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EXHIBIT 4.16
STERLING PULP CHEMICALS, LTD.
as Corporation
and
CIT BUSINESS CREDIT CANADA INC.
as Agent and Lender
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DEBENTURE PLEDGE AGREEMENT
JULY 11, 2001
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STIKEMAN ELLIOTT
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DEBENTURE PLEDGE AGREEMENT
Debenture Pledge Agreement dated July 11, 2001 made between Sterling
Pulp Chemicals, Ltd. (the "CORPORATION") and CIT Business Credit Canada Inc.
(the "AGENT") for itself and on behalf of the Lenders (as hereinafter defined).
Description of Debenture:
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Principal Sum: Cdn. $75,000,000.00
Date: July 11, 2001
Interest Rate: Twenty-five percent (25%) per annum
Payable: On Demand
RECITALS:
(a) The Agent and the Lenders have agreed to make certain credit
facilities available to the Corporation upon the terms and
conditions contained in a financing agreement among the
Corporation, as borrower, and the Agent, as agent for and on
behalf of itself and the other Lenders (as defined in the Loan
Agreement) and the Lenders under the loan agreement (the
"LENDERS"), dated July 11, 2001 (such financing agreement as
it may at any time or from time to time hereafter be amended,
supplemented, restated or replaced, the "LOAN AGREEMENT"); and
(b) The Corporation has agreed to execute and deliver this
debenture pledge agreement together with the Debenture (as
hereinafter defined and referred to) as security for the
payment and performance of the Corporation's obligations to
the Agent and the Lenders under the Loan Agreement.
In consideration of the foregoing , the sum of $10.00 now paid by each
party to the other and other good and valuable consideration (the receipt and
adequacy of which are acknowledged), the Corporation and the Agent agree as
follows:
SECTION 1 PLEDGE OF DEBENTURE.
The Corporation pledges and hypothecates to, and deposits with, the
Agent, acting on behalf of itself and the Lenders, the debenture created by the
Corporation, a copy of which is attached hereto as Schedule "A", together with
all renewals thereof, substitutions therefor, accretions thereto, interest
thereon and proceeds thereof (collectively, the "DEBENTURE").
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SECTION 2 OBLIGATIONS SECURED.
(1) The pledge and hypothecation in this debenture pledge agreement (the
"PLEDGE") secure the payment and performance of all debts, liabilities
and obligations including all charges and fees of the Agent and the
Lenders due from the Corporation to the Agent and the Lenders pursuant
to or in connection with the Loan Agreement and the other Loan
Documents (as defined in the Loan Agreement) (collectively, and
together with the expenses, costs and charges set out in Section 2(2),
the "OBLIGATIONS").
(2) All expenses, costs and charges incurred by or on behalf of the Agent
and the Lenders in connection with this debenture pledge agreement or
the Debenture, including all legal fees, court costs, receiver's or
agent's remuneration and other expenses of taking possession of,
repairing, protecting, insuring, preparing for disposition, realizing,
collecting, selling, transferring, delivering or obtaining payment for
the Charged Premises, and of taking, defending or participating in any
action or proceeding in connection with any of the foregoing matters or
otherwise in connection with the interest of the Agent and the Lenders
in any Charged Premises, whether or not directly relating to the
enforcement of this debenture pledge agreement, the Debenture or the
Loan Agreement, shall be added to and form a part of the Obligations.
(3) The Corporation acknowledges that (i) value has been given, (ii) it has
rights in the Debenture, (iii) it has not agreed to postpone the time
of attachment of the Pledge, and (iv) it has received a copy of this
debenture pledge agreement.
SECTION 3 SCOPE OF SECURITY.
(1) To the extent that the creation of the Security (as defined in the
Debenture) over the Charged Premises (as defined in the Debenture)
would constitute a breach or permit the acceleration or termination of
any agreement, right, licence or permit of the Corporation (each, a
"RESTRICTED ASSET"), the Security so created under the Debenture will
constitute a trust created in favour of the Agent and the Lenders
pursuant to which the Corporation shall hold as trustee its interest in
all proceeds arising under or in connection with the Restricted Asset
in trust for the Agent on the following basis:
(i) until the Security has become enforceable, the Corporation
shall be entitled to receive all proceeds from or in respect
of such Restricted Asset; and
(ii) whenever the Security has become enforceable, all rights of
the Corporation to receive such proceeds shall cease, the
Corporation shall at the request of the Agent take all such
actions to collect and enforce payment and other rights
arising
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under the Restricted Asset in accordance with the instructions
of the Agent and all such proceeds arising under or in
connection with the Restricted Asset shall be immediately paid
over to the Agent for the benefit of the Lenders,
and the Agent hereby confirms and agrees that the Charged Premises
under the Debenture is limited in such manner and to such effect.
(2) The Corporation shall not exercise any rights of set-off with respect
to amounts payable under or in connection with any Restricted Asset and
shall use its best efforts to ensure that no other party to the
Restricted Asset shall exercise any rights of set off against any
amounts payable thereunder. The Corporation shall use its best efforts
to obtain such consents of the other parties to the Restricted Asset to
the creation of the Security over the Restricted Asset in favour of the
Agent and the Lenders in accordance with the Debenture as the Agent may
from time to time request and shall use its best efforts to ensure that
all agreements entered into on and after the date hereof expressly
permit the creation of the Security in favour of the Agent and the
Lenders in accordance with the terms of the Debenture.
SECTION 4 ENFORCEMENT.
