EXHIBIT 10.27
WARRANT AGREEMENT
among
PANOLAM INDUSTRIES HOLDINGS, INC.,
GENSTAR CAPITAL PARTNERS II, L.P.
and
STARGEN II LLC
Dated as of November 24, 1999
WARRANT AGREEMENT
WARRANT AGREEMENT, dated as of November 24, 1999 (as thereafter amended,
supplemented or otherwise modified, this "Agreement"), among Panolam Industries
Holdings, Inc., a corporation organized and existing under the laws of the State
of Delaware (the "Company"), Genstar Capital Partners II, L.P. ("Genstar"), a
Delaware limited partnership, and StarGen II LLC, a Delaware limited liability
company ("Stargen").
W I T N E S S E T H
- - - - - - - - - -
WHEREAS, in connection with the Stock Purchase and Redemption Agreement,
dated October 14, 1999, among Genstar, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇. and
Panolam Acquisition Company L.L.C., a limited liability company organized and
existing under the laws of the State of Delaware ("PAC"), and the issuance and
delivery of junior subordinated notes (the "Notes") to Genstar and Stargen by
the Company as payment for the shares of Class A Common Stock, par value $0.01
per share (the "Common Stock"), of the Company redeemed thereunder, the Company
has agreed, if and only if any portion of the principal amount of the Notes
shall remain outstanding on November 24, 2005, to issue and deliver to Genstar
and Stargen warrant certificates (the "Warrant Certificates") evidencing
warrants to purchase shares of Common Stock;
WHEREAS, the Underlying Common Stock (as defined below) will be subject to
the terms and conditions of the Stockholders' Agreement, dated as of November
24, 1999 (as thereafter amended, supplemented or otherwise modified, the
"Stockholders' Agreement"), among the Company, PAC, Genstar and Stargen; and
WHEREAS, the parties hereto desire to enter into this Agreement in order to
set forth their agreement concerning the terms and provisions of the Warrants
(as defined below) and the respective rights and obligations thereunder of the
Company and the registered holders of the Warrants, and such other matter as are
set forth herein;
NOW, THEREFORE, in consideration of the foregoing and the mutual agreements
and covenants hereinafter set forth and other good and valuable consideration,
the receipt and adequacy of which are hereby acknowledged, and intending to be
legally bound hereby, the parties hereto hereby agree as follows:
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ARTICLE I
DEFINITIONS
SECTION 1.01. CERTAIN DEFINED TERMS. Unless the context otherwise requires,
the following terms, when used in this Agreement, shall have the respective
meanings specified below:
"ADDITIONAL DETERMINATION DATE" shall mean November 24 of each of 2006
through 2009, inclusive, if any amounts are still owing under the Notes on such
dates.
"ADDITIONAL WARRANTS" shall mean warrants of a series designated as such to
purchase shares of Common Stock, representing that number of shares of Common
Stock equal to (x) the aggregate principal amount outstanding under the Notes on
the applicable Additional Determination Date divided by $19.0 million,
multiplied by (y) 2.5% of the number of shares of Common Stock outstanding on
such Additional Determination Date.
"AFFILIATE" shall mean, with respect to any person, any other person that
directly, or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with, such specified person.
"AGREEMENT" or "THIS AGREEMENT" shall have the meaning specified in the
preamble to this Agreement.
"BENEFICIAL OWNER" or "BENEFICIALLY OWN" shall have the meaning given such
term in Rule 13d-3 under the Exchange Act.
"BOARD" shall mean the board of directors of the Company.
"BUSINESS DAY" shall mean any day that is not a Saturday, a Sunday or other
day on which banks are required or authorized by law to be closed in New York,
New York.
"COMMISSION" shall mean the Securities and Exchange Commission, and any
successor commission or agency having similar powers.
"COMMON STOCK" shall have the meaning specified in the recitals to this
Agreement.
"COMPANY" shall have the meaning specified in the preamble to this
Agreement.
"CONTROL" (including the terms "CONTROLLED BY" and "UNDER COMMON CONTROL
WITH") shall mean, with respect to the relationship between or among two or more
persons, the possession, directly or indirectly or as trustee or executor, of
the power to direct or cause the direction of the affairs or management of a
person, whether through the ownership of voting securities, as trustee or
executor, by contract or otherwise, including, without limitation, the
ownership, directly or indirectly, of securities having the power to elect a
majority of the board of directors or similar body governing the affairs of such
person.
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"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as amended,
and the rules and regulations thereunder.
"EXERCISE PRICE" shall have the meaning specified in Section 3.01.
"EXPIRATION DATE" shall be five years from the date of issuance of the
applicable Warrant Certificate.
"FAIR MARKET VALUE" shall mean, with respect to any shares of Common Stock
as of any date of determination, (i) if such shares of Common Stock are not
registered under the Exchange Act, the fair value of such shares of Common Stock
(or the Common Stock into or for which such shares of Common Stock are
convertible, exchangeable or exercisable) on a fully diluted basis (A) as
determined reasonably and in good faith in the most recently completed arm's-
length transaction between the Company and an unaffiliated third party in which
such determination is necessary and the closing of which shall have occurred
within the six months preceding such date of determination; or (B) if no such
transaction shall have occurred within such six-month period, as determined
reasonably and in good faith by the Board in accordance with the Valuation
Criteria; or (ii) if such shares of Common Stock are registered under the
Exchange Act, the average of the daily Market Prices of such shares of Common
Stock (or the Common Stock into or for which such Shares are convertible,
exchangeable or exercisable) for the 10 consecutive trading days immediately
preceding such date of determination or, if such shares of Common Stock have
been registered under the Exchange Act for fewer than 10 consecutive trading
days before such date, then the average of the daily Market Prices for all of
the trading days before such date for which daily Market Prices are available;
provided, however, that the Fair Market Value of any shares of Common Stock
convertible, exchangeable or exercisable for Common Stock shall be reduced by
the aggregate value of the consideration, if any, payable upon the conversion,
exchange or exercise of such Shares.
