EXHIBIT 10.20
EXECUTIVE STOCK PLEDGE AGREEMENT
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THIS PLEDGE AGREEMENT is made as of November 24, 1999 (the "Closing Date"),
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between ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇. (the "Executive") and Panolam Industries Holdings,
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Inc., a Delaware corporation ("Holdings").
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WHEREAS, the Executive and Holdings (the "Parties") and Panolam Industries
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International, Inc., a Delaware corporation ("International") have entered into
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a certain Employment Agreement dated as of November 24, 1999 (the "Employment
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Agreement");
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WHEREAS, pursuant to the Employment Agreement, the Parties have entered
into a certain Executive Stock Purchase Agreement, dated as of the Closing Date
(the "Executive Stock Agreement"), under which the Executive has purchased
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2,717.5 shares (the "Pledged Shares") of Holdings' common stock, $.01 par value,
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for an aggregate purchase price of $3,500,000;
WHEREAS, the Executive purchased the Pledged Shares by delivering to
Holdings a promissory note in the aggregate principal amount of $3,500,000 (the
"Executive Note");
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WHEREAS, the Parties desire to set forth the terms and conditions upon
which the Executive Note is secured by the Executive's pledge to Holdings of the
Pledged Shares;
NOW, THEREFORE, in consideration of the premises contained herein and other
good and valuable consideration the receipt and sufficiency of which are hereby
acknowledged, and in order to induce Holdings to accept the Executive Note as
full payment for the Pledged Shares, the Parties hereby agree as follows:
1. Pledge. The Executive hereby pledges to Holdings, and grants to
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Holdings a security interest in, the Pledged Shares as security for the prompt
and complete payment when due of the unpaid principal of, and interest on, the
Executive Note. Holdings shall be deemed to hold the Pledged Shares for the
benefit of itself as lender pursuant to the Executive Note and otherwise in
trust for the Executive pursuant to the terms hereof.
2. Delivery of Pledged Shares. Upon the execution of this Pledge
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Agreement, the Executive shall deliver to Holdings the certificate(s)
representing the Pledged Shares, together with such duly executed forms of
assignment sufficient to transfer title thereto as Holdings may reasonably
request.
3. Voting Rights; Cash Dividends. Notwithstanding anything to the
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contrary contained herein, during the term of this Pledge Agreement and until
such time as there exists a material default under the Executive Note, the
Executive shall be entitled to all voting rights with respect to the Pledged
Shares, and shall be entitled to receive all cash dividends paid in respect of
the Pledged Shares. Upon the occurrence of, and during the continuance of, any
such default, Holdings shall retain all such cash dividends payable on the
Pledged Shares as additional security hereunder.
4. Stock Dividends, Distributions, etc. If, while this Pledge Agreement
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is in effect, the Executive becomes entitled to receive or receives any
securities or other property in respect of, in substitution for, or in exchange
for any of the Pledged Shares (whether as a distribution in connection with any
recapitalization, reorganization or reclassification, a stock dividend or
otherwise), the Executive shall, upon reasonable request by Holdings, accept
such securities or other property on behalf of, and for the benefit of, Holdings
as additional security for the Executive's obligations under the Executive Note
and shall promptly deliver such additional security to Holdings together with
such duly executed forms of assignment as Holdings may reasonably request, and
such additional security shall be deemed to be part of the Pledged Shares
hereunder.
