigns.
XVI-21
(b) Upon a successor US Administrative Agent becoming the US
Administrative Agent under the US Credit Agreement, such successor US
Administrative Agent automatically shall become the US Administrative Agent
hereunder with all the rights and powers of the US Administrative Agent
hereunder without the need for any further action on the part of any party
hereto.
(c) Upon a successor Canadian Administrative Agent becoming the Canadian
Administrative Agent under the Canadian Credit Agreement, such successor
Canadian Administrative Agent automatically shall become the Canadian
Administrative Agent hereunder with all the rights and powers of the Canadian
Administrative Agent hereunder without the need for any further action on the
part of any party hereto.
25. Governing Law.
-------------
This Agreement shall be governed by, and construed and interpreted in
accordance with, the law of the State of New York.
[Signature pages follow]
XVI-22
IN WITNESS WHEREOF, the parties hereto have caused this Intercreditor and
Subordination Agreement to be duly executed and delivered as of the day and year
first above written.
PANOLAM INDUSTRIES INTERNATIONAL,
INC., as US Borrower
By:___________________________
Name:
Title:
PANOLAM INDUSTRIES LTD., as
Canadian Borrower
By:___________________________
Name:
Title:
PANOLAM INDUSTRIES HOLDINGS, INC.,
as a Loan Party
By:___________________________
Name:
Title:
PANOLAM GROUP, INC., as a Loan
Party
By:___________________________
Name:
Title:
PII SECOND, INC., as a Loan Party
By:___________________________
Name:
Title:
XVI-23
PANOLAM INDUSTRIES, INC., as a
Loan Party
By:___________________________
Name:
Title:
PIONEER PLASTIC CORPORATION, as a
Loan Party
By:___________________________
Name:
Title:
CREDIT SUISSE FIRST BOSTON, as US
Administrative Agent
By:___________________________
Name:
Title:
By:___________________________
Name:
Title:
CREDIT SUISSE FIRST BOSTON CANADA,
as Canadian Administrative Agent
By:___________________________
Name:
Title:
By:___________________________
Name:
Title:
XVI-24