PANOLAM INDUSTRIES LTD.
CREDIT AGREEMENT
DATED AS OF FEBRUARY 18, 1999
This CREDIT AGREEMENT (this "AGREEMENT") is dated as of February 18,
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1999, and entered into among PANOLAM INDUSTRIES LTD., an Ontario corporation
(the "BORROWER"), the other Loan Parties signatory hereto, the financial
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institutions and other entities listed on the signature pages hereof as initial
Lenders (the "INITIAL LENDERS"), CREDIT SUISSE FIRST BOSTON CANADA ("CSFBC"),
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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.
RECITALS
A. The Borrower has requested the Lenders to extend certain credit
facilities to the Borrower of up to US$65,000,000 in the aggregate to provide
funds (i) to refinance certain existing indebtedness of the Borrower, (ii) to
pay fees and expenses in connection with the Transactions (this and the other
capitalized terms used in the recitals without definition are defined in Section
1.01 hereof), (iii) for the Borrower's working capital requirements, (iv) for
Permitted Acquisitions and (v) 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
Administrative Agent and the Lender Parties, a security interest in and Lien
upon substantially all of its existing and after-acquired personal and real
property.
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D. Each of the Borrower's Parents and their Subsidiaries (other than
the Borrower) has agreed to guarantee all of the obligations of the Borrower to
the Administrative Agent and the Lender Parties under the Loan Documents and to
grant to the Administrative Agent, for the benefit of the Administrative Agent
and the Lender Parties, a security interest in and Lien upon substantially all
of their respective existing and after-acquired personal and real property to
secure such guarantees, including without limitation, a first priority Lien on
all of the Capital Stock of the Borrower.
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 hereby agree as follows:
ARTICLE I.
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.01 CERTAIN DEFINED TERMS. As used in this Agreement, the
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following terms shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
"ACCEPTANCE FEE" means a fee payable by the Borrower with respect to
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the acceptance of a Bankers' Acceptance under this Agreement, as set forth in
Section 2.07(c).
"ACQUISITION" means the acquisition, in one transaction or a series
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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 for any
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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 Canada, 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 of the
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Administrative Agent maintained by the Administrative Agent with The Bank of New
York at its office at 00 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, SWIFT Address:
XXXXXX0X, ABA No.: 021 000 018, Account No. 890 0361 212, Reference: Panolam
Industries Ltd., or the Canadian Dollar account of the Administrative Agent
maintained by the Administrative Agent with Royal Bank of Canada at F-1 Client
Service Centre, 000 Xxxxxxxxxx Xxxxxx West, 6th Floor, Xxxxxxx, Xxxxxxx, X0X
0X0, SWIFT Address: ROYCCAT 2, Transit No.: 07172, Account No. 000-000-0,
Reference: Panolam Industries Ltd., or such other account or accounts as may be
specified by the Administrative Agent in a written notice to the Borrower and
the Lenders from time to time.
"AFFECTED LENDER" has the meaning specified in Section 2.08(c)
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"AFFILIATE" means, as to any Person, any other Person that, directly
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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 and
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the Documentation Agent.
"APPLICABLE BA ACCEPTANCE RATE" means, as of any date of
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determination, with respect to Revolving 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, 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 BA Acceptance Rate to be
effective on the date of any corresponding change in the Applicable Leverage
Ratio.
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APPLICABLE BA ACCEPTANCE RATE WITH
APPLICABLE LEVERAGE RATIO RESPECT TO REVOLVING LOANS
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4.0: 1.0 or greater 2.75%
3.5: 1.0 or greater, but less than 4.0: 1.0 2.50%
3.0: 1.0 or greater, but less than 3.5: 1.0 2.25%
2.5: 1.0 or greater, but less than 3.0: 1.0 2.00%
less than 2.5: 1.0 1.75%
"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%.
APPLICABLE BASE RATE MARGIN
WITH RESPECT TO REVOLVING
LOANS, SWING LINE LOANS
APPLICABLE LEVERAGE RATIO AND TERM A LOANS
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4.0 : 1.0 or greater 1.75%
3.5 : 1.0 or greater, but less than 4.0 : 1.0 1.50%
3.0 : 1.0 or greater, but less than 3.5 : 1.0 1.25%
2.5 : 1.0 or greater, but less than 3.0 : 1.0 1.00%
less than 2.5 : 1.0 0.75%
"APPLICABLE CANADIAN FACILITY PERCENTAGE" means, as of any date
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of determination, the quotient (expressed as a percentage) obtained by dividing
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(a) 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
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Commitments in effect at such time, by (b) the sum of (i) the amount determined
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according to the foregoing clause (a), plus (ii) the aggregate principal amount
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of loans and letter of credit obligations outstanding under the US Credit
Agreement at such time, plus (iii) the aggregate unused revolving commitments in
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effect under the US Credit Agreement at such time.
"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
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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 REVOLVING LOANS
APPLICABLE LEVERAGE RATIO AND TERM A LOANS
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4.0 : 1.0 or greater 2.75%
3.5 : 1.0 or greater, but less than 4.0 : 1.0 2.50%
3.0 : 1.0 or greater, but less than 3.5 : 1.0 2.25%
2.5 : 1.0 or greater, but less than 3.0 : 1.0 2.00%
less than 2.5 : 1.0 1.75%
"APPLICABLE LEVERAGE RATIO" means, with respect to any date of
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determination, the Consolidated Leverage Ratio for Panolam International 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
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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 90th day after the
end of the fourth fiscal quarter of any Fiscal Year (the "CUTOFF DATE" with
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respect to any such fiscal quarter), the Borrower shall be deemed, for the
purpose 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 Panolam International and its Subsidiaries as of
the last day of such fiscal quarter was 4.0:1.0; and, provided further, that if
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the 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 PRIME RATE MARGIN" means, as of any date of
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determination, with respect to Revolving Loans and Swing Line 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, 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 Prime
Rate Margin to be effective on the day of any corresponding change in the
Applicable Leverage Ratio.
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APPLICABLE PRIME RATE MARGIN
WITH RESPECT TO REVOLVING LOANS AND
APPLICABLE LEVERAGE RATIO SWING LINE LOANS
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4.0 : 1.0 or greater 1.75%
3.5 : 1.0 or greater, but less than 4.0 : 1.0 1.50%
3.0 : 1.0 or greater, but less than 3.5 : 1.0 1.25%
2.5 : 1.0 or greater, but less than 3.0 : 1.0 1.00%
less than 2.5 : 1.0 0.75%
"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 US Securities and Exchange
Commission subject to agreed upon procedures to be performed by Panolam
International's independent accountants, if prior to the consummation of such
Permitted Acquisition Panolam International delivers to the Administrative Agent
and the Lenders a certificate signed by the Chief Financial Officer 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 fund
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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.
"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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"BA EQUIVALENT LOAN" means a loan made by a Non BA Lender
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evidenced by a Discount Note.
"BA LOAN" means a Revolving Loan made by a Revolving Lender by
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way of the acceptance and purchase by that Lender of a Bankers' Acceptance drawn
by the Borrower.
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"BA REFERENCE LENDER" means CSFBC.
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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.
"BANKERS' ACCEPTANCE" and "BA" each means a xxxx of exchange
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denominated in Canadian Dollars substantially in the form of Exhibit VIII-A,
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drawn by the Borrower and accepted by a Lender and includes a Discount Note and
a depository xxxx issued in accordance with the Depository Bills and Notes Act
(Canada).
"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 effect
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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 reference rate in effect
for determining rates on US Dollar denominated commercial loans made by it in
Canada; 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 reference
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 reference rate
or the Federal Funds Rate, as the case may be.
"BASE RATE LOAN" means a Loan that bears interest as provided in
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Section 2.05(a).
"BORROWER" has the meaning set forth in the introduction to this
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Agreement.
"BORROWER'S ACCOUNT" means the US Dollar account (number 0000000)
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the Borrower or the Canadian Dollar account (number 178012) of the Borrower, as
applicable, maintained by the Borrower with The Bank of Nova Scotia at its
branch at 0000 Xxxxxxxxxx Xxxxxx Xxxx, Xxxxxxxx, Xxxxxx, 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 determination,
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(i) the sum of 60% of Eligible Inventory plus 85% of Eligible Receivables less
(ii) any Reserves. For the purpose of valuing Eligible Inventory and Eligible
Accounts denominated in Canadian Dollars, the amounts thereof shall be converted
into the Equivalent Amounts thereof in US Dollars on the date of each Borrowing
Base Certificate.
"BORROWING BASE CERTIFICATE" means a certificate of the Borrower
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in the form attached hereto as Exhibit VI.
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"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 Toronto, Ontario and, if the
applicable Business Day relates to any (1) Eurodollar Rate Loans, a day of the
year on which dealings in US Dollars are carried on in the London interbank
market; (2) payment by or to any Lender Party under this Agreement in US
Dollars, a day of the year on which banks are not required or authorized by law
to close in New York, New York; or (3) any Borrowing, conversion or continuation
of any Loan or Issuance of any Letter of Credit, a day of the year on which
banks are not required or authorized by law to close in Montreal, Quebec.
"CANADIAN BENEFIT PLANS" means all material employee benefit
----------------------
plans of any nature or kind whatsoever that are not Canadian Pension Plans and
which are maintained or contributed to by any Loan Party for its employees or
former employees in Canada.
"CANADIAN DOLLARS" and "CDN$" each means lawful currency of
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Canada.
"CANADIAN PENSION PLAN" means each plan which is considered to be
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a pension plan for the purposes of any applicable pension benefits standards
statute and/or regulation in Canada established, maintained or contributed to by
any Loan Party for its employees or former employees .
"CANADIAN SUBSIDIARY" means a Subsidiary of the Borrower all the
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shares of which are owned directly or indirectly by the Borrower (recognizing
that, in order to better perfect the Administrative Agent's security therein,
those shares may be registered in the Administrative Agent's or its nominee's
name) that is (i) a corporation incorporated under the laws of Canada (but not
the Province of Quebec) and (ii) a Loan Party.
"CAPITAL EXPENDITURES" means, for any period, the sum of all
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expenditures during such period by Panolam International 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
Panolam International during such periods.
"CAPITAL LEASE" means, with respect to any Person, any lease of
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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 and
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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 a Security
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Agreement executed by the Borrower and delivered to the Administrative Agent.
"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, Canada, any province thereof or any agency of any of the foregoing
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 Xxxxx'x Investors Service, Inc.; and (iii) certificates of
deposit or time deposits, maturing no more than one year from the date of
creation thereof, issued by (A) commercial banks incorporated under the laws of
the United States of America or chartered banks incorporated under the laws of
Canada, each having combined capital, surplus and undivided profits of not less
than US$300,000,000 or the Equivalent Amount thereof and having a senior
unsecured rating of "A" or better by a nationally recognized rating agency, (B)
the Administrative Agent or (C) any Lender.
"CDOR RATE" means, on any day, the annual rate of interest which
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is the arithmetic average of the "BA/month" rates applicable to Canadian Dollar
bankers' acceptances identified as such on the Reuters Screen CDOR Page at
approximately 10:00 a.m. (Toronto time) on such day (as adjusted by the
Administrative Agent after 10:00 a.m. (Toronto time) to reflect any error in any
posted rate or in the posted average rate).
"CERCLA" means the US Comprehensive Environmental Response,
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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;
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(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 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 Panolam International or of any Parent; or
(e) Panolam International shall cease to own 100% of the Capital Stock
of the Borrower, Panolam US or Pioneer.
"CHATTEL PAPER" means any "chattel paper", as such term is defined in
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the PPSA, now owned or hereafter acquired by any Loan Party, wherever located.
"CHIEF FINANCIAL OFFICER" means the Chief Financial Officer of Panolam
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International or the Borrower, or at any time that there is no chief financial
officer, the director of finance or the treasurer of Panolam International or
the Borrower.
"CLOSING DATE" means the date on or before February 26, 1999, on which
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each of the conditions in Section 4.01 is satisfied or waived and the initial
Borrowings are made.
"COLLATERAL" means all "COLLATERAL" referred to in the Collateral
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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 Agreements, the Mortgages
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and any other instrument or agreement purporting to create a Lien to secure the
Obligations under the Loan Documents.
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"COLLATERAL REPORTS" means the Borrower's reports required as set
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forth in Schedule II.
"COMMITMENT" means a Term A Commitment, a Term B Commitment, a
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Revolving Commitment, a Swing Line Commitment or a Letter of Credit Commitment.
"COMPANY" means Holdings together with its direct and indirect
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Subsidiaries, including, but not limited to, the Borrower, Panolam International
and Pioneer.
"COMPLIANCE CERTIFICATE" means a certificate of the Chief Financial
----------------------
Officer, substantially in the form attached as Exhibit IX hereto, certifying (i)
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the truth, accuracy and completeness in all material respects of all financial
information provided therewith pursuant to Section 6.03(b), or 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 Panolam
International 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
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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
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with GAAP.
"CONSOLIDATED EBITDA" means, for any period, the EBITDA for Panolam
-------------------
International and its Subsidiaries, or, for the purpose of Section 6.04(e)(ii),
the EBITDA for the Borrower and its Subsidiaries, determined, in each case, on a
Consolidated basis in conformity with GAAP for such period. For purposes of
calculating Consolidated EBITDA for Panolam International and its Subsidiaries
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 Panolam International during such periods. For purposes of calculating
Consolidated EBITDA for Panolam International and its Subsidiaries or for the
Borrower and its Subsidiaries, as
-11-
applicable, for any period prior to the end of the fourth full fiscal quarter of
Panolam International or the Borrower, as applicable, 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 Panolam International or the Borrower, as applicable, 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 Panolam International and its Subsidiaries
on a Consolidated basis in conformity with GAAP. 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 Panolam International 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 Panolam
International and its Subsidiaries, or for the purpose of Section 6.04(e)(ii),
of the Borrower and its Subsidiaries, in each case, on a Consolidated basis for
such period in conformity with GAAP, including (without duplication) in respect
of Panolam International and its Subsidiaries, 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 Panolam International and its Subsidiaries (including
Pioneer) or the Borrower and its Subsidiaries, as applicable, 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 Panolam
International and its Subsidiaries or the Borrower and its Subsidiaries (other
than, in each case, the newly-acquired Person or assets), as applicable, 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
-12-
the Debt incurred and assumed (including Borrowings hereunder and borrowings
under the US 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 Panolam International and its Subsidiaries, or, for the
purpose of Section 6.04(e)(ii), of the Borrower and its Subsidiaries, in each
case, 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 Panolam International and its Subsidiaries, as
determined on a Consolidated basis in conformity with GAAP.
"CONTRACT PERIOD" means a period selected by the Borrower consisting
---------------
of approximately 30, 60, 90 or, subject to the Administrative Agent consenting
thereto, acting reasonably, 180 days, and commencing and expiring on a Business
Day; provided that no Contract Period shall extend beyond the Revolving
-------- ----
Commitment Termination Date.
"CONVERSION", "CONVERT" and "CONVERTED" each refer to a conversion of
---------- ------- ---------
Loans of one Interest Type into Loans of another Interest Type pursuant to
Section 2.05 or Section 2.06.
"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 or capital and payable within such year,
but excluding the current portion of long-term debt required to be paid within
one year and, in the
-13-
case of the Borrower and Panolam International, 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 US 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 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.
-14-
"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.
"DISCOUNT NOTE" means a non-interest bearing promissory note
-------------
denominated in Canadian Dollars, substantially in the form of Exhibit VIII-B,
--------------
issued by the Borrower to a Non BA Lender to evidence a BA Equivalent Loan.
"DISCOUNT PROCEEDS" means, for any Bankers' Acceptance issued
-----------------
hereunder, an amount calculated on the applicable date of Borrowing by dividing:
(a) the face amount of the Bankers' Acceptance by
(b) the sum of one plus the product of:
(i) the Discount Rate applicable to the Bankers' Acceptance and
(ii) a fraction, the numerator of which is the applicable
Contract Period and the denominator of which is 365
with the product being rounded up or down to the fifth decimal place and
.000005 being rounded up.
"DISCOUNT RATE" means, with respect to an issue of a Bankers'
-------------
Acceptance, the arithmetic average (rounded upward to the nearest multiple of
0.01% at or about 10:00 a.m. (Toronto time) on the date of issue) of the
discount rates, expressed as a rate per annum and calculated on the basis of a
year of 365 days, applicable to Bankers' Acceptances with the same maturity date
accepted by the BA Reference Lender.
"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 Panolam International, 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 Panolam International), 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.
-15-
"DOCUMENTS OF TITLE" means any "documents of title", as such term is
------------------
defined in the PPSA, now owned or hereafter acquired by any Loan Party, wherever
located.
"DOMESTIC SUBSIDIARY" means, with reference to Panolam International,
-------------------
any direct or indirect Subsidiary of Panolam International that is not a Foreign
Subsidiary.
"DOMTAR" means Domtar Inc.
------
"DOMTAR LITIGATION" means the lawsuit commenced by the Borrower
-----------------
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 the Borrower and Domtar, as amended.
"DOMTAR NOTE" means the US$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, or (b) any
commercial or chartered bank, savings and loan association, savings bank,
finance company, insurance
-16-
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 and shall be deemed not to be
unreasonably withheld if the proposed assignment or participation would result
in any material additional cost being incurred by the Borrower, including but
not limited to any gross-up for withholding tax under Section 2.10(a), (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 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
------------------
Canadian 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
saleability of or access to Inventory or in Prior Claims 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 Canadian 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 Canadian
Subsidiary's) performance with respect to that Inventory), except (i) the
Liens in favor of the Administrative Agent, on behalf of itself and the
Lender Parties and (ii) Prior Claims that are unregistered;
(b) that is (i) not located on premises owned, leased or operated by
the Borrower or a Canadian 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
-17-
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);
(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 Canadian 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,
subject only to Prior Claims that are unregistered;
(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 Canadian 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
-18-
the collectability by the Administrative Agent of such Receivables or in Prior
Claims 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 (except in the case of any
modification of Reserves referred to in clause (a)(ii) 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 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 Canadian Subsidiaries in the
ordinary course of its business;
(b) (i) upon which the Borrower's or the applicable Canadian
Subsidiary's right to receive payment is not absolute or is contingent upon
the fulfilment of any condition whatsoever or (ii) upon which the Borrower
or the applicable Canadian 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 Canadian Subsidiary's 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 defence, 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 Canadian
Subsidiaries or (ii) is subject to any right, claim, security interest or
other interest of any other Person, other than (A) Liens in favor of the
Administrative Agent, on behalf of itself and the Lender Parties and (B)
Prior Claims that are unregistered;
(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
Canadian government (Her Majesty the Queen in Right of Canada) or a
provincial or territorial government or a political subdivision of any
thereof, or any department, agency or instrumentality of any thereof or
that is the US government or a state government or
-19-
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, the Receivable is
assignable by way of security and the Borrower or the applicable Canadian
Subsidiary, if necessary or desirable, has complied with the Financial
Administration Act (Canada) and any amendments thereto or the US Federal
Assignment of Claims Act of 1940, and any amendments thereto, as
applicable, or any applicable provincial or state statute or municipal
ordinance or any other analogous law of similar purpose and effect with
respect to such obligation;
(i) that is the obligation of a Receivables Debtor located in the
Province of Newfoundland or in the Northwest Territories (unless a
perfected first priority Lien in favor of the Administrative Agent is
obtained therein under the laws of such jurisdiction) or in a foreign
country other than the United States of America 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 xxxx-
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;
(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 Insolvency
Law;
(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 (1) above;
-20-
(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
subject only to Prior Claims that are unregistered;
(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
Canadian Subsidiaries, the Receivable exceeds 10% in face value of all
Receivables of the Borrower and its Canadian Subsidiaries then outstanding,
to the extent of such excess; or
(r) that is payable in any currency other than Canadian Dollars or US
Dollars.
"ELKHART PROPERTY" has the meaning set forth in Section 6.01(q)(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 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,
-----------------
provincial, state or local law, rule, regulation, order or judgment relating to
the environment, occupational health and safety or Hazardous Materials.
"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.
-21-
"EQUIVALENT AMOUNT" means, on any date of determination, with respect
-----------------
to obligations or valuations denominated in one currency (the "FIRST
CURRENCY"), the amount of another currency (the "SECOND CURRENCY") which would
result from the conversion of the relevant amount of the first currency into the
second currency at the 12:00 noon rate quoted on the Reuters Monitor Screen Page
BOFC (or such other Page as may replace such Page for the purpose of displaying
such exchange rates) on such date or, if such date is not a Business Day, on the
Business Day immediately preceding such date of determination, or at such other
rate as may have been agreed in writing between the Borrower and the
Administrative Agent.
"ERISA" means the US 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 US 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.
"EUROCURRENCY LIABILITIES" has the meaning specified in Regulation D
------------------------
of the Board of Governors of the US Federal Reserve System, as in effect from
time to time.
"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
-22-
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 tha t 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 US 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 CSFBC.
---------------------------
"EVENTS OF DEFAULT" has the meaning specified in Section 7.01.
-----------------
"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
-----
-23-
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 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 US 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
------------------------
Panolam International 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 Panolam
International, (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.
"EXCLUDED FOREIGN SUBSIDIARY" means a Foreign Subsidiary other than
---------------------------
the 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 one of the "EXCLUDED MELAMINE SUBS" if and to
the extent that the Loan Parties
-24-
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 Panolam
International.
"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 Panolam International, (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 Panolam International, (c)
transactions solely between Panolam International and any of its Subsidiaries or
solely among Subsidiaries of Panolam International, (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
Panolam International 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 Panolam International and its
Subsidiaries pursuant to plans approved by a majority of members of the Board of
Directors of Panolam International 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 Panolam
International or its Subsidiaries, but in any event not to exceed US$1,500,000
or the Equivalent Amount thereof in the aggregate outstanding at any one time,
(g) the payment of reasonable fees and indemnities to directors of Panolam
International and its Subsidiaries who are not employees of Panolam
International 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 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 DOCUMENTATION" means, collectively, the Existing
-----------------------------
Credit Agreement, the Existing US 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).
"EXISTING LENDERS" means, collectively, the agent and lenders under
----------------
the Existing Credit Agreement and the agent and lenders under the Existing US
Credit Agreement.
"EXISTING US 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
-25-
the lenders thereunder, and the other financial institutions and entities
signatory thereto as lenders, as the same may have been amended or otherwise
modified to date.
"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 US 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.
"FEE AGREEMENT" means the agreement dated January 4, 1999 among the
-------------
Lead Arranger, the Syndication Agent, Credit Suisse First Boston, the US
Borrower and the Borrower under which the US Borrower and the Borrower agreed to
pay certain fees in connection with the Facilities and the credit facilities
provided under the US Credit Agreement, as amended, restated, supplemented and
otherwise modified from time to time.
"FISCAL MONTH" shall mean any calendar month.
------------
"FISCAL YEAR" means a fiscal year of Panolam International 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) the Borrower 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 US 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
Panolam International or any of its Subsidiaries, all
-26-
Debt for borrowed money which is part of the Obligations under the Loan
Documents or the US 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.; 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 International,
----------
Panolam US, Pioneer and each other Person, if any, that executes or otherwise
becomes a party to a Guaranty or other similar agreement in favor of the
Administrative Agent, for the benefit of the Administrative Agent and the Lender
Parties, or in favor of the Administrative Agent and the Lender Parties, as
appropriate, 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).
-----------------
-27-
"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 Panolam International or any of
Panolam International'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 Panolam International or (b)
Qualified Capital Stock of any of Panolam International's Parents, to the extent
that the cash proceeds therefrom are used as a Capital Contribution to Panolam
International; (ii) "QUALIFIED CAPITAL STOCK" means any Capital Stock of Panolam
-----------------------
International that is not Disqualified Capital Stock; and (iii) "CAPITAL
-------
CONTRIBUTION" means any contribution to the equity of Panolam International from
------------
any of its Parents for which no consideration other than the issuance of
Qualified Capital Stock is given.
"INSOLVENCY LAW" means any of the Bankruptcy and Insolvency Act
--------------
(Canada), the Companies' Creditors Arrangement Act (Canada) and Titles 7 and 11
of the United States Code entitled "BANKRUPTCY", each as now and hereafter in
effect, any successors to such statutes and any other applicable insolvency or
other similar law of any jurisdiction.
"INSTRUMENTS" means any "INSTRUMENTS", as such term is defined in the
-----------
PPSA, now owned or hereafter acquired by any Loan 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 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 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 legal counsel fees)
incurred by Holdings or any of its Subsidiaries in connection with the
adjustment or settlement of any claims of Holdings or such Subsidiary in respect
thereof. Cash payments or proceeds payable in respect of any loss
-28-
incurred by the Borrower or any of its Subsidiaries or any taking of assets of
the Borrower or any of its Subsidiaries of the nature described above shall be
deemed to be received by the Borrower or its applicable Subsidiary for the
purposes of this Agreement notwithstanding that such cash payments or proceeds
may actually be paid to Holdings or another Subsidiary of Holdings.
"INTERCOMPANY NOTE" means a promissory note in the applicable form of
-----------------
Exhibit XVII evidencing intercompany Debt and pledged to the Administrative
------------
Agent and (except where the intercompany Debt evidenced thereby is owing to a
Foreign Subsidiary) the US Administrative Agent pursuant to the Security
Agreements and subject to the Intercreditor Agreement.
"INTERCREDITOR AGREEMENT" has the meaning specified in Section
-----------------------
4.01(k)(xxx).
"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).
---------------
"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 among Loans bearing interest
-------------
based on the Prime Rate, Loans bearing interest based on the Base Rate, Loans
bearing interest based on the Eurodollar Rate and Loans discounted by the
Discount Rate and subject to an Acceptance Fee.
"INTERNAL REVENUE CODE" means the US 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
---------
PPSA, now or hereafter owned or acquired by any Loan Party, wherever located,
and in any event including inventory, merchandise, goods and other personal
property which are held by or on behalf of any Loan 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 Loan 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
-29-
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 chartered bank, as issuer of a Letter of Credit.
"ITA" means the Income Tax Act (Canada), as amended, and any successor
---
thereto.
"LEAD ARRANGER" means Xxxxxxxxx, Xxxxxx & Xxxxxxxx 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 denominated in US
----------------
Dollars or Canadian Dollars and issued hereunder.
"LETTER OF CREDIT AGREEMENT" has the meaning specified in Section
--------------------------
3.02(a).
"LETTER OF CREDIT BANK" means Royal Bank of Canada, in its capacity as
---------------------
an Issuing Bank.
"LETTER OF CREDIT CASH COLLATERAL ACCOUNT" has the meaning specified
----------------------------------------
in a Security Agreement executed by the Borrower and delivered to the
Administrative Agent.
"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 from time to time pursuant to Section
2.04.
"LETTER OF CREDIT DOCUMENTS" has the meaning specified in Section
--------------------------
3.04(a).
-30-
"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
--------------
Bankers' Acceptances, the Discount Notes, each Guaranty, the Collateral
Documents, each Letter of Credit Agreement, the Agreement Respecting
Intellectual Property, the Acknowledgement Respecting Sales Agreements, each
Bank Hedge Agreement, the Intercreditor Agreement, the Fee Agreement and the
share transfer powers in respect of Capital Stock of the Loan Parties that is
required to be pledged to the Administrative Agent pursuant to this Agreement or
any Collateral Document.
"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 Panolam US, the Borrower 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.
-31-
"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 US$1,000,000, or the Equivalent Amount thereof, 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
cancellable without penalty (or with a penalty of US$50,000 or less or the
Equivalent Amount thereof) 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.
"MORTGAGE POLICIES" has the meaning specified in Section
-----------------
4.01(k)(xv)(B).
"MORTGAGES" has the meaning specified in Section 4.01(k)(xv) and shall
---------
also include any Additional Mortgages.
"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 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,
-32-
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 BA LENDER" means a Lender that cannot or does not as a matter of
-------------
policy issue bankers' acceptances.
"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 US 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.
---------
"OBCA" means the Business Corporations Act (Ontario).
----
-33-
"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, 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 Loan Parties under the Loan Documents
include (a) the obligation to pay principal, interest, Letter of Credit
commissions, charges, expenses, fees, legal fees and disbursements, indemnities
and other amounts payable by any Loan 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
Loan 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 2.10(b).
-----------
"PANOLAM INTERNATIONAL" means Panolam Industries International, Inc.,
---------------------
a Delaware 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 Panolam International now or hereafter
existing and, when used with reference to the Borrower, means Panolam
International 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 Panolam International or any of its Subsidiaries if all of
the following conditions are met:
-34-
(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 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;
(b) such Acquisition has not been preceded by an unsolicited tender
offer or take-over bid for such Person by Panolam International 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, if Panolam International or any of its Subsidiaries is making such
Acquisition, after giving effect to such Acquisition, such Person becomes a
wholly-owned direct or indirect Subsidiary of Panolam International;
(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) Panolam International and its Subsidiaries and 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) Panolam International
and the Borrower can reasonably be expected to remain in compliance with
such covenants, with no increase in the
-35-
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
US$25,000,000 or the Equivalent Amount thereof in the aggregate plus up to
----
an additional US$5,000,000, or the Equivalent Amount thereof, 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 US$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
US$5,000,000 or the Equivalent Amount thereof in the aggregate; and
(m) in the case of an Acquisition of an entity organized under the
laws of Canada or any political subdivision thereof, the acquiror shall be
the Borrower 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
-36-
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)
zoning restrictions, 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.
"PERMITTED RESTRICTIONS", with respect to any consensual restriction
----------------------
on the ability of any Subsidiary of Panolam International 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, Panolam International or any
of its Subsidiaries, means:
(a) restrictions imposed pursuant to this Agreement, the US Credit
Agreement, any of the other Loan Documents or any of the other US Loan
Documents;
(b) restrictions imposed by the Subordinated Notes or the Subordinated
Note Indenture or by other Debt of Panolam International or any of its
Subsidiaries permitted hereunder; provided that, such restrictions are no
-------- ----
more restrictive taken as a whole than those imposed by this Agreement or
the US 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 Panolam International 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 Panolam
International or is amalgamated, merged or consolidated with or into
Panolam International or one of its Subsidiaries, and which is not incurred
in violation of this Agreement, the US Credit Agreement, the Subordinated
Note Indenture or any agreement relating to any property,
-37-
asset, or business acquired by Panolam International 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 Panolam
International 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 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 Panolam International 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 under the Loan Documents and
under the US 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 Panolam International
-------------------
of 100% of the equity securities of Pioneer pursuant to the Pioneer Acquisition
Agreement.
-38-
"PIONEER ACQUISITION AGREEMENT" means the Stock Purchase Agreement
-----------------------------
dated as of July 17, 1998 by and between Rugby U.S.A., Inc. and Panolam
International, 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 (excluding a Canadian Pension
----
Plan) or a Multiple Employer Plan.
"PPSA" means the Personal Property Security Act (Ontario) and the
----
Regulations thereunder, as from time to time in effect, provided, however, if
-------- -------
attachment, perfection or priority of the Administrative Agent's or the Lenders'
security interests (or the applicable equivalent thereof) in any Collateral is
governed by the personal property security laws of any jurisdiction other than
Ontario, PPSA means those personal property security laws in such other
jurisdiction for the purposes of the provisions hereof relating to such
attachment, perfection or priority and for the definitions related to such
provisions.
"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.
"PRIME RATE" means a fluctuating interest rate per annum in 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 reference rate in effect
for determining interest rates on Canadian Dollar denominated commercial loans
made by it in Canada and (b) the CDOR Rate in effect from time to time plus 1/2
of one percent per annum. Any change in the Prime Rate shall be effective as of
the opening of business on the effective day of such change in the
Administrative Agent's reference rate or CDOR Rate, as the case may be.
"PRIME RATE LOAN" means a Loan that bears interest as provided in
---------------
Section 2.05(d).
-39-
"PRIOR CLAIMS" means all Liens created by applicable law (in contrast
------------
with Liens voluntarily granted) which rank or are capable of ranking prior to or
pari passu with the Administrative Agent's or the Lenders' security interests
(or the applicable equivalent thereof) against all or part of the Collateral,
including for amounts owing (to the extent that such amounts may be secured by
such a Lien) for employee deductions, goods and services taxes, sales taxes,
employer health taxes, municipal taxes, workers' compensation, pension fund
obligations and overdue rents.
"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 Panolam International'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 Panolam International,
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 IX 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
-----------
PPSA, now owned or hereafter acquired by any Loan Party and, in any event,
including (a) all accounts receivable, other receivables, book debts, claims and
other forms of obligations (other than forms of obligations evidenced by Chattel
Paper, securities or Instruments) now owned or hereafter received or acquired by
or belonging or owing to any Loan 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
PPSA), (b) all of each Loan 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 Loan 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 Loan Party, under
all purchase orders and contracts for the sale of goods or the performance of
services or both by such Loan Party or in connection with any other transaction
(whether or not yet earned by performance on the part of such Loan 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.
-40-
"RECEIVABLES DEBTOR" means any Person who may become obligated to any
------------------
Loan 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).
--------
"REGULATION T" means Regulation T of the Board of Governors of the US
------------
Federal Reserve System, as in effect from time to time.
"REGULATION U" means Regulation U of the Board of Governors of the US
------------
Federal Reserve System, as in effect from time to time.
"RELATED DOCUMENTS" means the Pioneer Acquisition Documents, the
-----------------
Subordinated Debt Documents and the US Loan Documents.
"REPLACEMENT LENDER" has the meaning specified in Section 2.08(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 (i) Inventory that is excess, obsolete, unsaleable,
shopworn, seconds, damaged or unfit for sale; and (ii) Prior Claims (including,
without limitation, the rights of unpaid suppliers under Section 81.1 of the
Bankruptcy and Insolvency Act (Canada), the reserve for which initially shall be
15% of raw material Inventory) 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.
-41-
"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 701.
"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 denominated
--------------
in Canadian Dollars or US Dollars payable to the order of any Revolving Lender,
in substantially the form of Exhibit VII-A-1 or Exhibit VII-A-2 hereto,
--------------- ---------------
respectively, evidencing the aggregate indebtedness of the Borrower to such
Lender resulting from the Revolving Loans made by such Lender in Canadian
Dollars or US Dollars, respectively.
"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 701) 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 701) at such time.
"SECURED OBLIGATIONS" has the meaning specified in the applicable
-------------------
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
-42-
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.
"SOLVENCY" and "SOLVENT" mean (1) with respect to any Person on a
-------- -------
particular date that is subject to Canadian Insolvency Law, that on such date
(a) the property of such Person is sufficient, if disposed of at a fairly
conducted sale under legal process, to enable payment of all its obligations,
due and accruing due, (b) the property of such Person is, at a fair valuation,
greater than the total amount of liabilities, including contingent liabilities,
of such Person to enable payment of all its obligations due and accruing due,
(c) such Person has not ceased paying its current obligations in the ordinary
course of business as they generally become due and (d) such Person is not for
any reason unable to meet its obligations as they generally become due; and (2)
with respect to any Person on a particular date that is subject to US Insolvency
Law, 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 saleable 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 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.
-43-
"SUBORDINATED NOTE INDENTURE" means the Subordinated Note Indenture
---------------------------
dated as of February 18, 1999, between Panolam International 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?% Senior Subordinated Notes
------------------
due 2009 of Panolam International issued pursuant to the Subordinated Note
Indenture and the Series B 11?% 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 US$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% 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.
"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
-44-
Section 9.07 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 CSFBC 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 denominated
---------------
in Canadian Dollars or US Dollars payable to the order of the Swing Line Lender,
in substantially the form of Exhibit VII-D-1 hereto or Exhibit VII-D-2 hereto,
--------------- ---------------
evidencing the aggregate indebtedness of the Borrower to such Lender under the
Swing Line Facility.
"SWING LINE SUBLIMIT" means US$5,000,000 or the Equivalent Amount
-------------------
thereof in Canadian Dollars.
"SYNDICATION AGENT" means DLJ Capital Funding, Inc., as syndication
-----------------
agent for the Facilities 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, the Administrative Agent, each participant under a participation and each
SPV, respectively, taxes that are imposed on or measured by its net income or
capital by the jurisdiction under the laws of which it is organized or resident
or carries on business through a permanent establishment located therein or any
political subdivision thereof.
"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 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).
-----------
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"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 701.
"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 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 701.
"TERM BORROWING" means a borrowing consisting of simultaneous Term
--------------
Loans of the same Interest Type made by the Term Lenders.
-46-
"TERM FACILITIES" means, collectively, the Term A Facility and Term B
---------------
Facility.
"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 Canadian 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
-------------------------
Panolam International 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 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
-47-
(ii) such Lender's Revolving Pro 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.