"GENSTAR" shall have the meaning specified in the preamble to this
Agreement.
"HOLDERS" shall mean the registered holders from time to time of the
Warrants and, unless otherwise provided or indicated herein, the registered
holders from time to time of the Underlying Common Stock.
"INDEPENDENT FINANCIAL EXPERT" shall mean a nationally recognized
investment banking firm that does not (and whose directors, officers, employees
and affiliates do not) have a direct or indirect financial interest in the
Company or any of its Affiliates, that has not been and at the time it is called
upon to give independent financial advice to the Company, is not (and none of
whose directors, officers, employees or Affiliates is) a promoter, director or
officer of the Company or any of its Affiliates or an underwriter or placement
agent with respect to any of the securities of the Company or any of its
Affiliates, and that does not provide any advice or opinions to the Company or
any of its Affiliates except as an Independent Financial Expert.
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"MARKET PRICE" shall mean, with respect to any shares of Common Stock
registered under the Exchange Act for any specified trading day, (i) in the case
of shares of Common Stock listed or admitted to trading on any securities
exchange, the closing price, regular way, on such day, or if no sale takes place
on such day, the average of the closing bid and asked prices on such day, (ii)
in the case of shares of Common Stock not then listed or admitted to trading on
any securities exchange, the last reported sale price on such day, or if no sale
takes place on such day, the average of the closing bid and asked prices on such
day, as reported by a reputable quotation source designated by the Company,
(iii) in the case of shares of Common Stock not then listed or admitted to
trading on any securities exchange and as to which no such reported sale price
or bid and asked prices are available, the average of the reported high bid and
low asked prices on such day, as reported by a reputable quotation service, or a
newspaper of general circulation in the Borough of Manhattan, City and State of
New York, customarily published on each business day, designated by the Company,
or if there shall be no bid and asked prices on such day, the average of the
high bid and low asked prices, as so reported, on the most recent day (not more
than 10 days prior to the date in question) for which prices have been so
reported, and (iv) if there are no bid and asked prices reported during the 10
days prior to the specified date, the Fair Market Value of such shares of Common
Stock as determined as if such shares of Common Stock were not registered under
the Exchange Act.
"NOTE" shall have the meaning specified in the recitals to this Agreement.
"PERSON" shall mean any individual, corporation, partnership, association,
joint-stock company, trust, unincorporated organization or other entity or any
government or political subdivision, agency or instrumentality thereof, as well
as any syndicate or group that would be deemed to be a person under Section
13(d)(3) of the Exchange Act.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended, and the
rules and regulations thereunder.
"SERIES 1 DETERMINATION DATE" shall mean November 24, 2005.
"SERIES 1 WARRANTS" shall mean warrants designated Series 1 Warrants to
purchase shares of Common Stock, representing, in the aggregate, that number of
shares of Common Stock equal to (x) the aggregate principal amount outstanding
under the Notes on the Series 1 Determination Date divided by $19.0 million,
multiplied by (y) 2.5% of the number of shares of Common Stock outstanding on
the Series 1 Determination Date.
"STOCKHOLDERS' AGREEMENT" shall have the meaning specified in the recitals
to this Agreement.
"SUBSIDIARY" shall mean, with respect to any person, any affiliate of such
person controlled by such person directly, or indirectly through one or more
intermediaries.
"UNDERLYING COMMON STOCK" shall mean the shares of Common Stock issuable or
issued upon the exercise of the Warrants.
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"VALUATION CRITERIA" shall mean one or more valuation methods that the
Independent Financial Expert or the Board, as the case may be, in its best
professional or business judgment, as the case may be, determines to be most
appropriate for use in determining the Fair Market Value of any Shares for which
such determination is required pursuant to this Agreement, without giving effect
to any discount attributable to any lack of liquidity of such Shares or to the
fact that the Company may have no class of equity securities registered under
the Exchange Act.
"WARRANT CERTIFICATES" shall have the meaning specified in the recitals to
this Agreement.
"WARRANTS" shall mean the Series 1 Warrants and the Additional Warrants,
collectively.
ARTICLE II
ORIGINAL ISSUE OF WARRANTS
SECTION 2.01. FORM OF WARRANT CERTIFICATES. The Warrants shall be
evidenced by Warrant Certificates in registered form only and substantially in
the form attached hereto as Exhibit A, shall be dated the date on which signed
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by the Company and may have such legends and endorsements typed, stamped,
printed, lithographed or engraved thereon as the Company may deem appropriate
and as are not inconsistent with the provisions of this Agreement, or as may be
required to comply with any law or with any rule or regulation pursuant thereto,
with any rule or regulation of any securities exchange on which the Warrants may
be listed or with the Stockholders' Agreement, or to conform to usage.