In the event the Corporation fails to pay or perform any of the
Obligations when due and payable or to be performed, as the case may be, the
Agent may at any time realize upon or otherwise dispose of the Debenture by
sale, transfer or delivery or exercise and enforce all rights and remedies of a
holder of the Debenture as if the Agent were absolute owner of the Debenture,
without notice to or control by the Corporation and any such remedy may be
exercised separately or in combination and shall be in addition to and not in
substitution for any other rights the Agent may have, however created.
SECTION 5 PAYMENT OF INTEREST.
Payment to the Agent and the Lenders of interest for any period in
respect of the Obligations shall be deemed to be payment in satisfaction of the
interest payment for the same period under the Debenture in such manner as the
Agent shall deem appropriate.
SECTION 6 APPLICATION OF PROCEEDS.
The proceeds of the Debenture shall be applied by the Agent and the
Lenders on account of the Obligations in accordance with the Loan Agreement.
SECTION 7 DEALING WITH THE DEBENTURE.
(1) The Agent and the Lenders shall not be obliged to exhaust its recourse
against the Corporation or any other person or persons or against any
other security it may hold in respect of the Obligations before
realizing upon or
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otherwise dealing with the Debenture in such manner as the Agent and
the Lenders may consider desirable.
(2) The Agent and the Lenders may grant extensions or other indulgences,
take and give up securities, accept compositions, grant releases and
discharges and otherwise deal with the Corporation and with other
persons, sureties or securities as it may see fit without prejudice to
the Obligations, the liability of the Corporation or the rights of the
Agent and the Lenders in respect of the Debenture.
(3) Neither the Agent nor the Lenders shall be (i) liable or accountable
for any failure of the Agent or the Lenders to collect, realize or
obtain payment in respect of the Debenture, (ii) bound to institute
proceedings for the purpose of collecting, enforcing, realizing or
obtaining payment of the Debenture or for the purpose of preserving any
rights of the Agent or the Lenders, the Corporation or any other
parties, (iii) responsible for any loss occasioned by any sale or other
dealing with the Debenture or by the retention of or failure to sell or
otherwise deal with the Debenture, or (iv) bound to protect the
Debenture from depreciating in value or becoming worthless.
SECTION 8 NO MERGER.
The Debenture and this debenture pledge agreement shall not operate by
way of merger of any of the Obligations and no judgment recovered by the Agent
and the Lenders shall operate by way of merger of, or in any way affect, the
Pledge which is in addition to, and not in substitution for, any other security
now or hereafter held by the Agent and the Lenders in respect of the
Obligations.
SECTION 9 NOTICES.
Any notices, directions or other communications provided for in this
debenture pledge agreement shall be in writing and given in accordance with the
provisions of the Loan Agreement.
SECTION 10 FURTHER ASSURANCES.
The Corporation shall from time to time, whether before or after the
Pledge shall have become enforceable, do all such acts and things and execute
and deliver all such transfers, assignments and instruments as the Agent may
reasonably require for (i) protecting the Debenture, (ii) perfecting the Pledge,
and (iii) exercising all powers, authorities and discretions conferred upon the
Agent. The Corporation shall, from time to time after the Pledge has become
enforceable, do all such acts and things and execute and deliver all such
transfers, assignments and instruments as the Agent may require for facilitating
the sale of the Debenture in connection with its realization.
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SECTION 11 SUPPLEMENTAL SECURITY.
This debenture pledge agreement and the Debenture are in addition and
without prejudice to and supplemental to all other security now held or which
may hereafter be held by the Agent and the Lenders.
SECTION 12 SUCCESSORS AND ASSIGNS.
This debenture pledge agreement shall be binding upon the Corporation,
its successors and assigns, and shall enure to the benefit of the Agent and the
Lenders and their successors and assigns. This debenture pledge agreement shall
not be assigned by the Corporation and may only be assigned by the Agent upon
the concurrent assignment of the Debenture, and the Debenture may only be
assigned upon the concurrent assignment of this debenture pledge agreement.
SECTION 13 GENDER AND NUMBER.
Any reference in this debenture pledge agreement to gender shall
include all genders and words importing the singular number only shall include
the plural and vice versa.
SECTION 14 HEADINGS, ETC.
The division of this debenture pledge agreement into sections and the
insertion of headings are for convenient reference only and are not to affect
its interpretation.
SECTION 15 SEVERABILITY.
If any provision of this debenture pledge agreement is deemed by any
court of competent jurisdiction to be invalid or void, the remaining provisions
shall remain in full force and effect.
SECTION 16 GOVERNING LAW.
This debenture pledge agreement shall be governed by and interpreted
and enforced in accordance with the laws of the Province of Ontario and the
federal laws of Canada applicable therein.
SECTION 17 LOAN AGREEMENT TO SUPERSEDE.
Notwithstanding anything contained herein or in the Debenture, to the
extent that the provisions of this Pledge or the Debenture conflict with
provisions in the Loan Agreement, the relevant provisions of the Loan Agreement
supersede and shall govern. For greater certainty, notwithstanding anything
contained herein or in the Debenture, the indebtedness, liabilities and
obligations actually owing by the Corporation shall be limited to the amounts
and terms set forth in the Loan Agreement and the Corporation shall be entitled
to notice and opportunity to cure, if any, set forth in the Loan Agreement
before the security hereunder or under the Debenture shall become enforceable.
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IN WITNESS WHEREOF the Corporation has executed this debenture pledge
agreement.
STERLING PULP CHEMICALS, LTD.
By:
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Authorized Signing Officer
By:
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Authorized Signing Officer
CIT BUSINESS CREDIT CANADA INC., AS AGENT
AND LENDER
By:
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Authorized Signing Officer
By:
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Authorized Signing Officer
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SCHEDULE "A"
DEBENTURE