"US" means the United States of America.
--
"US ADMINISTRATIVE AGENT" means the Administrative Agent under the US
-----------------------
Credit Agreement.
"US CREDIT AGREEMENT" means the Credit Agreement, dated as of the date
-------------------
hereof, and entered into among Panolam International, the financial institutions
and other entities party thereto as US Lenders, DLJ Capital Funding, Inc., as
syndication agent, Credit Suisse First Boston, as administrative agent, and
Royal Bank of Canada, as documentation agent.
"US CREDIT AGREEMENT GUARANTY" means the guaranty dated as of the date
----------------------------
hereof, and entered into among Holdings, Group, PII Second, Panolam US and
Pioneer, and acknowledged by Panolam International and the US Administrative
Agent, as the same may be amended, supplemented or otherwise modified from time
to time.
"US DOLLARS" and "US$" each means lawful currency of the United States
---------- ---
of America.
"US LENDERS" means the lenders or lender parties, as applicable, under
----------
the US Credit Agreement.
"US LOAN DOCUMENTS" means the US Credit Agreement, the notes (if any),
-----------------
the US Credit Agreement Guaranty, the other guaranties, the collateral
documents, each letter of credit agreement, each bank hedge agreement and the
Intercreditor Agreement, in each case, in connection with the US Credit
Agreement executed and delivered to, or in favor of, the US Administrative Agent
and/or any of the US Lenders.
"US OBLIGATIONS" means all Obligations (as defined in the US Credit
--------------
Agreement) of any 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 US Credit Agreement or any of the other US Loan Documents.
"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.
-48-
"WELFARE PLAN" means a welfare plan, as defined in Section 3(l) 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 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,
--------------
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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 by way of Prime Rate Loans, Base Rate
Loans, Eurodollar Rate Loans and BA Loans 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 US$1,000,000 or an integral multiple of US$100,000 in excess
thereof and each Revolving Borrowing of Base Rate Loans shall be in an
aggregate amount of US$500,000 or an integral multiple of US$100,000 in
excess thereof. Each Revolving Borrowing of BA Loans shall be in an
aggregate amount of CDN$1,000,000 or an integral multiple of CDN$100,000 in
excess thereof and each Revolving Borrowing of Prime Rate Loans shall be in
an aggregate amount of CDN$500,000 or an integral multiple of CDN$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 Line Loans, the aggregate
-50-
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 Prime Rate
Loans or Base Rate Loans, shall be in an amount equal to CDN$500,000 or an
integral multiple of CDN$100,000 in excess thereof if consisting of Prime
Rate Loans, or in an amount equal to US$500,000 or an integral multiple of
US$100,000 in excess thereof if consisting of Base Rate Loans (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. (Toronto time) (or such later time
as the Administrative Agent may agree) on (i) the Business Day immediately
preceding the Closing Date in the case of the initial Borrowings of Prime
Rate Loans, Base Rate Loans and/or BA Loans and (ii) on the second Business
Day immediately preceding the Closing Date in the case of the initial
Borrowings of Eurodollar Rate Loans. Such Notice of Borrowing shall be
irrevocable upon receipt by the Administrative Agent. Each Appropriate
Lender shall, before 11:00 a.m. (Toronto time) on the Closing Date, make
available to the Administrative Agent such Lender's ratable share of such
Borrowings by depositing same day funds in the Administrative Agent's
Account.
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(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. (Toronto time) (a) on the Business
Day prior to the date of such Borrowing if such Borrowing consists of Prime
Rate Loans or Base Rate Loans, (b) on the second Business Day prior to the
date of Borrowing if such Borrowing consists of BA Loans and (c) 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 or BA 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 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. (Toronto 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 (1) the Business Day prior to the
date of such Borrowing if such Borrowing consists of Prime Rate Loans or
Base Rate Loans, (2) the second Business Day prior to the date of such
Borrowing if such Borrowing consists of BA Loans or (3) the third Business
Day prior to the date of such Borrowing if such Borrowing consists of
Eurodollar Rate Loans, 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. (Toronto time) on the date of such Borrowing in
the case of any Revolving Borrowing to be made on such date, make available
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. (Toronto time) on the date of such Borrowing in the case
of a Swing Line Borrowing, make available 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
-52-
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 Administrative Agent's cost of funds (the
determination of which by the Administrative Agent shall be conclusive and
binding for all purposes under this Agreement in each case, absent manifest
error). 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 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 Prime Rate Loans or 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)),
-53-
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.
(Toronto time) on the Business Day following the date on which such
Notice of Borrowing is given), make available 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 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 the currency 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
-54-
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 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
-55-
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 2.09(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:
TERM A LOANS
TERM A LOAN PAYMENT DATE QUARTERLY INSTALMENT
------------------------ --------------------
March 2000 US$375,000
June 2000 375,000
September 2000 375,000
December 2000 375,000
March 2001 562,500
June 2001 562,500
September 2001 562,500
December 2001 562,500
March 2002 687,500
June 2002 687,500
September 2002 687,500
December 2002 687,500
-56-
March 2003 875,000
June 2003 875,000
September 2003 875,000
December 2003 875,000
TOTAL US$10,000,000
provided, however, that the last such instalment 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 2.09(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:
TERM B LOANS
TERM B LOAN PAYMENT DATE QUARTERLY INSTALMENT
------------------------ --------------------
March 1999 US$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
-57-
TERM B LOANS
TERM B LOAN PAYMENT DATE QUARTERLY INSTALMENT
------------------------ --------------------
June 2004 100,000
September 2004 100,000
December 2004 9,400,000
March 2005 9,400,000
June 2005 9,400,000
September 2005 9,400,000
December 2005 US$40,000,000
TOTAL
provided, however, that the last such instalment 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 2.09(a)) on the Revolving
Commitment Termination Date the aggregate principal amount of all Revolving
Loans owing to such Lender out standing 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 2.09(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. (Toronto 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 Prime Rate Loans or 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
-58-
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 US$1,000,000 or an integral multiple of
US$100,000 in excess thereof, and each partial prepayment of Base Rate
Loans or Prime Rate Loans shall be in an aggregate principal amount of
US$500,000 or an integral multiple of US$100,000 in excess thereof or
CDN$500,000 or an integral multiple of CDN$100,000 in excess thereof, as
applicable (it being understood that the amount of such prepayment shall be
rounded upwards to the nearest multiple of US$100,000 or CDN$100,000, as
applicable, after giving effect to the next sentence); and, provided
--------
further, that BA Loans may not be prepaid under this Section 2.04(a),
-------
provided however, the Borrower may pay to the Administrative Agent for the
-------- -------
accounts of the Appropriate Lenders, in same day funds, for deposit in a
Cash Collateral Account (over which the Administrative Agent shall have
sole and exclusive control and right of withdrawal) an amount of cash equal
to the amount of an issue of outstanding Bankers' Acceptances, which cash
shall be applied thereto on their maturity. So long as no Event of Default
has occurred that is continuing, the Administrative Agent, on behalf of the
Appropriate Lenders, shall pay to the Borrower interest on the cash so
deposited pursuant to this Section 2.04(a) at the Prime Rate in effect from
time to time minus 2.00% per annum. Notwithstanding anything to the
-----
contrary herein, an optional prepayment of Term Loans under this Section
2.04(a) may only be made if (i) a simultaneous optional prepayment of term
loans is made under the US Credit Agreement, and the aggregate amount of
such prepayments is such that the Applicable Canadian Facility Percentage
of such amount is equal to at least US$300,000 or the Equivalent Amount
thereof. 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 clauses (ii) and (iii) 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);
(ii) subject to clause (iii) below, where the optional
prepayment is made pursuant to an election described in Section
7.01(p), to the Term B Loans to the full extent thereof on a pro
rata basis in direct order of maturity; and
(iii) notwithstanding the foregoing clauses (i) and (ii),
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 optional prepayment under Section 2.04(a). In the event
that any Term B Lender elects by 2:00 p.m. (Toronto 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. In the event that any
-59-
Term B Lender elects by 2:00 p.m. (Toronto 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)(ii), 50% of that Term B
Lender's ratable share of such prepayment shall be applied to the
payment 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 application of
prepayments to the Term B Loans shall not be available.
The Borrower shall deliver to the Administrative Agent an Officer's
Certificate demonstrating the calculation of the amount of the Net
Cash Proceeds that gave rise to the optional prepayment described in
Section 7.01(p) and describing the application thereof provided for in
Section 7.01(p)(i) concurrently with such optional prepayment.
(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 US$500,000 or any integral
multiple of US$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 Canadian Facility Percentage of the
amount of the total Excess Cash Flow of Panolam International 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):
-60-
EXCESS CASH FLOW
CONSOLIDATED LEVERAGE RATIO PREPAYMENT PERCENTAGE
--------------------------- ---------------------
**3.50:1.00 50%
**3.00:1.00*3.50:1.00 35%
*3.00:1.00 0%
/**/ Greater than equal to
/*/ Less than
(ii) PREPAYMENTS AND REDUCTIONS FROM ASSET SALE PROCEEDS.On
---------------------------------------------------
the date of receipt by the Borrower or any of its 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 A 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 by which
such Net Cash Proceeds exceed the amount of any optional
prepayment of the Term B Loans made pursuant to an election
described in Section 7.01(p).
(iii) PREPAYMENTS AND REDUCTIONS FROM INSURANCE/
-----------------------------------------
CONDEMNATION PROCEEDS. On the date of receipt by the Borrower or
---------------------
any of its Subsidiaries of any Insurance/Condemnation Proceeds in
excess of (A) US$15,000,000 or the Equivalent Amount thereof,
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)
US$10,000,000 or the Equivalent Amount thereof 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 A 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 by which the Applicable Canadian Facility
Percentage of the amount of such Net Cash Proceeds exceeds the
amount of any optional prepayment of the Term B Loans made
pursuant to an election described in Section 7.01(p);
provided,however, for purposes of this clause , Capital Leases
-------- -------
and purchase money Debt shall not be deemed to be debt
Securities.
-61-
(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
US$5,000,000 or the Equivalent Amount thereof 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 Panolam International 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 A 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 Canadian 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 ,
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 Canadian 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 , as
applicable, the Consolidated Leverage Ratio shall be deemed to be
greater than 3.0:1.0 for purposes of this clause and (C) if, in
connection with and 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 Canadian
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 Canadian
Facility Percentage of such Net Cash Proceeds; and, provided
--------
further, that the prepayment under this clause shall be reduced
-------
by the amount of any related optional prepayment of the Term B
Loans made pursuant to an election described in Section 7.01(p).
(vi) CONSTRAINED AMOUNTS. On the day immediately following
-------------------
the fifth anniversary of the Closing Date, the Borrower shall
prepay the Term B Loans in an amount equal to the aggregate of
all amounts which would, but for Section 2.04(c)(xiii)(A)(2),
have been required to have been prepaid during the five years
following the Closing Date unless Panolam International has
complied with Section 2.04(c)(xiii)(C) of the US Credit
Agreement.
-62-
(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 (including by
reason of fluctuations in the exchange rate between Canadian
Dollars and US Dollars) 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 (including
by reason of fluctuations in the exchange rate between Canadian
Dollars and US Dollars) 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. If any excess remains after the prepayments required by
this Section 2.04(c)(vii), the Borrower shall pay to the
Administrative Agent for the accounts of the Appropriate Lenders,
in same day funds, for deposit to a Cash Collateral Account (over
which the Administrative Agent shall have sole and exclusive
control, including right of withdrawal) an amount equal to such
excess amount.
(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 through 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 Agent an Officers' Certificate
demonstrating the derivation of the additional amounts resulting
in such excess and specifying the application thereof as provided
above.
-63-
(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 , and above, all prepayments under this Section 2.04(c)
shall be applied as follows:
(1) subject to clause 3, 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) where the applicable clause of this Section 2.04(c)
does not limit the prepayment to the Term A Loans, and, where the
applicable clause of this Section 2.04(c) does limit the
prepayment to the Term A Loans, to the prepayment of the Term A
Loans to the full extent
-64-
thereof on a pro rata basis in direct order of maturity 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);
(2) notwithstanding the foregoing clause 1, no
prepayment under Section 2.04(c)(i) or Section 2.04(c)(iii) shall
be applied to the Term B Loans to the extent that such
application would result in the prepayment of more than 25% of
the original principal amount of the Term B Loans on or before
the fifth anniversary of the Closing Date, taking into account
any prior prepayments and the scheduled repayments of the Term B
Loans in Section 2.03(b); and
(3) notwithstanding the foregoing clauses 1 and
2, 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 prepayment under this Section 2.04(c). In the event that
any Term B Lender elects by 2:00 p.m. (Toronto 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 (1), as
between Base Rate Loans and Eurodollar Rate Loans, 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 Section
9.04(c) and (2) as between Prime Rate Loans and BA Loans, first to
Prime Rate Loans to the full extent thereof before application to BA
Loans, in each case in a manner that minimizes the amount of any
payments required to be made by the Borrower pursuant to Section
9.04(c). If a Contract Period in respect of a BA Loan to which a
prepayment is to be applied has not expired, the Borrower shall pay to
the Administrative Agent for the accounts of the Appropriate Lenders,
in
-65-
same day funds, for deposit to a Cash Collateral Account (over
which the Administrative Agent shall have sole and exclusive
control, including right of withdrawal) an amount equal to the
required prepayment to secure the Borrower's obligations in
respect of such BA Loan until the expiry of the Contract Period
therefor upon which such cash collateral shall be applied to the
repayment of such BA Loan.
(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 in US Dollars under Section 2.01 for any
Interest Period pursuant to subsections and of this Section 2.05, the
Borrower shall pay interest on the unpaid principal amount of each Loan
made in US Dollars, 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 to the sum of the Base Rate in effect 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 in US Dollars 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 have more
than seven 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:
-66-
(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(f), elect to pay interest on all or any portion of any Loans in US
Dollars 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 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 US$1,000,000 or any integral
multiple of US$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. (Toronto 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
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anniversary of the first day of such Interest Period, in each case at a
rate equal 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(f),
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) INTEREST ON PRIME RATE LOANS. Except to the extent that the
--- ----------------------------
Borrower shall elect to borrow Revolving Loans in Canadian Dollars under
Section 2.01 pursuant to Section 2.06, the Borrower shall pay interest on
the unpaid principal amount of each Loan made in Canadian Dollars, from the
date of such Loan until such principal amount is paid in full, (i)
quarterly in arrears on the last Business Day of each March, June,
September and December, commencing March 31, 1999, and (ii) on the
Revolving Commitment Termination Date, in each case at a fluctuating
interest rate per annum equal to the sum of the Prime Rate in effect from
time to time plus the Applicable Prime Rate Margin in effect from time to
----
time.
(e) INTEREST ON OVERDUE AMOUNTS. Upon a default in the payment of
---------------------------
interest or any other amount (other than principal) due under this
Agreement or any of the other Loan Documents to which the Borrower is a
party, the Borrower shall pay interest on such overdue amount, both before
and after judgment, at a rate per annum equal to (1) the rate of interest
payable under this Section 2.05 on the principal amount to which such
overdue interest relates, in the case of overdue interest, and (2) (a) the
Prime Rate plus the Applicable Prime Rate Margin in effect from time to
----
time plus 2.00% per annum, in the case of all such other overdue amounts
----
denominated in Canadian Dollars, and (b) the Base Rate plus the Applicable
----
Base Rate Margin in effect from time to time in respect of Term B Loans
that are Base Rate Loans plus 2.00% per annum, in the case of all such
----
other overdue amounts denominated in US Dollars (which overdue amounts, for
greater certainty, shall not include overdue principal or interest in any
case to which this subsection (2) is applicable), in each case, calculated
on a daily basis from the date such amount becomes overdue for so long as
such amount remains overdue. Such interest
-68-
shall be payable at the dates set forth herein for the payment of interest
and upon demand by the Administrative Agent.
(f) 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 to perform its obligations hereunder to make
Eurodollar Rate Loans or to continue to fund or maintain 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. 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(f)(i) or
-69-
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.
(g) INTEREST ACT. For purposes of disclosure pursuant to the Interest
------------
Act (Canada), the annual rates of interest or fees, to which the rates of
interest or fees provided in this Agreement and the other Loan Documents,
and stated herein or therein, as applicable, to be computed on the basis of
a 360 or 365 day year are equivalent, are the rates so determined
multiplied by the actual number of days in the applicable calendar year and
divided by 360 or 365, respectively.
(h) LIMIT ON RATE OF INTEREST. If any provision of this Agreement or
-------------------------
any of the other Loan Documents would obligate the Borrower to make any
payment of interest or other amount payable to any Lender in an amount or
calculated at a rate which would be prohibited by law or would result in a
receipt by that Lender of interest at a criminal rate (as such terms are
construed under the Criminal Code (Canada)) then, notwithstanding such
provision, such amount or rate shall be deemed to have been adjusted with
retroactive effect to the maximum amount or rate of interest, as the case
may be, as would not be so prohibited by law or so result in a receipt by
that Lender of interest at a criminal rate, such adjustment to be effected,
to the extent necessary, as follows: (1) firstly, by reducing the amount or
rate of interest required to be paid to the affected Lender under Section
2.05 or 2.06(c); and (2) thereafter, by reducing any fees, commissions,
premiums and other amounts required to be paid to the affected Lender which
would constitute interest for purposes of Section 347 of the Criminal Code
(Canada). Notwithstanding the foregoing, and after giving effect to all
adjustments contemplated thereby, if any Lender shall have received an
amount in excess of the maximum permitted by that section of the Criminal
Code (Canada), then the Borrower shall be entitled, by notice in writing to
the affected Lender, to obtain reimbursement from that Lender in an amount
equal to such excess, and pending such reimbursement, such amount shall be
deemed to be an amount payable by that Lender to the Borrower. Any amount
or rate of interest referred to in this Section 2.05(h) shall be determined
in accordance with generally accepted actuarial practices and principles as
an effective annual rate of interest over the term that any Loan remains
outstanding on the assumption that any charges, fees or expenses that fall
within the meaning of "interest" (as defined in the Criminal Code (Canada))
shall, if they relate to a specific period of time, be pro-rated over that
period of time and otherwise be pro-rated over the period from the Closing
Date to the date on which all of the obligations in respect of the
Revolving Facility, the Term A Loans or the Term B Loans to which any such
charges, fees or expenses relate and, in the event of a dispute, a
certificate of a Fellow of the Canadian Institute of Actuaries appointed by
the Administrative Agent shall be conclusive, absent manifest error, for
the purposes of such determination.
-70-
SECTION 2.06 BA LOANS.
--------
(a) BANKERS' ACCEPTANCES. The Borrower may, from time to time, on
--------------------
the condition that no Default or Event of Default has occurred and is
continuing, request Revolving Loans consisting of BA Loans or convert
Revolving Borrowings consisting of Prime Rate Loans into Revolving
Borrowings consisting of BA Loans in a Notice of Borrowing or Notice of
Conversion/Continuation, as applicable, specifying the amount of the Loans
as to which such request is made (which amount shall aggregate at least
CDN$1,000,000 or any integral multiple of CDN$100,000 in excess thereof)
and the first day and duration of the Contract Period applicable thereto,
which notice shall be received by the Administrative Agent before 11:00
a.m. (Toronto Time) on the second Business Day prior to the first day of
such Contract Period. The obligations of the Revolving Lenders to make
Revolving Borrowings consisting of BA Loans shall in each case be subject
to availability thereof.
(b) DISCOUNT RATE. On each day on which Bankers' Acceptances are
-------------
to be accepted and purchased, the Administrative Agent shall advise the
Borrower as to the Administrative Agent's determination of the applicable
Discount Rate for the Bankers' Acceptances.
(c) PURCHASE. Upon acceptance of a Bankers' Acceptance by a
--------
Lender, the Borrower shall sell and that Lender shall purchase the Bankers'
Acceptance at the applicable Discount Rate. The Lender shall provide the
Administrative Agent for the account of the Borrower the Discount Proceeds
less the fee payable by the Borrower with respect to the Bankers'
Acceptance pursuant to Section 2.07(c).
(d) SALE. Each Lender may from time to time hold, sell, rediscount
----
or otherwise dispose of any or all Bankers' Acceptances accepted
and purchased by it.
(e) LENDERS TO SIGN BANKERS' ACCEPTANCES ON BEHALF OF THE
-----------------------------------------------------
BORROWER. In order to facilitate the acceptance of Bankers'
--------
Acceptances under this Agreement, the Borrower hereby appoints each Lender,
acting by an employee of the Lender with the responsibility for managing
the Borrower's account, attorney of the Borrower to sign and endorse in
handwriting or by facsimile or mechanical signature, and to complete,
Bankers' Acceptances (including filling in the amount, date and maturity)
for and on behalf of and in the name of the Borrower, as drawer. Neither
the Administrative Agent nor any Lender nor any of their respective
directors, officers, employees or representatives shall be responsible or
liable for any action taken or omitted to be taken by it or them under this
Section except if such action or omission constitutes gross negligence or
willful misconduct. The Borrower hereby agrees to indemnify each Lender and
its respective directors, officers, employees and representatives and to
hold it and them harmless from and against any loss, liability, expense or
claim of any kind or nature whatsoever incurred by any of them as a result
of any action or inaction in any way
-71-
relating to or arising out of the power of attorney granted hereby to such
Lender; provided that, this indemnity shall not apply to any loss,
-------- ----
liability, expense or claim which results from the gross negligence or
willful misconduct of such Lender or any of its directors, officers,
employees or representatives. A power of attorney granted pursuant to this
Section 2.06(e) may be revoked at any time upon not less than five Business
Days' written notice served upon a Lender at its address set out in
Schedule I hereto or the Assignment and Acceptance pursuant to which it
became a Lender, as applicable, provided that, no such revocation shall
-------- ----
reduce, limit or otherwise affect the obligations of the Borrower in
respect of any Bankers' Acceptance executed, completed, endorsed,
discounted and/or delivered in accordance herewith prior to the time at
which such revocation becomes effective.
(f) EXECUTION. Notwithstanding that any Person whose signature
---------
appears on any Bankers' Acceptance may no longer be an authorized signatory
for the Borrower at the time of issuance of a Bankers' Acceptance, that
signature shall nevertheless be valid and sufficient for all purposes as if
the authority had remained in force at the time of issuance and any
Bankers' Acceptance so signed shall be binding on the Borrower.
(g) ISSUANCE. The Administrative Agent, promptly following receipt
--------
of a Notice of Borrowing or Notice of Conversion/Continuation, shall advise
the Lenders of the notice and shall advise each Lender of the face amount
of the Bankers' Acceptance to be accepted and purchased by it and the
applicable Contract Period (which shall be identical for all Lenders). The
aggregate face amount of Bankers' Acceptance to be accepted and purchased
by a Lender shall be determined by the Administrative Agent by reference to
that Lender's rateable portion of the issue of Bankers' Acceptances, except
that, if the face amount of a Bankers' Acceptance which would otherwise be
accepted by a Lender would not be CDN$100,000, or a whole multiple thereof,
the face amount shall be increased or reduced by the Administrative Agent
in its sole discretion to CDN$100,000, or the nearest whole multiple of
that amount, as appropriate.
(h) CONTINUATION. At or before 11:00 a.m. (Toronto time) on the
-------------
second Business Day before the maturity date of any Bankers' Acceptances,
the Borrower shall give to the Administrative Agent a Notice of
Conversion/Continuation if the Borrower intends to issue Bankers'
Acceptances on the maturity date to provide for the payment of the maturing
Bankers' Acceptances. Otherwise, the Borrower shall provide payment to the
Administrative Agent on behalf of the Lenders of an amount equal to the
aggregate face amount of all Bankers' Acceptances of the same issue on
their maturity date. If the Borrower fails to make the payment, the
Borrower's obligations in respect of the maturing Bankers' Acceptances
shall automatically be converted on the maturity date thereof into Prime
Rate Loans.
(i) TRANCHES. The Borrower may not have more than three tranches
--------
of Bankers' Acceptances owing to any Lender outstanding at any time.
-72-
(j) WAIVER OF PRESENTMENT AND OTHER CONDITIONS. The Borrower
------------------------------------------
waives presentment for payment and any other defence to payment of any
amounts due to a Lender in respect of a Bankers' Acceptance accepted and
purchased by it pursuant to this Agreement which might exist solely by
reason of the Bankers' Acceptance being held, at the maturity thereof, by
the Lender in its own right and the Borrower agrees not to claim any days of
grace if the Lender as holder sues the Borrower on the Bankers' Acceptance
for payment of the amount payable by the Borrower thereunder.
(k) BA EQUIVALENT LOANS BY NON BA LENDERS. Whenever the Borrower
-------------------------------------
requests a BA Loan, each Non BA Lender shall, in lieu of accepting a
Bankers' Acceptance, make a BA Equivalent Loan in an amount equal to the Non
BA Lender's rateable portion of the Borrowing.
(l) TERMS APPLICABLE TO DISCOUNT NOTES. As set out in the
----------------------------------
definition of "BANKERS' ACCEPTANCES", that term includes Discount Notes and
---------------------
all terms of this Agreement applicable to Bankers' Acceptances shall apply
equally to Discount Notes evidencing BA Equivalent Loans with such changes
as may in the context be necessary. For greater certainty:
(i) the term of a Discount Note shall be the same as the
Contract Period for Bankers' Acceptances accepted and purchased on
the same date of Borrowing in respect of the same Borrowing;
(ii) an acceptance fee will be payable in respect of a
Discount Note and shall be calculated at the same rate and in the
same manner as the Acceptance Fee in respect of a Bankers'
Acceptance; and
(iii) the Discount Rate applicable to a Discount Note shall be
the Discount Rate applicable to Bankers' Acceptances accepted and
purchased on the same date of Borrowing.
(m) DEPOSITORY BILLS AND NOTES ACT. At the option of the Borrower
------------------------------
and any Lender, Bankers' Acceptances under this Agreement to be accepted by
that Lender may be issued in the form of depository bills for deposit with
The Canadian Depository for Securities Limited pursuant to the Depository
Bills and Notes Act (Canada). All depository bills so issued shall be
governed by the provisions of this Section 2.06.
(n) INDEMNITY. Each Notice of Borrowing and Notice of
---------
Conversion/Continuation given by the Borrower under this Section 2.06 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 2.06 and
-73-
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 BA Loan when such BA Loan, as a
result of such failure, is not made or does not become effective.
(o) SUSPENSION ON EVENT OF DEFAULT. Upon the occurrence and during
------------------------------
the continuance of an Event of Default, (i) each BA Loan will automatically,
on the last day of the then existing Contract Period therefor, Convert into
a Prime Rate Loan and (ii) the obligation of the Revolving Lenders to make,
or to Convert Prime Rate Loans into, or to continue, BA Loans shall be
suspended.
SECTION 2.07 FEES.
----
(a) COMMITMENT FEES. The Borrower agrees to pay to the
---------------
Administrative Agent a commitment fee in US Dollars 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) BANKERS' ACCEPTANCE FEE. Upon acceptance of a Bankers'
-----------------------
Acceptance by a Lender, the Borrower shall pay to the Administrative Agent
on behalf of the Lender a fee in Canadian Dollars calculated on the face
amount of the Bankers' Acceptance at a rate per annum equal to the
Applicable BA Acceptance Rate in effect on the date of such acceptance on
the basis of the number of days in the Contract Period for the Bankers'
Acceptance and a year of 365 days.
(d) OTHER FEES. The Borrower agrees to pay to the Lead Arranger and
----------
the Administrative Agent, for their own respective accounts (i) the fees in
US Dollars in the amounts and at the times set forth in the Fee Agreement,
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.
(e) ABSOLUTE OBLIGATION. The Borrower's obligation hereunder to
-------------------
pay the fees referred to in this Section 2.07 shall be absolute and
unconditional and shall survive the making and repayment of Loans, the
termination of all Letter of Credit Obligations
-74-
and the termination of this Agreement. All fees which are due or become due
pursuant to this Section 2.07 are nonrefundable.
SECTION 2.08 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 US 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 any Loan 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.
(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 US 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
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payment of additional amounts or increased costs as provided in Section
2.08(a), Section 2.08(b) or Section 2.10(a) or of written notice from any
Lender under Section 2.05(f)(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 2.09 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 the currency of the Obligation to which
such payment relates and in same day funds delivered to the Administrative
Agent not later than 2:00 p.m. (Toronto 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. (Toronto 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 its account, 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 2.08, Section 2.10 or Section 9.04(c)) to such
Lender for its account or to such Issuing Bank, in each case to be applied
in accordance with, and subject to, the terms of this Agreement, including
Section 2.09(e). 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,
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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. Unless stated otherwise (1) all calculations,
------------
comparisons, measurements and determinations under this Agreement shall be
made in US Dollars and (2) all calculations of interest, fees and
commissions shall be made by the Administrative Agent on a daily basis and
on the basis of a year of 360 days in the cases of amounts denominated in
US Dollars or a year of 365 days in the cases of amounts denominated in
Canadian Dollars, 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. For the purpose of all calculations, comparisons,
measurements and determinations referred to in clause (1) above, amounts
denominated in Canadian Dollars shall be converted into the Equivalent
Amount of US Dollars on the date of calculation, comparison, measurement or
determination. Each determination by the Administrative Agent of an
interest rate, fee, commission or discount rate and each calculation,
comparison and measurement by the Administrative Agent 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 in the case of amounts denominated in US Dollars or the
Administrative Agent's cost of funds in the case of amounts denominated in
Canadian Dollars.
(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.
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(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) RECEIPT OF PAYMENTS. If the Administrative Agent receives any
-------------------
payment from or on behalf of the Borrower in a currency other than the
currency in which an Obligation due and payable is denominated, the
Administrative Agent may convert the payment (including the monetary
proceeds of a realization upon Collateral) into the currency of the
relevant Obligation at the exchange rate that the Administrative Agent
would be prepared to sell the currency in which the relevant Obligation is
denominated against the proceeds received in Toronto on the Business Day
immediately following the date of actual payment. The Obligations shall be
satisfied only to the extent of the amount actually received by the
Administrative Agent upon such conversion.
(h) 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 Loan Party under the US
Bankruptcy Code or upon acceleration).
SECTION 2.10 TAXES.
------
(a) WITHHOLDING TAXES. Except as otherwise provided in Section
------------------
9.07, 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 2.09, free and clear of and without deduction for
any Taxes. 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) except as otherwise provided
in Section 9.07, 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 2.10) such Lender Party or
the Administrative Agent (as the case may be)
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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 (including goods and services),
property or similar taxes, charges or levies that arise from any 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 Section 9.07,
----------------
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 2.10, 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 9.02, the original receipt of payment
thereof or a certified copy of such receipt.
(e) 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 2.10 shall survive the payment in full
of principal and interest hereunder and under the Notes (if any).
(f) 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 2.10, the Borrower shall have the right, upon notice to such
Lender or the Administrative 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 2.10, 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
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Lender or the Administrative Agent, as applicable, in connection with any
such designation or assignment.
SECTION 2.11 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
2.11 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 2.12 USE OF PROCEEDS.
----------------
(a) TERM LOANS. The proceeds of the Term Loans shall be applied by
-----------
the Borrower to refinance all existing indebtedness of the Borrower
outstanding under the Existing Credit Agreement and to pay related fees and
expenses of the Transactions.
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(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 Permitted Acquisitions by
the Borrower and its Subsidiaries 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 2.13 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 or Contract Period
applicable thereto, (ii) the terms of each Assignment and Acceptance
delivered to and accepted by it, (iii) the amount of any principal,
interest, discount and fees 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 Exhibits VII-A-1
----------------
and VII-A-2 for Revolving Loans, Exhibit VII-B for Term A Loans, Exhibit
------- ------------- -------
VII-C for Term B Loans and Exhibit VII-D-1 and Exhibit VII-D-2 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.
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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) US$3,000,000
or the Equivalent Amount thereof in Canadian Dollars (the "LETTER OF CREDIT
----------------
SUBLIMIT") and (b) the Net Borrowing Availability and (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. (Toronto
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) currency of such Letter of Credit, (iv) expiration
date of such Letter of Credit, (v) name and address of the beneficiary of
such Letter of Credit, and (vi) 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
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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
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,
in the case of such principal amounts that are denominated in US Dollars, or,
the rate applicable to Revolving Loans that are Prime Rate Loans in effect from
time to time, in the case of such principal amounts that are denominated in
Canadian Dollars, and (b) from and after such first Business Day, the applicable
rate referred to in paragraph (a) above plus, in each case, 2.00% per annum. 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
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Administrative Agent's Account, in same day funds, an amount equal to the
portion of the unreimbursed principal 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. (Toronto 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):
(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;
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(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 the currency of such Letter
of Credit and 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 (A) all Letters of Credit denominated in US Dollars in an
amount equal to the Applicable Eurodollar Rate Margin then in
effect for Revolving Loans and (B) all Letters of Credit
denominated in Canadian Dollars in an amount equal to the
Applicable BA 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.