SECTION 2.02. EXECUTION AND DELIVERY OF WARRANT CERTIFICATES. Warrant
Certificates evidencing Series 1 Warrants shall be executed by the Company and
delivered on the Series 1 Determination Date to the Holders of Notes on such
date, to each such Holder in the same proportion that the principal amount then
outstanding under the Notes then held by such Holder bears to the aggregate
principal amount then outstanding under all Notes. If any principal amount
remains owing under the Notes on any Additional Determination Date, then Warrant
Certificates evidencing Additional Warrants as applicable on any such Additional
Determination Date shall be executed by the Company and delivered on the
Additional Determination Date to the Holders of Notes on such date, to each such
Holder in the same proportion that the principal amount then outstanding under
the Notes then held by such Holder bears to the aggregate principal amount then
outstanding under all Notes. The Warrant Certificates shall be executed on
behalf of the Company by its Chairman of the Board, Chief Executive Officer,
President or by any of its Vice Presidents, either manually or by facsimile
signature printed thereon. In case any officer of the Company whose manual or
facsimile signature has been placed upon any Warrant Certificate shall have
ceased to be such before such Warrant Certificate is issued, it may be issued
with the same effect as if such officer had not ceased to be such at the date of
issuance.
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ARTICLE III
EXERCISE PRICE; EXERCISE OF WARRANTS GENERALLY
SECTION 3.01. EXERCISE PRICE. Each Warrant Certificate shall entitle the
Holder thereof, subject to the provisions of the Agreement, to purchase one
share of Common Stock for each Warrant represented thereby at an exercise price
(the "EXERCISE PRICE") of $0.01 per share.
SECTION 3.02. EXERCISE OF WARRANTS. Subject to the terms and conditions
set forth herein, (i) the Series 1 Warrants shall be exercisable, on or prior to
the Expiration Date, at any time or from time to time after the Series 1
Determination Date, and (ii) the Additional Warrants shall be exercisable, on or
prior to the Expiration Date, at any time or from time to time after the
applicable Additional Determination Date.
SECTION 3.03. EXPIRATION OF WARRANTS. The Warrants shall terminate and
become void as of the close of business on the applicable Expiration Date.
SECTION 3.04. METHOD OF EXERCISE.
(a) In order to exercise a Warrant or to sell a Warrant to the
Company, the Holder thereof must surrender the Warrant Certificate evidencing
such Warrant to the Company, with one of the forms on the reverse of or attached
to the Warrant Certificate duly executed, and by paying in full to the Company
(i) in cash, or (ii) by certified or official bank check, or (iii) by any
combination of the foregoing, the Exercise Price for each share of Underlying
Common Stock as to which Warrants are then being exercised and any applicable
taxes, other than taxes that the Company is required to pay hereunder. A Holder
may exercise such Holder's Warrant for the full number of shares of Underlying
Common Stock issuable upon exercise thereof or any lesser number of whole shares
of Underlying Common Stock.
(b) Upon surrender of a Warrant Certificate in conformity with the
foregoing provisions and payment by the Holder of the full Exercise Price for
the shares of Underlying Common Stock as to which such Warrants are then being
exercised, the Company shall transfer to the Holder of such Warrant Certificate
appropriate evidence of ownership of any shares of Underlying Common Stock or
other securities or property (including any money) to which the Holder is
entitled, registered or otherwise placed in, or payable to the order of, such
name or names as may be directed in writing by the Holder, and shall deliver
such evidence of ownership and any other securities or property (including any
money) to the person or persons entitled to receive the same, together with an
amount in cash in lieu of any fraction of a share as provided in Section 4.04.
If such Warrant Certificate shall not have been exercised in full, the Company
will issue to such Holder a new Warrant Certificate exercisable for the number
of shares of Underlying Common Stock as to which such Warrant shall not have
been exercised. The Company will cancel all Warrants so surrendered.
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(c) Each person in whose name any certificate representing shares of
Underlying Common Stock is issued shall for all purposes be deemed to have
become the holder of record of such shares of Underlying Common Stock on the
date on which the Warrant Certificate was surrendered to the Company and payment
of the Exercise Price therefor and any applicable taxes was made to the Company,
irrespective of the date of delivery of such certificate representing shares of
Underlying Common Stock.
SECTION 3.05. CANCELLATION OF WARRANTS. The Company shall cancel any
Warrant Certificate delivered to it for exercise, in whole or in part, or
delivered to it for transfer, exchange or substitution, and no Warrant
Certificates shall be issued in lieu thereof except as expressly permitted by
any of the provisions of this Agreement. The Company shall destroy canceled
Warrant Certificates. If the Company shall acquire any of the Warrants, such
acquisition shall not operate as a redemption or termination of the right
represented by such Warrants unless and until the Warrant Certificates
evidencing such Warrants are surrendered to the Company for cancellation.
ARTICLE IV
ADJUSTMENTS
SECTION 4.01. ADJUSTMENTS. The number of shares of Common Stock issuable
upon exercise of each Warrant shall be subject to adjustment from time to time
as follows:
(a) STOCK DIVIDENDS; STOCK SPLITS; REVERSE STOCK SPLITS;
RECLASSIFICATIONS. In the event that the Company shall (i) pay a dividend or
make any other distribution with respect to its Common Stock in shares of its
capital stock, (ii) subdivide its outstanding Common Stock, (iii) combine its
outstanding Common Stock into a smaller number of shares, or (iv) issue any
shares of its capital stock in a reclassification of the Common Stock (including
any such reclassification in connection with a merger, consolidation or other
business combination in which the Company is the continuing corporation) the
number of shares of Common Stock issuable upon exercise of each Warrant
immediately prior to the record date for such dividend or distribution, or the
effective date of such subdivision or combination, shall be adjusted so that the
Holder of each Warrant shall thereafter be entitled to receive the kind and
number of shares of Common Stock or other securities of the Company that such
Holder would have owned or have been entitled to receive after the happening of
any of the events described above, had such Warrant been exercised immediately
prior to the happening of such event or any record date with respect thereto.