5. Default. If the Executive defaults in the payment of principal or
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interest under the Executive Note when it becomes due, Holdings may exercise any
and all the rights, powers and remedies of any owner of the Pledged Shares
(including the right to vote the Pledged Shares and receive dividends and
distributions with respect to the Pledged Shares) and shall have, and may
exercise, any and all the rights and remedies granted to a secured party upon
default under the Uniform Commercial Code of New York or otherwise available to
Holdings under applicable law. Without limiting the foregoing, Holdings is
authorized to sell, assign and deliver at its discretion, from time to time, all
or any part of the Pledged Shares at any private sale or public auction, on not
less than ten days written notice to the Executive, at such price or prices and
upon such terms as Holdings may deem advisable. The Executive shall have no
right to redeem the Pledged Shares after any such sale or assignment. At any
such sale or auction, Holdings may bid for, and become the purchaser of, the
whole or any part of the Pledged Shares offered for sale. In case of any such
sale, after deducting the costs, attorneys' fees and other expenses of sale and
delivery, the remaining proceeds of such sale shall be applied to the principal
of and accrued interest on the Executive Note; provided, however, that after
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payment in full of the aggregate indebtedness evidenced by the Executive Note,
the balance of the proceeds of sale then remaining shall be paid to the
Executive and the Executive shall be entitled to the return of any of the
Pledged Shares remaining in the custody of Holdings. To the extent provided in
Section 4(a) of the Executive Note, the Executive shall be liable for any
deficiency if the remaining proceeds are insufficient to pay the indebtedness
under the Executive Note in full.
6. Payment of Indebtedness and Release of Pledged Shares. Upon payment of
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any portion of the aggregate indebtedness evidenced by the Executive Note,
Holdings shall promptly release a pro rata portion of the Pledged Shares to the
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Executive, together with all forms of assignment reasonably requested by the
Executive and other documentation reasonably requested by the Executive relating
to the released Pledged Shares. Upon full payment of all principal and interest
evidenced by the Executive Note, Holdings shall promptly release all Pledged
Shares to the Executive, together with all forms of assignment reasonably
requested by the Executive and other documentation reasonably requested by the
Executive relating to them.
If any Pledged Shares are to be transferred pursuant to an exercise of
"Tag-Along Rights" or "Drag-Along Rights" or in an "Approved Sale" (as such
terms are defined in the Executive Stockholders' Agreement of even date herewith
among Panolam Acquisition Company, L.L.C., Holdings and the Executive), then the
proceeds from such transfer, to the extent of the indebtedness then outstanding
under the Executive Note, shall be applied to prepay amounts
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outstanding under the Executive Note (provided that any non-cash proceeds shall
be valued at their Fair Market Value). Upon reasonable conditions as Holdings
may then in good faith establish, Holdings shall release all or any part of the
Pledged Shares to be transferred pursuant to an exercise of Tag-Along Rights or
Drag-Along Rights or in an Approved Sale.
7. Further Assurances. Each Party agrees that at any time, and from time
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to time, upon the reasonable written request of the other Party, such Party
shall promptly execute and deliver such further documents, and promptly do such
further acts and things, as are reasonably necessary in order to effect the
purposes of this Pledge Agreement.
8. Miscellaneous. The following Sections of the Employment Agreement
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shall be deemed incorporated into this Pledge Agreement as if fully set forth
herein, except that (A) all references to "the Company" shall be disregarded,
(B) all references to "this Agreement" shall be deemed to be references to this
Pledge Agreement, (C) the term "Covered Claim" as used in Section 15 of the
Employment Agreement shall be deemed to include only claims arising under or
relating to this Pledge Agreement and (D) references to attached "forms of
agreement" shall be disregarded:
(i) Section 13 (relating to assignments and transfers),
(ii) Section 14 (relating to representations),
(iii) Section 15 (relating to dispute resolution),
(iv) Section 16 (relating to notices),
(v) Section 17(a) (the "integration clause") which shall be deemed
to include the Employment Agreement and the agreements forms of which are
attached to the Employment Agreement,
(vi) Section 17(b) (relating to severability),
(vii) Section 17(c) (relating to amendments and waivers),
(viii) Section 17(d) (relating to headings),
(ix) Section 17(e) (second sentence only) (relating to the
Executive's death or incompetence),
(x) Section 17(f) (relating to survival of provisions),
(xi) Section 17(j) (relating to governing law) and
(xii) Section 17(k) (relating to counterparts).
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IN WITNESS WHEREOF, the Parties have entered into this Pledge Agreement as of
the date first set forth above.
THE EXECUTIVE
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▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
PANOLAM INDUSTRIES HOLDINGS, INC.
By: _________________________
Name:
Title:
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