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(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, (ii) in compliance with all
applicable laws and (iii) for aggregate proceeds not exceeding
US$160,000,000 at closing (excluding fees, expenses and other costs
relating to the Transactions totaling approximately US$12,500,000) and not
requiring any additional payments other than payments not exceeding
US$15,000,000 in the aggregate pursuant to Section 2(e)(v) of the Pioneer
Acquisition Agreement;
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(e) Panolam International shall have received gross proceeds of
at least US$135,000,000 from the sale of the Subordinated Notes and
US$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 US 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 US
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 International 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
day of 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:
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(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 Certificate of
Status from the Director under the OBCA for the Borrower, a good
standing certificate from the Secretary of State (or other
appropriate authority) of each other Loan Party's jurisdiction of
incorporation for such Loan Party and the applicable equivalent
thereof for each other province and state in which any Loan Party
is qualified as an extra-provincial or foreign corporation to do
business (as set forth on Schedule 4.01(k)(ii)) and, to the
extent generally available for each Loan Party, 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) a bringdown Certificate of Status from the Director
under the OBCA for the Borrower and bringdown good standing
certificates for each other Loan Party from the Secretary of
State (or other appropriate authority) of such Loan Party's
jurisdiction of incorporation certifying that such Loan Party is
incorporated and has not been dissolved or is duly incorporated,
as applicable, and, in the case of the Loan Parties other than
the Borrower, is 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 unanimous shareholder agreement to which
the Borrower is subject, duly executed by Panolam International,
together with resolutions of Panolam International and the
resolutions of the Board of Directors of each other 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 the Borrower or such
other Loan Party is or is to be a party, and authorizing the
execution, delivery and performance of each Loan Document and
Related Document to which the Borrower or such other Loan Party
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 (if
any), each other Loan Document and each Related Document;
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(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 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 Patent License Agreement between
Panolam US, as licensor, and the Borrower, as licensee, dated as
of June 7, 1996, the Trade Xxxx License Agreement between Panolam
US, as licensor, and the Borrower, as licensee, dated as of June
7, 1996, the Trade Xxxx License Agreement between Panolam US, as
licensor, and the Borrower, 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 and the agreement referred to in clause (B) immediately
below) and (B) the Agreement Respecting Intellectual Property
duly executed by Panolam US, the Borrower, the US Administrative
Agent and the Administrative Agent;
(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;
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(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 Director's or the Secretary of State's certificate
referred to in Section 4.01(k)(ii), as applicable, (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 of each Loan Party and good standing of each
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 each 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;
(xiv) a security agreement in substantially the applicable
form of Exhibit X (together with any additional security
---------
agreement executed by any Loan Party in favor of the
Administrative Agent and/or the Lenders after the Closing Date,
as amended from time to time in accordance with their terms,
each, a "SECURITY AGREEMENT"), duly executed by each Loan Party,
------------------
together with:
(A) certificates representing the Pledged Shares of
the Borrower referred to in the Security Agreement executed by
Panolam International, accompanied by an undated share transfer
power executed in blank, and instruments evidencing the Pledged
Debt referred to in the Security Agreement endorsed in blank by
the Borrower;
(B) a verification statement verifying proper
registration under the PPSA (Ontario) and executed copies of
proper financing statements, in appropriate form for filing under
the PPSA of all jurisdictions in the United States of America,
that the Administrative Agent may deem necessary or desirable in
order to perfect and protect the Liens created by the Security
Agreements, covering the Collateral described in the Security
Agreements; and
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(C) confirmations executed by Persons with PPSA
registrations prior to the registrations in favor of the
Administrative Agent confirming the nature of the Collateral in
respect of which those registrations have been made in form and
substance reasonably satisfactory to the Administrative Agent;
(xv) mortgages, assignment of leases and rents, deeds of
trust, trust deeds, leasehold mortgages and leasehold deeds of
trust in substantially the applicable form of Exhibit XII and
-----------
covering the properties listed on Schedule 4.01(k)(xv), together
with any additional security documents of substantially similar
purposes executed by any Loan Party in favor of the
Administrative Agent and/or the Lenders after the Closing Date,
as amended from time to time in accordance with their terms, the
"MORTGAGES"), duly executed by each applicable Loan 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 (in the case of any Mortgage executed by
the Borrower) or second (in the case of any Mortgage executed by
any other Loan Party) and subsisting Lien on the property
described therein (subject to Permitted Liens and exceptions set
forth in the applicable Mortgage Policies (as defined below)) in
favor of the Administrative Agent for the benefit of the
Administrative Agent and the Lender Parties and that all filing
and recording taxes and fees have been paid or provided for;
(B) for the properties described in paragraphs 2 to 7
inclusive of Schedule 4.01(k)(xv), fully paid American Land Title
Association Lender's Extended Coverage title insurance policies,
and for the property described in paragraph 1 of Schedule
4.01(k)(xv), a fully paid First American Title Insurance Company
Form 1 (12-90) Loan Policy (Ontario) with a guarantee endorsement
for the ALTA 1970 Loan Policy, as amended in 1992 (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 (in the case of any Mortgage executed
by the Borrower) or second (in the case of any Mortgage executed
by any other Loan Party) 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',
construction and materialmen's Liens) and such coinsurance and
direct access reinsurance
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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;
(xvi) a guaranty in substantially the form of Exhibit XI
----------
(together with any additional guaranty or guarantee executed by
any Loan Party in favor of the Administrative Agent and/or the
Lenders after the Closing Date, as amended from time to time in
accordance with its terms, each, a "GUARANTY"), duly executed by
--------
each of the Guarantors;
(xvii) pro forma Consolidated opening balance sheets of each
of the Borrower and Panolam International 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
Panolam International, 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
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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) favorable opinions of Xxxxxx, Xxxx & Xxxx, counsel
to the Borrower, and of Xxxxxxx, Phleger & Xxxxxxxx LLP, counsel
to the other Loan Parties, in substantially the forms of Exhibit
-------
XIII-A hereto and as to such other matters as the Agents or any
------
Lender through the Administrative Agent may reasonably request;
(xxvi) favorable opinions of counsel to the Borrower or
Panolam International under the laws of each jurisdiction in
which any material portion of the Collateral is located with
respect to the 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 applicable form of opinion
annexed hereto as Exhibit XIII-B;
--------------
(xxvii) copies of (i) such opinions of counsel delivered to
the parties under the US 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
Panolam International 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 opinion
authorizing the Lenders to rely upon such opinion to the same
extent as though it were addressed to the Lenders;
(xxviii) 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;
(xxix) an acknowledgement (as amended, supplemented and
otherwise modified, the "ACKNOWLEDGEMENT RESPECTING SALES
--------------------------------
AGREEMENTS") duly executed by Panolam US and the Borrower and
----------
addressed to the Administrative Agent and the US Administrative
-93-
Agent in which those Loan Parties clarify certain inadvertent
errors in certain sales agreements described in the Schedules to
such acknowledgement, in form and substance reasonably
satisfactory to the Administrative Agent;
(xxx) 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 US
Administrative Agent and the Loan Parties;
(l) the Administrative Agent shall have received the initial
Notice of Borrowing in accordance with Section 2.02(a) and a Borrowing Base
Certificate as of January 31, 1999 and such other Receivables and Inventory
reports as the Administrative Agent may reasonably request; and
(m) Panolam International shall have received (or shall
substantially concurrently receive) the proceeds of the initial loans under
the US Credit Agreement of at least US$55,000,000 or the Administrative
Agent shall otherwise be satisfied that the closing under the US Credit
Agreement will happen concurrently with the 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
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);
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(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 LOAN PARTIES.
-----------------------------------------------
Each Loan Party represents and warrants as follows:
(a) INCORPORATION, QUALIFICATION, CORPORATE POWER AND
-------------------------------------------------
AUTHORIZATION. 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.
(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)
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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.
(c) AUTHORIZATION; NO CONFLICT OR VIOLATION; COMPLIANCE WITH
--------------------------------------------------------
LAWS. The execution, delivery and performance by each Loan Party of this
----
Agreement, the Notes (if any), 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 US
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 US 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 (if any), 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 US Loan Documents, (iii)
the perfection or maintenance of the Liens created by the Collateral
Documents and the US 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 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
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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 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 & Xxxxxxx, 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, 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
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and the years ended December 27, 1996 and December 26, 1997, and
the related audited statements of cash 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 the Borrower 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, 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 International as of the Closing
Date, and the related Consolidated pro forma statements of income
and cash flows of the Borrower and Panolam International as of
December 31, 1998 and for the Fiscal Year then ended, certified
by the Chief Financial Officer, copies of which have been
furnished to each Lender, fairly present the Consolidated pro
forma financial condition of the Borrower and of Panolam
International and its Domestic Subsidiaries as at the Closing
Date and the Consolidated pro forma results of operations of the
Borrower and of Panolam International and its Domestic
Subsidiaries 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
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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 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 is 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
Panolam International only or of Panolam International 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 Canadian Benefit Plans and Canadian
Pension Plans respecting employees and/or former employees of any
Loan Party.
(ii) The Canadian Pension Plans are duly registered under
the ITA and all other applicable laws which require registration
and no event has occurred which is reasonably likely to cause the
loss of such registered status. None of the Loan Parties makes
any contributions in respect of a multi-employer pension plan.
All material obligations of each Loan Party (including fiduciary,
funding, investment and administration obligations) required to
be performed in respect of the Canadian Benefit Plans and the
Canadian Pension Plans and the funding agreements therefor have
been performed in a timely fashion.
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(iii) There have been no improper withdrawals or
applications of the assets of the Canadian Pension Plans or the
Canadian Benefit Plans. There are no outstanding disputes
concerning the assets of the Canadian Pension Plans or the
Canadian Benefit Plans.
(iv) The most recent actuarial report respecting each of
the Canadian Pension Plans has been filed with all applicable
regulatory authorities in a timely fashion and has been delivered
to the Administrative Agent and the Lenders. The Employee
Pension Plan for employees of the Borrower is in the process of
being converted from a defined benefit plan to a defined
contribution plan effective January 1, 1999, as described in
Schedule 5.01(j). There have been no material adverse changes to
any of the Canadian Pension Plans since the events described in
Schedule 5.01(j).
(v) Set forth on Schedule 5.01(j) hereto is a complete
and accurate list of all Plans and Welfare Plans with respect to
any employees of any Loan Party.
(vi) 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
US$2,000,000.
(vii) 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 US$2,000,000, copies
of which have been filed with the US 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.
(viii) 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 for the plan years
of such Multiemployer Plans immediately preceding the plan year
in which such Withdrawal Liability is incurred by an amount
exceeding US$1,000,000.
(ix) 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
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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 US$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 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, Hazardous
Materials have not been generated, used,
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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, provincial, 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 Loan Parties for which US Federal income tax returns have
been filed and (B) the Borrower 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 US Federal income tax liability of the Loan
Parties proposed by the US Internal Revenue Service with respect
to Open Years does not exceed US$100,000. The aggregate unpaid
amount, as of the date hereof, of adjustments to the Canadian
Federal income tax liability of the Borrower 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 Loan
Party 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
US$50,000 in the case of any of the Loan Parties (excluding the
Borrower) or CDN$75,000 in the case of the Borrower. No issues
have been raised by Revenue Canada or the US 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 Company proposed by all state, local and foreign taxing
authorities (other than amounts arising from adjustments to US
Federal income tax returns) does not exceed US$50,000. The
aggregate unpaid amount, as of the date hereof, of adjustments to
the provincial, local and
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foreign tax liability of the Borrower proposed by all provincial,
local and foreign taxing authorities (other than amounts arising
from adjustments to Canadian Federal income tax returns) does not
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 US 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
US$10,000 or the Equivalent Amount thereof; Group owns no assets
other than the Capital Stock of PII Second and other assets with
a fair market value that does not exceed US$ 10,000 or the
Equivalent Amount thereof; PII Second owns no assets other than
the Capital Stock of Panolam International and other assets with
a fair market value that does not exceed US$10,000 or the
Equivalent Amount thereof; Panolam International owns no assets
other than the Capital Stock of each of the Borrower, Panolam US
and Pioneer, other Investments in its Subsidiaries permitted
hereunder and other assets with a fair market value that does not
exceed US$10,000 or the Equivalent Amount thereof.
(ii) As of the Closing Date, none of Holdings, Group, PII
Second or Panolam International 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 the
Loan Documents and the Related Documents, and in connection with
its corporate formation and maintenance.
-103-
(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.
(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, 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 each Loan Party,
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
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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.
(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, the computer and management
information systems of each Loan Party 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
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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 LOAN PARTIES
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, each Loan Party will, unless the Required
Lenders shall otherwise consent in writing:
(a) COMPLIANCE WITH LAWS, ETC. Comply, and cause each of its
--------------------------
Subsidiaries to comply (i) in all material respects, with all applicable
laws, rules, regulations and orders and (ii) in all respects with all
provisions under applicable laws containing prohibitions or restrictions on
financial assistance and, for greater certainty and without limiting any
other covenant of any Loan Party hereunder, each Loan Party agrees that any
event, activity or transaction otherwise permitted hereunder shall only be
permitted to occur if such event, activity or transaction would not result
in a breach of this Section 6.01(a).
(b) PAYMENT OF TAXES, ETC. Pay and discharge, and cause 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 none of the Loan Parties nor any of their 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; and provided further, that if the
-------- -------
non-payment of any such tax, assessment, charge, levy or claim might become
a Lien upon any Loan Party's property, such Loan Party shall have notified
the Administrative Agent of the maximum amount thereof, and such amount
shall constitute a Reserve (but without duplication) for the purpose of
determining the Borrowing Base Amount (unless the Administrative Agent
otherwise consents in writing).
(c) COMPLIANCE WITH ENVIRONMENTAL LAWS. Comply, and cause 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.
-106-
(d) MAINTENANCE OF INSURANCE; DAMAGE TO OR DESTRUCTION OF COLLATERAL.
-----------------------------------------------------------------
(i) 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
legal counsel fees, court costs and other reasonable charges related
thereto, shall be payable on demand by the Borrower (to the extent not
prohibited or limited by applicable law and, if prohibited or limited
by applicable law, then at the expense (to the extent not recoverable
from the Borrower) of any one or more of the other Loan Parties
designated by the Administrative Agent) 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 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 US$10,000,000, or the Equivalent Amount
thereof, 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
-107-
Administrative Agent or the Required Lenders may reasonably request;
(B) any related insurance proceeds shall be immediately paid into a
Cash Collateral Account in the name of the Borrower at a bank (other
than a Lender or the Administrative Agent) acceptable to the
Administrative Agent (which account must be subject to a blocked
account agreement reasonably satisfactory in form and substance to the
Administrative Agent) which account 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 paid into such Cash
Collateral Account 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 (provided that no
-------- ----
amount shall be applied to the payment of the Term B Loans to the
extent that such application would result in the payment of more than
25% of the original principal amount of the Term B Loans on or before
the fifth anniversary of the Closing Date, taking into account any
prior prepayments and the scheduled repayments of the Term B Loans in
Section 2.03(b)) 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
-----------------------------------------
its corporate existence, rights (charter and statutory) and franchises;
provided, however, a Loan Party may consummate any amalgamation, merger or
-------- -------
consolidation permitted under Section 6.02(d), 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 or chartered 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 90 days after such request, at the expense of the
Borrower (to the extent not prohibited or limited by applicable law and, if
prohibited or limited by applicable law, then at the expense (to the extent
not recoverable from the Borrower) of any one or more
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of the other Loan Parties designated by the Administrative Agent), 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 (to the extent not prohibited or
limited by applicable law, and, if prohibited or limited by applicable law,
then at the expense (to the extent not recoverable from the Borrower) of
any one or more of the other Loan Parties designated by the Administrative
Agent), and each Loan Party hereby grants and agrees 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 (to the extent not
-----------
prohibited or limited by applicable law, and, if prohibited or limited by
applicable law, then at the expense (to the extent not recoverable from the
Borrower) of any one or more of the other Loan Parties designated by the
Administrative Agent), 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 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
-------------------------------
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.
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(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
Panolam International and its Subsidiaries by the Board of Directors of
Panolam International, (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.
(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 it is
entitled to make under such Loan Document or Related Document.
(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 Panolam International's Board of Directors (or the Borrower's
Board of Directors if the Borrower is party to such Material Contract and
the Borrower's Board of Directors' powers to manage or supervise the
management of the business and affairs of the Borrower have not been
restricted by a written declaration constituting an unanimous shareholder
agreement made by Panolam International, as the sole shareholder of the
Borrower) determines otherwise in the best interest of Panolam
International (or the Borrower if the Borrower or any of its Subsidiaries
is party to such Material Contract), 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 it is entitled to make under such Material Contract.
(n) ADDITIONAL LOAN PARTIES; ADDITIONAL COLLATERAL.
-----------------------------------------------
(i) Substantially concurrently with the formation or
acquisition of any Subsidiary of any Loan Party, (A) cause such
Subsidiary to deliver to the Administrative Agent a confirmation that
it is a "LOAN PARTY" and shall comply with and be bound by this
----------
Agreement and the Intercreditor Agreement as a Loan Party hereto and
thereto, (B) cause such Subsidiary (unless such Subsidiary is a
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Foreign Subsidiary that is not a Subsidiary of the Borrower) 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 Guaranty substantially in the
form of Exhibit XIV, if such Subsidiary is a corporation incorporated
-----------
under the laws of the United States of America, or a guarantee in form
and substance satisfactory to the Administrative Agent, acting
reasonably, in all other cases, (C) cause such Subsidiary (unless such
Subsidiary is a Foreign Subsidiary that is not a Subsidiary of the
Borrower) to execute and deliver to the Administrative Agent, an
amendment to Security Agreement, substantially in the form of Exhibit
-------
XV, if such Subsidiary is organized under the laws of the United
--
States of America, or a Security Agreement (or the applicable
equivalent thereof taking into account the laws of the relevant
jurisdictions under which the Subsidiary is organized, domiciled
(within the meaning of the Quebec Civil Code), and located and in
which the Subsidiary has assets or property) in form and substance
satisfactory to the Administrative Agent, acting reasonably, in all
other cases, (whereby such Subsidiary shall in each case, xxxxx x Xxxx
on those of its assets described in the Security Agreements delivered
under Section 4.01 on or before the Closing Date (or in another
Collateral Document, if appropriate, of substantially the same purpose
and effect)), (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 owned by any Loan Party to secure
such Loan Party's Obligations under the Loan Documents, (E) with
respect to any real property in which such Subsidiary has an interest,
cause such Subsidiary (unless such Subsidiary is a Foreign Subsidiary
that is not a Subsidiary of the Borrower) to execute and deliver such
deeds of trust, trust deeds, mortgages or the applicable equivalent
thereof ("ADDITIONAL MORTGAGES") in appropriate form for filling in
--------------------
all filing or recording offices that the Administrative Agent may deem
necessary or desirable to create a valid first (or second, in case of
any Domestic Subsidiary) and subsisting Lien on the property described
therein in favor of the Administrative Agent for the benefit of the
Administrative Agent and the Lender Parties, (F) promptly take, and
cause such Subsidiary and each other Loan 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 Collateral Documents, as required and as amended
pursuant to this Section 6.01(n), (G) promptly take, and cause such
Subsidiary 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
(or the applicable equivalent thereof), 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
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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 (or the applicable equivalent thereof)).
(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 Loan Party to secure such Loan Party's Obligations
under the Loan Documents, (B) promptly take, and cause such Excluded
Acquisition Sub and each other Loan 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
Loan Party (other than any Foreign Subsidiary that is not a Subsidiary
of the Borrower) on or after the date hereof of any interest in any
real property (A) the applicable Loan 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 (or second, in case of
Panolam International or any Domestic Subsidiary) and subsisting Lien
on such real property in favor of the Administrative Agent for the
benefit of the Administrative Agent and the Lender Parties, (B) the
applicable Loan Party shall 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) each Loan Party shall 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 (or the applicable
equivalent thereof), 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 (D)
promptly deliver to the Administrative Agent such Officers'
Certificates and opinions of counsel, if any, as the Administrative
Agent or the Required Lenders
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may reasonably require with respect to the foregoing (including
opinions as to enforceability and perfection of security interests).
(o) YEAR 2000 ASSURANCES. Panolam International 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 Panolam
International 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) CANADIAN PENSION PLANS. For each existing Canadian Pension Plan,
-----------------------
each Loan Party shall ensure that such plan retains its registered status
under and is administered in a timely manner in all respects in accordance
with the applicable pension plan text, funding agreement, the ITA and all
other applicable laws. For each Canadian Pension Plan hereafter adopted or
contributed to by any Loan Party which is required to be registered under
the ITA or any other applicable laws, any Loan Party shall use its best
efforts to seek and receive confirmation in writing from the applicable
regulatory authorities to the effect that such plan is unconditionally
registered under the ITA and such other applicable laws. For each existing
Canadian Pension Plan and Canadian Benefit Plan hereafter adopted or
contributed to by any Loan Party, the applicable Loan Party shall in a
timely fashion perform in all material respects all obligations (including
fiduciary, funding, investment and administration obligations) required to
be performed in connection with such plan and the funding therefor.
(q) 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, acting reasonably.
(ii) Within 30 days after the Closing Date, provide to the
Administrative Agent amended or replacement lenders' loss payable and
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additional insured endorsements in form and substance satisfactory to
the Administrative Agent, acting reasonably.
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, each of the Loan Parties (other than
Holdings with respect to Section 6.02(g)), the Excluded Acquisition Sub (with
respect to Sections 6.02(a), (b), (f) and (h)) and each of the Excluded Melamine
Subs (with respect to Sections 6.02(a), (b), (f) and (h)), 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 any
-----------
Lien on or with respect to any of its properties of any character
(including, without limitation, Receivables) whether now owned or hereafter
acquired, or sign or file under the PPSA of any jurisdiction, a financing
statement (or the applicable equivalent thereof) that names any Loan Party,
the Excluded Acquisition Sub or either of the Excluded Melamine Subs as
debtor, or sign any security agreement authorizing any secured party
thereunder to file such financing statement (or applicable equivalent
thereof), or assign any Receivables 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 US 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 by Holdings or its applicable
Subsidiary 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) shall not exceed
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US$10,000,000 or the Equivalent Amount thereof 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
Panolam International and its Subsidiaries; provided, that the
-------- ----
aggregate principal amount of the Debt secured by Liens permitted
by clause above and this clause shall not exceed US$10,000,000
or the Equivalent Amount thereof 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 US$300,000 or the Equivalent
Amount thereof in the aggregate for all Loan Parties; 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); or
(b) DEBT. Create, incur, assume or suffer to exist any Debt
-----
other than:
(i) in the case of Panolam International:
(A) Debt under the Loan Documents;
(B) Debt under the US Credit Agreement;
(C) Subordinated Debt evidenced by the Subordinated
Notes;
(D) Permitted Seller Financing in an aggregate
principal amount at any time outstanding not to exceed
US$5,000,000 or the Equivalent Amount thereof; 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 pursuant
to a Security Agreement; provided that, neither Panolam
-------- ----
International nor any of its Subsidiaries shall repay any
interest on or principal of, or pay any other amount in
-115-
respect of, such Debt (except Debt owing to the Borrower or
any of its Subsidiaries) upon or following the occurrence of
any Default that is continuing;
(ii) in the case of any of Panolam International's Domestic
Subsidiaries and the Borrower and its Subsidiaries:
(A) intercompany Debt owed to Panolam International or to
a wholly-owned Subsidiary of Panolam International so long as
such Debt is evidenced by one or more Intercompany Notes that
have been pledged to the Administrative Agent pursuant to a
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 upon or following the occurrence of any Default
that is continuing, other than such repayments by Domestic
Subsidiaries of Panolam International on or of their Debt owing
to Panolam International or any other Domestic Subsidiary and
such repayments by any Loan Party to the Borrower or any of its
Subsidiaries on or of Debt owing to the Borrower or any of its
Subsidiaries;
(B) Debt pursuant to the Loan Documents; and
(C) Debt pursuant to the US Credit Agreement Guaranty.
(iii) in the case of any Parent (other than Panolam
International), Debt pursuant to the Loan Documents and the US
Credit Agreement Guaranty;
(iv) in the case of Panolam International and the Borrower,
Debt in respect of Hedge Agreements in an aggregate notional
amount for all such Debt under this clause (v) not to exceed
US$30,000,000 or the Equivalent Amount thereof at any time
outstanding;
(v) in the case of any Loan Party:
(A) Debt of Panolam International or any of its
Subsidiaries secured by Liens permitted by Section 6.02(a)(iv) or
not to exceed in the aggregate the amount set forth in such
Section;
(B) the Surviving Debt;
(C) endorsement of negotiable instruments for deposit or
collection or similar transactions in the ordinary course of
business; and
(D) 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
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result after giving effect thereto, other Debt not exceeding
US$1,000,000 or the Equivalent Amount thereof in the aggregate
(for Panolam International and its Subsidiaries);
(vi) in the case of the Excluded Acquisition Sub:
(A) Non-Recourse Debt in an aggregate principal amount not
to exceed US$60,000,000 or the Equivalent Amount thereof at any
time outstanding; and
(B) intercompany Debt owed to Panolam International to the
extent constituting Investments permitted under Section
6.02(f)(ix); 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, any obligations as lessee for the rental or hire of real or personal
property in connection with any synthetic lease transaction.
(d) MERGERS, ETC. Amalgamate with, merge into or consolidate with any
-------------
Person or permit any Person to amalgamate with, merge into or consolidate
with it, except that (i) any Domestic Subsidiary of Panolam International
that is Solvent may merge into or consolidate with any other Domestic
Subsidiary of Panolam International that is Solvent; provided that, the
-------- ----
Person formed by such merger or consolidation shall be a Domestic
Subsidiary of Panolam International, (ii) any of Panolam International's
Domestic Subsidiaries that is Solvent may merge into Panolam International,
(iii) any Canadian Subsidiary of the Borrower that is Solvent may
amalgamate with a Canadian Subsidiary of the Borrower that is Solvent or
with the Borrower, (iv) a wholly-owned Subsidiary of Panolam International
or the Borrower 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 (i) in each case, immediately after giving effect thereto, no
-------
event shall occur and be continuing that constitutes a Default, (ii) in the
case of any such merger to which Panolam International is a party, Panolam
International is the surviving corporation and (iii) in the case of any
amalgamation to which the Borrower or any of its Subsidiaries is party, the
continuing corporation is incorporated under the laws of Canada (but not
the Province of Quebec) and the Administrative Agent shall have been given
sufficient prior notice by the Borrower of such transaction to enable it to
request and to receive, in form and substance satisfactory to it, acting
reasonably, concurrently therewith if it reasonably determines it necessary
or advisable one or more agreements (including guarantees, security
agreements and mortgages) duly executed by the continuing person from such
transaction
-117-
together with Officers' Certificates and legal opinions in connection
therewith (as to customary corporate matters relating to such continuing
person and as to the enforceability of such agreements and the perfection
of the Liens created by the Collateral Documents executed thereby).
(e) SALES, ETC. OF ASSETS. Sell, lease, transfer or otherwise dispose
----------------------
of any assets or grant any option or other right to purchase, lease or
otherwise acquire any Collateral 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 US$5,000,000 or the Equivalent
Amount thereof in any period of 12 consecutive months and US$15,000,000 or
the Equivalent Amount thereof in the aggregate since the Closing Date, (iv)
the sale of any asset by any Loan Party 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 the Loan Party for such asset shall be no less than the fair
market value of such asset at the time of such sale and (B) the purchase
price for such asset shall be paid to that Loan Party solely in cash, (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 among the Loan Parties so long as in
the case of any transfer by the Borrower or any other Foreign Subsidiary to
Panolam International, any of its Parents or any Domestic Subsidiary, 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 any
-------------------------------------------
Investment in any Person, or make any Acquisition, except that:
(i) the Borrower and its 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 or its applicable
Subsidiary pursuant to negotiated agreements or reorganization
proceedings under an Insolvency Law 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 Default has occurred and is continuing,
each Loan Party may make additional Investments in any Subsidiary that
is a Loan Party other than any Excluded Foreign Subsidiary;
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(iii) each Subsidiary of Panolam International may maintain its
existing Investments in the other Subsidiaries of Panolam
International as of the Closing Date and, subject to Section 6.02(b),
and so long as no Default has occurred and is continuing, each such
Subsidiary may make additional Investments in any other wholly-owned
Subsidiary of Panolam International other than any Excluded Foreign
Subsidiary;
(iv) the Borrower may maintain its existing Investments in
Panolam International as of the Closing Date and, subject to Section
6.02(b), and so long as no Default has occurred and is continuing, the
Borrower may make additional Investments in Panolam International;
(v) unless an Event of Default has occurred and is continuing
and there is a Revolving Loan or Swing Line Loan outstanding, Panolam
International and its operating Domestic Subsidiaries and the Borrower
and its operating Canadian Subsidiaries may make investments in Cash
Equivalents;
(vi) so long as no Default shall have occurred and be
continuing, Panolam International 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 Subsidiaries may make loans and
advances described in clause (f) of the definition of "EXEMPTED
--------
AFFILIATE TRANSACTION";
---------------------
(viii) Panolam International and its Domestic Subsidiaries
may make any Investment permitted under the US Credit Agreement;
(ix) Panolam International may make an Investment of up to
US$5,000,000 or the Equivalent Amount thereof in the Excluded
Acquisition Sub;
(x) so long as no Event of Default has occurred and is
continuing, the Excluded Acquisition Sub may consummate the Excluded
Acquisition;
(xi) Panolam International may maintain its existing
Investments in the Excluded Melamine Subs as of the Closing Date, but
may not make any additional Investments therein;
(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 US$5,000,000 or the Equivalent Amount
thereof; and
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(xiii) so long as no Event of Default shall have occurred and be
continuing, Panolam International may make other Investments not
exceeding US$500,000 or the Equivalent Amount thereof in the aggregate
at any time outstanding.
(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, 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, except that, Panolam
International's Domestic Subsidiaries may declare and pay cash dividends to
Panolam International and the Borrower's Subsidiaries may declare and pay
cash dividends to the Borrower, and so long as no Default shall have
occurred and be continuing:
(i) Panolam International and its Subsidiaries may declare
and deliver dividends and distributions payable only in common stock
of Panolam International or such Subsidiary, as applicable;
(ii) the Borrower may declare and pay cash dividends to Panolam
International (and Panolam International and its 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 Panolam International 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;
(iii) the Borrower and Panolam International may declare and 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 US$3,000,000 or the Equivalent
Amount thereof and (B) amounts necessary to repay (and only
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substantially concurrently with payment of) the Domtar Note in
accordance with Section 6.02(k); and
(iv) the Borrower may declare and pay other cash dividends to
Panolam International.
(h) CHANGE IN NATURE OF BUSINESS. (i) Make any material change in
-----------------------------
the 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) in the case of any
Parent, engage in any trade or business, or own any assets or incur any
Debt or Obligations, except the Domtar Note 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 affect any Lender Party, amend its certificate of incorporation or
bylaws (or applicable equivalent).
(j) ACCOUNTING CHANGES. 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,
--------------------------
defense 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, (B) regularly scheduled or required
repayments or redemptions of Surviving Debt, (ii) make any payment in
violation of any subordination terms of any Debt, or (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 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, other than (A) the prepayment of any
Debt payable to the Borrower or, subject to Section 6.02(b), Panolam
International, (B) subject to Section 6.02(b), the payment by Panolam
International 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 International of loans under the US 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
--------
further, that no Default or Event of Default exists or would result
--------
therefrom,.
-121-
(l) AMENDMENT, ETC. OF RELATED DOCUMENTS. Except as otherwise
-------------------------------------
provided in the Intercreditor Agreement with respect to the US 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.
(m) AMENDMENT, ETC. OF MATERIAL CONTRACTS. Cancel or terminate any
--------------------------------------
Material Contract or consent to or accept any cancellation or termination
thereof, amend or 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, in each case, except as determined by such Loan Party's
management to be in the best interests of that Loan Party.
(n) AMENDMENT, ETC. OF DOMTAR NOTE AND GENSTAR AGREEMENTS.
------------------------------------------------------
(i) 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 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 due
thereunder (other than extend time for payment);
-122-
(C) granting any security or collateral to secure payments
thereunder; or (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 LOAN PARTIES. Enter into or
--------------------------------------------
permit 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 Panolam
International or any of its 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 considered a restriction on the ability of the applicable
Loan Party 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 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 US Administrative Agent
and the US Lenders pursuant to the terms of the US 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, other than any Subsidiary of Panolam International
whose sole assets 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
-123-
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 US$1,000,000 or the Equivalent
Amount thereof, is disclosed in advance to the Administrative Agent and,
concurrently with such disclosure, Panolam International 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 Panolam International that are disinterested in such
transaction, if any (y) each such transaction involving consideration to
either party in excess of US$5,000,000 or the Equivalent Amount thereof,
shall in addition require that Panolam International, 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 Panolam International 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
(ii) Debt payable by Holdings to Domtar Industries Inc.
under the Domtar Note may be set off against Domtar's liabilities
to the Borrower under the Asset Purchase Agreement dated February
15, 1996 between the Borrower and Domtar, as amended.
(s) EXCLUDED MELAMINE SUBS. Notwithstanding any contrary provision
-----------------------
of this Agreement or any other Loan Document (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:
-124-
(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 Panolam International 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: (i) Consolidated and consolidating balance sheets of Panolam
International and its Subsidiaries as of the end of such quarter and
Consolidated and consolidating statements of income and cash flows of
Panolam International 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 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 Panolam
International and each of its Subsidiaries (including the Borrower) 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
Panolam International 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
-125-
for Panolam International 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 or solicitor
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 Panolam
International 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 Panolam
International and its Subsidiaries, approved by the Board of Directors of
Panolam International and its Subsidiaries, 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 based on historical performance), and
including plans for personnel, Capital Expenditures and facilities.
(f) CANADIAN PENSION PLAN FAILURE TO MAKE REQUIRED PAYMENT. Prompt
-------------------------------------------------------
and in any event within five Business Days after any Loan Party has failed
to make a required contribution to a Canadian Pension Plan in a timely
fashion, a statement of the
-126-
Chief Financial Officer describing such failure and the action, if any,
that the applicable Loan Party has taken and proposes to take with respect
thereto.
(g) CANADIAN PENSION PLAN TERMINATIONS. Promptly and in any event
-----------------------------------
within 10 Business Days after receipt by any Loan Party of a notice from an
applicable regulatory authority indicating that such authority has or will
(1) terminate the registration of, (2) require or commence the winding up
of, or (3) act as, or appoint, an administrator in respect of, a Canadian
Pension Plan.
(h) CANADIAN PENSION PLAN INCREASE IN ANNUAL COSTS AND NEW PLANS.
-------------------------------------------------------------
Promptly and in any event within 30 days after, (1) any increases having a
cost to any Loan Party of in excess of CDN$500,000 per annum in the
benefits of any existing Canadian Pension Plan or Canadian Benefit Plan,
(2) the establishment of any new Canadian Pension Plan or Canadian Benefit
Plan, the annual costs of which exceed CDN$500,000, or (3) the commencement
of contributions to any such plan to which any Loan Party was not
previously contributing where the annual contributions exceed CDN$500,000.
(i) CANADIAN PENSION PLAN ACTUARIAL REPORTS. Promptly and in any
----------------------------------------
event within 30 days after the filing thereof, copies of each actuarial
report and annual information return respecting any of the Canadian Pension
Plans.
(j) 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
Panolam International 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(j) for any ERISA Event unless such ERISA Event has resulted in
or is reasonably likely to result in liability of any Loan Party or any of
its ERISA Affiliates in excess, either individually or in the aggregate
with all other ERISA Events which have occurred or are reasonably expected
to occur, of US$2,000,000.
(k) 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
US$2,000,000.
(l) 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
-127-
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
US$2,000,000.
(m) MULTIEMPLOYER PLAN NOTICES. Promptly and in any event within
---------------------------
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 US$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 US$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 US$2,000,000.
(n) LITIGATION. Promptly after learning of the commencement there
-----------
of, 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(n).
(o) SECURITIES REPORTS. Promptly after the sending or filing
-------------------
thereof copies of all (i) proxy statements, financial statements and
reports that any Loan Party sends to its stockholders, and (ii) regular,
periodic and special reports, and each prospectus and registration
statement, that any Loan Party files with the Ontario Securities
Commission, the Securities and Exchange Commission or any governmental
authority that may be substituted therefor, or with any national securities
exchange.
(p) 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.
(q) AGREEMENT NOTICES. Promptly upon receipt thereof, copies of
------------------
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.
-128-
(r) ENVIRONMENTAL CONDITIONS. Promptly after the occurrence there-
-------------------------
of 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.
(s) COLLATERAL REPORTS. From and after the Closing Date and until
-------------------
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.
(t) OTHER INFORMATION. Such other information respecting the
------------------
business, condition (financial or otherwise), operations, performance,
properties or prospects of any Loan Party 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, Panolam International shall maintain a Consolidated
Leverage Ratio for Panolam International 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):
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
-129-
MAXIMUM CONSOLIDATED
PERIOD LEVERAGE RATIO
--------------------------------------------------------- ---------------------
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
------------------------------------
the Closing Date, Panolam International shall maintain a ratio of (i)
Consolidated EBITDA of Panolam International and its Subsidiaries for the
four fiscal quarter period ending on the last day of the applicable fiscal
quarter to (ii) Consolidated Fixed Charges, 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):
MAXIMUM CONSOLIDATED
PERIOD LEVERAGE 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
(c) MINIMUM INTEREST COVERAGE RATIO. At all times from and after
--------------------------------
Closing Date, Panolam International shall maintain a ratio of (i)
Consolidated EBITDA of Panolam International 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):
MAXIMUM CONSOLIDATED
PERIOD LEVERAGE 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
-130-
MINIMUM INTEREST
PERIOD COVERAGE RATIO
------------------------------------------------------------ ----------------------------
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. Panolam International and its Subsidiaries
--------------------
shall not make any Capital Expenditures that would cause the aggregate
amount of all Capital Expenditures made by Panolam International 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 US$23,000,000
2000 16,000,000
2001 and thereafter 12,000,000
(e) MINIMUM CONSOLIDATED EBITDA. (i) At all times from and after June
---------------------------
30, 1999, Panolam International and its Domestic Subsidiaries shall not
permit their Consolidated EBITDA for any period of four consecutive fiscal
quarters ending on and after June 30, 1999 to be less than US$20,000,000.
(ii) At all times from and after June 30, 1999, the Borrower and its
Subsidiaries shall not permit their Consolidated EBITDA for any period of
four consecutive fiscal quarters ending on and after June, 1999 to be less
than US$10,000,000 or the Equivalent Amount thereof.
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:
(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 Loan
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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, , or , 602, 6.03 (other than
6.03(i) or 6.03(l)) 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 US$2,000,000,
or the Equivalent Amount thereof, 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 US Credit
Agreement) shall occur and be continuing (and has not been waived) under
the US 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
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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 ; or
(h) any judgment or order for the payment of money in excess of
US$2,000,000, or the Equivalent Amount thereof, 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 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 shall for any
reason (other than pursuant to the terms thereof) cease to create a valid
and perfected first priority Lien on the Collateral in which the Borrower
or any of its Subsidiaries has an interest and a valid and perfected second
priority Lien on the Collateral in which Panolam International or any of
its Domestic Subsidiaries has an interest, and 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, US$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
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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 US$1,000,000; or
(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 US$1,000,000; or
(o) a Change of Control shall have occurred; or
(p) the Borrower shall (i) fail to make an irrevocable election in
writing delivered to the Administrative Agent, prior to the Borrower or any
of its Subsidiaries committing to the completion of any asset sale, any
sale or issuance of debt Securities or any sale or issuance of any equity
Securities, in which the Borrower notifies the Administrative Agent that it
elects to make an optional prepayment of the Term B Loans in an amount
equal to that portion of the Net Cash Proceeds of any such sale or issuance
that would have been applied to the prepayment of the Term B Loans ratably
with, and in the same order as, the Term A Loans under Section
2.04(c)(xiii) if the applicable clause of Section 2.04(c) did not limit the
mandatory prepayment of the Term Loans to the Term A Loans; or (ii) having
made an irrevocable election in accordance with clause (i) above, fail to
make the optional prepayment of the Term B Loans as specified in such
election;
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 (including the face amount of all outstanding Bankers'
Acceptances accepted hereunder and regardless of whether their maturity dates
have occurred) 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 any
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Insolvency Law, (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 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
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(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 a Loan Party 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, 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 US Comptroller of the
Currency, the US Federal Deposit Insurance Corporation and the Board of
Governors of the US Federal Reserve System.