An adjustment made pursuant to this Section 4.01(a) shall become effective
immediately after the effective date of such event retroactive to the record
date, if any, for such event.
(b) ISSUANCE OF COMMON STOCK, RIGHTS, OPTIONS OR WARRANTS AT LOWER
VALUES. (i) In the event that the Company shall issue or sell shares of Common
Stock, or rights, options, warrants or convertible or exchangeable securities
containing the right to subscribe for or purchase shares of Common Stock, at a
price per share of Common Stock (determined in the case of such rights, options,
warrants or convertible or
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exchangeable securities, by dividing (x) the total amount receivable by the
Company in consideration of the issuance and sale of such rights, options,
warrants or convertible or exchangeable securities, plus the total
consideration, if any, payable to the Company upon exercise, conversion or
exchange thereof, by (y) the total number of shares of Common Stock covered by
such rights, options, warrants or convertible or exchangeable securities) that
is lower than the then Fair Market Value per share of the Common Stock
immediately prior to such sale or issuance, then the number of shares of Common
Stock thereafter issuable upon the exercise of each Warrant then outstanding
shall equal the Pre-Issuance Value per Warrant divided by the Unadjusted Post-
Issuance Value per Warrant. Such adjustment shall be made successively whenever
any such sale or issuance is made.
(ii) For purposes of this Section 4.01(b), (A) "PRE-ISSUANCE
VALUE" shall mean (1) the total number of shares of Common Stock then issuable
upon exercise of each Warrant, multiplied by (2) the Fair Market Value per share
of Common Stock immediately prior to any issuance or sale described in Section
4.01(b)(i); and (B) "UNADJUSTED POST-ISSUANCE VALUE" shall mean (1) the sum of
(x) the total number of shares of Common Stock outstanding immediately prior to
any issuance or sale described in Section 4.01(b)(i), multiplied by the Fair
Market Value per share of Common Stock immediately prior to such issuance or
sale, plus (y) the total number of additional shares of Common Stock issued or
sold by the Company, multiplied by the price per share for which such additional
shares of Common Stock were issued or sold, divided by (2) the total number of
shares of Common Stock outstanding immediately after such issuance or sale.
(iii) In the event that the Company shall issue and sell shares
of Common Stock or rights, options, warrants or convertible or exchangeable
securities containing the right to subscribe for or purchase shares of Common
Stock for consideration consisting, in whole or in part, of property other than
cash or its equivalent, then in determining the "price per share of Common
Stock" and the "consideration" receivable by or payable to the Company for
purposes of the first sentence of Section 4.01(b)(i), the Board shall determine,
in good faith, the fair value of such property. In the event that the Company
shall issue and sell rights, options, warrants or convertible or exchangeable
securities containing the right to subscribe for or purchase shares of Common
Stock, together with one or more other securities as part of a unit at a price
per unit, then in determining the "price per share of Common Stock" and the
"consideration" receivable by or payable to the Company for purposes of the
first sentence of Section 4.01(b)(i), the Board shall determine, in good faith,
the fair value of the rights, options, warrants or convertible or exchangeable
securities then being sold as part of such unit.
(iv) Any adjustment to the number of shares of Common Stock
issuable upon exercise of all Warrants then outstanding made pursuant to this
Section 4.01(b) shall be allocated among each Warrant then outstanding on a pro
rata basis.
(v) Notwithstanding anything herein to the contrary, the
provisions of this Section 4.01(b) shall not apply to (A) options or other
similar rights issued pursuant to an employee stock option plan or similar plan
providing for options or other similar rights to purchase (or issuances pursuant
to incentive bonus plans) covering in the aggregate not in excess
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of 10% of the fully-diluted shares of Common Stock outstanding from time to
time, or (B) shares issued on the exercise of any such options or rights.
(c) EXPIRATION OF RIGHTS, OPTIONS AND CONVERSION PRIVILEGES. Upon the
expiration of any rights, options, warrants or conversion or exchange privileges
that have previously resulted in an adjustment hereunder, if any thereof shall
not have been exercised, the number of shares of Common Stock issuable upon the
exercise of each Warrant shall, upon such expiration, be readjusted and shall
thereafter, upon any future exercise, be such as they would have been had they
been originally adjusted (or had the original adjustment not been required, as
the case may be) as if (i) the only shares of Common Stock so issued were the
shares of Common Stock, if any, actually issued or sold upon the exercise of
such rights, options, warrants or conversion or exchange rights and (ii) such
shares of Common Stock, if any, were issued or sold for the consideration
actually received by the Company upon such exercise plus the consideration, if
any, actually received by the Company for issuance, sale or grant of all such
rights, options, warrants or conversion or exchange rights whether or not
exercised.
(d) DE MINIMIS ADJUSTMENTS. No adjustment in the number of shares of
Common Stock issuable hereunder shall be required unless such adjustment would
require an increase or decrease of at least one percent in the number of share
of Common Stock purchasable upon an exercise of each Warrant; provided, however,
that any adjustments which by reason of this Section 4.01(d) are not required to
be made shall be carried forward and taken into account in any subsequent
adjustment. All calculations shall be made to the nearest one-tenth of a share.
SECTION 4.02. DETERMINATION OF ADJUSTMENT. Whenever the number of shares
of Common Stock issuable upon the exercise of each Warrant is adjusted as herein
provided, a certificate of a senior officer of the Company setting forth the
number of shares of Common Stock issuable upon the exercise of each Warrant
after such adjustment, setting forth a brief statement of the facts requiring
such adjustment and setting forth the computation by which such adjustment was
made, shall, absent manifest error, be conclusive evidence of such adjustment.
The Company shall be entitled to rely on such certificate and shall exhibit the
same from time to time to any Holder desiring an inspection thereof during
reasonable business hours.
SECTION 4.03. STATEMENT ON WARRANTS. Irrespective of any adjustment in
the number or kind of shares issuable upon the exercise of the Warrants,
Warrants theretofore or thereafter issued may continue to express the same price
and number and kind of shares as are stated in the Warrants initially issuable
pursuant to this Agreement.
SECTION 4.04. FRACTIONAL INTEREST. The Company shall not be required to
issue fractional shares of Common Stock on the exercise of Warrants. If more
than one Warrant shall be presented for exercise in full at the same time by the
same Holder, the number of full shares of Common Stock which shall be issuable
upon such exercise thereof shall be computed on the basis of the aggregate
number of shares of Common Stock acquirable on exercise of the Warrants so
presented. If any fraction of a share of Common Stock would, except for the
provisions of this Section 4.04, be issuable on the exercise of any Warrant (or
specified portion thereof), the Company shall pay an amount in cash calculated
by it to be equal
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to the then Fair Market Value per share of Common Stock multiplied by such
fraction computed to the nearest whole cent.
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.01. WARRANT TRANSFER BOOKS.
(a) The Warrant Certificates shall be issued in registered form only.
The Company shall keep at its executive office a register in which, subject to
such reasonable regulations as it may prescribe, the Company shall provide for
the registration of Warrant Certificates and of transfers or exchanges of
Warrant Certificates as herein provided.
(b) Every Warrant Certificate surrendered for registration of transfer
or exchange shall (if so required by the Company) be duly endorsed, or be
accompanied by a written instrument of transfer in form satisfactory to the
Company, duly executed by the Holder thereof or his attorney duly authorized in
writing.
(c) No service charge shall be made for any registration of transfer
or exchange of Warrant Certificates.
SECTION 5.02. NO STOCK RIGHTS. Prior to the exercise of the Warrants, no
holder of a Warrant Certificate, as such, shall be entitled to vote or be deemed
the holder of Common Stock or any other securities of the Company which may at
any time be issuable on the exercise hereof, nor shall anything contained herein
be construed to confer upon any holder of a Warrant Certificate, as such, the
rights of a stockholder of the Company or the right to vote for the election of
directors or upon any matter submitted to stockholders at any meeting thereof,
or to give or withhold consent to any corporate action, to exercise any
preemptive right, to receive notice of meetings or other actions affecting
stockholders (except as provided herein), or to receive dividends or
subscription rights or otherwise.
SECTION 5.03. RESTRICTIONS ON TRANSFER. The Holder of any Warrant
Certificate, by acceptance thereof, acknowledges and agrees that the Underlying
Common Stock issuable upon exercise of such Warrants shall be subject to the
terms and conditions of the Stockholders' Agreement in effect from time to time,
including, without limitation, the provisions therein relating to restrictions
on transfer.
SECTION 5.04. NO REGISTRATION OF WARRANTS OR UNDERLYING COMMON STOCK UNDER
SECURITIES LAWS.
(a) Neither the Warrants nor the Underlying Common Stock have been
registered under the Securities Act or any state securities laws.
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(b) The Holder of any Warrant Certificate, by acceptance thereof,
represents that it is acquiring the Warrants to be issued to it for its own
account and not with a view to the distribution thereof, and agrees not to sell,
transfer, pledge or hypothecate any Warrants or any Underlying Common Stock
unless (i) (A) such transfer is made in connection with an effective
registration statement under the Securities Act and any applicable state
securities laws or (B) the Holder thereof has furnished the Company a
satisfactory opinion of counsel for such Holder to the effect that such
transaction is exempt from the registration requirements of the Securities Act,
the rules and regulations in effect thereunder and any applicable state
securities laws, and (ii) such transfer is made in accordance with terms and
conditions set forth in the Stockholders' Agreement relating to restrictions on
transfer to the extent the Warrants or Underlying Common Stock are subject
thereto.
SECTION 5.05. RESERVATION OF COMMON STOCK FOR ISSUANCE ON EXERCISE OF
WARRANTS. The Company shall at all times reserve and keep available, free from
preemptive rights, out of its authorized but unissued Common Stock, solely for
the purpose of issue upon exercise of Warrants as herein provided, such number
of shares of Common Stock as shall then be issuable upon the exercise of all
outstanding Warrants. All shares of Common Stock which shall be so issuable
shall, upon such issue, be duly and validly issued and fully paid and non-
assessable.