SECTION 8.03 AGENTS AND AFFILIATES.
----------------------
With respect to its Commitments, 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 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, as applicable. Each
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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 Administrative Agent (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 the Administrative Agent in any way relating to or arising out of the
Loan Documents or any action taken or omitted by the Administrative Agent 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 Administrative Agent
promptly upon demand for its ratable share of any costs and expenses payable by
the Borrower under Section 9.04, to the extent that the Administrative Agent 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
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 Administrative Agent as
provided herein, shall not relieve any other Lender of its obligation hereunder
to reimburse the Administrative Agent for its ratable share of such amount,
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but no Lender shall be responsible for the failure of any other Lender to
reimburse the Administrative Agent 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 chartered bank having
a combined capital and surplus of at least CDN$100,000,000. 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.
SECTION 8.08 MINISTERIAL ACTS
----------------
The duties of the Administrative Agent shall be ministerial and
administrative in nature, and the Administrative 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).
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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, notwithstanding anything
to the contrary in any Loan Document, 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 any 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, the 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
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in writing and signed by the Administrative Agent in addition to the
Lenders required above to 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 Panolam International'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 Panolam International 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 Ltd.
c/o Panolam Industries International, Inc.
00 Xxxxxxxx Xxxxx
Xxxxxxx, XX 00000
Attention: President
Telecopier: (000) 000-0000
If to any Initial Lender: At its address for notices specified on its
signature page hereto, or if not so
specified, at its address 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
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If to the Administrative Agent: Credit Suisse First Boston Canada
One First Canadian Place
Suite 3000
P.O. Box 301
Toronto, Ontario
M5X 1C9
Attention: Syndications Administration
Telecopier: (000) 000-0000
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 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 with
respect thereto, with respect to advising the Administrative Agent as to
its 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, each Lender and each Issuing Bank
in connection with the enforcement of the Loan
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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 and each Lender with
respect thereto).
(b) Each Loan Party jointly and severally agrees to indemnify and hold
harmless the Administrative Agent, each Lender, each Issuing Bank and each
of their Affiliates and their officers, directors, employees, agents,
trustees, investment advisors and other advisors (each, an "INDEMNIFIED
-----------
PARTY"), to the extent that such indemnification would not be prohibited or
-----
restricted under applicable law, 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. Each Loan Party 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 or BA Loan is made by the Borrower to or for the account of a
Lender other than on the last day of the Interest Period or Contract
Period, respectively, for such Loan, as a result of a payment or conversion
pursuant to this Agreement, acceleration of the maturity of any of the
Obligations 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 or
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Contract Period, as applicable, 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 2.08(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.
(d) If any Loan 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 Loan 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, to the extent that such
payment would not be prohibited or restricted under applicable law, for any
amounts so paid with interest thereon at the rate of interest per annum
that would be applicable thereto pursuant to Section 2.05(e) if the
Borrower was the Loan Party which failed to make the required payment of
such defaulting Loan Party, in each case 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 to authorize the Administrative Agent to declare any
Obligations 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.
-143-
SECTION 9.06 BINDING EFFECT.
---------------
This Agreement shall become effective when it shall have been executed
by each Loan Party 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 each Loan
Party, the Administrative Agent, the Documentation Agent and each Lender Party
and their respective successors and assigns, except that none of the Loan
Parties shall 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) 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 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 US$1,000,000, or
CDN$1,000,000, as applicable, and shall be in integral multiples of
US$100,000 or CDN$100,000, as applicable in excess thereof, (ii) each such
assignment shall be to an Eligible Assignee or to an Affiliate or Approved
Fund of the assignor, (iii) except for any assignments by the
Administrative Agent and any assignments to another Lender or an Affiliate
or an Approved Fund of the assigning Lender or of any other Lender or an
SPV, 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 (iv) 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 US$3,500; provided, however that no such fee shall
-------- -------
be payable in the case of an assignment to an Affiliate, an SPV or an
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 US$3,5000 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, benefits 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, benefits and obligations of a Lender
-144-
hereunder; provided that, the rights and benefits under Section 2.10 shall
-------- ----
only be available to the assignee to the extent that the assigning Lender
would have had such rights and benefits and (y) the Lender assignor
thereunder shall, to the extent that rights, benefits and obligations
hereunder have been assigned by it pursuant to such Assignment and
Acceptance, relinquish its rights and benefits 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, benefits 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 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
-145-
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 Business Days after its receipt of
such notice of 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-1, VII-A-2, VII-B, VII-C, VII-D-1
---------------- ------- ----- ----- -------
and VII-D-2, as applicable.
-------
(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;
-146-
and, provided further, that participants shall have the same rights and
-------- -------
benefits as Lenders under Section 2.08 and Section 2.10, 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 US 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 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 any Insolvency
Law. 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
-147-
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
and thereunder except that, with reference to the rights and benefits
provided under Section 2.10, only to the extent that the relevant Granting
Lender would have been entitled to such rights and benefits. This Section
9.07(h) may not be amended without the written consent of the SPV.
SECTION 9.08 GOVERNING LAW; JURISDICTION.
----------------------------
(a) This Agreement and the Notes (if any) shall be governed by, and
construed in accordance with, the laws of the Province of Ontario and of
Canada applicable therein.
(b) Each party hereby consents and agrees that the courts located in
the Province of Ontario shall have non-exclusive jurisdiction to hear and
determine any claim or dispute pertaining to this Agreement or any of the
other Loan Documents; provided that, nothing in this Agreement shall be
-------- -----
deemed or operate to preclude the Administrative Agent from bringing suit
or taking other legal action in any other jurisdiction to realize on the
Collateral or any other security for the Obligations or to enforce a
judgment or other court order. Each Party hereby irrevocably waives, to
the fullest extent permitted by law, the defense of an inconvenient forum
to the maintenance of such action or proceedings 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,
-148-
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 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'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 provincial, federal or foreign authority or examiner regulating
the activities of such Lender Party or (d) in connection with customary filings
with the US National Association of Insurance Commissioners.
SECTION 9.12 JUDGMENT CURRENCY.
------------------
(a) If, for the purpose of obtaining or enforcing judgment against any
Loan Party in any court in any jurisdiction, it becomes necessary to
convert into any other currency (such other currency being hereinafter in
this Section 9.12 referred to as the "JUDGMENT CURRENCY") an amount due
-----------------
under any Loan Document in any currency (the "OBLIGATION CURRENCY") other
-------------------
than the Judgment Currency, the conversion shall be made at the rate of
exchange prevailing on the Business Day immediately preceding the date of
actual payment of the amount due, in the case of any proceeding in the
courts of the Province of Ontario or in the courts of any other
jurisdiction that will give effect to such conversion being made on such
date, or the date on which the judgment is given, in the case of any
proceeding in the courts of any other jurisdiction (the applicable date as
of which such conversion is made pursuant to this Section 9.12 being
hereinafter in this Section 9.12 referred to as the "JUDGMENT CONVERSION
-------------------
DATE").
----
-149-
(b) If, in the case of any proceeding in the court of any jurisdiction
referred to in Section 9.12(a), there is a change in the rate of exchange
prevailing between the Judgment Conversion Date and the date of actual
receipt of the amount due in same day funds, the applicable Loan Party
shall pay such additional amount (if any, but in any event not a lesser
amount) or the Administrative Agent or applicable Lender, as appropriate,
shall refund to the Borrower such amount (if any), as applicable, as may be
necessary to ensure that the amount actually received in the Judgment
Currency, when converted at the rate of exchange prevailing on the date of
payment, will produce the amount of the Obligation Currency which could
have been purchased with the amount of the Judgment Currency stipulated in
the judgment or judicial order at the rate of exchange prevailing on the
Judgment Conversion Date. Any amount due from a Loan Party under this
Section 9.12(b) shall be due as a separate debt and shall not be affected
by judgment being obtained for any other amounts due under or in respect of
any of the Loan Documents.
(c) The term "rate of exchange" in this Section 9.12 means the rate of
exchange at which the Administrative Agent would, on the relevant date at
or about 12:00 noon (Toronto time), be prepared to sell the Obligation
Currency against the Judgment Currency.
SECTION 9.13 WAIVER OF JURY TRIAL.
---------------------
Each of the Loan Parties, the Administrative Agent, the Issuing Banks
and the Lender Parties 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.
[INTENTIONALLY LEFT BLANK]
-150-
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 LTD.
as Borrower
By: /s/ Xxxxxx X. Xxxxxx
---------------------------
Title: President
------------------------
By: /s/ Xxxx Xxxxxx
---------------------------
Title: Secretary
------------------------
-151-
CREDIT SUISSE FIRST BOSTON CANADA,
as an Initial Lender and as Administrative Agent
By: /s/ X.X. XxXxxxxxx
----------------------------------------
Title: Vice President
-------------------------------------
By: /s/ Xxxxx Xxxxxxx
----------------------------------------
Title: Vice President
-------------------------------------
Lending Office and Address for Notices:
Credit Suisse First Boston Canada
0 Xxxxx Xxxxxxxx Xxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxx
X0X 0X0
Attention: Xxxx XxXxxxxxx
Telephone No.: (000) 000-0000
Telecopier No.: (000) 000-0000
-152-
ROYAL BANK OF CANADA, as an Initial
Lender and as Documentation Agent
By: /s/ Xxx Xxxxxxxxxx
-----------------------------------
Title: Deputy to the Vice - President
and Sales and Market Manager
--------------------------------
By: [SIGNATURE ILLIGIBLE]
----------------------------------
Title: ________________________________
Lending Office and Address for Notices:
Royal Bank of Canada
1 Place Ville Xxxxx
0/xx/ Xxxxx, Xxxx Xxxx
Xxxxxxxx, Xxxxxx
X0X 0X0
Attention: Xxxxxx Xxxx
Telephone No.: (000) 000-0000
Telecopier No.: (000) 000-0000
With a copy to:
Royal Bank of Canada
Xxx Xxxxxxx Xxxxx, 0/xx/ Xxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Attention: Xxxxxxx Xxxx
Telephone No.: (000) 000-0000
Telecopier No.: (000) 000-0000
-153-
COMERICA BANK-CANADA, as an Initial
Lender
By: /s/ Xxxxxxx X. Xxxxxxxxxx
-----------------------------------
Title: Vice President
--------------------------------
By: ___________________________________
Title: ________________________________
Lending Office and Address for Notices:
Comerica Bank-Canada
Suite 0000
Xxxxx Xxxxx, Xxxxx Xxxx Xxxxx
Xxxxxxx, Xxxxxxx
X0X 0X0
Attention: Xxxxxxx Xxxxxxxxxx
Telephone No.: (000) 000-0000 Ext. 230
Telecopier No.: (000) 000-0000
-154-
The following Persons are signatories to this Agreement in their
capacity as Loan Parties and not as Borrower.
PANOLAM INDUSTRIES HOLDINGS, INC.
By: /s/ Xxxxxx X. Xxxxxx
----------------------------------
Title: _______________________________
By: /s/ Xxxx Xxxxxx
----------------------------------
Title: _______________________________
PANOLAM GROUP, INC.
By: /s/ Xxxxxx X. Xxxxxx
----------------------------------
Title: _______________________________
By: /s/ Xxxx Xxxxxx
----------------------------------
Title: _______________________________
PII SECOND, INC.
By: /s/ Xxxxxx X. Xxxxxx
----------------------------------
Title: _______________________________
By: /s/ Xxxx Xxxxxx
----------------------------------
Title: _______________________________
-155-
PANOLAM INDUSTRIES INTERNATIONAL, INC.
By: /s/ Xxxxxx X. Xxxxxx
------------------------------------
Title: _________________________________
By: /s/ Xxxx Xxxxxx
------------------------------------
Title: _________________________________
PANOLAM INDUSTRIES, INC.
By: /s/ Xxxxxx X. Xxxxxx
------------------------------------
Title:__________________________________
By: /s/ Xxxx Xxxxxx
------------------------------------
Title: _________________________________
PIONEER PLASTICS CORPORATION
By: /s/ Xxxxxx X. Xxxxxx
------------------------------------
Title: _________________________________
By: /s/ Xxxx Xxxxxx
------------------------------------
Title: _________________________________
-156-
--------------------------------------------------------------------------------
US$65,000,000
CREDIT AGREEMENT
DATED AS OF FEBRUARY 18, 1999
AMONG
PANOLAM INDUSTRIES LTD.,
AS BORROWER,
THE OTHER LOAN PARTIES SIGNATORY HERETO,
THE LENDERS NAMED HEREIN,
AS INITIAL LENDERS,
DLJ CAPITAL FUNDING, INC.,
AS SYNDICATION AGENT,
CREDIT SUISSE FIRST BOSTON CANADA,
AS ADMINISTRATIVE AGENT
AND
ROYAL BANK OF CANADA,
AS DOCUMENTATION AGENT
LEAD ARRANGED BY:
XXXXXXXXX, LUFKIN & XXXXXXXX SECURITIES CORPORATION
--------------------------------------------------------------------------------
SCHEDULES AND EXHIBITS
SCHEDULES
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) Jurisdiction 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
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-1 Form of Canadian Dollar Revolving Note
Exhibit VII-A-2 Form of US Dollar Revolving Note
Exhibit VII-B Form of Term A Note
Exhibit VII-C Form of Term B Note
-i-
Exhibit VII-D-1 Form of Canadian Dollar Swing Line Note
Exhibit VII-D-2 Form of US Dollar Swing Line Note
Exhibit VIII-A Form of Bankers' Acceptance
Exhibit VIII-B Form of Discount Note
Exhibit IX Form of Compliance Certificate/Quarterly
Compliance Certificate
Exhibit X Forms of Canadian Security Agreement and US
Security Agreement
Exhibit XI Form of US Guaranty
Exhibit XII Forms of Mortgage/Assignment of Rents/Deed of
Trust/Leasehold Deed of Trust/Leasehold Mortgage
Exhibit XIII-A Forms of Opinions of Borrower's Canadian and
US Counsel
Exhibit XIII-B Form of Opinion of Borrower's US Local Counsel
Exhibit XIV Form of Amendment to US Guaranty
Exhibit XV Form of Amendment to US Security Agreement
Exhibit XVI Form of Intercreditor and Subordination
Agreement
Exhibit XVII Form of Intercompany Note
-ii-
TABLE OF CONTENTS
Page
Article I. DEFINITIONS AND ACCOUNTING TERMS................................................................ 2
Section 1.01 Certain Defined Terms................................................................. 2
Section 1.02 Computation of Time Periods........................................................... 49
Section 1.03 Accounting Terms...................................................................... 49
Section 1.04 Other Definitional Provisions......................................................... 49
Article II. AMOUNTS AND TERMS OF THE LOANS................................................................. 49
Section 2.01 The Loans............................................................................. 49
Section 2.02 Making the Loans...................................................................... 51
Section 2.03 Scheduled Repayment................................................................... 56
Section 2.04 Prepayments; Reduction of Revolving Commitments and
Swing Line Commitment................................................................. 58
Section 2.05 Interest.............................................................................. 66
Section 2.06 BA Loans.............................................................................. 71
Section 2.07 Fees.................................................................................. 74
Section 2.08 Increased Costs, Etc.................................................................. 75
Section 2.09 Payments and Computations............................................................. 76
Section 2.10 Taxes................................................................................. 78
Section 2.11 Sharing of Payments, Etc.............................................................. 80
Section 2.12 Use of Proceeds....................................................................... 80
Section 2.13 Evidence of Debt...................................................................... 81
Article III. AMOUNTS AND TERMS OF LETTERS OF CREDIT........................................................ 82
Section 3.01 The Letter of Credit Subfacility...................................................... 00
-x-
Xxxxxxx 0.00 Xxxxxxxx of Letters of Credit........................................................... 82
Section 3.03 Drawing and Reimbursement............................................................... 83
Section 3.04 Obligations Absolute.................................................................... 84
Section 3.05 Letter of Credit Fees................................................................... 85
Section 3.06 Use of Letters of Credit................................................................ 86
Article IV. CONDITIONS OF LENDING............................................................................ 86
Section 4.01 Conditions Precedent to Initial Borrowings.............................................. 86
Section 4.02 Conditions Precedent to Each Borrowing and Issuance..................................... 94
Section 4.03 Determinations Under Section 4.01....................................................... 95
Article V. REPRESENTATIONS AND WARRANTIES.................................................................... 95
Section 5.01 Representations and Warranties of Loan Parties.......................................... 95
Article VI. COVENANTS OF THE LOAN PARTIES.................................................................... 106
Section 6.01 Affirmative Covenants................................................................... 106
Section 6.02 Negative Covenants...................................................................... 114
Section 6.03 Reporting Requirements.................................................................. 124
Section 6.04 Financial Covenants..................................................................... 129
Article VII. EVENTS OF DEFAULT............................................................................... 131
Section 7.01 Events of Default....................................................................... 131
Section 7.02 Actions in Respect of the Letters of Credit Upon Default................................ 135
Article VIII. THE ADMINISTRATIVE AGENT....................................................................... 135
Section 8.01 Authorization and Action................................................................ 135
Section 8.02 Administrative Agent's Reliance, Etc.................................................... 136
Section 8.03 Agents and Affiliates................................................................... 136
Section 8.04 Lender Credit Decision.................................................................. 137
-ii-
Section 8.05 Indemnification....................................................................... 137
Section 8.06 Successor Administrative Agents....................................................... 138
Section 8.07 Documentation Agent................................................................... 138
Section 8.08 Ministerial Acts...................................................................... 138
Article IX. MISCELLANEOUS.................................................................................. 139
Section 9.01 Amendments, Etc.; Release of Collateral............................................... 139
Section 9.02 Notices, Etc.......................................................................... 140
Section 9.03 No Waiver, Remedies................................................................... 141
Section 9.04 Costs and Expenses.................................................................... 141
Section 9.05 Right of Set-Off...................................................................... 143
Section 9.06 Binding Effect........................................................................ 144
Section 9.07 Assignments and Participations........................................................ 144
Section 9.08 Governing Law; Jurisdiction........................................................... 148
Section 9.09 Execution in Counterparts............................................................. 148
Section 9.10 No Liability of the Issuing Banks..................................................... 148
Section 9.11 Confidentiality....................................................................... 149
Section 9.12 Judgment Currency..................................................................... 149
Section 9.13 Waiver of Jury Trial.................................................................. 150
-iii-
EXHIBIT I
FORM OF ASSIGNMENT AND ACCEPTANCE
Reference is made to the Credit Agreement, dated as of February 16, 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 LTD., an Ontario corporation (the
"BORROWER"), the other Loan Parties signatory thereto, the financial
--------
institutions and other entities listed on the signature pages of the Credit
Agreement as Lender, and CREDIT SUISSE FIRST BOSTON CANADA, for itself as a
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 held by the Assignor and requests 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 assumed by
the Assignee pursuant hereto or new Notes payable to the order of the Assignee
in an amount equal to the Commitments assumed by the Assignee pursuant hereto
and the Assignor in an amount equal to the Commitments 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 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,
I-1
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; and (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.
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, 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 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,
from and after the Effective Date, the Administrative Agent shall make all
payments under the Credit Agreement and any 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 any 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 Province of Ontario.
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 and Acceptance by telecopier shall
be effective as delivery of a manually executed counterpart of this Assignment
and Acceptance.
I-2
IN WITNESS WHEREOF, the Assignor and the Assignee have caused Schedule
1 to 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: ___________, ____
Assignee's Notice Address:
Assignee's Account Information:
I-3
Accepted and Approved this ____
day of ___________, ____
CREDIT SUISSE FIRST BOSTON CANADA,
as Administrative Agent
By __________________________________
Title:
[Approved this ____ day
of _____________, ____
PANOLAM INDUSTRIES LTD.
By __________________________________
Title:]
I-4
EXHIBIT II
FORM OF NOTICE OF BORROWING
[Date]
Credit Suisse First Boston Canada, as Administrative Agent
for the Lenders party
to the Credit Agreement
referred to below
0 Xxxxx Xxxxxxxx Xxxxx
00/xx/ Xxxxx
Xxxxxxx, Xxxxxxx, X0X 0X0
Attn: Syndications Agency
PANOLAM INDUSTRIES LTD.
Ladies and Gentlemen:
The undersigned, Panolam Industries Ltd., refers to the Credit Agreement, dated
as of February 16, 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 other
Loan Parties signatory thereto, the financial institutions and other entities
listed on the signature pages of the Credit Agreement as Lenders, Credit Suisse
First Boston Canada for itself as a Lender and as Administrative Agent, and
hereby gives you notice, irrevocably, pursuant to Section 2.02 of the Credit
Agreement, that the undersigned hereby requests a [Term A Loan][Term B
Loan][Revolving Loan] 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 Loan comprising the Proposed Borrowing is a
[Term A Loan][Term B Loan][Revolving Loan] [Base Rate Loan] [Eurodollar
Rate Loan] [BA Loan] [Prime Rate Loan].
(iii) The aggregate amount of the Proposed Borrowing is
[US][CND]$__________.
[(iv) The initial Interest Period for each Eurodollar Rate Loan
made as part of the Proposed Borrowing is [one][two][three][six] month[s].]
[(v) The Contract Period for each BA Loan representing part of
the Proposed Borrowing is approximately [thirty] [sixty] [ninety] [one
hundred eighty] days ending on _________ ___,_____.]
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;
(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 LTD.
By:_____________________________________
Title:
II-2
EXHIBIT III
FORM OF NOTICE OF CONVERSION/CONTINUATION
[Date]
Credit Suisse First Boston Canada, as Administrative Agent
for the Lenders party
to the Credit Agreement
referred to below
0 Xxxxx Xxxxxxxx Xxxxx
00/xx/ Xxxxx
Xxxxxxx, Xxxxxxx, X0X 0X0
Attn: Syndications Agency
PANOLAM INDUSTRIES LTD.
Ladies and Gentlemen:
The undersigned, Panolam Industries Ltd. ("Borrower"), refers to the Credit
Agreement, dated as of February 16, 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 other Loan Parties signatory thereto, the financial
institutions and other entities listed on the signature pages of the Credit
Agreement as Lenders, and, Credit Suisse First Boston Canada for itself as a
Lender and as Administrative Agent. Borrower hereby gives you notice,
irrevocably, pursuant to Section [2.05(c)][2.06(a)] of the Credit Agreement that
the undersigned hereby requests [a Conversion under the Credit Agreement (the
"PROPOSED BASE RATE/EURODOLLAR CONVERSION") of US$________ in principal amount
-----------------------------------------
of presently outstanding [Term A][Term B][Revolving] Loans that are [Base Rate]
[Eurodollar Rate] Loans to [Eurodollar Rate] [Base Rate] Loans on ________ __,
____] [a Conversion under the Credit Agreement (the "PROPOSED PRIME RATE/BA
----------------------
CONVERSION") of CDN$_________ of outstanding Revolving Loans that are Prime Rate
----------
Loans to BA Loans with a Contract Period ending _______ __, _____] [a
Continuation under the Credit Agreement (the "PROPOSED BA CONTINUATION") as BA
------------------------
Loans of CDN$________ in principal amount of presently outstanding BA Loans with
a contract period requested to be approximately a [thirty] [sixty] [ninety] [one
hundred eighty] day period ending on _________ __, _____.] [a Continuation under
the Credit Agreement (the "PROPOSED EURODOLLAR CONTINUATION") as Eurodollar Rate
--------------------------------
Loans of US$ ________ 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 statement is true
on the date hereof, and will be true on the date of the Proposed [[Base
Rate/Eurodollar][Prime Rate/BA]Conversion] [[BA][Eurodollar]Continuation]:
(A) the representations and warranties contained in each Loan
Document are correct, before and after giving effect to the Proposed [[BA
Rate/Eurodollar][Prime Rate/BA]Conversion] [[BA][Eurodollar]Continuation]
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 [[Base Rate/Eurodollar][Prime Rate/BA]Conversion]
[[BA][Eurodollar]Continuation]; and
(B) no event has occurred and is continuing, or would result from
such Proposed [[Base Rate/Eurodollar] [Prime Rate/BA] Conversion]
[BA][Eurodollar]Continuation] that constitutes or would constitute a
Default or an Event of Default.
Very truly yours,
PANOLAM INDUSTRIES LTD.
By:_____________________________________
Title:
III-2
EXHIBIT IV
FORM OF NOTICE OF ISSUANCE
[Date]
Credit Suisse First Boston Canada, as Administrative Agent
for the Lenders party
to the Credit Agreement
referred to below
0 Xxxxx Xxxxxxxx Xxxxx
00/xx/ Xxxxx
Xxxxxxx, Xxxxxxx, X0X 0X0
Attn: Syndications Agency
[Name and address of
Issuing Bank
Attention: ________________________]
PANOLAM INDUSTRIES LTD.
Ladies and Gentlemen:
The undersigned, Panolam Industries Ltd., refers to the Credit Agreement, dated
as of February 16, 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 other
Loan Parties signatory thereto, the financial institutions and other entities
listed on the signature pages of the Credit Agreement as Lenders, and Credit
Suisse First Boston Canada, for itself as a Lender and as Administrative 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
[US$__________ ] [CDN$____________.]
(iii) The requested expiration date of such Letter of Credit is
________ ___, ____.
(iv) The name and address of the beneficiary of such requested
Letter of Credit is as follows:
IV-1
________________________________
________________________________
________________________________
(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;
(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 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 LTD.
By:_____________________________________
Title:
IV-2
EXHIBIT V
FORM OF NOTICE OF SWING LINE BORROWING
[Date]
Credit Suisse First Boston Canada, as Administrative Agent
for the Lenders party
to the Credit Agreement
referred to below
0 Xxxxx Xxxxxxxx Xxxxx
00/xx/ Xxxxx
Xxxxxxx, Xxxxxxx, X0X 0X0
Attn: Syndications Agency
PANOLAM INDUSTRIES LTD.
Ladies and Gentlemen:
The undersigned, Panolam Industries Ltd., refers to the Credit Agreement, dated
as of February 16, 1999 (as amended, supplemented, amended or 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 other
Loan Parties signatory thereto, the financial institutions and other entities
listed on the signature pages of the Credit Agreement as Lenders and Credit
Suisse First Boston Canada for itself as a Lender and as Administrative 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 aggregate amount of the Proposed Swing Line Borrowing by
way of [Prime Rate Loan][Base Rate Loan] is [CDN$][US$]_____________.
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;
(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 lesser of (i) the remainder of the Borrowing Base Amount then in
effect minus 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; or (ii) the aggregate Revolving
Commitments then in effect.
Very truly yours,
PANOLAM INDUSTRIES LTD.
By:_____________________________________
Title:
V-2
EXHIBIT VI
FORM OF BORROWING BASE CERTIFICATE
In connection with the Credit Agreement by and among PANOLAM
INDUSTRIES LTD. (the "BORROWER"), the financial institutions and certain other
--------
entities listed on the signature pages of the Credit Agreement as Lenders and
Credit Suisse First Boston Canada, for itself as a Lender and as Administrative
Agent (as amended, supplemented amended and restated or otherwise modified from
time to time, the "CREDIT AGREEMENT"), dated as of February 16, 1999, I, [NAME
----------------
OF OFFICER], in my personal 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 are, 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 [AND ITS CANADIAN SUBSIDIARIES] 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 [AND ITS CANADIAN SUBSIDIARIES] 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) and is attached hereto as Schedule 3).
3. During the most recent fiscal quarter of the Borrower, [more than
US$1,000,000 or the Equivalent Amount thereof] [less than US$1,000,000
or the Equivalent Amount thereof] of the Collateral at any one time
was being warehoused and/or processed at locations not owned or leased
by any of the Credit Parties.
Unless otherwise defined herein, all terms used herein shall have the
meanings ascribed to them in the Credit Agreement.
Executed this ___ day PANOLAM INDUSTRIES LTD.
of __________, ____
By:_____________________________________
title
VI-1
EXHIBIT VII-A-1
FORM OF CANADIAN DOLLAR REVOLVING NOTE
Equivalent Amount in Canadian Dollars
of US$[____________] Dated: February 16, 1999
FOR VALUE RECEIVED, the undersigned, PANOLAM INDUSTRIES LTD., an
Ontario corporation (the "BORROWER"), HEREBY PROMISES TO PAY to the order of
--------
[NAME OF LENDER] (the "LENDER") the aggregate principal amount of the Revolving
------
Loans (as defined below) denominated in Canadian Dollars owing to the Lender by
the Borrower pursuant to the Credit Agreement (as defined below) on the
Revolving Commitment Termination Date. All capitalized terms used and not
otherwise defined herein have the meanings given to them in the Credit
Agreement.
The Borrower promises to pay interest on the unpaid principal amount
of each Revolving Loan denominated in Canadian Dollars from the date of such
Revolving Loan until such principal amount is paid in full, at such interest
rates, and payable at such times, as are specified in the Credit Agreement.
Both principal and interest are payable in lawful money of Canada in
same day funds to the Lender in accordance with the provisions of Section 2.09
of the Credit Agreement. Each Revolving Loan denominated in Canadian Dollars
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 Promissory 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 Promissory Note is one of the Revolving Notes referred to in, and
is entitled to the benefits of, the Credit Agreement dated as of February 16,
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 other Loan Parties signatory thereto, the Lender and certain other
entities listed on the signature pages of the Credit Agreement as Lenders and
Credit Suisse First Boston Canada, for itself as a Lender and as Administrative
Agent. The Credit Agreement, among other things, (i) provides for the making of
loans (the "REVOLVING LOANS") denominated in Canadian Dollars by the Lender to
---------------
the Borrower from time to time in an aggregate principal amount not to exceed at
any time outstanding the Equivalent Amount in Canadian Dollars of the amount in
US Dollars first above mentioned, the indebtedness of the Borrower resulting
from each such Revolving Loan denominated in Canadian Dollars being evidenced by
this Promissory 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 shall operate as a waiver of such rights.
VIII-A-1-1
THIS PROMISSORY NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE PROVINCE ONTARIO.
PANOLAM INDUSTRIES LTD.
By:___________________________________
Title:
VII-A-1-2
CANADIAN DOLLAR REVOLVING LOANS AND PAYMENTS OF PRINCIPAL
========================================================================================================================
Date Amount of Canadian Amount of Principal Paid Unpaid Principal Balance Notation
Dollar Revolving Loan or Prepaid Made By
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VII-A-1-3
EXHIBIT VII-A-2
FORM OF US DOLLAR REVOLVING NOTE
US$[____________] Dated: February 16, 1999
FOR VALUE RECEIVED, the undersigned, PANOLAM INDUSTRIES LTD., an
Ontario corporation (the "BORROWER"), HEREBY PROMISES TO PAY to the order of
--------
[NAME OF LENDER] (the "LENDER") the aggregate principal amount of the Revolving
------
Loans (as defined below) denominated in US Dollars owing to the Lender by the
Borrower pursuant to the Credit Agreement (as defined below) on the Revolving
Commitment Termination Date. All capitalized terms used and not otherwise
defined herein have the meanings given to them in the Credit Agreement.
The Borrower promises to pay interest on the unpaid principal amount
of each Revolving Loan denominated in US Dollars from the date of such Revolving
Loan until such principal amount is paid in full, at such interest rates, and
payable 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 2.09 of the Credit Agreement. Each Revolving Loan
denominated in US Dollars 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 Promissory 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 other Loan Parties signatory thereto, the Lender and certain other
entities listed on the signature pages of the Credit Agreement as Lenders and
Credit Suisse First Boston Canada, for itself as a Lender and as Administrative
Agent. The Credit Agreement, among other things, (i) provides for the making of
loans (the "REVOLVING LOANS") denominated in US Dollars by the Lender to the
---------------
Borrower from time to time in an aggregate principal amount not to exceed at any
time outstanding the amount of US Dollars first above mentioned, the
indebtedness of the Borrower resulting from each such Revolving Loan being
evidenced by this Promissory 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 shall operate as a waiver of such rights.
VIII-A-2-1
THIS PROMISSORY NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE PROVINCE ONTARIO.
PANOLAM INDUSTRIES LTD.
By:_____________________________________
Title:
VII-A-2-2
US DOLLAR REVOLVING LOANS AND PAYMENTS OF PRINCIPAL
========================================================================================================================
Date Amount of US Dollar Amount of Principal Paid Unpaid Principal Balance Notation
Revolving Loan or Prepaid Made By
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VII-A-2-3
EXHIBIT VII-B
FORM OF TERM A NOTE
US$[____________] Dated: February 16, 1999
FOR VALUE RECEIVED, the undersigned, PANOLAM INDUSTRIES LTD., an
Ontario corporation (the "BORROWER"), HEREBY PROMISES TO PAY to the order of
--------
[NAME OF LENDER] (the "LENDER") the aggregate 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. All capitalized terms used and not otherwise defined herein
have the meanings given to them in the Credit Agreement.
The Borrower promises to pay interest on the unpaid principal amount
of the Term A Loan from the date of such Term A Loan until such principal amount
is paid in full, at such interest rates, and payable 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 2.09 of the Credit Agreement. The Term A 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
Promissory 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 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
----------------
other Loan Parties signatory thereto, the Lender and certain other entities
listed on the signature pages of the Credit Agreement as Lenders and Credit
Suisse First Boston Canada, for itself as a Lender and as Administrative Agent.
The Credit Agreement, among other things, (i) provides for a single Term A Loan
by the Lender to the Borrower on the Closing Date in an aggregate principal
amount not to exceed at any time outstanding the US Dollar amount first above
mentioned, the indebtedness of the Borrower resulting from each such Term A Loan
being evidenced by this Promissory 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 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 shall operate as a waiver of such
rights.
VII-B-1
THIS PROMISSORY NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE PROVINCE ONTARIO.
PANOLAM INDUSTRIES LTD.
By:___________________________________
Title:
VII-B-2
TERM A LOANS AND PAYMENTS OF PRINCIPAL
==============================================================================================
Date Amount of Term A Loan Amount of Principal Paid Unpaid Principal Balance Notation
or Prepaid Made By
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==============================================================================================
XXX-X-0
XXXXXXX XXX-X
XXXX XX XXXX X NOTE
US$ [____________] Dated: February 16, 1999
FOR VALUE RECEIVED, the undersigned, PANOLAM INDUSTRIES LTD., an
Ontario corporation (the "BORROWER"), HEREBY PROMISES TO PAY to the order of
--------
[NAME OF LENDER] (the "LENDER") the aggregate 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. All capitalized terms used and not otherwise defined herein
have the meanings given to them in the Credit Agreement.
The Borrower promises to pay interest on the unpaid principal amount
of the Term B Loan from the date of such Term B Loans until such principal
amount is paid in full, at such interest rates, and payable 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 2.09 of the Credit Agreement. The Term B 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
Promissory 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 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
----------------
other Loan Parties signatory thereto, the Lender and certain other entities
listed on the signature pages of the Credit Agreement as Lenders and Credit
Suisse First Boston Canada, for itself as a Lender and as Administrative Agent.
The Credit Agreement, among other things, (i) provides for a single Term B Loan
by the Lender to the Borrower on the Closing Date in an aggregate principal
amount not to exceed at any time outstanding the US Dollar amount first above
mentioned, the indebtedness of the Borrower resulting from each such Term B Loan
being evidenced by this Promissory 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 shall operate as a waiver of such
rights.
VII-C-1
THIS PROMISSORY NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE PROVINCE ONTARIO.
PANOLAM INDUSTRIES LTD.
By:________________________________
Title:
VII-C-2
TERM B LOANS AND PAYMENTS OF PRINCIPAL
==============================================================================================
Date Amount of Term B Loan Amount of Principal Paid Unpaid Principal Balance Notation
or Prepaid Made By
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==============================================================================================
VII-C-3
EXHIBIT VII-D-1
FORM OF CANADIAN DOLLAR SWING LINE NOTE
Equivalent Amount in Canadian Dollars
of US$ [_________] Dated: February 16, 1999
FOR VALUE RECEIVED, the undersigned, PANOLAM INDUSTRIES LTD., an
Ontario corporation (the "BORROWER"), HEREBY PROMISES TO PAY to the order of
--------
[NAME OF LENDER] (the "LENDER") the aggregate principal amount of the Swing Line
------
Loans (as defined below) denominated in Canadian Dollars owing to the Lender by
the Borrower pursuant to the Credit Agreement (as defined below) on the
Revolving Commitment Termination Date. All capitalized terms used and not
otherwise defined herein have the meanings given to them in the Credit
Agreement.