SECTION 5.06. PAYMENT OF TAXES. The Company shall pay all taxes and other
governmental charges that may be imposed on the Company or on the Warrants or on
any securities deliverable upon exercise of Warrants with respect thereto. The
Company shall not be required, however, to pay any tax or other charge imposed
in connection with any transfer involved in the issue of any certificate for
shares of Common Stock or other securities underlying the Warrants or payment of
cash to any person other than the Holder of a Warrant Certificate surrendered
upon the exercise or purchase of a Warrant, and in case of such transfer or
payment, the Company shall not be required to issue any stock certificate or pay
any cash until such tax or charge has been paid or it has been established to
the Company's satisfaction that no such tax or other charge is due.
SECTION 5.07. CERTAIN PERSONS TO EXECUTE AGREEMENT. Without in any way
limiting any transfer restrictions contained elsewhere herein or in the
Stockholders' Agreement, no Holder shall sell or otherwise dispose of any
Warrants held by such Holder, unless, prior to the consummation of any such sale
or other disposition, the person to whom such sale or other disposition is
proposed to be made executes and delivers to the Company an agreement, in form
and substance satisfactory to the Company, whereby such prospective transferee
confirms that, with respect to the Warrants that are the subject of such sale or
other disposition, it shall be deemed to be a "Holder" for the purposes of this
Agreement and agrees to be bound by all the terms of this Agreement. Upon the
execution and delivery by such prospective transferee of the agreement referred
to in the next preceding sentence, and subject to all applicable transfer
restrictions, such prospective transferee shall be deemed a "Holder" for the
purposes of this Agreement, and shall have the rights and be subject to the
obligations of a Holder hereunder with respect to the Warrants held by such
prospective transferee.
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SECTION 5.08. PRIOR NOTICE OF CERTAIN EVENTS. In case at any time the
Company proposes to take any action which may result in an adjustment pursuant
to Section 4.01, the Company shall give prior notice thereof. Such notice shall
be given at least three Business Days prior to the earlier of the action in
question and, if applicable, any record date or date on which the Company's
transfer books are closed with respect thereto.
ARTICLE VI
MISCELLANEOUS
SECTION 6.01. EXPENSES. Except as otherwise specified in this Agreement,
all costs and expenses, including, without limitation, fees and disbursements of
counsel, financial advisors and accountants, incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by the party
incurring such costs and expenses.
SECTION 6.02. NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given or made (and
shall be deemed to have been duly given or made upon receipt) by delivery in
person, or by courier service, cable, telecopy, telegram, or registered or
certified mail (postage prepaid, return receipt requested) to the respective
parties hereto at their addresses set forth on the signature pages to this
Agreement (or at such other address for a party hereto as shall be specified in
a notice given in accordance with this Section 6.02).
SECTION 6.03. HEADINGS. The descriptive headings contained in this
Agreement are for convenience of reference only and shall not affect in any way
the meaning, construction or interpretation of this Agreement.
SECTION 6.04. SEVERABILITY. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any law or
public policy, all other terms and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in an acceptable manner in
order that the transactions contemplated hereby are consummated as originally
contemplated to the greatest extent possible.
SECTION 6.05. MUTILATED OR MISSING WARRANT CERTIFICATES. If any Warrant
Certificate is lost, stolen, mutilated or destroyed, the Company in its
discretion may issue, in exchange and substitution for and upon cancellation of
the mutilated Warrant Certificate, or in lieu of and substitution for the
Warrant Certificate lost, stolen or destroyed, upon receipt of a proper
affidavit or other evidence satisfactory to the Company (and surrender of any
mutilated Warrant Certificate) and bond of indemnity in form and amount and with
corporate surety satisfactory to the Company in each instance protecting the
Company, a new Warrant Certificate of like tenor and exercisable for an
equivalent number of shares of Common Stock as the Warrant Certificate so lost,
stolen, mutilated or destroyed. Any such new Warrant
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Certificate shall constitute an original contractual obligation of the Company,
whether or not the allegedly lost, stolen, mutilated or destroyed Warrant
Certificate at any time shall be enforceable by anyone. An applicant for such a
substitute Warrant Certificate also shall comply with such other reasonable
regulations and pay such other reasonable charges as the Company may prescribe.
All Warrant Certificates shall be held and owned upon the express condition that
the foregoing provisions are exclusive with respect to the replacement of lost,
stolen, mutilated or destroyed Warrant Certificates, and shall preclude any and
all other rights or remedies notwithstanding any law or statute existing or
hereafter enacted to the contrary with respect to the replacement of negotiable
instruments or other securities without their surrender.
SECTION 6.06. ENTIRE AGREEMENT. This Agreement and the documents
referenced to herein constitute the entire agreement of the parties hereto with
respect to the subject matter hereof and supersede all prior agreements and
undertakings, both written and oral, between or among the parties with respect
to the subject matter hereof.
SECTION 6.07. GENSTAR PERMITTED ASSIGNS. Genstar may transfer its rights
and obligations under this Agreement to any Person to whom the Notes are
transferred in accordance with the terms thereof.
SECTION 6.08. NO THIRD PARTY BENEFICIARIES. This Agreement shall be
binding upon and inure solely to the benefit of the parties hereto and their
respective successors and permitted assigns. Nothing in this Agreement, whether
express or implied, is intended to or shall confer upon any person other than
the parties hereto and their respective successors and permitted assigns, any
legal or equitable right, benefit or remedy of any nature whatsoever, under or
by reason of this Agreement.
SECTION 6.09. AMENDMENT; WAIVER. This Agreement may not be amended,
modified, supplemented or waived except by an instrument in writing signed by,
or on behalf of, each of the parties hereto or, in the case of a waiver, the
party to be bound thereby.
SECTION 6.10. GOVERNING LAW. IN ALL RESPECTS, INCLUDING ALL MATTERS OF
CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS AGREEMENT AND THE OBLIGATIONS OF
EACH PARTY ARISING HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE APPLICABLE TO CONTRACTS
EXECUTED IN AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE, WITHOUT REGARD TO
THE PRINCIPLES THEREOF REGARDING CONFLICT OF LAWS.
SECTION 6.11. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date fast above written.
PANOLAM INDUSTRIES HOLDINGS, INC.
By:
Name:
Title:
GENSTAR CAPITAL PARTNERS II, L.P.
By:
Name:
Title:
STARGEN II LLC
By:
Name:
Title:
EXHIBIT A
[FORM OF WARRANT CERTIFICATE]
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS AND MAY NOT BE
TRANSFERRED, SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF, AND
NO REGISTRATION OF TRANSFER OF SUCH SECURITIES WILL BE MADE ON THE BOOKS OF THE
ISSUER, UNLESS (i) SUCH TRANSFER IS MADE IN CONNECTION WITH AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH ACT AND ANY APPLICABLE STATE SECURITIES LAWS
OR (ii) THE COMPANY HAS BEEN FURNISHED WITH A SATISFACTORY OPINION OF COUNSEL
FOR THE HOLDER HEREOF THAT SUCH TRANSFER IS EXEMPT FROM THE REGISTRATION
REQUIREMENTS OF SUCH ACT, THE RULES AND REGISTRATIONS IN EFFECT THEREUNDER AND
ANY APPLICABLE STATE SECURITIES LAWS.
THE SECURITIES ISSUABLE UPON THE EXERCISE OF THIS CERTIFICATE ARE SUBJECT TO
CERTAIN RESTRICTIONS ON TRANSFER AS SET FORTH IN A STOCKHOLDERS' AGREEMENT,
DATED AS OF NOVEMBER 24, 1999, AS THEREAFTER AMENDED, SUPPLEMENTED OR OTHERWISE
MODIFIED FROM TIME TO TIME, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL
EXECUTIVE OFFICES OF THE ISSUER. NO REGISTRATION OF TRANSFER OF SUCH SECURITIES
WILL BE MADE ON THE BOOKS OF THE ISSUER UNLESS AND UNTIL SUCH RESTRICTIONS SHALL
HAVE BEEN COMPLIED WITH.
PANOLAM INDUSTRIES HOLDINGS, INC.
SERIES __ WARRANT CERTIFICATE
Dated as of _________, _____
SERIES ____ WARRANTS TO PURCHASE ____ SHARES OF COMMON STOCK
Certificate No. ___ Certificate for _______ Warrants
PANOLAM INDUSTRIES HOLDINGS, INC., a corporation organized and existing
under the laws of the State of Delaware (the "COMPANY"), hereby certifies that,
for value received, ________________, or its registered assigns, is the
registered holder of the number of Series ____ Warrants set forth above (the
"WARRANTS"). Each Warrant entitles the registered holder thereof (the
"HOLDER"), subject to the provisions contained herein and in the Warrant
Agreement (as defined below), to receive from the Company one share of Class A
Common Stock, par value $0.01 per share, of the Company ("COMMON STOCK"),
subject to adjustment upon the occurrence of certain events as more fully
described in the Warrant Agreement (as
defined below), at an exercise price of $0.01 per share. This Warrant
Certificate shall terminate and become void as of the close of business on the
earlier of (i) the date on which all amounts outstanding under the Notes (as
defined in the Warrant Agreement) are paid in full, and (ii) _____________,
_______ [five years from the date of issuance] (the "EXPIRATION DATE" ).
This Warrant Certificate is issued under and in accordance with the Warrant
Agreement, dated as of November 24, 1999 (as thereafter amended, modified or
supplemented, the "WARRANT AGREEMENT"), among the Company, Genstar Capital
Partners II, L.P., a Delaware limited partnership ("Genstar") and StarGen II
LLC, a Delaware limited liability company ("Stargen"), and is subject to the
terms and provisions contained in the Warrant Agreement and the stockholders'
agreement, dated as of November 24, 1999 (as thereafter amended, supplemented or
otherwise modified, the "STOCKHOLDERS' AGREEMENT"), among the Company, Genstar,
Stargen and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇., to all of which terms and provisions the
Holder of this Warrant Certificate consents by acceptance hereof. The Warrant
Agreement and the Stockholders' Agreement are hereby incorporated herein by
reference and made a part hereof. Reference is hereby made to the Warrant
Agreement and the Stockholders' Agreement for a full statement of the respective
rights, limitations of rights, duties and obligations thereunder of the Company
and the Holders of the Warrants.
The number of shares of Common Stock issuable upon the exercise of each
Warrant is subject to adjustment as provided in the Warrant Agreement.
All shares of Common Stock issuable by the Company upon the exercise of
Warrants shall, upon such issue, be duly and validly issued and fully paid and
non-assessable.