The Borrower promises to pay interest on the unpaid principal amount
of each Swing Line Loan denominated in Canadian Dollars from the date of such
Swing Line Loan until such principal amount is paid in full, at such interest
rates, and payable at such times, as are specified in the Credit Agreement.
Both principal and interest are payable in lawful money of Canada in
same day funds to the Lender in accordance with the provisions of Section 2.09
of the Credit Agreement. Each Swing Line Loan denominated in Canadian Dollars
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 Promissory 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 other Loan Parties signatory thereto, the Lender and certain other
entities listed on the signature pages of the Credit Agreement as Lenders and
Credit Suisse First Boston Canada, for itself as a Lender and as Administrative
Agent. The Credit Agreement, among other things, (i) provides for the making of
Swing Line Loans denominated in Canadian Dollars by the Lender to the Borrower
from time to time in an aggregate principal amount not to exceed at any time
outstanding the Equivalent Amount in Canadian Dollars of the amount in US
Dollars first above mentioned, the indebtedness of the Borrower resulting from
each such Swing Line Loan being evidenced by this Promissory 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 A Note hereby waive presentment,
demand, interest and notice of any kind. No failure to exercise, and no delay in
exercising, any rights hereunder on the part of the holder shall operate as a
waiver of such rights.
VII-D-1-1
THIS PROMISSORY NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE PROVINCE ONTARIO.
PANOLAM INDUSTRIES LTD.
By:____________________________
Title:
VII-D-1-2
CANADIAN DOLLAR SWING LINE LOANS AND PAYMENTS OF PRINCIPAL
================================================================================================
Date Amount of Canadian Amount of Principal Paid Unpaid Principal Balance Notation
Dollar Swing Line Loan or Prepaid Made By
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VII-D-1-3
EXHIBIT VII-D-2
FORM OF US DOLLAR SWING LINE NOTE
US$ [_________] Dated: February 16, 1999
FOR VALUE RECEIVED, the undersigned, PANOLAM INDUSTRIES LTD., an
Ontario corporation (the "BORROWER"), HEREBY PROMISES TO PAY to the order of
--------
[NAME OF LENDER] (the "LENDER") the aggregate principal amount of the Swing Line
------
Loans (as defined below) denominated in US Dollars owing to the Lender by the
Borrower pursuant to the Credit Agreement (as defined below) on the Revolving
Commitment Termination Date. All capitalized terms used and not otherwise
defined herein have the meanings given to them in the Credit Agreement.
The Borrower promises to pay interest on the unpaid principal amount
of each Swing Line Loan denominated in US Dollars from the date of such Swing
Line Loan until such principal amount is paid in full, at such interest rates,
and payable 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 2.09 of the Credit Agreement. Each Swing Line Loan
denominated in US Dollars 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 Promissory 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
16, 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 other Loan Parties signatory thereto, the Lender and certain other
entities listed on the signature pages of the Credit Agreement as Lenders and
Credit Suisse First Boston Canada, for itself as a Lender and as Administrative
Agent. The Credit Agreement, among other things, (i) provides for the making of
Swing Line Loans denominated in US Dollars by the Lender to the Borrower from
time to time in an aggregate principal amount not to exceed at any time
outstanding the US Dollar amount first above mentioned, the indebtedness of the
Borrower resulting from each such Swing Line Loan being evidenced by this
Promissory 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 shall operate as a waiver of such rights.
VII-D-2-1
THIS PROMISSORY NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE PROVINCE ONTARIO.
PANOLAM INDUSTRIES LTD.
By:____________________________
Title:
VIII-D-2-2
US DOLLAR SWING LINE LOANS AND PAYMENTS OF PRINCIPAL
================================================================================================
Date Amount of US Dollar Amount of Principal Paid Unpaid Principal Balance Notation
Swing Line Loan or Prepaid Made By
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VIII-D-2-3
EXHIBIT VIII-A
FORM OF BANKERS' ACCEPTANCE
==========================================================================
BANKER'S ACCEPTANCE No.________
To:____________________ Due ______________ ________ 19 __________
Bank
_______________________________________ days after date (without grace)
Address
ACCEPTED For value received pay to the order of the
undersigned drawer the sum of CDN$___________
________________________ _____________________Dollars $ ____________
Payable At
________________________
[THIS IS A DEPOSITORY XXXX SUBJECT TO THE
DEPOSITORY BILLS AND NOTES ACT.]
________________________ Value Received and Charge to the Account of:
For ____________________ _____________________________________________
________________________ Per: ________________________________________
Authorized Signature
________________________ Per: ________________________________________
Authorized Signature
=========================================================================
VIII-A-1
===========================================
___________________________________________
___________________________________________
Per:_______________________________________
Per:_______________________________________
===========================================
VIII-A-2
EXHIBIT VIII-B
DISCOUNT NOTE
CDN$ _____________ Date: ________
FOR VALUE RECEIVED, the undersigned unconditionally promises to pay on
__________________________, 19____, to or to the order of ______________________
______________(the "HOLDER"), the sum of CDN$_____________with no interest
thereon.
The undersigned hereby waives presentment, protest and notice of every
kind and waives any defences based upon indulgences which may be granted by the
Holder to any party liable hereon and any days of grace.
This promissory note evidences a BA Equivalent Loan, as defined in the
Credit Agreement dated as of February 16, 1999 between Panolam Industries Ltd.,
as the Borrower, the other Loan Parties signatory thereto, the financial
institutions and other entities listed on the signature page thereof, as lenders
(the "LENDERS") and Credit Suisse First Boston Canada, as a Lender and as
Administrative Agent for the Lenders, as amended, restated, supplemented or
otherwise modified from time to time, and constitutes indebtedness to the Holder
arising under the BA Equivalent Loan. Payment of this note shall be made at the
offices of the Administrative Agent located at 0 Xxxxx Xxxxxxxx Xxxxx, 00/xx/
Xxxxx, Xxxxxxx, Xxxxxxx, X0X 0X0.
PANOLAM INDUSTRIES LTD.
By: ___________________________
Name:
Title:
VIII-B-1
EXHIBIT IX
FORM OF COMPLIANCE CERTIFICATE /
QUARTERLY COMPLIANCE CERTIFICATE
[Date]
Credit Suisse First Boston Canada, as Administrative Agent
for the Lenders party
to the Credit Agreement
referred to below
0 Xxxxx Xxxxxxxx Xxxxx
00/xx/ Xxxxx
Xxxxxxx, Xxxxxxx, X0X 0X0
Attn: Syndications Agency
RE: COMPLIANCE CERTIFICATE
This certificate is given [IN ACCORDANCE WITH SECTION 6.03[(B)][(C)][(D)] OF]
[PURSUANT TO A PERMITTED ACQUISITION UNDER] the Credit Agreement, dated as of
February 16, 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 LTD., an Ontario
corporation (the "BORROWER"), the other Loan Parties signatory thereto, the
--------
financial institutions and other entities listed on the signature pages of the
Credit Agreement as Lenders and CREDIT SUISSE FIRST BOSTON CANADA, for itself as
a Lender and as Administrative Agent. The undersigned hereby certifies that:
(a) I am the [Chief Financial Officer] [Treasurer] [Director of Finance]
of [the Borrower] [Panolam International];
(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 present the financial condition of
[Holdings] [Panolam International] and its Subsidiaries (including the
Borrower) [and Pioneer ] 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 [Holdings] [Panolam International] and
its Subsidiaries (including the Borrower) [and Pioneer], on a
Consolidated and consolidating basis, in each case as at the end of
the relevant period and for the period then ended;
(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 [Holdings]
[Panolam International] and its Subsidiaries (including the Borrower)
[and Pioneer] 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
A-IX-1
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 that 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,] Panolam International and its Subsidiaries (including the
Borrower) are 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
LTD.
By:__________________________
Title:
A-IX-2
EXHIBIT X-B
FORM OF US SECURITY AGREEMENT
This SECURITY AGREEMENT (as it may be amended, supplemented or
otherwise modified from time to time, the "AGREEMENT") is dated as of February
---------
16, 1999 and made by PANOLAM INDUSTRIES INTERNATIONAL, INC., a Delaware
corporation with an office at 00 Xxxxxxxx Xxxxx, Xxxxxxx, Xxxxxxxxxxx 00000 (the
"BORROWER"), PANOLAM INDUSTRIES HOLDINGS, INC., a Delaware corporation with an
--------
office at 00 Xxxxxxxx Xxxxx, Xxxxxxx, Xxxxxxxxxxx 00000 ("HOLDINGS"), PANOLAM
--------
GROUP, INC., a Delaware corporation with an office at 00 Xxxxxxxx Xxxxx,
Xxxxxxx, Xxxxxxxxxxx 00000 ("GROUP"), PII SECOND, INC., a Delaware corporation
-----
with an office at 00 Xxxxxxxx Xxxxx, Xxxxxxx, Xxxxxxxxxxx 00000 ("PII SECOND"),
----------
PANOLAM INDUSTRIES, INC., a Delaware corporation with an office at 00 Xxxxxxxx
Xxxxx, Xxxxxxx, Xxxxxxxxxxx 00000 ("PANOLAM US"), PIONEER PLASTICS CORPORATION,
----------
a Delaware corporation with an office at 00 Xxxxxxxx Xxxxx, Xxxxxxx, Xxxxxxxxxxx
00000 ("PIONEER"), and any future direct or indirect parent or subsidiary, if
-------
any, of the Borrower that becomes a party to this Agreement as an additional
Grantor (as defined below), in favor of and for the benefit of (i) CREDIT SUISSE
FIRST BOSTON ("CSFB"), as administrative agent (in such capacity, together with
----
any successor in such capacity, the "US ADMINISTRATIVE AGENT") for the Lender
-----------------------
Parties (as defined in the US Credit Agreement (as hereinafter defined), such
Lender Parties being referred to herein as the "US LENDERS") that are or may
----------
hereafter become party to the US Credit Agreement, and (ii) CREDIT SUISSE FIRST
BOSTON CANADA ("CSFB CANADA"), as administrative agent (in such capacity,
-----------
together with any successor in such capacity, the "CANADIAN ADMINISTRATIVE
-----------------------
AGENT") for the Lender Parties (as defined in the Canadian Credit Agreement (as
hereinafter defined) , such Lender Parties being referred to herein as the
"CANADIAN LENDERS") that are or may hereafter become party to the Canadian
----------------
Credit Agreement. 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." The US Administrative Agent, US Lenders, the Canadian
--------
Administrative Agent and the Canadian Lenders are each referred to herein as a
"SECURED PARTY" and are collectively referred to herein as the "SECURED
------------- -------
PARTIES."
PRELIMINARY STATEMENTS
(1) The Borrower is party to a Credit Agreement, dated as of the date
hereof (said agreement, as it may hereafter be amended, supplemented, amended
and restated or otherwise modified from time to time, being the "US CREDIT
---------
AGREEMENT," the terms defined therein and not otherwise defined herein being
---------
used herein as therein defined) with the Lender Parties from time to time party
thereto, the Administrative Agent, DLJ Capital Funding, Inc., as syndication
agent.
(2) Panolam Industries, Ltd. ("PANOLAM CANADA") is party to a Credit
--------------
Agreement, dated as of the date hereof (said agreement, as it may hereafter be
amended, supplemented, amended and restated or otherwise modified from time to
time, being the
X-B-1
"CANADIAN CREDIT AGREEMENT") with the Lender Parties (as defined therein) from
-------------------------
time to time party thereto and the Canadian Administrative Agent.
(3) 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 Parent Grantors and the Subsidiary Grantors have guaranteed
all obligations of the Borrower under the US Credit Agreement [and all
obligations of Panolam Canada under the Canadian Credit Agreement].
(4) 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 have entered into an Intercreditor Agreement, dated as of the
date hereof (said agreement, as it may hereafter be amended, supplemented,
amended and restated or otherwise modified from time to time, being the
"INTERCREDITOR AGREEMENT"), setting forth, among other things, the relative
-----------------------
rights of the US Administrative Agent, the US Lenders, the Canadian
Administrative Agent and the Canadian Lenders with respect to the security
interests provided for herein and in the other Collateral Documents.
(5) Each Grantor is the owner of the shares (the "PLEDGED SHARES") of
--------------
stock and other certificated securities described in Part I of Schedule I hereto
----------
and issued by the Persons named therein and of the indebtedness described in
Part II of such Schedule I (the "PLEDGED DEBT") and issued by the obligors named
---------- ------------
therein.
(6) It is a condition precedent to (i) the making of Loans by the US
Lenders under the US Credit Agreement and (ii) and the making of Loans (as
defined in the Canadian Credit Agreement) by the Canadian Lenders under the
Canadian Credit Agreement that each Grantor shall have granted the assignment
and security interest and made the pledge and assignment contemplated by this
Agreement.
NOW, THEREFORE, in consideration of the premises and for other good
and valuable consideration the receipt and sufficiency of which are hereby
acknowledged, the Grantors, and each of them, hereby agrees with (i) the US
Administrative Agent for its benefit and the ratable benefit of the US Lenders,
and (ii) the Canadian Administrative Agent for its benefit and the ratable
benefit of the Canadian Lenders as follows:
SECTION 1. DEFINITIONS.
-----------
(a) CERTAIN TERMS. Capitalized terms defined in the preamble and the
-------------
recitals to this Agreement have the meanings set forth therein. Capitalized
terms defined in the US Credit Agreement and used and not otherwise defined
herein have the meanings assigned to such terms in the US Credit Agreement. As
used in this Agreement, the following terms have the meanings specified below:
"ACCOUNT COLLATERAL" has the meaning set forth in Section 2(a)(viii).
------------------
"ACTING ADMINISTRATIVE AGENT" means until such time as all Secured
---------------------------
Obligations referred to in clause (i) of the definition thereof have been paid
in full, the US Administrative Agent and, thereafter, shall mean the Canadian
Administrative Agent.
X-B-2
"BANKRUPTCY CODE" means Title 11 of the United States Code, as from
---------------
time to time amended.
"CASH COLLATERAL ACCOUNT" means any account established by the
-----------------------
Administrative Agent for purposes of holding any cash proceeds of Collateral,
insurance proceeds, amounts required to cash collateralize Letters of Credit or
any other amounts deposited from time to time by any Credit Party for purposes
of, or otherwise held by the Acting Administrative Agent for purposes of,
securing the Secured Obligations.
"CLAIM" has the meaning set forth in the Bankruptcy Code.
-----
"COLLATERAL" has the meaning set forth in Section 2(a).
----------
"COPYRIGHTS" has the meaning set forth in Section 2(a)(xii).
----------
"COPYRIGHT LICENSES" has the meaning set forth in Section 2(a)(xii).
------------------
"EQUIPMENT" means all "equipment," as such term is defined in the NY
---------
Uniform Commercial Code, now owned or hereafter acquired by any Grantor,
wherever located and, in any event, including all such Grantor's machinery and
equipment, including processing equipment, conveyors, machine tools, data
processing and computer equipment with software and peripheral equipment (other
than software constituting part of the Receivables and Intellectual Property),
and all engineering, processing and manufacturing equipment, office machinery,
furniture, materials handling equipment, tools, attachments, accessories,
automotive equipment, trailers, trucks, forklifts, molds, dies, stamps, motor
vehicles, rolling stock and other equipment of every kind and nature, trade
fixtures and fixtures not forming a part of real property, all whether now owned
or hereafter acquired, and wherever situated, together with (but excluding
Inventory) all additions and accessions thereto, replacements therefor, all
parts therefor, all substitutes for any of the foregoing, fuel therefor, and all
manuals, drawings, instructions, warranties and rights with respect thereto, and
all products and proceeds thereof and condemnation awards and insurance proceeds
with respect thereto.
"EXCLUDED ASSETS" means rights, licenses and franchises granted by any
---------------
governmental authority in which it is unlawful to create a Lien.
"LETTER OF CREDIT CASH COLLATERAL ACCOUNT" means a Cash Collateral
----------------------------------------
Account established for purposes of maintaining amounts deposited to cash
collateralize Letters of Credit.
"NY UNIFORM COMMERCIAL CODE" means, at any time of determination, the
--------------------------
Uniform Commercial Code in effect in the State of New York at such time.
"PATENTS" has the meaning set forth in Section 2(a)(x).
-------
"PATENT LICENSES" has the meaning set forth in Section 2(a)(x).
---------------
"RELATED CONTRACTS" means all security agreements, leases and other
-----------------
contracts and agreements of every type included in the Collateral, whether
relating to an Account or otherwise.
X-B-3
"SECURED OBLIGATIONS" is defined in Section 2(b).
-------------------
"SECURITY COLLATERAL" has the meaning set forth in Section 2(a)(vii).
-------------------
"TRADEMARKS" has the meaning set forth in Section 2(a)(xi).
----------
"TRADEMARK LICENSES" has the meaning set forth in Section 2(a)(xi).
------------------
"WORK" has the meaning set forth in Section 11(n).
----
(b) TERMS DEFINED IN THE UNIFORM COMMERCIAL CODE. When capitalized,
--------------------------------------------
the following terms used in this Agreement or any other Collateral Document have
the meanings given to them in the NY Uniform Commercial Code: Accounts;
Certificated Security; Chattel Paper; Commodity Account; Commodity Contract;
Commodities Intermediary; Control; Documents; Equipment; Financial Asset;
Fixtures; General Intangibles; Goods; Instruments; Inventory; Investment
Property; Securities Account; Securities Intermediary; Security; Security
Certificate; Security Entitlement; and Uncertificated Security. Unless otherwise
defined herein or in the US Credit Agreement, terms used in Article 8 or Article
9 the NY Uniform Commercial Code are used herein as therein defined.
SECTION 2. GRANT OF SECURITY; SECURED OBLIGATIONS.
---------------------------------------
(a) GRANT OF SECURITY INTERESTS. As security for the payment of the
---------------------------
Secured Obligations, each Grantor hereby (I) assigns to the US Administrative
Agent for the ratable benefit of the US Administrative Agent and the US Lenders,
and grants to the US Administrative Agent for the ratable benefit of the US
Administrative Agent and the US Lenders a continuing and first priority security
interest (except as otherwise modified in the Intercreditor Agreement with
respect to the capital stock of Panolam Canada) in, and (II) assigns to the
Canadian Administrative Agent for the ratable benefit of the Canadian
Administrative Agent and the Canadian Lenders, and grants to the Canadian
Administrative Agent for the ratable benefit of the Canadian Administrative
Agent and the Canadian Lenders a continuing and second priority security
interest (except as otherwise modified in the Intercreditor Agreement with
respect to the capital stock of Panolam Canada) in, all of such Grantor's right,
title and interest in and to the following types or items of property, in each
case whether now or hereafter existing or owned by such Grantor or in which such
Grantor now owns or hereafter acquires an interest and wherever the same may be
located (collectively, the "COLLATERAL"):
-----------
(i) all Inventory, including specifically all raw materials,
work-in-process, finished Goods, supplies, materials, spare parts,
Goods held for sale or on lease or for lease or furnished or to be
furnished under contracts of service, merchandise inventory, rental
inventory, and returned or repossessed Goods and all rights to enforce
return or repossession by reclamation, stoppage in transit or
otherwise,
(ii) all Equipment, including specifically all manufacturing,
printing, distribution, delivery, retailing, vending, computing, data
processing, communications, office and other equipment in all of its
forms, all vehicles, all tools, dies, and molds, all Fixtures, all
other Goods used or bought for use
X-B-4
primarily in a business and all other Goods except Inventory,
(iii) all Accounts,
(iv) all Chattel Paper,
(v) all Documents,
(vi) all Instruments and all other Claims that are in any
respect evidenced or represented by any writing, including
specifically the Pledged Debt described in Schedule I and all other
Pledged Debt and all other writings evidencing or representing a Claim
against any Credit Party or any other Person,
(vii) all of the following (the "SECURITY COLLATERAL"): all
-------------------
Securities, whether constituting Certificated Securities or
Uncertificated Securities, all Financial Assets, all Security
Entitlements, all Securities Accounts, all Commodity Contracts, all
Commodity Accounts, and all other Investment Property, including
specifically the Pledged Shares described in Schedule I and all other
Equity Interests,
(viii) all of the following (the "ACCOUNT COLLATERAL"): (a)
------------------
each Cash Collateral Account, the Letter of Credit Cash Collateral
Account, all funds held therein and all certificates and instruments,
if any, from time to time representing or evidencing any Cash
Collateral Account or the Letter of Credit Cash Collateral Account,
(b) all other deposit accounts of such Grantor, all funds held therein
and all certificates and instruments, if any from time to time
representing or evidencing such deposit accounts, (c) all notes,
certificates of deposit, deposit accounts, checks and other
instruments from time to time hereafter delivered to or otherwise
possessed by the Administrative Agent for or on behalf of such Grantor
in substitution for or in addition to any or all of the then existing
Account Collateral, and (d) all interest, dividends, cash, instruments
and other property from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of the then
existing Account Collateral,
(ix) all money, cash and cash equivalents,
(x) (A) all letters patent of the United States or any other
country and all reissues and extensions thereof, including, without
limitation, any thereof referred to in Part I of Schedule II hereto,
------------
and (B) all applications for letters patent of the United States or
any other country and all divisions, continuations and continuations-
in-part thereof, including, without limitation, any thereof referred
to in Part I of Schedule II hereto (collectively, the "PATENTS"), and
------------ -------
(C) all agreements, whether written or oral, providing for the grant
by or to such Grantor of any right to manufacture, use or sell any
invention covered by a Patent, including, without limitation, any
thereof referred to in Part II of Schedule II (collectively, the
------------
"PATENT LICENSES");
----------------
(xi) (A) all trademarks, trade names, corporate names, company
names,
X-B-5
business names, fictitious business names, trade styles, service
marks, logos and other source or business identifiers, and the
goodwill associated therewith, now existing or hereafter adopted or
acquired, all registrations and recordings thereof, and all
applications in connection therewith, whether in the United States
Patent and Trademark Office or in any similar office or agency of the
United States, any state thereof or any other country or any political
subdivision thereof, or otherwise, including, without limitation, any
thereof referred to in Part I of Schedule III, and (B) all renewals
------------
thereof (collectively, the "TRADEMARKS"), and (C) all agreements,
----------
written or oral, providing for the grant by or to such Grantor of any
right to use any trademark, including, without limitation, any thereof
referred to in Part II of Schedule III (collectively, the "TRADEMARK
------------- ---------
LICENSES");
--------
(xii) (A) all copyrights in all works, whether published or
unpublished, registered or unregistered, including, without
limitation, those listed on Part I of Schedule IV, all registrations
-----------
and recordings thereof, and all applications in connection therewith,
including, without limitation, registrations, recordings and
applications in the United States Copyright Office or in any other
country, and (B) all renewals thereof (collectively, the
"COPYRIGHTS"), and (C) all agreements, written or oral, providing for
----------
the grant by or to such Grantor of any right to reproduce, copy,
publish or otherwise use any Copyright, including, without limitation,
the agreements set forth on Part II of Schedule IV (collectively, the
------------
"COPYRIGHT LICENSES");
------------------
(xiii) all other General Intangibles, including specifically (A)
all customer lists and agreements, (B) all supplier lists and
agreements, (C) all employee and consultant lists, rights, and
agreements, (D) all computing, data and information processing and
communications programs, discs, designs, and information and the data
and other entries thereon, (E) all books, records, catalogs, back
issues, library rights and all manifestations and embodiments thereof,
(F) all contracts, contract rights and agreements and all rights and
claims arising under or in respect of all contracts and agreements of
every type and nature (including, without limitation, all stock and/or
asset purchase agreements and all rights and claims arising under or
in respect of the US Credit Agreement or any other Loan Document,
including rights and claims against the Administrative Agent or any
Lender Party and each Hedge Agreement to which such Grantor is now or
may hereafter become a party, in each case as such agreements may be
amended, amended and restated, supplemented or otherwise modified from
time to time), (G) all rights and claims arising in respect of the
related transaction, (H) all Net Cash Proceeds, (I) all tax refunds,
(J) all policies of insurance and condemnation awards of every type
and description and the proceeds thereof, (K) all loans receivable,
letters of credit, bonds and undertakings, deferred purchase price or
deferred purchase consideration, consulting or non-competition
payments and other indebtedness, liabilities and obligations
receivable not constituting an Account and not evidenced or
represented by any Instrument, Chattel Paper or Security, (L) all
rights of recoupment, recourse, reimbursement, subrogation, indemnity
or contribution (including those arising under any Loan Document,
those arising in respect of any
X-B-6
guarantee of the senior subordinated notes or any other guarantee or
any payment thereon, and those arising on account of any other
agreement, transaction or event), (M) all other causes of action and
claims of every type and description, whether fixed or contingent,
liquidated or not liquidated, accrued or not accrued, and all
judgments, orders and recoveries thereon, (N) all other rights,
privileges, benefits, entitlements, franchises, licenses and
expectancies of every type and description, (O) all other intangible
property of every type and description, and (P) all goodwill
associated with any of the foregoing,
(xiv) all property that is at any time delivered to, or that is
at any time in the Control of, the Administrative Agent,
TOGETHER, IN EACH CASE, WITH (1) all accessions thereto and products and
replacements thereof, (2) all guaranties, Liens and other forms of collateral
security therefor, and (3) all dividends, distributions, and payments received
thereon or in exchange or substitution therefor or upon transfer thereof, and
(4) all other proceeds thereof,
EXCEPT AND EXCLUDING, HOWEVER, each item of property that is an Excluded Asset,
for as long as it remains an Excluded Asset.
Notwithstanding anything to the contrary in this Agreement, no Grantor
shall be required to pledge to the U.S. Administrative Agent, in its capacity as
such, more than 65% of the shares of the capital stock of any Foreign Subsidiary
(as defined below) to secure the U.S. Secured Obligations (it being understood
and agreed that 100% of the shares of capital stock of any such Foreign
Subsidiary shall be pledged hereunder to the Canadian Administrative Agent to
secure the Canadian Secured Obligation, subject to the terms of the
Intercreditor Agreement). For the purposes of this Section, "Foreign
Subsidiary" means any "controlled foreign corporation" within the meaning of
Section 957(a) of the Internal Revenue Code, as to which such Grantor is a
"United States shareholder" as defined in Section 951(b) of the Internal Revenue
Code.
X-B-7
(b) SECURITY FOR OBLIGATIONS. This Agreement secures with respect to
------------------------
each Grantor, and the Collateral of such Grantor is collateral security for, in
each case subject to the terms of the Intercreditor Agreement, the prompt
payment and performance in full when due, whether on a specified payment date,
at stated maturity, by acceleration or otherwise (including, without limitation,
the payment of amounts that would become due but for the operation of the
automatic stay under Section 362(a) of the Bankruptcy Code or any similar law)
of (i) all Obligations of such Grantor now or hereafter existing under the Loan
Documents, whether for principal, interest (including, without limitation,
interest that, but for the filing of a petition in bankruptcy would accrue on
such obligations), fees, expenses or otherwise (all such Obligations being the
"US SECURED OBLIGATIONS"), and (ii) all Obligations of such Grantor now or
----------------------
hereafter existing under the Canadian Loan Documents, whether for principal,
interest (including, without limitation, interest that, but for the filing of a
petition in bankruptcy would accrue on such obligations), fees, expenses or
otherwise (all such Obligations being the "CANADIAN SECURED OBLIGATIONS"; the US
----------------------------
Secured Obligations and the Canadian Secured Obligations are collectively
referred to herein as the "SECURED OBLIGATIONS"). Without limiting the
-------------------
generality of the foregoing, this Agreement secures the payment of all amounts
that constitute part of the Secured Obligations and would be owed by any Grantor
to any Secured Party under the Loan Documents or the Canadian Loan Documents but
for the fact that they are unenforceable or not allowable due to the existence
of a bankruptcy, reorganization or similar proceeding.
SECTION 3. GRANTORS REMAIN LIABLE.
-----------------------
Anything herein to the contrary notwithstanding, (a) each Grantor
shall remain liable under the Related Contracts to the extent set forth therein
to perform all of its duties and obligations thereunder to the same extent as if
this Agreement had not been executed, (b) the exercise by the Acting
Administrative Agent of any of the rights hereunder shall not release any
Grantor from any of its duties or obligations under the Related Contracts and
(c) neither the Acting Administrative Agent nor any other Secured Party shall
have any obligation or liability under the Related Contracts by reason of this
Agreement, nor shall the Acting Administrative Agent or any other Secured Party
be obligated to perform any of the obligations or duties of any Grantor
thereunder, to take any action to collect or enforce any claim for payment
assigned hereunder, to make any payment or to make any inquiry as to the nature
or the sufficiency of any payment received by it or as to the sufficiency of any
performance by any party in respect of any Account or any Related Contract.
SECTION 4. DELIVERY OF SECURITY COLLATERAL AND ACCOUNT COLLATERAL.
-------------------------------------------------------
All certificates or instruments, if any, representing or evidencing
Security Collateral or Account Collateral shall be delivered to and held by or
on behalf of the Acting Administrative Agent pursuant hereto (a) on or prior to
the Closing Date, with respect to such Collateral in existence on the Closing
Date, and (b) within 3 Business Days of any Grantor obtaining rights thereto
with respect to any other such Collateral. All such Collateral when so
delivered shall be in suitable form for transfer by delivery, or shall be
accompanied by duly executed instruments of transfer or assignment in blank, all
in form and substance satisfactory to the Acting Administrative Agent. The
Acting Administrative Agent shall have the right, at any time in its discretion
and without notice to any Grantor, to transfer to or to register in the name of
the Acting Administrative Agent or any of its nominees any or all of the
Security Collateral and
X-B-8
Account Collateral, subject only to the revocable rights specified in Section
10(a). In addition, the Acting Administrative Agent shall have the right at any
time to exchange certificates or instruments representing or evidencing Security
Collateral or Account Collateral for certificates or instruments of smaller or
larger denominations.
SECTION 5. REPRESENTATIONS AND WARRANTIES.
-------------------------------
Each Grantor represents and warrants as follows:
(a) All of the Equipment and Inventory are located at the places
specified in Schedule VI hereto. The chief place of business and chief
------------
executive office of such Grantor and the office where such Grantor keeps
its records concerning the Accounts, and the original copies of the Related
Contracts and all originals of all Chattel Paper, are located at the
address first specified above for such Grantor, and the original copies of
each Related Contract and all originals of all Chattel Paper that evidence
Accounts, are located at the address first specified above for such
Grantor. None of the Accounts or the Account Collateral is evidenced by a
promissory note or other instrument.
(b) Such Grantor is the legal and beneficial owner of the Collateral
of such Grantor free and clear of any Lien, except for the security
interests created by this Agreement and Permitted Liens. No effective
financing statement or other instrument similar in effect covering all or
any part of the Collateral is on file in any recording office, except such
as may have been filed in favor of the Acting Administrative Agent and the
Canadian Administrative Agent relating to this Agreement and except as
otherwise permitted under the US Credit Agreement and the Canadian Credit
Agreement. Such Grantor has the trade names listed on Part I of Schedule
--------
III.
---
(c) Such Grantor has exclusive possession and control of the Equipment
constituting Collateral and Inventory constituting Collateral.
(d) The Pledged Shares have been duly authorized and validly issued
and are fully paid and non-assessable. The Pledged Debt has been duly
authorized, authenticated or issued and delivered, is the legal, valid and
binding obligation of the issuers thereof and is not in default.
(e) The Pledged Shares constitute the percentage of the issued and
outstanding shares of stock of the issuers thereof indicated on Schedule I.
----------
The Pledged Debt is, as of the date hereof, outstanding in the principal
amount indicated on Schedule I.
----------
(f) This Agreement, the pledge of the Security Collateral pursuant
hereto and the pledge and assignment of the certificates, if any,
representing the Account Collateral pursuant hereto create a valid and
perfected first priority security interest in such Collateral, securing the
payment of the Secured Obligations, and all filings and other actions
necessary or desirable to perfect and protect such security interests have
been duly taken. Upon the filing of financing statements under the Uniform
Commercial Code in each of the filing offices listed on Schedule V with
-----------
respect to each Grantor, which financing statements have been duly filed or
executed in appropriate form for filing and
X-B-9
delivered to the Acting Administrative Agent, the security interest of each
of the US Administrative Agent and the Canadian Administrative Agent in
respect of all other Collateral will be perfected to the extent a security
interest in such Collateral may be perfected by the filing of financing
statements.
(g) No consent of any other Person and no authorization, approval or
other action by, and no notice to or filing with, any governmental
authority or regulatory body or other third party is required either (i)
for the grant by such Grantor of the assignment and security interest
granted or purported to be granted hereby, for the pledge by such Grantor
of the Security Collateral pursuant hereto or for the execution, delivery
or performance of this Agreement by such Grantor, (ii) for the perfection
or maintenance of the pledge, assignment and security interest created or
purported to be created hereby (including the first priority nature of such
pledge, assignment or security interest), except for the filing of
financing and continuation statements under the Uniform Commercial Code,
which financing statements have been duly filed or executed in appropriate
form for filing and delivered to the Acting Administrative Agent, and the
recording of this Agreement in the United States Patent and Trademark
Office, which Agreement has been duly filed or executed in appropriate form
for filing and delivered to the Acting Administrative Agent, or (iii) for
the exercise by the Acting Administrative Agent of its voting or other
rights provided for in this Agreement or the remedies in respect of the
Collateral pursuant to this Agreement, except as may be required in
connection with the disposition of any portion of the Security Collateral
by laws affecting the offering and sale of securities generally.
(h) The Inventory has been produced by such Grantor in compliance with
all requirements of the Fair Labor Standards Act.
(i) None of the Collateral constitutes, or is the proceeds of, farm
products.
SECTION 6. FURTHER ASSURANCES.
-------------------
(a) Each Grantor agrees that from time to time, at the expense of such
Grantor, such Grantor will promptly execute and deliver all further instruments
and documents, and take all further action, that may be necessary or desirable,
or that the Acting Administrative Agent may request, in order to perfect and
protect any pledge, assignment or security interest granted or purported to be
granted hereby or to enable the Acting Administrative Agent to exercise and
enforce its rights and remedies hereunder with respect to any Collateral.
Without limiting the generality of the foregoing, such Grantor will: (i) xxxx
conspicuously all Chattel Paper, each Related Contract, and, at the request of
the Acting Administrative Agent, each of its records pertaining to the
Collateral with a legend, in form and substance satisfactory to the Acting
Administrative Agent, indicating that such document, Chattel Paper, Related
Contract or Collateral is subject to the security interest granted hereby; (ii)
if any Collateral shall be evidenced by a promissory note or other instrument,
deliver and pledge to the Acting Administrative Agent hereunder such note or
instrument duly indorsed and accompanied by duly executed instruments of
transfer or assignment, all in form and substance satisfactory to the Acting
Administrative Agent; and (iii) execute and file such financing or continuation
statements, or amendments thereto, and such other instruments or notices, as may
be necessary
X-B-10
or desirable, or as the Acting Administrative Agent may request, in order to
perfect and preserve the pledge, assignment and security interest granted or
purported to be granted hereby.
(b) Each Grantor hereby authorizes the US Administrative Agent and the
Canadian Administrative Agent to file one or more financing or continuation
statements, and amendments thereto, relating to all or any part of the
Collateral without the signature of such Grantor where permitted by law. A
photocopy or other reproduction of this Agreement or any financing statement
covering the Collateral or any part thereof shall be sufficient as a financing
statement where permitted by law.
(c) Each Grantor will furnish to the US Administrative Agent and the
Canadian Administrative Agent from time to time statements and schedules further
identifying and describing the Collateral and such other reports in connection
with the Collateral as the Administrative Agent may reasonably request, all in
reasonable detail.
SECTION 7. AS TO EQUIPMENT AND INVENTORY.
------------------------------
(a) Each Grantor shall keep the Equipment and Inventory (other than
Inventory sold in the ordinary course of business) at the places therefor
specified in Section 5(a) or, upon 30 days' prior written notice to the US
Administrative Agent and the Canadian Administrative Agent, at such other places
in a jurisdiction where all action required by Section 6 shall have been taken
with respect to the Equipment and Inventory.
(b) Each Grantor shall cause the Equipment to be maintained and
preserved in the same condition, repair and working order as when new, ordinary
wear and tear excepted, and in accordance with any manufacturer's manual, and
shall forthwith, or in the case of any loss or damage to any of the Equipment
as quickly as practicable after the occurrence thereof, make or cause to be made
all repairs, replacements and other improvements in connection therewith that
are necessary or desirable to such end. Each Grantor shall promptly furnish to
the Acting Administrative Agent a statement respecting any loss or damage to any
Equipment.