In order to exercise a Warrant, the Holder hereof must surrender this
Warrant Certificate at the office of the Company, with the Form of Election to
Purchase attached hereto appropriately completed and duly executed by the Holder
hereof, with signature guaranteed as therein specified, all subject to the terms
and conditions hereof and of the Warrant Agreement.
THIS WARRANT CERTIFICATE, THE WARRANTS EVIDENCED HEREBY AND THE UNDERLYING
COMMON STOCK ISSUABLE UPON EXERCISE OF SUCH WARRANTS ARE SUBJECT TO THE TERMS
AND CONDITIONS OF THE STOCKHOLDERS' AGREEMENT, INCLUDING, WITHOUT LIMITATION,
THE PROVISIONS THEREIN RELATING TO RESTRICTIONS ON TRANSFER.
All terms used in this Warrant Certificate that are defined in the Warrant
Agreement shall have the meanings assigned to them in the Warrant Agreement.
Copies of the Warrant Agreement are on file at the office of the Company
and may be obtained by writing to the Company at ____________________,
Attention: ___________.
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IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be
executed by its officers thereunto duly authorized as of the date first written
above.
PANOLAM INDUSTRIES HOLDINGS, INC.
By: ________________________________
Name:
Title:
By: ________________________________
Name:
Title:
FORM OF ELECTION TO PURCHASE
(To Be Executed by the Holder if the Holder Desires to Exercise Warrants
Evidenced by the Foregoing Warrant Certificate)
To: Panolam Industries Holdings, Inc.
The undersigned hereby irrevocably elects to exercise the Warrants evidenced by
the foregoing Warrant Certificate for, and to acquire thereunder, one full share
(subject to adjustment) of Common Stock issuable upon exercise of each such
Warrant, all on the terms and conditions specified in the within Warrant
Certificate and the Warrant Agreement therein referred to. The undersigned
hereby surrenders this Warrant Certificate and all right, title and interest
therein to the Company and directs that the shares of Common Stock deliverable
upon the exercise of such Warrants be registered or placed in the name of the
undersigned at the address specified below and delivered thereto.
Address: _________________________________________________
_________________________________________________
_________________________________________________
(Include Zip Code)
Taxpayer Identification or Social Security Number: _______________
Dated: ___________________
Name of Holder: _________________________________________________
(Please Print)
_________________________________________________
(Signature)*
_________________________________________________
(By:)_______________________________________________
(Please Print)
(Name:)__________________________________________
(Title:)_________________________________________
Signature Guaranteed By: ______________________________________________
(Please Print)
_______________________
*The signature must correspond with the name as written upon the face of the
foregoing Warrant Certificate in every particular, without alteration or
enlargement or any change whatever, and must be guaranteed by a financial
institution satisfactory to the Company.
FORM OF ASSIGNMENT
FOR VALUE RECEIVED, the undersigned Holder of the foregoing Warrant Certificate
hereby sells, assigns and transfers/1/ unto each assignee set forth below
(including the undersigned with respect to any Warrants constituting a part of
the Warrants evidenced by the foregoing Warrant Certificate not being assigned
hereby) all of the rights of the undersigned in and to the number of Warrants
(as defined in and evidenced by the foregoing Warrant Certificate) set forth
opposite the name of such assignee below and in and to the foregoing Warrant
Certificate with respect to said Warrants and the shares of Common Stock
issuable upon exercise of said Warrants:
Name of Assignee: ________________________________________________
(Please Print)
Address: _________________________________________________
_________________________________________________
_________________________________________________
(Include Zip Code)
Number of Warrants: _____________________________________________
and does hereby irrevocably constitute and appoint the Company the undersigned's
attorney to make such transfer on the books of the Company maintained for that
purpose, with full power of substitution in the premises.
If the total of said Warrants shall not be all the Warrants evidenced by the
foregoing Warrant Certificate, the undersigned requests that a new Warrant
Certificate evidencing the Warrants not so assigned be issued in the name of and
delivered evidencing the Warrants not so assigned be issued in the name of and
delivered to the undersigned.
Dated: _______________
_______________________
/1/THE SECURITIES EVIDENCED BY THE FOREGOING WARRANT CERTIFICATE ARE SUBJECT TO
CERTAIN RESTRICTIONS ON TRANSFER AS SET FORTH IN THE STOCKHOLDERS' AGREEMENT, A
COPY OF WHICH IS ON FILE AT THE PRINCIPAL EXECUTIVE OFFICES OF THE ISSUER. NO
REGISTRATION OF TRANSFER OF SUCH SECURITIES WILL BE MADE ON THE BOOKS OF THE
ISSUER UNLESS AND UNTIL SUCH RESTRICTIONS SHALL HAVE BEEN COMPILED WITH.
Name of Holder: _________________________________________________
(Please Print)
_________________________________________________
(Signature)*
(By:) _________________________________________________
(Please Print)
(Name:)__________________________________________
(Title:)_________________________________________
Signature Guaranteed By: _________________________________________________
(Please Print)
Dated: _______________
Name of Holder: _________________________________________________
(Please Print)
_________________________________________________
(Signature)*
(By:) _______________________________________________
(Please Print)
(Name:)__________________________________________
(Title:)_________________________________________
Signature Guaranteed By: _________________________________________________
(Please Print)
____________________
*The signature must correspond with the name as written upon the face of the
foregoing Warrant Certificate in every particular, without alteration or
enlargement or any change whatever, and must be guaranteed by a financial
institution satisfactory to the Company.