SECTION 8. INSURANCE.
----------
(a) Each Grantor (or the Borrower, on behalf of each Grantor) shall,
at its own expense, maintain the insurance required pursuant to the Credit
Agreement and with such insurers, as shall be reasonably satisfactory to the
Acting Administrative Agent from time to time. Each policy for liability
insurance shall provide for all losses to be paid on behalf of the Acting
Administrative Agent and such Grantor as their interests may appear, and each
policy for property damage insurance shall provide for all losses (except for
losses of less than $10,000,000 per occurrence) to be paid directly to the
Acting Administrative Agent in accordance with Section 6.01(d) of the Credit
Agreement. Each such policy be subject to such loss payee endorsements and
additional insured provisions as the Acting Administrative Agent may require.
Each Grantor shall, if so requested by the Acting Administrative Agent, deliver
to the Acting Administrative Agent original or duplicate policies of such
insurance and, as often as the Acting Administrative Agent may reasonably
request, a report of a reputable insurance broker with respect to such
insurance. Further, each Grantor shall, at the request of the Acting
Administrative Agent, duly exercise and deliver instruments of assignment of
such insurance
X-B-11
policies to comply with the requirements of Section 6 and cause the insurers to
acknowledge notice of such assignment.
(b) Reimbursement under any liability insurance maintained by any
Grantor pursuant to this Section 8 may be paid directly to the Person who shall
have incurred liability covered by such insurance. In case of any loss
involving damage to Equipment or Inventory when no Event of Default has occurred
and is continuing, such Grantor shall make or cause to be made the necessary
repairs to or replacements of such Equipment or Inventory, and any proceeds of
insurance maintained by such Grantor pursuant to this Section 8 shall be paid to
such Grantor as reimbursement for the costs of such repairs or replacements in
accordance with Section 6.01(d) of the US Credit Agreement or the Canadian
Credit Agreement, as applicable.
(c) Upon the occurrence and during the continuance of any Default or
Event of Default or the actual or constructive total loss of any Equipment or
Inventory, all insurance payments in respect of such Equipment or Inventory
shall be paid to and applied by the Acting Administrative Agent as specified in
Section 16(b).
SECTION 9. PLACE OF PERFECTION; RECORDS; COLLECTION OF ACCOUNTS.
-----------------------------------------------------
(a) Each Grantor shall keep its chief place of business and chief
executive office and the office where it keeps its records concerning the
Collateral, and the original copies of the Related Contracts and all originals
of all Chattel Paper, at the location therefor specified in Section 5(a) or,
upon 30 days' prior written notice to the US Administrative Agent and the
Canadian Administrative Agent, at such other locations in a jurisdiction where
all actions required by Section 6 shall have been taken with respect to the
Collateral. Each Grantor will hold and preserve such records, Related Contracts
and Chattel Paper and will permit representatives of the US Administrative Agent
and the Canadian Administrative Agent at any time during normal business hours
to inspect and make abstracts from such records, Related Contracts and Chattel
Paper.
(b) Each Grantor will not change its name, identity or corporate
structure to such an extent that any financing statement filed by the
Administrative Agent in connection with this Agreement would become seriously
misleading, unless it shall have given the US Administrative Agent and the
Canadian Administrative Agent at least 30 days' prior written notice of such
change and shall have taken any action required by the US Administrative Agent
or the Canadian Administrative Agent in connection therewith.
(c) Except as otherwise provided in this subsection (c), each Grantor
shall continue to collect, at its own expense, all amounts due or to become due
such Grantor under the Accounts. In connection with such collections, each
Grantor may take (and, at the Acting Administrative Agent's direction, shall
take) such action as such Grantor or the Acting Administrative Agent may deem
necessary or advisable to enforce collection of the Accounts; provided, however,
-------- -------
that the Acting Administrative Agent shall have the right at any time after the
occurrence and during the continuance of an Event of Default, upon written
notice to such Grantor of its intention to do so, to notify the Obligors under
any Accounts of the assignment of such Accounts to the Acting Administrative
Agent and to direct such Obligors to make payment of all amounts due or to
become due to such Grantor thereunder directly to the Acting
X-B-12
Administrative Agent and, upon such notification and at the expense of such
Grantor, to enforce collection of any such Accounts, and to adjust, settle or
compromise the amount or payment thereof, in the same manner and to the same
extent as such Grantor might have done. After receipt by such Grantor of the
notice from the Acting Administrative Agent referred to in the proviso to the
preceding sentence, (i) all amounts and proceeds (including instruments)
received by such Grantor in respect of the Accounts shall be received in trust
for the benefit of the Acting Administrative Agent hereunder, shall be
segregated from other funds of such Grantor and shall be forthwith paid over to
the Acting Administrative Agent in the same form as so received (with any
necessary or requested indorsement) and either (A) released to such Grantor so
long as no Default or Event of Default shall have occurred and be continuing or
(B) if any Default or Event of Default shall have occurred and be continuing,
applied as provided by Section 16(b) and (ii) such Grantor shall not adjust,
settle or compromise the amount or payment of any Account, release wholly or
partly any obligor thereof, or allow any credit or discount thereon. At the
Acting Administrative Agent's request such Grantor shall deliver to the Acting
Administrative Agent all original and other documents evidencing, and relating
to, the agreements and transactions which gave rise to the Accounts, including,
without limitation, all original orders, invoices and shipping receipts.
SECTION 10. VOTING RIGHTS; DIVIDENDS; ETC.
------------------------------
(a) So long as no Default or Event of Default shall have occurred and
be continuing:
(i) Each Grantor shall be entitled to exercise any and all
voting and other consensual rights pertaining to the Security
Collateral or any part thereof for any purpose not inconsistent with
the terms of this Agreement or the other Loan Documents; provided,
--------
however, that no Grantor shall exercise or refrain from exercising any
-------
such right if could reasonably be expected to have a Material Adverse
Effect on the value of the Security Collateral or any part thereof or
adversely affect (A) the validity, perfection or priority of the
security interest and pledge granted or purported to be granted by
this Agreement or (B) the right and remedies of the Acting
Administrative Agent or the Secured Parties hereunder;
(ii) Each Grantor shall be entitled to receive and retain any and
all dividends and interest paid in respect of the Security Collateral;
provided, however, that any and all
-------- -------
(A) dividends and interest paid or payable other than in
cash in respect of, and instruments and other property received,
receivable or otherwise distributed in respect of, or in exchange
for, any Security Collateral,
(B) dividends and other distributions paid or payable in
cash in respect of any Security Collateral in connection with a
partial or total liquidation or dissolution or in connection with
a reduction of capital, capital surplus or paid-in-surplus and
X-B-13
(C) cash paid, payable or otherwise distributed in respect
of principal of, or in redemption of, or in exchange for, any
Security Collateral
shall be, and shall be forthwith delivered to the Acting Administrative
Agent to hold as, Security Collateral and shall, if received by such
Grantor, be received in trust for the benefit of the Acting
Administrative Agent, be segregated from the other property or funds of
such Grantor and be forthwith delivered to the Acting Administrative
Agent as Security Collateral in the same form as so received (with any
necessary or requested indorsement).
(iii) The Acting Administrative Agent shall execute and deliver
(or cause to be executed and delivered) to any Grantor all such
proxies and other instruments as such Grantor may reasonably request
for the purpose of enabling such Grantor to exercise the voting and
other rights that it is entitled to exercise pursuant to paragraph (i)
above and to receive the dividends or interest payments that it is
authorized to receive and retain pursuant to paragraph (ii) above.
(b) Upon the occurrence and during the continuance of a Default or
Event of Default:
(i) All rights of each Grantor (x) to exercise or refrain from
exercising the voting and other consensual rights that it would
otherwise be entitled to exercise pursuant to Section 10(a)(i) shall,
upon notice to such Grantor by the Acting Administrative Agent, cease
and (y) to receive the dividends and interest payments that it would
otherwise be authorized to receive and retain pursuant to Section
10(a)(ii) shall automatically cease, and all such rights shall
thereupon become vested in the Acting Administrative Agent, which
shall thereupon have the sole right to exercise or refrain from
exercising such voting and other consensual rights and to receive and
hold as Security Collateral such dividends and interest payments.
(ii) All dividends and interest payments that are received by
any Grantor contrary to the provisions of paragraph (i) of this
Section 10(b) shall be received in trust for the benefit of the Acting
Administrative Agent and the Lender Parties, shall be segregated from
other funds of such Grantor and shall be forthwith paid over to the
Acting Administrative Agent as Security Collateral in the same form as
so received (with any necessary or requested indorsement).
SECTION 11. AS TO PATENTS, TRADEMARKS AND COPYRIGHTS.
-----------------------------------------
(a) Schedule II includes all Patents and Patent Licenses owned by
-----------
each Grantor in its own name on the date hereof.
(b) Schedule III includes all Trademarks and Trademark Licenses owned
------------
by each Grantor in its own name on the date hereof.
(c) Schedule IV includes all Copyrights and Copyright Licenses owned
-----------
by
X-B-14
each Grantor in its own name on the date hereof.
(d) Except as set forth on Schedule II, III or IV, to the best of each
----------------------
Grantor's knowledge, each Patent, Trademark and Copyright is on the date hereof
valid, subsisting, unexpired, enforceable and has not been abandoned.
(e) Except as set forth in Schedule II, III or IV, none of such
----------------------
Patents, Trademarks or Copyrights is on the date hereof the subject of any
licensing or franchise agreement.
(f) Except as set forth on Schedule II, III or IV, no holding,
----------------------
decision or judgment has been rendered by any governmental authority which would
limit, cancel or question the validity of any Patent, Trademark or Copyright in
any respect that could reasonably be expected to have a Material Adverse Effect.
(g) Except as set forth on Schedule II, III or IV, no action or
----------------------
proceeding is pending on the date hereof (i) seeking to limit, cancel or
question the validity of any Patent, Trademark or Copyright, or (ii) which, if
adversely determined, would have a material adverse effect on the value of any
material Patent, Trademark or Copyright.
(h) Each Grantor (either itself or through licensees) will (i)
continue to use each material Trademark of such Grantor on each and every
trademark class of goods applicable to its current line as reflected in its
current catalogs, brochures and price lists in order to maintain such Trademark
in full force free from any claim of abandonment for non-use, (ii) maintain as
in the past the quality of products and services offered under such material
Trademark, (iii) employ such material Trademark with the appropriate notice of
registration, (iv) not adopt or use any xxxx which is confusingly similar or a
colorable imitation of such material Trademark unless the Acting Administrative
Agent, for the ratable benefit of the Secured Parties (subject to the terms of
the Intercreditor Agreement), shall obtain a perfected first priority security
interest in such xxxx pursuant to this Agreement, and (v) not (and not permit
any licensee or sublicensee thereof to) do any act or knowingly omit to do any
act whereby such material Trademark may become invalidated.
(i) No Grantor will do any act, or omit to do any act, whereby any
material Patent may become abandoned or dedicated.
(j) Each Grantor will notify the Acting Administrative Agent and the
Lender Parties immediately if it knows, or has reason to know, that any
application or registration relating to any material Patent or Trademark may
become abandoned or dedicated, or of any adverse determination or development
(including, without limitation, the institution of, or any such determination or
development in, any proceeding in the United States Patent and Trademark Office
or any court or tribunal in any country) regarding such Grantor's ownership of
any material Patent or Trademark or its right to register the same or to keep
and maintain the same.
(k) Whenever any Grantor, either by itself or through any agent,
employee, licensee or designee, shall file an application for the registration
of any Patent or Trademark with the United States Patent and Trademark Office or
any similar office or agency in any other country or any political subdivision
thereof, such Grantor shall report such filing to the Acting
X-B-15
Administrative Agent within five Business Days after the last day of the fiscal
quarter in which such filing occurs. Upon request of the Acting Administrative
Agent, such Grantor shall execute and deliver any and all agreements,
instruments, documents, and papers as the Acting Administrative Agent may
request to evidence the Acting Administrative Agent's and the Secured Parties'
security interest in any Patent or Trademark and the goodwill and general
intangibles of such Grantor relating thereto or represented thereby.
(l) Each Grantor will take all reasonable and necessary steps,
including, without limitation, in any proceeding before the United States Patent
and Trademark Office, or any similar office or agency in any other country or
any political subdivision thereof, to maintain and pursue each application (and
to obtain the relevant registration) and to maintain each registration of the
material Patents and Trademarks, including, without limitation, filing of
applications for renewal, affidavits of use and affidavits of incontestability.
(m) In the event that any material Patent or Trademark included in the
Collateral is infringed, misappropriated or diluted by a third party, each
Grantor shall (i) take such actions as such Grantor shall reasonably deem
appropriate under the circumstances to protect such Patent or Trademark and (ii)
if such Patent or Trademark is of material economic value, promptly notify the
Acting Administrative Agent after it learns thereof and xxx for infringement,
misappropriation or dilution, to seek injunctive relief where appropriate and to
recover any and all damages for such infringement, misappropriation or dilution.
(n) Each Grantor (either itself or through licensees) will (i) employ
the appropriate notice of copyright for each published work which is or may be
subject to copyright protection under Title 17 of the U.S. Code (each such
published work, a "WORK") subject to copyright protection to the extent
----
necessary to protect the Copyright relating to such Work and (ii) not (and not
permit any licensee or sublicensee thereof to) do any act or knowingly omit to
do any act whereby any material Copyright may become invalidated, except where
the failure to take any such action would not reasonably be expected to have a
Material Adverse Effect.
(o) No Grantor will (either itself or through licensees) do any act,
or omit to do any act, whereby any material Copyright may become injected into
the public domain, except where such action or the failure to take any such
action would not have a Material Adverse Effect.
(p) Each Grantor will notify the Acting Administrative Agent
immediately if it knows, or has reason to know, that any material Copyright may
become injected into the public domain or of any adverse determination or
development (including, without limitation, the institution of, or any such
determination or development in, any proceeding in any court or tribunal in any
country) regarding such Grantor's ownership of any such Copyright or its
validity and of any action such Grantor is taking in respect of such event.
(q) Whenever any Grantor, either by itself or through any agent,
employee, licensee or designee, shall file an application for the registration
of any Copyright with the United States Copyright Office or any similar office
in any other country or political subdivision thereof, such Grantor shall report
such filing to the Acting Administrative Agent within five Business Days after
the last day of the fiscal quarter in which such filing occurs. Such Grantor
X-B-16
shall execute and deliver any and all agreements, instruments, documents and
papers as shall be necessary or appropriate or as the Acting Administrative
Agent reasonably may request to evidence the security interest granted or
purported to be granted to the Acting Administrative Agent for its benefit and
the ratable benefit of the Secured Parties (subject to the Intercreditor
Agreement) in such Copyright and shall deliver to the Acting Administrative
Agent an officer's certificate of such Grantor, in form and substance
satisfactory to the Acting Administrative Agent as to compliance with this
Section 11(q).
(r) Each Grantor will take all reasonable and necessary steps, as it
shall deem appropriate under the circumstances, in accordance with its
reasonable business judgment, to maintain and pursue each application (and to
obtain the relevant registration) and to maintain to the extent permitted by law
each registration of each material Copyright owned by such Grantor including,
without limitation, filing of applications for renewal, where necessary.
(s) Each Grantor will promptly notify the Acting Administrative Agent
of any material infringement of any material Copyright owned by it of which it
becomes aware and will take such actions as it shall reasonably deem appropriate
under the circumstances to protect such Copyright, including, where appropriate
in its reasonable business judgment, the bringing of suit or the settling of
actual or potential suits for infringement, seeking injunctive relief and
seeking to recover any and all damages for such infringement.
SECTION 12. TRANSFERS AND OTHER LIENS; ADDITIONAL SHARES.
---------------------------------------------
(a) Each Grantor shall not, except as otherwise permitted by the US
Credit Agreement and the Canadian Credit Agreement (i) sell, assign (by
operation of law or otherwise) or otherwise dispose of, or grant any option with
respect to, any of the Collateral, or (ii) create or suffer to exist any Lien
upon or with respect to any of the Collateral except for the pledges,
assignments and security interests created by this Agreement.
(b) Each Grantor shall (i) cause each issuer of the Pledged Shares not
to issue any stock or other securities in addition to or in substitution for the
Pledged Shares issued by such issuer, except to such Grantor, and (ii) pledge
hereunder, immediately upon its acquisition (directly or indirectly) thereof,
any and all additional shares of stock or other securities of each issuer of the
Pledged Shares.
SECTION 13. ACTING ADMINISTRATIVE AGENT APPOINTED ATTORNEY-IN-FACT.
-------------------------------------------------------
Each Grantor hereby irrevocably appoints the Acting Administrative
Agent and any officer or agent thereof, with full power of substitution, such
Grantor's attorney-in-fact, with full authority in the place and stead of such
Grantor and in the name of such Grantor or otherwise, from time to time in the
Acting Administrative Agent's discretion, to take any action and to execute any
instrument that the Acting Administrative Agent may deem necessary or advisable
to accomplish the purposes of this Agreement, including, without limitation:
(a) to obtain and adjust insurance required to be paid to the Acting
Administrative Agent pursuant to Section 8,
(b) to ask for, demand, collect, xxx for, recover, compromise, receive
and give
X-B-17
acquittance and receipts for moneys due and to become due under or in respect of
any of the Collateral,
(c) to receive, indorse and collect any drafts or other instruments,
documents and chattel paper, in connection with clause (a) or (b) above,
(d) in the case of any Patent, Trademark or Copyright, execute and
deliver any and all agreements, instruments, documents, and papers as the Acting
Administrative Agent may request to evidence the Acting Administrative Agent's
and the Secured Parties' security interest in such Patent, Trademark or
Copyright and the goodwill and general intangibles of such Grantor relating
thereto or represented thereby; and
(e) to file any claims or take any action or institute any proceedings
that the Acting Administrative Agent may deem necessary or desirable for the
collection of any of the Collateral or otherwise to enforce compliance with the
terms and conditions of any Related Contract or the rights of the Acting
Administrative Agent with respect to any of the Collateral.
Anything in this Section 13 to the contrary notwithstanding, the Acting
Administrative Agent agrees that it will not exercise any rights under the power
of attorney provided for in this Section 13 unless an Event of Default shall
have occurred and be continuing. Each Grantor hereby ratifies all that said
attorney shall lawfully do or cause to be done by virtue hereof. All powers,
authorizations and agencies contained in this Agreement are coupled with an
interest and are irrevocable until this Agreement is terminated and the security
interests created hereby are released.
SECTION 14. ACTING ADMINISTRATIVE AGENT MAY PERFORM.
----------------------------------------
If any Grantor fails to perform any agreement contained herein, the
Acting Administrative Agent may itself perform, or cause performance of, such
agreement, and the expenses of the Acting Administrative Agent incurred in
connection therewith shall be payable by such Grantor and the Borrower under
Section 17(b).
SECTION 15. THE ACTING ADMINISTRATIVE AGENT'S DUTIES.
-----------------------------------------
The powers conferred on the Acting Administrative Agent hereunder are
solely to protect its interest in the Collateral and shall not impose any duty
upon it to exercise any such powers. Except for the safe custody of any
Collateral in its possession and the accounting for moneys actually received by
it hereunder, the Acting Administrative Agent shall have no duty, under Section
9-207 of the NY Uniform Commercial Code or otherwise, as to any Collateral, as
to ascertaining or taking action with respect to calls, conversions, exchanges,
maturities, tenders or other matters relative to any Security Collateral,
whether or not the Acting Administrative Agent or any other Secured Party has or
is deemed to have knowledge of such matters, or as to the taking of any
necessary steps to preserve rights against any parties or any other rights
pertaining to any Collateral. The Acting Administrative Agent shall be deemed
to have exercised reasonable care in the custody and preservation of any
Collateral in its possession if such Collateral is accorded treatment
substantially equal to that which the Acting Administrative Agent (in its
individual capacity) accords its own property.
X-B-18
SECTION 16. REMEDIES.
---------
If any Event of Default shall have occurred and be continuing:
(a) The Acting Administrative Agent may exercise in respect of the
Collateral, in addition to other rights and remedies provided for herein or
otherwise available to it, all the rights and remedies of a secured party upon
default under the NY Uniform Commercial Code (whether or not the NY Uniform
Commercial Code applies to the affected Collateral) and also may (i) require
each Grantor to, and each Grantor hereby agrees that it will at its expense and
upon request of the Acting Administrative Agent forthwith, assemble all or part
of the Collateral as directed by the Acting Administrative Agent and make it
available to the Acting Administrative Agent at a place to be designated by the
Acting Administrative Agent that is reasonably convenient to both parties and
(ii) without notice except as specified below, sell the Collateral or any part
thereof in one or more parcels at public or private sale, at any of the Acting
Administrative Agent's offices or elsewhere, for cash, on credit or for future
delivery, and upon such other terms as the Acting Administrative Agent may deem
commercially reasonable. Each Grantor agrees that, to the extent notice of sale
shall be required by law, at least ten days' notice to such Grantor of the time
and place of any public sale or the time after which any private sale is to be
made shall constitute reasonable notification. The Acting Administrative Agent
shall not be obligated to make any sale of Collateral regardless of notice of
sale having been given. The Acting Administrative Agent may adjourn any public
or private sale from time to time by announcement at the time and place fixed
therefor, and such sale may, without further notice, be made at the time and
place to which it was so adjourned.
(b) All cash proceeds received by the Acting Administrative Agent in
respect of any sale of, collection from, or other realization upon all or any
part of the Collateral may, in the discretion of the Acting Administrative
Agent, be held by the Acting Administrative Agent as collateral for, and/or then
or at any time thereafter applied (after payment of any amounts payable to the
Acting Administrative Agent pursuant to Section 17) in whole or in part by the
Acting Administrative Agent as set forth in Section [__] of the Intercreditor
Agreement. Any surplus of such cash or cash proceeds held by the Acting
Administrative Agent and remaining after payment in full of all the Secured
Obligations shall be paid over to the Borrower or to whomsoever may be lawfully
entitled to receive such surplus.
(c) The Acting Administrative Agent may exercise any and all rights
and remedies of any Grantor under or in connection with the Related Contracts or
otherwise in respect of the Collateral, including, without limitation, any and
all rights of any Grantor to demand or otherwise require payment of any amount
under, or performance of any provision of, any Related Contract.
(d) All payments received by any of the Grantors under or in
connection with any Related Contract or otherwise in respect of the Collateral
shall be received in trust for the benefit of the Acting Administrative Agent,
shall be segregated from other funds of such Grantor and shall be forthwith paid
over to the Acting Administrative Agent in the same form as so received (with
any necessary or requested indorsement).
(e) The Acting Administrative Agent may, without notice to any Grantor
X-B-19
except as required by law and at any time or from time to time, charge, set-off
and otherwise apply all or any part of the Secured Obligations against the
Letter of Credit Cash Collateral Account or any part thereof.
SECTION 17. INDEMNITY AND EXPENSES.
-----------------------
(a) Each Grantor agrees, jointly and severally, to indemnify the
Acting Administrative Agent and each other Secured Party from and against any
and all claims, losses and liabilities growing out of or resulting from this
Agreement (including, without limitation, enforcement of this Agreement), except
claims, losses or liabilities resulting from the Acting Administrative Agent's
or such Secured Party's gross negligence or willful misconduct as determined by
a final judgment of a court of competent jurisdiction.
(b) Each Grantor agrees, jointly and severally, upon demand to pay to
the US Administrative Agent and the Canadian Administrative Agent the amount of
any and all reasonable expenses, including the reasonable fees and expenses of
its counsel and of any experts and agents, that the US Administrative Agent or
the Canadian Administrative Agent may incur in connection with (i) the
administration of this Agreement, (ii) the custody, preservation, use or
operation of, or the sale of, collection from or other realization upon, any of
the Collateral, (iii) the exercise or enforcement of any of the rights of the
Acting Administrative Agent or any Secured Party hereunder or (iv) the failure
by such Grantor to perform or observe any of the provisions hereof.
SECTION 18. WAIVERS; DEFICIENCY.
--------------------
Each Grantor waives and agrees not to assert any rights or privileges
which it may acquire under Section 9-112 of the NY Uniform Commercial Code.
Each Grantor shall remain liable for any deficiency if the proceeds of any sale
or other disposition of the Collateral are insufficient to pay the Secured
Obligations and the fees and disbursements of any attorneys employed by the
Acting Administrative Agent or any Secured Party to collect such deficiency.
SECTION 19. AMENDMENTS; WAIVERS; ETC.
-------------------------
(a) No amendment or waiver of any provision of this Agreement and no
consent to any departure by any Grantor herefrom shall in any event be effective
unless the same shall be in writing and signed by (i) the US Administrative
Agent (with the consent or at the direction of the Required Lenders under the US
Credit Agreement or, if required pursuant to the US Credit Agreement, all
Lenders, in each case except as otherwise provided in this Section 19 and except
as otherwise provided in the US Credit Agreement or the Intercreditor
Agreement), and (ii) the Canadian Administrative Agent (with the consent or at
the direction of the Required Lenders under the Canadian Credit Agreement or, if
required pursuant to the Canadian Credit Agreement, all Lenders thereunder, in
each case except as otherwise provided in this Section 19 and except as
otherwise provided in the US Credit Agreement or the Intercreditor Agreement),
and then such waiver or consent shall be effective only in the specific instance
and for the specific purpose for which given. No failure on the part of the
Acting Administrative Agent to exercise, and no delay in exercising any right
hereunder, shall operate as a waiver thereof; nor shall any
X-B-20
single or partial exercise of any such right preclude any other or further
exercise thereof or the exercise of any other right.
(b) Upon the execution and delivery to the Administrative Agent by
any Person of an Amendment to Security Agreement in substantially the form of
Exhibit XV to the Credit Agreement (each, an "AMENDMENT TO SECURITY AGREEMENT"),
-------------------------------
which Amendment to Security Agreement need not be executed by any other Grantor,
and the acceptance thereof by the Acting Administrative Agent, such Person shall
be and become a Grantor hereunder, and each reference in this Security Agreement
to a "Grantor" shall include such Person and each reference in any other Loan
Document to a "Grantor", "Credit Party" or a "Loan Party" shall include such
Person.
SECTION 20. ADDRESSES FOR NOTICES.
----------------------
All notices and other communications provided for hereunder shall be
in writing (including telecopier, telegraphic, telex or cable communication)
and, mailed, telegraphed, telecopied, telexed, cabled or delivered to each
Grantor or to the US Administrative Agent or the Canadian Administrative Agent,
as the case may be, in each case addressed to it at its address specified in the
US Credit Agreement or the Canadian Credit Agreement or, if not specified
therein, set forth opposite such Grantor's name on the signature page hereto or,
as to any party, at such other address as shall be designated by such party in a
written notice to each other party complying as to delivery with the terms of
this Section 20. All such notices and other communications shall, when mailed,
telecopied, telegraphed, telexed or cabled, respectively, be effective when
deposited in the mails, telecopied, delivered to the telegraph company,
confirmed by telex answerback or delivered to the cable company, respectively,
addressed as aforesaid.
SECTION 21. CONTINUING SECURITY INTEREST; ASSIGNMENTS UNDER THE
---------------------------------------------------
CREDIT AGREEMENTS.
------------------
This Agreement shall create a continuing security interest in the
Collateral and shall (a) remain in full force and effect until the last to occur
of (i) the payment in full in cash of the Secured Obligations, (ii) the
Revolving Commitment Termination Date (as defined in the US Credit Agreement and
the Canadian Credit Agreement), (iii) the Term A Termination Date (as defined in
the US Credit Agreement and the Canadian Credit Agreement), (iv) the Term B
Termination Date (as defined in the US Credit Agreement and the Canadian Credit
Agreement), and (v) the expiration or termination of all Bank Hedge Agreements
(as defined in the US Credit Agreement and the Canadian Credit Agreement), (b)
be binding upon each Grantor, its successors and assigns and (c) inure, together
with the rights and remedies of the Acting Administrative Agent hereunder, to
the benefit of the US Administrative Agent, the Canadian Administrative Agent,
the other Secured Parties and their respective successors, transferees and
assigns. Without limiting the generality of the foregoing clause (c), any
Secured Party may assign or otherwise transfer all or any portion of its rights
and obligations under the US Credit Agreement or the Canadian Credit Agreement
(including, without limitation, all or any portion of its Commitments (as
defined in the US Credit Agreement and the Canadian Credit Agreement), the Loans
(as defined in the US Credit Agreement and the Canadian Credit Agreement)owing
to it and the Note or Notes (as defined in the US Credit Agreement and the
Canadian Credit Agreement) (if any) held by it to any other Person, and such
other Person shall thereupon become vested with all the benefits in respect
thereof granted to such Lender herein or
X-B-21
otherwise, in each case as provided in Section 9.07 of the US Credit Agreement
or Section [9.07] of the Canadian Credit Agreement, as the case may be.
SECTION 22. RELEASE AND TERMINATION.
------------------------
(a) Upon any sale, lease, transfer or other disposition of any item of
Collateral permitted in accordance with the terms of the Loan Documents (other
than sales of Inventory in the ordinary course of business), the Acting
Administrative Agent will, at such Grantor's expense, execute and deliver to
such Grantor such documents as such Grantor shall reasonably request to evidence
the release of such item of Collateral from the assignment and security interest
granted hereby; provided, however, that (i) at the time of such request and such
-------- -------
release no Event of Default shall have occurred and be continuing, (ii) such
Grantor shall have delivered to the Acting Administrative Agent, at least ten
Business Days prior to the date of the proposed release, a written request for
release describing the item of Collateral and the terms of the sale, lease,
transfer or other disposition in reasonable detail, including the price thereof
and any expenses in connection therewith, together with a form of release for
execution by the Acting Administrative Agent and a certification by such Grantor
to the effect that the transaction is permitted in compliance with the Loan
Documents and as to such other matters as the Acting Administrative Agent may
request, and (iii) the proceeds of any such sale, lease, transfer or other
disposition required to be applied in accordance with Section 2.04 of the US
Credit Agreement or Section [2.04] of the Canadian Credit Agreement shall be
paid to, or in accordance with the instructions of the Acting Administrative
Agent.
(b) Subject to Section 22(c) below, upon the last to occur of (i) the
payment in full in cash of the Secured Obligations, (ii) the Revolving
Commitment Termination Date (as defined in the US Credit Agreement and the
Canadian Credit Agreement), (iii) the Term A Termination Date, (iv) the Term B
Termination Date (as defined in the US Credit Agreement and the Canadian Credit
Agreement), and (v) the expiration or termination of all Bank Hedge Agreements
(as defined in the US Credit Agreement and the Canadian Credit Agreement), the
pledge, assignment and security interest granted hereby shall terminate and all
rights to the Collateral shall revert to each applicable Grantor. Upon any such
termination, the Acting Administrative Agent will, at such Grantor's expense,
execute and deliver to such Grantor such documents as such Grantor shall
reasonably request to evidence such termination.
(c) This Agreement shall continue to be effective or be reinstated, as
the case may be, if at any time any amount received by the Acting Administrative
Agent or any Secured Party in respect of the Secured Obligations is rescinded or
must otherwise be restored or returned by the Acting Administrative Agent or any
Secured Party upon the insolvency, bankruptcy, dissolution, liquidation or
reorganization of any Grantor or any other Person or upon the appointment of any
receiver, intervenor, conservator, trustee or similar official for any Grantor
or any other Person or any substantial part of its assets, or otherwise, all as
though such payments had not been made.
(d) In the event the Canadian Administrative Agent shall become the
Acting Administrative Agent hereunder, the US Administrative Agent shall, at the
expense of the Borrower, take such action with respect to the delivery to the
Canadian Administrative Agent of Collateral then in the possession of the US
Administrative Agent, the execution and filing or
X-B-22
recording of such financing statements, or amendments thereto or termination
statements, and such amendments or supplements to the Mortgages, and such other
instruments or notices, as may be necessary or desirable, or as the Canadian
Administrative Agent may reasonably request, in order to continue the perfection
of the Liens granted or purported to be granted hereunder and under the other
Collateral Documents, and the Canadian Administrative Agent shall succeed to and
become vested with all the rights, powers, discretion, privileges and duties of
the Acting Administrative Agent, and the US Agent shall be discharged from its
duties and obligations under this Agreement and the other Collateral Documents.
SECTION 23. SECURITY INTEREST ABSOLUTE.
---------------------------
The obligations of each Grantor under this Agreement are independent
of the Secured Obligations, and a separate action or actions may be brought and
prosecuted against each Grantor to enforce this Agreement, irrespective of
whether any action is brought against the Borrower or whether the Borrower is
joined in any such action or actions. All rights of the Acting Administrative
Agent and the other Secured Parties and the pledge, assignment and security
interest hereunder, and all obligations of each Grantor hereunder, shall be
absolute and unconditional, irrespective of:
(a) any lack of validity or enforceability of any Loan Document or any
other agreement or instrument relating thereto;
(b) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Secured Obligations or any other amendment or
waiver of or any consent to any departure from any Loan Document, including,
without limitation, any increase in the Secured 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 other
collateral, or any taking, release or amendment or waiver of or consent to
departure from any guaranty, for all or any of the Secured Obligations;
(d) any manner of application of collateral, or proceeds thereof, to
all or any of the Secured Obligations, or any manner of sale or other
disposition of any collateral for all or any of the Secured Obligations 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; or
(f) any other circumstance that might otherwise constitute a defense
available to, or a discharge of, such Grantor (unless the Grantor is the
Borrower) or a third party grantor of a security interest.
SECTION 24. MORTGAGES.
----------
In the event that any of the Collateral hereunder is also subject to a
valid and enforceable Lien under the terms of any Mortgage and the terms of such
Mortgage are inconsistent with the terms of this Agreement, then with respect to
such Collateral, the terms of
X-B-23
such Mortgage shall be controlling in the case of Fixtures and leases, letting
and licenses of, and contracts and agreements relating to the lease of real
property, and the terms of this Agreement shall be controlling in the case of
all other Collateral.
SECTION 25. GOVERNING LAW.
--------------
This Agreement shall be governed by and construed in accordance with
the laws of the State of New York, except to the extent that the validity or
perfection of the security interest hereunder, or remedies hereunder, in respect
of any particular Collateral are governed by the laws of a jurisdiction other
than the State of New York.
[Remainder of page intentionally blank. Signature pages follow.]
X-B-24
IN WITNESS WHEREOF, each Grantor has caused this Agreement to be duly
executed and delivered by its officer thereunto duly authorized as of the date
first above written.
PANOLAM INDUSTRIES INTERNATIONAL, INC.,
a Delaware corporation
By: /s/ Xxxxxx X. Xxxxxx
---------------------------------
Title:
Address for Notice:
As set forth in the US Credit Agreement
PANOLAM INDUSTRIES HOLDINGS, INC.,
a Delaware corporation
By: /s/ Xxxxxx X. Xxxxxx
---------------------------------
Title:
Address for Notice:
00 Xxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxxxxx 00000
Telecopier: (203) ___-____
Telephone: (000) 000-0000
Attention: [Xxxxxx X. Xxxxxx]
X-B-25
PANOLAM GROUP, INC.,
a Delaware corporation
By: /s/ Xxxxxx X. Xxxxxx
------------------------------
Title:
Address for Notice:
00 Xxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxxxxx 00000
Telecopier: (203) ___-____
Telephone: (000) 000-0000
Attention: [Xxxxxx X. Xxxxxx]
PII SECOND, INC.,
a Delaware corporation
By: /s/ Xxxxxx X. Xxxxxx
--------------------------------
Title:
Address for Notice:
00 Xxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxxxxx 00000
Telecopier: (203) ___-____
Telephone: (000) 000-0000
Attention: [Xxxxxx X. Xxxxxx]
X-B-26
PANOLAM INDUSTRIES, INC.,
a Delaware corporation
By: /s/ Xxxxxx X. Xxxxxx
--------------------------------
Title:
Address for Notice:
00 Xxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxxxxx 00000
Telecopier: (203) ___-____
Telephone: (000) 000-0000
Attention: [Xxxxxx X. Xxxxxx]
PIONEER PLASTIC CORPORATION,
a Delaware corporation
By: /s/ Xxxxxx X. Xxxxxx
--------------------------------
Title:
Address for Notice:
00 Xxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxxxxx 00000
Telecopier: (203) ___-____
Telephone: (000) 000-0000
Attention: [Xxxxxx X. Xxxxxx]
X-B-27
EXHIBIT XI
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 GUARANTORS"), 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, the Lenders, the Issuing
Banks, the Letter of Credit Bank and the Swing Line Lender (such Agents,
Lenders, Issuing Banks, Letter of Credit Bank and Swing Line Lender 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 Subsidiary 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 LTD., a Ontario 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 and as Issuing Banks,
the Letter of Credit Bank and the Swing Line Lender, and CREDIT SUISSE FIRST
BOSTON, as Administrative Agent for such Lenders, such Issuing Banks, the Letter
of Credit Bank and the Swing Line Lender (in such capacity, together with any
successor appointed pursuant to Article VIII of such Credit Agreement, the
"ADMINISTRATIVE 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 will derive substantial direct and indirect benefit from the
transactions contemplated by the Credit Agreement. It is a condition precedent
to the making of Loans by the Lenders 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:
SECTION 1. GUARANTY; LIMITATION OF LIABILITY.
---------------------------------
XI-1
(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 Subsidiary 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 in any
other term of, all or any of the Guaranteed Obligations or any other
Obligations of any other Loan 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 increase in the Guaranteed Obligations
resulting from the extension of additional credit to the Borrower or any of
its Subsidiaries or otherwise;
XI-2
(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 ACKNOWLEDGMENTS.
---------------------------
(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 requirement 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.
(c) Each Guarantor acknowledges that the Administrative Agent may,
without notice to or demand upon such Guarantor and without affecting the
liability of such Guarantor under this Guaranty, foreclose under any Mortgage by
nonjudicial sale, and each Guarantor hereby waives all rights and defenses
(including, without limitation, any defense to the recovery
XI-3
by the Administrative Agent and the other Guaranteed Parties against any
Guarantor of any deficiency after such nonjudicial sale and any defense or
benefits that may be afforded by applicable law) arising out of an election of
remedies by any Guaranteed Party, even though that election of remedies, such as
a nonjudicial foreclosure with respect to security for a Guaranteed Obligation,
has destroyed such Guarantor's rights of subrogation and reimbursement against
the principal.
(d) Each Guarantor acknowledges that it will receive substantial
direct and indirect benefits from the financing arrangements contemplated by the
Loan Documents and that the waivers set forth in this Section 3 are knowingly
made in contemplation of such benefits.
SECTION 4. SUBROGATION; SUBORDINATION; CONTRIBUTION.
----------------------------------------
(a) Each Guarantor agrees that it will not exercise any rights that it
may now or hereafter acquire against the Borrower or any other insider guarantor
that arise from the existence, payment, performance or enforcement of such
Guarantor's Obligations under this Guaranty or any other Loan Document,
including, without limitation, any right of subrogation, reimbursement,
exoneration, contribution or indemnification and any right to participate in any
claim or remedy of the Administrative Agent or any other Guaranteed Party
against the Borrower or any other insider guarantor or any collateral, whether
or not such claim, remedy or right arises in equity or under contract, statute
or common law, including, without limitation, the right to take or receive from
the Borrower or any other insider guarantor, directly or indirectly, in cash or
other property or by set-off or in any other manner, payment or security on
account of such claim, remedy or right, unless and until all of the Obligations
and all other amounts payable under this Guaranty shall have been paid in full
in cash, all Bank Hedge Agreements shall have expired or been terminated and the
Commitments shall have expired or terminated. If any amount shall be paid to
any Guarantor in violation of the preceding sentence at any time prior to 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 Bank Hedge
Agreements, such amount shall be held in trust for the benefit of the
Administrative Agent and the other Guaranteed Parties and shall forthwith be
paid to the Administrative Agent to be credited and applied to the Guaranteed
Obligations and all other amounts payable under this Guaranty, whether matured
or unmatured, in accordance with the terms of the Loan Documents, or to be held
as collateral for any Guaranteed Obligations or other amounts payable under this
Guaranty thereafter arising. If (i) any Guarantor shall make payment to the
Administrative Agent or any other Guaranteed Party of all or any part of the
Guaranteed Obligations, (ii) all of the Guaranteed Obligations and all other
amounts payable under this Guaranty shall be paid in full in cash, (iii) each of
the Revolving Commitment Termination Date, the Term A Termination Date and the
Term B Termination Date shall have occurred and (iv) all 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
XI-4
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, 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 have been paid in full 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
(i) so long as no Event of Default shall have occurred and be continuing and
(ii) during the continuance of any Event of Default so long as the
Administrative Agent has not provided the Borrower and each Guarantor with
written notice of default stating that such payment shall no longer be
permitted, but in either of the foregoing events only to the extent such
payments would not render the Borrower incapable of performing the Guaranteed
Obligations. 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 Lenders, all or any 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 Lenders, 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 Lenders, 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 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.
XI-5
(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 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
XI-6
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 on 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 or the Notes. If any form or document referred to in this
Section 5(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), that the
Guaranteed Party reasonably considers to be confidential, the Guaranteed Party
shall give notice thereof 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 form 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 under Section 5 (a) or indemnification under Section 5(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) 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.
XI-7
(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 require the creation or imposition of any Lien upon or with respect
to any of the properties of such Guarantor or any of its Subsidiaries.
(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 any Credit Party 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
XI-8
thereof) or (iv) the exercise by the Administrative Agent or any Lender 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
hereunder or (iii) Equity Interests used to repay the Domtar 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) and, in the case of any such
XI-9
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 for payment hereunder or (iii) 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 thereof; nor shall any single or partial exercise of
any right hereunder 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 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 and the Notes 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
XI-10
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 or
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 limitation on 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 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 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 limitation, all or any portion of its Commitments, the Loans owing to it
and any Note or Notes held by it) to any other 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.
-------------------------------------------------------
XI-11
(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,
AND 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
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.
XI-12
[Remainder of page intentionally blank. Signature pages follow.]
XI-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:
00 Xxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxxxxx 00000
Telecopier: (203) ___-____
Telephone: (000) 000-0000
Attention: [Xxxxxx X. Xxxxxx]
PANOLAM GROUP, INC.,
a Delaware corporation
By:
__________________________
Title:
Address for Notice:
00 Xxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxxxxx 00000
Telecopier: (203) ___-____
Telephone: (000) 000-0000
Attention: [Xxxxxx X. Xxxxxx]
XI-14
PII SECOND, INC.,
a Delaware corporation
By:
__________________________
Title:
Address for Notice:
00 Xxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxxxxx 00000
Telecopier: (203) ___-____
Telephone: (000) 000-0000
Attention: [Xxxxxx X. Xxxxxx]
PANOLAM INDUSTRIES, INC.,
a Delaware corporation
By:
__________________________
Title:
Address for Notice:
00 Xxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxxxxx 00000
Telephone: (000) 000-0000
Attention: [Xxxxxx X. Xxxxxx]
XI-15
PIONEER PLASTIC CORPORATION,
a Delaware corporation
By:__________________________
Title:
Address for Notice:
00 Xxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxxxxx 00000
Telecopier: (203) ___-____
Telephone: (000) 000-0000
Attention: [Xxxxxx X. Xxxxxx]
XI-16
EXHIBIT XII
FORM OF MORTGAGE / ASSIGNMENT OF RENTS ON CANADIAN
PROPERTY OF BORROWER
[Contained in separate file.]
FORM OF DEED OF TRUST (MORTGAGE) / SECOND 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:
Xxxxxx & Xxxxxxx
000 Xxxx 0xx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxx Xxxxxxx
[SECOND] DEED OF TRUST AND ASSIGNMENT OF RENTS,
LEASES AND LEASEHOLD INTERESTS
THIS [SECOND] 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 16, 1999
-------------
by and among [PANOLAM INDUSTRIES, INC.] [PIONEER PLASTICS CORPORATION], a
Delaware corporation ("GRANTOR"), [__________], as trustee ("TRUSTEE"), and
------- -------
CREDIT SUISSE FIRST BOSTON [CANADA], 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 16, 1999, by and between
Borrower, Beneficiary 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 form time to time,
the "GUARANTY") of even date herewith, the Grantor has guaranteed
--------
all obligations of the Borrower under the Credit Agreement.
B. It is a condition precedent to the making of Loans 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.
XII-1
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, without 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 for, or appurtenant to, the use,
operation, management, maintenance, renewal, alteration or improvement of any of
the other Trust Property.
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
same 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 title 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.
XII-2
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 hereafter 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 1.01 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 completely 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.
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, all 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
XII-3
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.
(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 Beneficiary 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.
(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.
XII-4
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 for 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 now 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 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 Beneficiary, 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
XII-5
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
thereon 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 xxxx, statement or estimate procured from the appropriate
public office without inquiry into the accuracy of such xxxx, 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
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 proceedings, to which Beneficiary or Trustee, as applicable, shall be
a party, either as plaintiff, claimant or 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 law. Thereafter, upon the
expiration of such time and 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 lots 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 and 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.
(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,
XII-6
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 all 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 or 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 operation 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 now or hereafter existing at law or in equity. No
delay in the exercise or omission to exercise of 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 on 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 Trust 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:
XII-7
(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 other 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; or (iii) in preparation for or in connection
with 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;
XII-8
(d) determination of amounts deductible from sale proceeds;
(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 seq.), 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 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.
XII-9
(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 prosecution 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 Environmental Law on any Adjacent Property shall be applied
first to Beneficiary'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 agents 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
XII-10
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;
(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 thereof, 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 Obligations 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 limitation, 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 Grantor 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) all 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.
XII-11
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 hereof, 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
assigns and any successors and assigns of any party 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 unenforceable 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.
5.10 Future Advances. Beneficiary 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.
5.11 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.
XII-12
[5.12 Subordination. The lien of this Deed of Trust is subordinate
-------------
and subject to that certain Deed of Trust and Assignment of Rents, Leases and
Leasehold Interests by and between Grantor and Credit Suisse First Boston.]
[Signature page follows.]
XII-13
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:_________________________
XII-1
STATE OF __________)
) SS.
COUNTY OF _________)
BEFORE ME, a Notary Public, in and for said county and state,
personally appeared the 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
XII-2
EXHIBIT XIV
FORM OF AMENDMENT TO US GUARANTY
[L&W MODIFYING FOR CANADIAN FACILITIES]
This Amendment to Guaranty (this "AMENDMENT"), dated as of [________],
---------
[____], relates to the Guaranty dated as of February 16, 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 16, 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 Lenders 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,
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 US SECURITY AGREEMENT
[L&W MODIFYING FOR CANADIAN FACILITIES]
This Amendment to Security Agreement (the "AMENDMENT"), dated as of
---------
__________, ____, relates to the Security Agreement dated as of February 16,
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 00 Xxxxxxxx Xxxxx, Xxxxxxx, Xxxxxxxxxxx 00000 (the "BORROWER"),
--------
PANOLAM INDUSTRIES HOLDINGS, INC., a Delaware corporation with an office at 00
Xxxxxxxx Xxxxx, Xxxxxxx, Xxxxxxxxxxx 00000 ("HOLDINGS"), PANOLAM GROUP, INC., a
--------
Delaware corporation with an office at 00 Xxxxxxxx Xxxxx, Xxxxxxx, Xxxxxxxxxxx
00000 ("GROUP"), PII SECOND, INC., a Delaware corporation with an office at 20
-----
Progress Drive, Shelton, Connecticut 06484 ("PII SECOND"), PANOLAM INDUSTRIES,
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INC., a Delaware corporation with an office at 00 Xxxxxxxx Xxxxx, Xxxxxxx,
Xxxxxxxxxxx 00000 ("PANOLAM US"), PIONEER PLASTICS CORPORATION, a Delaware
----------
corporation with an office at 00 Xxxxxxxx Xxxxx, Xxxxxxx, Xxxxxxxxxxx 00000
("PIONEER"), and any future direct or indirect parent or subsidiary, if any, of
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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 6.01(n) of the Credit Agreement dated as of
February 16, 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, and the Lender Parties party thereto, 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 Lender 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 Lender
Parties, and grants to the Administrative Agent for the ratable benefit of the
Administrative Agent and the Lender 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
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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
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construed in accordance with, the laws of the State of New York.
[ADDITIONAL GUARANTOR]
By:___________________________________
Title:
Notice Address:
________________________________________
________________________________________
Telecopier:___________________
Telephone:____________________
Attention:_______________________________
ACCEPTED:
CREDIT SUISSE FIRST BOSTON,
as Administrative Agent
XV-2
By:_____________________________
Title:
XV-3
EXHIBIT XVI
FORM OF INTERCREDITOR AGREEMENT
See attached.
XVI-1
EXHIBIT XVII
FORM OF INTERCOMPANY NOTE/3/
INTERCOMPANY DEMAND PROMISSORY NOTE
Note Number: Dated: February 18, 1999
FOR VALUE RECEIVED, pursuant to this promissory note (this "PROMISSORY
----------
NOTE"), Panolam Industries International, Inc. ("PAYOR") promises to pay to
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the order of Panolam Industries Ltd. ("PAYEE"), on demand, in lawful money
-----
of [the United States of America] [Canada], 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 Payee to
Payor now or hereafter owing by Payor to Payee as shown either on Schedule
A attached hereto (and any continuation thereof) or in the books and
records of Payee, which loans and advances constitute Designated
Intercompany Indebtedness (as hereinafter defined). Capitalized terms used
herein but not otherwise defined herein shall have the meanings given 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 Ltd., as Borrower (the
----------------
"BORROWER"), each financial institution and other entity from time to time
--------
party thereto as a lender or issuing bank (together with its successors and
permitted assigns pursuant to Section 9.07 of the Credit Agreement, each a
"LENDER PARTY"), Credit Suisse First Boston Canada, as an initial lender
------------
and as administrative agent for the Lenders (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. This Promissory
Note evidences Designated Intercompany Indebtedness (as hereinafter
defined). For purposes hereof, the term "Designated Intercompany
Indebtedness" means (A) indebtedness in respect of any loan made directly
or indirectly by the 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 another of the US Borrower's Domestic Subsidiaries or to
the US Borrower, respectively, with the proceeds of a loan made directly or
indirectly by the Borrower or any of its Subsidiaries to the US Borrower or
any of its Domestic Subsidiaries.
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 Payor and Payee or, at the Administrative Agent's option after
the occurrence and during the continuance of an Event of Default, at the
rate set forth in Section [2.05(e)(2)(a) (if the Note is denominated in
Canadian Dollars)] [2.05(e)(2)(b) (if the Note is denominated in US
Dollars)] of the Credit Agreement. Interest shall be due and payable on
the 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 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] [Canada]
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
---------------------------
/3/ This form of Intercompany Note is to be used to evidence Designated
Intercompany Indebtedness owed to the Borrower by the US Borrower.
XVII-1
the case may be. Payee shall not be entitled to any additional amounts or
indemnification in respect of any withholding taxes or other deductions
exigible on any interest payable hereunder in accordance with applicable
law.
Payor may repay all or any part of the principal amount hereof prior
to maturity without notice or penalty.
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 Payee (i) to the Administrative
Agent, for the benefit of the Administrative Agent and the Lender Parties,
as security for Payee's Obligations, if any, under the Credit Agreement and
the other Loan Documents to which the Payee is a party, pursuant to the
terms of the Security Agreement to which the Payee is a party. Payor
acknowledges and agrees that the Administrative Agent may, to the extent
permitted under the Security Agreement to which Payee is party, exercise
all the rights of Payee under this Promissory Note and will not be subject
to any abatement, reduction, recoupment, defense, setoff or counterclaim
available to Payor.
If all or any part of the assets of Payor, or the proceeds thereof, are
subject to any distribution, division or application to the creditors of
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 Payor is dissolved or if (except as expressly permitted by the
Credit Agreement) substantially all of the assets of 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 Payor to Payee ("PAYOR INDEBTEDNESS") shall be
------------------
paid or delivered directly to the Administrative Agent for application to
the Obligations of Payee 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 shall have been
terminated. Payee irrevocably authorizes and empowers the Administrative
Agent, subject to the terms of the Security Agreement to which Payee is
party, to demand, xxx for, collect and receive every such payment or
distribution and give acquittance therefor and to make and present for and
on behalf of Payee such proofs of claim and take such other action, in the
Administrative Agent's own name or in the name of Payee or otherwise, as
the Administrative Agent may deem necessary or advisable for the
enforcement of this Promissory Note. The Administrative 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 Obligations of Payee in accordance with the terms of the
Intercreditor Agreement. Payee agrees that until the Obligations of have
been performed and paid in full in immediately available funds and the
Commitments have been terminated, Payee will not (i) assign or transfer to
any Person any claim Payee has or may have against any Payor, (ii) discount
or extend
XVII-2
the time for payment of any Payor Indebtedness, or (iii) otherwise amend,
modify, supplement or waive any provision 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 CONFLICTS OF LAWS) OF THE PROVINCE OF
ONTARIO. EACH PARTY HEREBY CONSENTS AND AGREES THAT THE COURTS LOCATED IN
THE PROVINCE OF ONTARIO SHALL HAVE NON-EXCLUSIVE JURISDICTION TO HEAR AND
DETERMINE ANY CLAIM OR DISPUTE PERTAINING TO THIS PROMISSORY NOTE.
This Promissory Note 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.
IN WITNESS WHEREOF, Payor has caused this 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:
By:___________________________________
Name:
Title:
XVII-3
PANOLAM INDUSTRIES LTD.
By:____________________________
Name:
Title:
By:_____________________________
Name:
Title:
XVII-5
FORM OF INTERCOMPANY NOTE/4/
INTERCOMPANY DEMAND PROMISSORY NOTE
Note Number: __________ Dated: February 18, 1999
FOR VALUE RECEIVED, each Loan Party which is a party to this 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 "PAVOR"
-----
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 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, which loans and advances constitute Designated Intercompany
Indebtedness (as hereinafter defined). Capitalized terms used herein but
not otherwise defined herein shall have the meanings given 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 Panolain Industries Ltd., as Borrower (the "BORROWER"),
--------
each financial institution and other entity from time to time party thereto
as a lender or issuing bank (together with its successors and permitted
assigns pursuant to Section 9.07 of the Credit Agreement, each a "LENDER
------
PARTY"), Credit Suisse First Boston Canada, as an initial lender and as
-----
administrative agent for the Lenders (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. This Promissory Note
evidences Designated Intercompany Indebtedness (as hereinafter defined).
For purposes hereof, the term "Designated Intercompany Indebtedness" means
(A) 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 (B) indebtedness in respect of any loan made
directly or indirectly by the US Borrower or any of its Domestic
Subsidiaries to another of the US Borrower's Domestic Subsidiaries or to
the US Borrower, respectively, with the proceeds of a loan made directly or
indirectly by the Canadian Borrower or any of its Subsidiaries to the US
Borrower or any of its Domestic Subsidiaries.
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 (as defined in the US Credit Agreement as in
effect on the Closing Date under the Credit Agreement). Interest shall be
due and payable on the 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.
________________
/4/ This form of Intercompany Note is to be used to evidence Designated
Intercompany Indebtedness owed to the US Borrower or any of its Domestic
Subsidiaries by a Domestic Subsidiary or the US Borrower.
XVII-6
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. None of
the Payees hereunder shall be entitled to any additional amounts or
indemnification in respect of any withholding taxes or other deductions
exigible on any interest payable hereunder in accordance with applicable
law.
Each 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 under and as defined in the Credit Agreement, 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 US Administrative Agent, for the benefit of the US
Administrative Agent and the lender parties under the US Credit Agreement,
as security for such Payee's Obligations (as defined in the US Credit
Agreement), if any, under the US Credit Agreement, the US Credit Agreement
Guaranty and the other US Loan Documents to which such Payee is a party, in
each case, pursuant to the terms of the Security Agreement to which such
Payee is a party. Each Payor acknowledges and agrees that the Acting
Administrative Agent under the Security Agreement to which any of its
Payees is party may, to the extent permitted under the Security Agreement
to which its Payee is party, exercise all the rights of such Payee under
this Promissory Note and will not be subject to any abatement, reduction,
recoupment, defense, set-off or counterclaim available to such Payor.
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, 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 to which such Payee is
party for application to the Canadian Obligations (as defined in the
Intercreditor Agreement) and the US Obligations (as defined in the
Intercreditor 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 each of the Canadian Credit Agreement
and the US Credit Agreement shall have been terminated. Each Payee
irrevocably authorizes and
XVII-7
empowers the Acting Administrative Agent under the Security Agreement to
which such Payee is party, and subject to the terms thereof, to demand, xxx
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
such 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 Canadian Obligations
(as defined in the Intercreditor Agreement) and the US Obligations (as
defined in the Intercreditor Agreement) in accordance with the terms of the
Intercreditor Agreement. Each Payee agrees that until the Canadian
Obligations (as defined in the Intercreditor Agreement) and the US
Obligations (as defined in the Intercreditor Agreement) 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 Canadian Credit Agreement and the US Credit
Agreement have been terminated, such Payee will not (i) assign or transfer
to any Person 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 provision 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 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. EACH PARTY HEREBY CONSENTS AND AGREES
THAT THE COURTS LOCATED IN THE STATE OF NEW YORK SHALL HAVE NON-EXCLUSIVE
JURISDICTION TO HEAR AND DETERMINE ANY CLAIM OR DISPUTE PERTAINING TO THIS
PROMISSORY NOTE.
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 party hereto regardless of whether any other Person
becomes or fails to become or ceases to be a Payor hereunder.
XVII-8
This Promissory Note 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.
[Signature Page Follows]
XVII-9
IN WITNESS WHEREOF, each 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 INTERNATIONAL, INC.
By: ___________________________________
Name:
Title:
By: ___________________________________
Name:
Title:
PANOLAM INDUSTRIES, INC.
By: ___________________________________
Name:
Title:
By: ___________________________________
Name:
Title:
PIONEER PLASTIC CORPORATION
By: ___________________________________
Name:
Title:
By: ___________________________________
Name:
Title:
XVII-10
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 Demand Promissory Note dated
February 18, 1999 (the "PROMISSORY NOTE"), made by Panolam Industries
---------------
International, Inc. ("PANOLAM INTERNATIONAL"), and each other Domestic
---------------------
Subsidiary of Panolam International 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 Panolam International and its Domestic
Subsidiaries party to the Credit Agreement on the date hereof From time to
time after the date hereof, additional Subsidiaries of those 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:
By: ___________________________________
Name:
Title:
XVII-11
PANOLAM INDUSTRIES, INC.
By: ___________________________________
Name:
Title:
By: ___________________________________
Name:
Title:
PIONEER PLASTIC CORPORATION
By: ___________________________________
Name:
Title:
By: ___________________________________
Name:
Title:
XVII-12
FORM OF INTERCOMPANY NOTE/5/
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 syndication agent for the
Lenders, and Credit Suisse First Boston, as administrative agent for the
Lenders (in such capacity, together with any successor administrative agent
appointed pursuant to Section 8.06 of the Credit Agreement, the
"Administrative 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 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 [$10,000,000].
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
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
_______________________
/5/ This form of Intercompany Note is to be used to evidence indebtedness owed
by any of the Loan Parties to each other.
XVII-13
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.
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 Payees 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 not 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 time or times when
such Payor does not have any outstanding Obligations in respect of Loans or
other outstanding Senior Obligations which are then due and payable.
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, 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
XVII-14
Payee ("PAYOR INDEBTEDNESS") shall be paid or delivered directly to the
Acting Administrative Agent under the Security Agreement to which such
Payee is party for application to the Canadian Obligations (as defined in
the Intercreditor Agreement) and the US Obligations (as defined in the
Intercreditor 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 each of the Canadian Credit Agreement
and the US Credit Agreement shall have been terminated. Each Payee
irrevocably authorizes and empowers the Acting Administrative Agent under
the Security Agreement to which such Payee is party, and subject to the
terms thereof, to demand, xxx 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 such 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 Canadian Obligations (as defined in the Intercreditor Agreement) and
the US Obligations (as defined in the Intercreditor Agreement) in
accordance with the terms of the Intercreditor Agreement. Each Payee agrees
that until the Canadian Obligations (as defined in the Intercreditor
Agreement) and the US Obligations (as defined in the Intercreditor
Agreement) 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 Canadian Credit Agreement
and the US Credit Agreement have been terminated, such Payee will not (i)
assign or transfer to any Person 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 provision 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 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. EACH PARTY HEREBY CONSENTS AND AGREES
THAT THE COURTS LOCATED IN THE STATE OF NEW YORK SHALL HAVE NON-EXCLUSIVE
JURISDICTION TO HEAR AND DETERMINE ANY CLAIM OR DISPUTE PERTAINING TO THIS
PROMISSORY NOTE.
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 party hereto regardless of whether any other Person
becomes or fails to become or ceases to be a Payor hereunder.
XVII-15
This Promissory Note 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.
[Signature Page Follows]
XVII-16
IN WITNESS WHEREOF, each 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 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
XVII-17
PANOLAM INDUSTRIES,INC.
By:______________________________________
Name:
Title
PIONEER PLASTIC CORPORATION
By:______________________________________
Name:
Title:
XVII-18
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 Demand Promissory Note dated February 18, 1999 (the
"PROMISSORY NOTE"), made by Panolam Industries International, Inc. ("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
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 endosrement 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:
XVII-19
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
XVII-20
EXHIBIT X-A
FORM OF CANADIAN SECURITY AGREEMENT
This SECURITY AGREEMENT (as it may be amended, supplemented, restated or
otherwise modified from time to time, this "AGREEMENT") is dated as of
---------
February 18, 1999 and made by PANOLAM INDUSTRIES LTD., an Ontario
corporation with its principal place of business at Xxxxxxx Xxxx 0, Xxx
0000, Xxxxxxxxxx, Xxxxxxx X0X 0X0 (the "GRANTOR") in favour of and for the
-------
benefit of CREDIT SUISSE FIRST BOSTON CANADA, 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 (as hereinafter defined)) that are or may hereafter become party
to the Credit Agreement. The Administrative Agent and the Lender Parties
are each referred to herein as a "SECURED PARTY" and are collectively
-------------
referred to herein as the "SECURED PARTIES".
---------------
PRELIMINARY STATEMENTS
(1) The Lender Parties, the Administrative Agent, Royal Bank of Canada, for
itself as an Initial Lender and as Documentation Agent, the Grantor, as
borrower, and the other Loan Parties thereto have entered into a Credit
Agreement dated as of February 18, 1999 (said agreement, as it may
hereafter be amended, supplemented, restated or otherwise modified from
time to time, being the "CREDIT AGREEMENT".
----------------
(2) The Grantor is the owner of the shares (the "PLEDGED SHARES") of stock
--------------
and other certificated securities described in Part I of Schedule I hereto
----------
and issued by the Persons named therein and of the indebtedness described
in Part II of such Schedule I (the "PLEDGED DEBT") and issued by the
---------- ------------
obligors named therein.
(3) It is a condition precedent to the making of Loans by the Lender
Parties and the issuance of Letters of Credit by the Issuing Banks under
the Credit Agreement that the Grantor shall have granted the security
interest and made the pledge and assignment contemplated by this Agreement.
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Grantor hereby agrees with the Administrative Agent for
its benefit and the ratable benefit of the Lender Parties as follows:
SECTION 1. DEFINITIONS.
(a) CERTAIN TERMS. Capitalized terms defined in the preamble and the
-------------
recitals to this Agreement have the meanings set forth therein.
Capitalized terms defined in the Credit Agreement and used and not
otherwise defined herein have the meanings assigned to such terms in the
Credit Agreement. As used in this Agreement, the following terms have the
meanings specified below:
"ACCOUNT COLLATERAL" has the meaning set forth in Section 2(a)(ix).
------------------
X-A-1
"CASH COLLATERAL ACCOUNT" means any account established by the
-----------------------
Administrative Agent for purposes of holding any cash proceeds of
Collateral, insurance proceeds, amounts required to cash collateralize
Letters of Credit, Bankers' Acceptances or any other amounts deposited from
time to time by any Loan Party for purposes of, or otherwise held by the
Administrative Agent for purposes of, securing the Secured Obligations.
"COLLATERAL" has the meaning set forth in Section 2(a).
----------
"COPYRIGHTS" means all copyrights that the Grantor now or hereafter owns
----------
(whether registered or unregistered) in all Works, whether published or
unpublished, including, without limitation, those listed on Part I of
Schedule IV, all registrations and recordings thereof, and all applications
-----------
in connection therewith, including, without limitation, all registrations,
recordings and applications in the Canadian Intellectual Property Office or
in any similar office in any other country, and all renewals thereof.
"COPYRIGHT LICENSES" means all agreements, written or oral, providing for
------------------
the grant by or to the Grantor of any license with respect to a copyright,
including, without limitation, the agreements set forth on Part II of
Schedule IV.
-----------
"DESIGNS" means all industrial designs, design patents and other designs
-------
that the Grantor now or hereafter owns including, without limitation, those
listed on Part I of Schedule V, all registrations and recordings thereof,
----------
and all applications in connection therewith, including, without
limitation, all registrations, recordings and applications in the Canadian
Intellectual Property Office or in any similar office in any other country,
and all reissues, extensions, or renewals thereof.
"DESIGN LICENSES" means all agreements, written or oral, providing for the
---------------
grant by or to the Grantor of any right to use any design, including,
without limitation, the agreements set forth on Part II of Schedule V.
----------
"EXCLUDED ASSETS" means rights, licenses and franchises granted by any
---------------
governmental authority in which it is unlawful to create a Lien.
"INTELLECTUAL PROPERTY" means all Copyrights, Copyright Licenses, Designs,
---------------------
Design Licenses, Patents, Patent Licenses, Trademarks and Trademark
Licenses.
"LETTER OF CREDIT CASH COLLATERAL ACCOUNT" means a Cash Collateral Account
----------------------------------------
established for purposes of maintaining amounts deposited to cash
collateralize Letters of Credit.
"PATENTS" means all letters patent of invention that the Grantor now or
-------
hereafter owns in Canada or any other country and all registrations and
recordings thereof and all reissues and extensions thereof, including,
without limitation, any thereof referred to in Part I of Schedule II
-----------
hereto, and all applications for letters patent of invention in Canada or
any other country and all divisions, continuations and continuations-in-
part thereof, including, without limitation, any thereof referred to in
Part I of Schedule II hereto.
-----------
X-A-2
"PATENT LICENSES" means all agreements, whether written or oral, providing
---------------
for the grant by or to the Grantor of any right to manufacture, use or sell
any invention covered by a patent, including, without limitation, any
thereof referred to in Part II of Schedule II.
-----------
"PPSA" means the Personal Property Security Act (Ontario) as amended from
----
time to time and any Act substituted therefor and amendments thereto.
"RELATED CONTRACTS" means all security agreements, leases and other
-----------------
contracts and agreements of every type included in the Collateral, whether
relating to an Account or otherwise.
"SECURED OBLIGATIONS" is defined in Section 2(b).
-------------------
"SECURITY COLLATERAL" has the meaning set forth in Section 2(a)(viii).
-------------------
"SOFTWARE" means all computer programs, databases and portions of each of
--------
the foregoing that the Grantor now or hereafter owns in whatever form and
on whatever medium those programs or databases are expressed, fixed,
embodied or stored from time to time including both the object code and
(except in respect of readily available commercial software) source code
versions of each such program and portions thereof and all corrections,
updates, enhancements, translations, modifications, adaptations and new
versions thereof together with the media upon or in which such programs,
databases and portions thereof are expressed, fixed, embodied or stored
(such as disks, diskettes, tapes and semiconductor chips) and all flow
charts, manuals, instructions, documentation and other material relating
thereto.
"SOFTWARE LICENSE" means all agreements, written or oral, providing for the
----------------
grant by or to the Grantor of any right to use, have access to or obtain
possession of, any software including, without limitation, any thereof
referred to in Schedule VI.
-----------
"TRADEMARKS" mean all trademarks, trade names, corporate names, business
----------
names, trade styles, service marks, logos, designs and other source or
business identifiers, and the goodwill associated therewith that the
Grantor now or hereafter owns, now existing or hereafter adopted or
acquired, all registrations and recordings thereof, and all applications in
connection therewith, whether in the Canadian Intellectual Property Office
or in any similar office in any other country, including, without
limitation, any thereof referred to in Part I of Schedule III, and all
------------
renewals thereof.
"TRADEMARK LICENSES" means all agreements, written or oral, providing for
------------------
the grant by or to the Grantor of any right to use any trademark,
including, without limitation, any thereof referred to in Part II of
Schedule III.
------------
"WORK" has the meaning set forth in Section 11(p).
----
(b) TERMS DEFINED IN THE PPSA. The terms "Account", "Goods", "Equipment",
-------------------------
"Instrument", "Intangible", "Security", "Accession", "Money", "Proceeds",
"financing statement" and "financing change statement" whenever used herein
shall be interpreted in
X-A-3
accordance with their respective meanings given to them in the PPSA. The
term "Goods" when used herein shall not include "consumer goods" of the
Grantor as that term is defined in the PPSA.
GRANT OF SECURITY; SECURED OBLIGATIONS.
(a) As continuing collateral security for the due payment and performance
by the Grantor of all of the Secured Obligations, the Grantor hereby grants
to the Administrative Agent for itself and for the ratable benefit of the
Lender Parties a security interest in the undertaking of the Grantor and in
all of the Grantor's present and after acquired personal property
including, without limitation, in all Goods (including all parts,
accessories, attachments, special tools, additions and accessions thereto),
Chattel Paper, Documents of Title (whether negotiable or not), Instruments,
Intangibles, Money and Securities now owned or hereafter owned or acquired
by or on behalf of the Grantor (including such as may be returned to or
repossessed by the Grantor) and in all Proceeds and renewals thereof,
accretions thereto and substitutions therefor, and including, without
limitation, all of the following now owned or hereafter owned or acquired
by or on behalf of the Grantor:
(i) all Inventory of whatever kind and wherever situate;
(ii) all Equipment of whatever kind and wherever situate;
(iii) all Accounts and book debts and generally all debts, dues,
claims, choses in action and demands of every nature and kind
howsoever arising or secured including letters of credit and advices
of credit, which are now due, owing or accruing or growing due to or
owned by or which may hereafter become due, owing or accruing or
growing due to or owned by the Grantor ("DEBTS");
(iv) all deeds, documents, writings, papers, books of account
and other books relating to or being records of Debts, Chattel Paper
or Documents of Title or by which such are or may hereafter be
secured, evidenced, acknowledged or made payable;
(v) all contractual rights and insurance claims;
(vi) all Intellectual Property;
(vii) all of the following (the "SECURITY COLLATERAL"): all
-------------------
Securities, whether constituting certificated Securities or
uncertificated Securities, including specifically the Pledged Shares
described in Schedule I and all other Equity Interests, and all
----------
dividends, distributions, cash, instruments, rights and other property
or proceeds from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of the Pledged
Shares.
(viii) all of the following (the "ACCOUNT COLLATERAL"): (a) each
------------------
Cash Collateral Account, the Letter of Credit Cash Collateral Account,
all funds held therein and all certificates and instruments, if any,
from time to time representing or evidencing any Cash Collateral
Account or the Letter of Credit Cash Collateral Account, (b) all other
deposit accounts of the Grantor, all funds held therein and all
certificates and instruments, if any from time to time representing or
evidencing such deposit accounts, (c) all Pledged Debt described in
Schedule I and all notes, certificates of deposit, deposit
disbursement and operating accounts, cheques and other instruments
from time to time hereafter delivered to or otherwise possessed by the
Administrative Agent for or on behalf of the Grantor in substitution
for or in addition to any or all of the then existing Account
Collateral, and (d) all interest, dividends, cash, instruments and
other property from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of the then
existing Account Collateral, EXCEPT AND EXCLUDING, HOWEVER, each item
of property that is an Excluded Asset, for as long as it remains an
Excluded Asset.
The foregoing undertaking and property are collectively referred to as
the "COLLATERAL". In addition, to secure the prompt and complete
payment, performance and observance of the Secured Obligations, the
Grantor hereby grants
X-A-4
to the Administrative Agent, for itself and for the benefit of the Lender
Parties, a right of set-off against Collateral held by the Administrative
Agent or any Lender Party for any purpose.
Without limiting the foregoing, as continuing collateral security for the
due payment and performance by the Grantor of all the Secured Obligations
(as defined in Section 2(b) below), the Grantor hereby irrevocably pledges
and assigns to the Administrative Agent for itself and for the ratable
benefit of the Secured Parties all of the Security Collateral and Account
Collateral now owned or hereafter owned or acquired by or on behalf of the
Grantor.
(b) SECURITY FOR OBLIGATIONS. This Agreement secures with respect to the
------------------------
Grantor, and the Collateral of the Grantor is collateral security for, the
prompt payment and performance in full when due, whether on a specified
payment date, at stated maturity, by acceleration or otherwise of all
Obligations of the Grantor now or hereafter arising under, pursuant to or
in connection with the Loan Documents, whether for principal, interest
(including, without limitation, interest that, but for the commencement of
any case or proceeding in bankruptcy would accrue on such obligations),
fees, expenses or otherwise (all such Obligations being the "SECURED
-------
OBLIGATIONS"). Without limiting the generality of the foregoing, this
-----------
Agreement secures the payment of all amounts that constitute part of the
Secured Obligations and would be owed by the Grantor to the Secured Parties
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.
GRANTOR REMAINS LIABLE.
Anything herein to the contrary notwithstanding, (a) the Grantor shall
remain liable under the Related Contracts to the extent set forth therein
to perform all of its duties and obligations thereunder to the same extent
as if this Agreement had not been executed, (b) the exercise by the
Administrative Agent of any of the rights hereunder shall not release the
Grantor from any of its duties or obligations under the Related Contracts
and (c) neither the Administrative Agent nor any other Secured Party shall
have any obligation or liability under the Related Contracts by reason of
this Agreement, nor shall the Administrative Agent or any Lender Party be
obligated to perform any of the obligations or duties of the Grantor
thereunder, to take any action to collect or enforce any claim for payment
assigned hereunder, to make any payment or to make any inquiry as to the
nature or the sufficiency of any payment received by it or as to the
sufficiency of any performance by any party in respect of any Account or
any Related Contract.
DELIVERY OF SECURITY COLLATERAL AND ACCOUNT COLLATERAL.
In order to better perfect the Administrative Agent's security in the
Security Collateral, all certificates, if any, representing or evidencing
Security Collateral shall be registered in the name of the Administrative
Agent, or, at the Administrative Agent's option, in the name of its
nominee, and all notes or instruments which evidence Account Collateral
shall be duly endorsed in favour of the Administrative Agent, or, at the
Administrative Agent's option, the name of its nominee. All certificates
representing or evidencing Security Collateral and all notes or instruments
evidencing Account Collateral shall be delivered to and held by or on
behalf of the Administrative Agent pursuant hereto (a) on
X-A-5
or prior to the Closing Date, with respect to such Collateral in existence
on the Closing Date, and (b) within three Business Days of the Grantor
obtaining rights thereto with respect to any other such Collateral. Grantor
shall cause any corporation whose Shares form part of the Pledged Shares to
record on its share register the Pledged Shares in the name of the
Administrative Agent, or, at the Administrative Agent's option, its nominee
and shall promptly deliver to the Administrative Agent following such
recordation a photocopy of the applicable share register to evidence such
registration. The Administrative Agent shall have the right, at any time in
its discretion and without notice to the Grantor, to transfer to or to
register in the name of the Administrative Agent or, at the Administrative
Agent's option, any of its nominees, any or all of the Account Collateral
or, in any case where the Administrative Agent has initially expressly
waived its rights set out in the first sentence of this Section 4, Security
Collateral, subject only to the revocable rights specified in Section
10(a). In addition, the Administrative Agent shall have the right at any
time to exchange certificates or instruments representing or evidencing
Security Collateral or Account Collateral for certificates or instruments
of smaller or larger denominations.
REPRESENTATIONS AND WARRANTIES.
The Grantor represents and warrants as follows:
(a) All of the Equipment, Inventory and records concerning Accounts are
located at the places specified in Schedule VIII hereto. The principal
-------------
place of business, chief executive office and domicile (within the meaning
of the Quebec Civil Code) of the Grantor and the office where the Grantor
keeps its records concerning the Accounts, and the original copies of the
Related Contracts and all originals of all Chattel Paper, are located at
the addresses so designated in Schedule VIII. All motor vehicles owned by
-------------
the Grantor are identified in Schedule VIII. Except for Intercompany
-------------
Notes, none of the Accounts or the Account Collateral is evidenced by a
promissory note or other Instrument.
(b) The correct legal name of the Grantor is Panolam Industries Ltd. (or
Panolam Industries Ltee. in the French language).
(c) The Grantor is the legal and beneficial owner of the Collateral free
and clear of any Lien, except for the security interests created by this
Agreement and Permitted Liens. No effective financing statement or other
instrument similar in effect covering all or any part of the Collateral is
on file in any recording office, except such as may have been filed in
favour of the Administrative Agent relating to this Agreement and except as
otherwise permitted under the Credit Agreement. The Grantor has the trade
names listed on Part I of Schedule III.
------------
(d) The Grantor has exclusive possession and control of the Equipment
constituting Collateral and Inventory constituting Collateral.
(e) The Pledged Shares have been duly authorized and validly issued and
are fully paid and non-assessable. The Pledged Debt has been duly
authorized, authenticated or
X-A-6
issued and delivered, is the legal, valid and binding obligation of the
issuers thereof and is not in default.
(f) The Pledged Shares constitute the percentage of the issued and
outstanding shares of stock of the issuers thereof indicated on Schedule I.
----------
The Pledged Debt is, as of the date hereof, outstanding in the principal
amount indicated on Schedule I.
----------
(g) This Agreement, the pledge of the Security Collateral pursuant hereto
and the pledge and assignment of the certificates, if any, representing the
Account Collateral pursuant hereto create a valid and perfected first
priority security interest in such Collateral, securing the payment of the
Secured Obligations, and all filings and other actions necessary or
desirable to perfect and protect such security interests have been duly
taken. Upon the filing of financing statements under the PPSA in each of
the jurisdictions listed on Schedule VII with respect to the Grantor, which
------------
financing statements have been duly filed or executed in appropriate form
for filing and delivered to the Administrative Agent, the security interest
of the Administrative Agent in respect of all other Collateral will be
perfected to the extent a security interest in such Collateral may be
perfected by the filing of financing statements.
(h) No consent of any other Person and no authorization, approval or other
action by, and no notice to or filing with, any governmental authority or
regulatory body or other third party is required (i) for the grant by the
Grantor of the assignment and security interest granted or purported to be
granted hereby, for the pledge by the Grantor of the Security Collateral
pursuant hereto or for the execution, delivery or performance of this
Agreement by the Grantor, (ii) for the perfection or maintenance of the
pledge, assignment and security interest created or purported to be created
hereby (including the first priority nature of such pledge, assignment or
security interest), except for the filing of financing statements under the
PPSA in each of the jurisdictions listed on Schedule VII, which financing
------------
statements have been duly filed, and the recording of this Agreement in the
applicable intellectual property office, which Agreement has been duly
filed or executed in appropriate form for filing and delivered to the
Administrative Agent, or (iii) for the exercise by the Administrative Agent
of its voting or other rights provided for in this Agreement or the
remedies in respect of the Collateral pursuant to this Agreement, except as
may be required in connection with the disposition of any portion of the
Security Collateral by laws affecting the offering and sale of securities
generally.
(i) All Excluded Assets of the Grantor, the absence or termination of
which would have a Material Adverse Effect, are listed on Schedule IX.
FURTHER ASSURANCES.
(a) The Grantor agrees that from time to time, at the expense of the
Grantor, the Grantor will promptly execute and deliver all further
instruments and documents, and take all further action, that may be
necessary or desirable, or that the Administrative Agent may reasonably
request, in order to perfect and protect any pledge, assignment or security
interest granted or purported to be granted hereby, to enable the
Administrative Agent to exercise and enforce its rights and remedies
hereunder with respect to any
X-A-7
Collateral or to create validly perfected security in any Collateral in any
jurisdiction in which this Agreement may not create such security. Without
limiting the generality of the foregoing, the Grantor will: (i) xxxx
conspicuously all Chattel Paper, and, at the request of the Administrative
Agent, each Related Contract and each of its records pertaining to the
Collateral with a legend, in form and substance satisfactory to the
Administrative Agent, indicating that such document, Chattel Paper, Related
Contract or Collateral is subject to the security interest granted hereby;
(ii) if any Collateral shall be evidenced by a promissory note or other
instrument, deliver and pledge to the Administrative Agent hereunder such
note or instrument duly endorsed or accompanied by duly executed
instruments of transfer or assignment, all in form and substance
satisfactory to the Administrative Agent; (iii) execute and deliver such
security documents as the Administrative Agent may reasonably request in
order to obtain the full benefit of the Loan Documents (including validly
created security on the Collateral) along with duly executed officer's
certificates and legal opinions in form and substance reasonably
satisfactory to the Administrative Agent; and (iv) execute and file such
financing or financing change statements, or amendments thereto, and such
other instruments or notices, as may be necessary or desirable, or as the
Administrative Agent may reasonably request, in order to perfect and
preserve the assignment, pledge and security interest granted or purported
to be granted hereby.
(b) The Grantor hereby authorizes the Administrative Agent to file one or
more financing or financing change statements, and amendments thereto,
relating to all or any part of the Collateral without the signature of the
Grantor where permitted by law. A photocopy or other reproduction of this
Agreement or any financing statement covering the Collateral or any part
thereof shall be sufficient as a financing statement where permitted by
law.
(c) The Grantor will furnish to the Administrative Agent, upon the
reasonable request of the Administrative Agent, from time to time
statements and schedules further identifying and describing the Collateral
and such other reports in connection with the Collateral as the
Administrative Agent may reasonably request, all in reasonable detail.
AS TO EQUIPMENT AND INVENTORY.
The Grantor shall keep the Equipment and Inventory (other than Inventory
sold in the ordinary course of business) at the places therefor specified
in Section 5(a) or, upon 30 days' prior written notice to the
Administrative Agent, at such other places in a jurisdiction where all
action required by Section 6 shall have been taken with respect to the
Equipment and Inventory.
INSURANCE.
(a) The Grantor shall, at its own expense, maintain the insurance required
pursuant to the Credit Agreement and with such insurers, as shall be
reasonably satisfactory to the Administrative Agent from time to time.
Each policy for liability insurance shall provide for all losses to be paid
on behalf of the Administrative Agent (and the Lenders with respect to
Quebec coverages) and the Grantor as their interests may appear, and each
X-A-8
policy for property damage insurance shall provide for all losses (except
for losses of less than US$10,000,000, or the Equivalent Amount thereof,
per occurrence) to be paid directly to the Administrative Agent in
accordance with Section 6.01(d) of the Credit Agreement. Each such policy
shall be subject to such loss payee endorsements and additional insured
provisions as the Administrative Agent may reasonably require (including,
without limitation, the Insurance Bureau of Canada's standard mortgage
clause and that the Lenders be named loss payees and additional insureds in
respect of Quebec coverages). The Grantor shall, if so requested by the
Administrative Agent, deliver to the Administrative Agent original or
duplicate policies of such insurance and, as often as the Administrative
Agent may reasonably request, a report of a reputable insurance broker with
respect to such insurance. Further, the Grantor shall, at the request of
the Administrative Agent, duly exercise and deliver instruments of
assignment of such insurance policies to comply with the requirements of
Section 6 and cause the insurers to acknowledge notice of such assignment.
(b) Reimbursement under any liability insurance maintained by the Grantor
pursuant to this Section 8 may be paid directly to the Person who shall
have incurred liability covered by such insurance. In case of any loss
involving damage to Equipment or Inventory when subsection (c) of this
Section 8 is not applicable, the Grantor shall make or cause to be made the
necessary repairs to or replacements of such Equipment or Inventory, and
any proceeds of insurance maintained by the Grantor pursuant to this
Section 8 shall be paid to the Grantor as reimbursement for the costs of
such repairs or replacements in accordance with Section 6.01(d) of the
Credit Agreement.
(c) Upon the occurrence and during the continuance of any Event of Default
or the actual and constructive total loss of any Equipment or Inventory,
all insurance payments in respect of such Equipment or Inventory shall be
paid to and applied by the Administrative Agent as specified in Section
16(c).
PLACE OF PERFECTION; RECORDS; COLLECTION OF ACCOUNTS.
(a) The Grantor shall keep its principal place of business and chief
executive office and the office where it keeps its records concerning the
Collateral, and the original copies of the Related Contracts and all
originals of all Chattel Paper, at the locations therefor specified in
Section 5(a) or, upon 30 days' prior written notice to the Administrative
Agent, at such other locations in a jurisdiction where all actions required
by Section 6 shall have been taken with respect to the Collateral. The
Grantor will hold and preserve such records, Related Contracts and Chattel
Paper and will permit representatives of the Administrative Agent at any
time during normal business hours to inspect and make abstracts from such
records, Related Contracts and Chattel Paper.
(b) The Grantor will not change its name, identity or corporate structure
to such an extent that any financing statement filed by the Administrative
Agent in connection with this Agreement would become seriously misleading,
unless it shall have given the Administrative Agent at least 30 days' prior
written notice of such change and shall have taken any action required by
the Administrative Agent in connection therewith (including compliance with
the requirements of Section 6).
X-A-9
(c) Except as otherwise provided in this subsection (c), the Grantor shall
continue to collect, at its own expense, all amounts due or to become due
to the Grantor under the Accounts. In connection with such collections,
the Grantor may take (and, at the direction of the Administrative Agent,
acting reasonably, shall take) such action as the Grantor or the
Administrative Agent may deem necessary or advisable to enforce collection
of the Accounts; provided, however, that the Administrative Agent shall
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have the right at any time after the occurrence and during the continuance
of an Event of Default, upon written notice to the Grantor of its intention
to do so, to notify the Obligors under any Accounts of the assignment of
such Accounts to the Administrative Agent and to direct such Obligors to
make payment of all amounts due or to become due to the Grantor thereunder
directly to the Administrative Agent and, upon such notification and at the
expense of the Grantor, to enforce collection of any such Accounts, and to
adjust, settle or compromise the amount or payment thereof, in the same
manner and to the same extent as the Grantor might have done. After
receipt by the Grantor of the notice from the Administrative Agent referred
to in the proviso to the preceding sentence, (i) all amounts and proceeds
-------
(including instruments) received by the Grantor in respect of the Accounts
shall be received in trust for the benefit of the Administrative Agent
hereunder, shall be segregated from other funds of the Grantor and shall be
forthwith paid over to the Administrative Agent in the same form as so
received (with any necessary or requested endorsement) and either (A)
released to the Grantor so long as no Default or Event of Default shall
have occurred and be continuing or (B) if any Default or Event of Default
shall have occurred and be continuing, applied as provided by Section 16(b)
and (ii) the Grantor shall not adjust, settle or compromise the amount or
payment of any Account, release wholly or partly any obligor thereof, or
allow any credit or discount thereon. At the Administrative Agent's
request the Grantor shall deliver to the Administrative Agent all original
and other documents evidencing, and relating to, the agreements and
transactions which gave rise to the Accounts, including, without
limitation, all original orders, invoices and shipping receipts.
VOTING RIGHTS; DIVIDENDS; ETC.
(a) So long as no Event of Default shall have occurred and be continuing:
(i) The Grantor shall be entitled to exercise any and all voting
and other consensual rights pertaining to the Security Collateral or
any part thereof for any purpose not inconsistent with the terms of
this Agreement or the other Loan Documents; provided, however, that
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the Grantor shall not exercise or refrain from exercising any such
right if it could reasonably be expected to have a Material Adverse
Effect on the value of the Security Collateral or any part thereof or
adversely affect (A) the validity, perfection or priority of the
security interest and pledge granted or purported to be granted by
this Agreement or (B) the rights and remedies of the Administrative
Agent or the Secured Parties hereunder;
(ii) The Grantor shall be entitled to receive and retain any and
all dividends and interest paid in respect of the Security Collateral;
provided, however, unless the Credit Agreement expressly permits
-------- -------
otherwise, any and all
X-A-10
(A) dividends and interest paid or payable other than in
cash in respect of, and instruments and other property received,
receivable or otherwise distributed in respect of, or in exchange
for, any Security Collateral,
(B) dividends and other distributions paid or payable in
cash in respect of any Security Collateral in connection with a
partial or total liquidation or dissolution or in connection with
a reduction of capital, capital surplus or paid-in-surplus, and
(C) cash paid, payable or otherwise distributed in respect
of principal of, or in redemption of, or in exchange for, any
Security Collateral
shall be, and shall be forthwith delivered to the Administrative Agent
to hold as, Security Collateral and shall, if received by the Grantor,
be received in trust for the benefit of the Administrative Agent, be
segregated from the other property or funds of the Grantor and be
forthwith delivered to the Administrative Agent as Security Collateral
in the same form as so received (with any necessary or requested
endorsement).
(iii) The Administrative Agent shall execute and deliver (or
cause to be executed and delivered) to the Grantor all such proxies
and other instruments as the Grantor may reasonably request for the
purpose of enabling the Grantor to exercise the voting and other
rights that it is entitled to exercise pursuant to paragraph (i) above
and to receive the dividends or interest payments that it is
authorized to receive and retain pursuant to paragraph (ii) above.
(b) Upon the occurrence and during the continuance of a Default or Event
of Default:
(i) All rights of the Grantor (x) to exercise or refrain from
exercising the voting and other consensual rights that it would
otherwise be entitled to exercise pursuant to Section 10(a)(i) shall,
upon notice to the Grantor by the Administrative Agent, cease and (y)
to receive the dividends and interest payments that it would otherwise
be authorized to receive and retain pursuant to Section 10(a)(ii)
shall automatically cease, and all such rights shall thereupon become
vested in the Administrative Agent, which shall thereupon have the
sole right to exercise or refrain from exercising such voting and
other consensual rights and to receive and hold as Security Collateral
such dividends and interest payments.
(ii) All dividends and interest payments that are received by
the Grantor contrary to the provisions of paragraph (i) of this
Section 10(b) shall be received in trust for the benefit of the
Administrative Agent and the Secured Parties, shall be segregated from
other funds of the Grantor and shall be forthwith paid over to the
Administrative Agent as Security Collateral in the same form as so
received (with any necessary or requested endorsement).
AS TO PATENTS, TRADEMARKS, COPYRIGHTS, DESIGNS AND SOFTWARE LICENSES.
(a) Schedule II includes all Patents and Patent Licenses on the date
-----------
hereof.
(b) Schedule III includes all Trademarks and Trademark Licenses on the
------------
date hereof.
(c) Schedule IV includes all Copyrights and Copyright Licenses on the
-----------
date hereof.
X-A-11
(d) Schedule V includes all Designs and Design Licenses on the date hereof.
----------
(e) Schedule VI includes all Software Licenses on the date hereof.
-----------
(f) Except as set forth on Schedule II, III, IV or V, to the best of the
-------------------------
Grantor's knowledge, each Patent, Trademark, Copyright and Design is on the
date hereof valid, subsisting, unexpired, enforceable and has not been
abandoned.
(g) Except as set forth in Schedule II, III, IV or V, none of such Patents,
-------------------------
Trademarks, Copyrights or Designs is on the date hereof the subject of any
licensing or franchise agreement.
(h) Except as set forth on Schedule II, III, IV or V, no holding, decision
-------------------------
or judgment has been rendered by any governmental authority which would
limit, cancel or question the validity of any Patent, Trademark, Copyright
or Design in any respect that could reasonably be expected to have a
Material Adverse Effect.
(i) Except as set forth on Schedule II, III, IV or V, no action or
-------------------------
proceeding is pending on the date hereof (i) seeking to limit, cancel or
question the validity of any Patent, Trademark, Copyright or Design, or
(ii) which, if adversely determined, would have a material adverse effect
on the value of any material Patent, Trademark, Copyright or Design.
(j) The Grantor (either itself or through licensees) will (i) continue to
use each material Trademark of the Grantor on each and every trademark
class of goods applicable to its current line as reflected in its current
catalogs, brochures and price lists in order to maintain such Trademark in
full force free from any claim of abandonment for non-use, (ii) maintain as
in the past the quality of products and services offered under such
material Trademark, (iii) when using such material Trademark, xxxx the
products and services with the appropriate notice of registration, (iv) not
adopt or use any xxxx which is confusingly similar or a colorable imitation
of such material Trademark unless the Administrative Agent, for the ratable
benefit of the Secured Parties, shall obtain a perfected first priority
security interest in such xxxx pursuant to this Agreement, and (v) not (and
not permit any licensee or sublicensee thereof to) do any act or knowingly
omit to do any act whereby such material Trademark may become invalidated.
(k) The Grantor will not do any act, or omit to do any act, whereby any
material Patent or Design may become abandoned or dedicated.
(1) The Grantor will notify the Administrative Agent and the Secured
Parties immediately if it knows, or has reason to know, that any
application or registration relating to any material Patent or Trademark or
Design may become abandoned or dedicated, or of any adverse determination
or development (including, without limitation, the institution of, or any
such determination or development in, any proceeding in the Canadian
Intellectual Property Office or in a similar office in any other country or
any court or tribunal in any country) regarding the Grantor's ownership of
any material Patent or Trademark or Design or its right to register the
same or to keep and maintain the same.
X-A-12
(m) Whenever the Grantor, either by itself or through any agent, employee,
licensee or designee, shall file an application for the registration of any
Patent or Trademark or Design with the Canadian Intellectual Property
Office or any similar office or agency in any other country or any
political subdivision thereof, the Grantor shall report such filing to the
Administrative Agent and the Lender Parties within five Business Days after
the last day of the fiscal quarter in which such filing occurs. Upon
request of the Administrative Agent, the Grantor shall execute and deliver
any and all agreements, instruments, documents, and papers as the
Administrative Agent may reasonably request to evidence the Administrative
Agent's and the Secured Parties' security interest in any Patent or
Trademark or Design and the goodwill and general intangibles of the Grantor
relating thereto or represented thereby.
(n) The Grantor will take all reasonable and necessary steps, including,
without limitation, in any proceeding before the Canadian Intellectual
Property Office, or any similar office or agency in any other country or
any political subdivision thereof, to maintain and pursue each application
(and to obtain the relevant registration) and to maintain each registration
of the material Patents and Trademarks and Designs, including, without
limitation, filing of applications for renewal, affidavits of use and
affidavits of incontestability.
(o) In the event that any material Patent or Trademark or Design included
in the Collateral is infringed, misappropriated or diluted by a third
party, the Grantor shall (i) take such actions as the Grantor shall
reasonably deem appropriate under the circumstances to protect such Patent
or Trademark or Design and (ii) if such Patent or Trademark or Design is of
material economic value, promptly notify the Administrative Agent and the
Lender Parties after it learns thereof and xxx for infringement,
misappropriation or dilution, to seek injunctive relief where appropriate
and to recover any and all damages for such infringement, misappropriation
or dilution.
(p) The Grantor (either itself or through licensees) will (i) employ the
appropriate notice of copyright for each published work which is or may be
subject to copyright protection under the Copyright Act (Canada), Title 17
of the U.S. Code and other similar legislation in any other country (each
such published work, a "WORK") to the extent necessary to protect the
----
Copyright relating to such Work and (ii) not (and not permit any licensee
or sublicensee thereof to) do any act or knowingly omit to do any act
whereby any material Copyright may become invalidated, except where the
failure to take any such action would not reasonably be expected to have a
Material Adverse Effect.
(q) The Grantor will not (either itself or through licensees) do any act,
or omit to do any act, whereby any material Copyright may become injected
into or fall into the public domain, except where such action or the
failure to take any such action would not have a Material Adverse Effect.
(r) The Grantor will notify the Administrative Agent immediately if it
knows, or has reason to know, that any material Copyright may become
injected into or fall into the public domain or of any adverse
determination or development (including, without limitation, the
institution of, or any such determination or development in, any
X-A-13
proceeding in any court or tribunal in any country) regarding the Grantor's
ownership of any such Copyright or its validity and of any action the
Grantor is taking in respect of such event.
(s) Whenever the Grantor, either by itself or through any agent, employee,
licensee or designee, shall file an application for the registration of any
Copyright with the Canadian Intellectual Property Office or any similar
office in any other country or political subdivision thereof, the Grantor
shall report such filing to the Administrative Agent within five Business
Days after the last day of the fiscal quarter in which such filing occurs.
The Grantor shall execute and deliver any and all agreements, instruments,
documents and papers as shall be necessary or appropriate or as the
Administrative Agent reasonably may request to evidence the security
interest granted or purported to be granted to the Administrative Agent for
its benefit and the ratable benefit of the Secured Parties in such
Copyright and shall deliver to the Administrative Agent an officer's
certificate of the Grantor, in form and substance satisfactory to the
Administrative Agent as to compliance with this Section 11(s).
(t) The Grantor will take all reasonable and necessary steps, as it shall
deem appropriate under the circumstances, in accordance with its reasonable
business judgment, to maintain and pursue each application (and to obtain
the relevant registration) and to maintain to the extent permitted by law
each registration of each material Copyright owned by the Grantor
including, without limitation, filing of applications for renewal, where
necessary.
(u) The Grantor will promptly notify the Administrative Agent of any
material infringement of any material Copyright owned by it of which it
becomes aware and will take such actions as it shall reasonably deem
appropriate under the circumstances to protect such Copyright, including,
where appropriate in its reasonable business judgment, the bringing of suit
or the settling of actual or potential suits for infringement, seeking
injunctive relief and seeking to recover any and all damages for such
infringement.
TRANSFERS AND OTHER LIENS; ADDITIONAL SHARES.
(a) The Grantor shall not, except as otherwise permitted by the Credit
Agreement (i) sell, assign (by operation of law or otherwise) or otherwise
dispose of, or grant any option with respect to, any of the Collateral, or
(ii) create or suffer to exist any Lien upon or with respect to any of the
Collateral except for the pledges, assignments and security interests
created by this Agreement.
(b) The Grantor shall (i) cause each issuer of the Pledged Shares not to
issue any shares or other Securities in addition to or in substitution for
the Pledged Shares issued by such issuer, except to the Grantor, and (ii)
pledge hereunder, immediately upon its acquisition (directly or indirectly)
thereof, any and all additional shares of capital or other Securities of
each issuer of the Pledged Shares.
X-A-14
ADMINISTRATIVE AGENT APPOINTED ATTORNEY-IN-FACT.
The Grantor hereby irrevocably appoints the Administrative Agent and any
officer or agent thereof, with full power of substitution, the Grantor's
attorney-in-fact, with full authority in the place and stead of the Grantor
and in the name of the Grantor or otherwise, from time to time in the
Administrative Agent's discretion, to take any action and to execute any
instrument that the Administrative Agent may deem necessary or advisable to
accomplish the purposes of this Agreement, including, without limitation:
(a) to obtain and adjust insurance required to be paid to the
Administrative Agent pursuant to the Credit Agreement or Section 8,
(b) to ask for, demand, collect, xxx for, recover, compromise, receive and
give acquittance and receipts for moneys due and to become due under or in
respect of any of the Collateral,
(c) to receive, endorse and collect any drafts or other Instruments,
Documents of Title and Chattel Paper, in connection with clause (a) or (b)
above,
(d) in the case of any Patent, Trademark, Copyright or Design, execute and
deliver any and all agreements, instruments, documents, and papers as the
Administrative Agent may request to evidence the Administrative Agent's and
the Secured Parties' security interest in such Patent, Trademark, Copyright
or Design and the goodwill and general intangibles of the Grantor relating
thereto or represented thereby; and
(e) to file any claims or take any action or institute any proceedings that
the Administrative Agent may deem necessary or desirable for the collection
of any of the Collateral or otherwise to enforce compliance with the terms
and conditions of any Related Contract or the rights of the Administrative
Agent with respect to any of the Collateral.
Anything in this Section 13 to the contrary notwithstanding, the Administrative
Agent agrees that it will not exercise any rights under the power of attorney
provided for in this Section 13 unless an Event of Default shall have occurred
and be continuing. The Grantor hereby ratifies all that said attorney shall
lawfully do or cause to be done by virtue hereof. All powers, authorizations
and agencies contained in this Agreement are coupled with an interest and are
irrevocable until this Agreement is terminated and the security interests
created hereby are released.
ADMINISTRATIVE AGENT MAY PERFORM.
If the Grantor fails to perform any agreement contained herein, the
Administrative Agent may itself perform, or cause performance of, such
agreement, and the expenses of the Administrative Agent incurred in
connection therewith shall be payable by the Grantor under Section 17(b).
THE ADMINISTRATIVE AGENT'S DUTIES.
The powers conferred on the Administrative Agent hereunder are solely to
protect its interest in the Collateral and shall not impose any duty upon
it to exercise any such powers. Except for the safe custody of any
Collateral in its possession and the
X-A-15
accounting for money actually received by it hereunder, the Administrative
Agent shall have no duty as to any Collateral , as to ascertaining or
taking action with respect to calls, conversions, exchanges, maturities,
tenders or other matters relative to any Security Collateral, whether or
not the Administrative Agent or any other Secured Party has or is deemed to
have knowledge of such matters, or as to the taking of any necessary steps
to preserve rights against any parties or any other rights pertaining to
any Collateral. The Administrative Agent shall be deemed to have exercised
reasonable care in the custody and preservation of any Collateral in its
possession if such Collateral is accorded treatment substantially equal to
that which the Administrative Agent accords its own property.
REMEDIES
If any Event of Default shall have occurred and be continuing:
(a) The Administrative Agent may exercise in respect of the Collateral, in
addition to other rights and remedies provided for herein or otherwise
available to it, all the rights and remedies of a secured party under the
PPSA and other applicable laws and also may (i) require the Grantor to, and
the Grantor hereby agrees that it will at its expense and upon request of
the Administrative Agent forthwith, assemble all or part of the Collateral
as directed by the Administrative Agent and make it available to the
Administrative Agent at a place to be designated by the Administrative
Agent that is reasonably convenient to both parties and (ii) without notice
except as specified below, sell the Collateral or any part thereof in one
or more parcels at public or private sale, at any of the Administrative
Agent's offices or elsewhere, for cash, on credit or for future delivery,
and upon such other terms as the Administrative Agent may deem commercially
reasonable. The Grantor agrees that, to the extent notice of sale shall be
required by law, fifteen days' notice to the Grantor of the time and place
of any public sale or the time after which any private sale is to be made
shall constitute reasonable notification. The Administrative Agent shall
not be obligated to make any sale of Collateral regardless of notice of
sale having been given. The Administrative Agent may adjourn any public or
private sale from time to time by announcement at the time and place fixed
therefor, and such sale may, without further notice, be made at the time
and place to which it was so adjourned.
(b) The Administrative Agent may appoint or reappoint by instrument in
writing, any person or persons, whether an officer or officers or an
employee or employees of the Administrative Agent or not, to be a receiver
or receivers (hereinafter called a "RECEIVER", which term when used herein
shall include a receiver and manager) of Collateral (including any
interest, income or profits therefrom) and may remove any Receiver so
appointed and appoint another in his/her stead. Any such Receiver shall,
so far as concerns responsibility for his/her acts, be deemed the agent of
the Grantor and not of the Administrative Agent or any Lender Parties, and
neither the Administrative Agent nor any Lender Parties shall be in any way
responsible for any misconduct, negligence or non-feasance on the part of
any such Receiver, his/her servants, agents or employees. Subject to the
provisions of the instrument appointing him/her, any such Receiver shall
have power to take possession of Collateral, to preserve Collateral or its
value, to carry
X-A-16
on or concur in carrying on all or any part of the business of the Grantor
and to sell, lease, license or otherwise dispose of or concur in selling,
leasing, licensing or otherwise disposing of Collateral. To facilitate the
foregoing powers, any such Receiver may, to the exclusion of all others,
including the Grantor, enter upon, use and occupy all premises owned or
occupied by the Grantor wherein Collateral may be situate, maintain
Collateral upon such premises, borrow money on a secured or unsecured basis
and use Collateral directly in carrying on the Grantor's business or as
security for loans or advances to enable the Receiver to carry on the
Grantor's business or otherwise, as such Receiver shall, in its discretion,
determine. Except as may be otherwise directed by the Administrative Agent,
all Money received from time to time by such Receiver in carrying out
his/her appointment shall be received in trust for and paid over to the
Administrative Agent. Every such Receiver may, in the discretion of the
Administrative Agent, be vested with all or any of the rights and powers of
the Administrative Agent. The Administrative Agent may, either directly or
through its agents or nominees, exercise any or all of the powers and
rights given to a Receiver by virtue of this Section 16.
(c) All cash proceeds received by the Administrative Agent in respect of
any sale of, collection from, or other realization upon all or any part of
the Collateral may, in the discretion of the Administrative Agent, be held
by the Administrative Agent as collateral for, and/or then or at any time
thereafter applied (after payment of any amounts payable to the
Administrative Agent pursuant to Section 17) in whole or in part by the
Administrative Agent for the ratable benefit of the Lender Parties against,
all or any part of the Secured Obligations in such order as the
Administrative Agent shall elect. Any surplus of such cash or cash proceeds
held by the Administrative Agent and remaining after payment in full of all
the Secured Obligations shall be paid over to the Grantor or to whomsoever
may be lawfully entitled to receive such surplus.
(d) The Administrative Agent may exercise any and all rights and remedies
of the Grantor under or in connection with the Related Contracts or
otherwise in respect of the Collateral, including, without limitation, any
and all rights of the Grantor to demand or otherwise require payment of any
amount under, or performance of any provision of, any Related Contract.
(e) All payments received by the Grantor under or in connection with any
Related Contract or otherwise in respect of the Collateral shall be
received in trust for the benefit of the Administrative Agent, shall be
segregated from other funds of the Grantor and shall be forthwith paid over
to the Administrative Agent in the same form as so received (with any
necessary or requested endorsement).
(f) The Administrative Agent may, without notice to the Grantor except as
required by law and at any time or from time to time, charge, set-off and
otherwise apply all or any part of the Secured Obligations against the
Letter of Credit Cash Collateral Account or any part thereof.
X-A-17
INDEMNITY AND EXPENSES.
(a) The Grantor agrees to indemnify the Administrative Agent, and any
Receiver appointed by it, and each other Secured Party from and against any
and all claims, losses and liabilities growing out of or resulting from
this Agreement (including, without limitation, enforcement of this
Agreement), except to the extent such claims, losses or liabilities result
from the Administrative Agent's, Receiver's or Secured Parties' gross
negligence or willful misconduct as determined by a final judgment of a
court of competent jurisdiction.
(b) The Grantor agrees upon demand to pay to the Administrative Agent the
amount of any and all reasonable expenses, including the reasonable fees
and expenses of counsel and of any experts and agents, that the
Administrative Agent or its Receiver may incur in connection with (i) the
administration of this Agreement, (ii) the custody, preservation, use or
operation of, or the sale of, collection from or other realization upon,
any of the Collateral, (iii) the exercise or enforcement of any of the
rights of the Administrative Agent or any Secured Party hereunder or (iv)
the failure by the Grantor to perform or observe any of the provisions
hereof.
WAIVERS; DEFICIENCY.
The Grantor waives protest of any Instrument constituting Collateral at any
time held by Administrative Agent on which the Grantor is in any way
liable. The Grantor shall remain liable for any deficiency if the proceeds
of any sale or other disposition of the Collateral are insufficient to pay
the Secured Obligations and the fees and disbursements of legal counsel
employed by the Administrative Agent or any Secured Party to collect such
deficiency.
AMENDMENTS; WAIVERS; ETC.
Subject to the Intercreditor Agreement, no amendment or waiver of any
provision of this Agreement, and no consent to any departure by the Grantor
herefrom, 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 or, if required pursuant to the Credit
Agreement, all Lender Parties), and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for
which given. No failure on the part of the Administrative Agent to
exercise, and no delay in exercising any right hereunder, 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.
ADDRESSES FOR NOTICES.
All notices and other communications provided for hereunder shall be in
writing (including telecopier, telegraphic, telex or cable communication)
and, mailed, telegraphed, telecopied, telexed, cabled or delivered to the
Grantor or to the Administrative Agent, as the case may be, in each case
addressed to it at its address
X-A-18
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 complying as to delivery with the terms of this Section 20. All
such notices and other communications shall, when mailed, telecopied,
telegraphed, telexed or cabled, respectively, be effective when deposited
in the mails, telecopied, delivered to the telegraph company, confirmed by
telex answerback or delivered to the cable company, respectively, addressed
as aforesaid.
CONTINUING SECURITY INTEREST; ASSIGNMENTS UNDER THE CREDIT AGREEMENT.
This Agreement shall create a continuing security interest in the
Collateral and shall (a) remain in full force and effect until the last to
occur of (i) the payment in full in cash of the Secured Obligations, (ii)
the Revolving Commitment Termination Date, (iii) the Term A Termination
Date, (iv) the Term B Termination and (v) the expiration or termination of
all Bank Hedge Agreements (as defined in the Credit Agreement), (b) be
binding upon the Grantor, its successors and assigns and (c) inure,
together with the rights and remedies of the Administrative Agent
hereunder, to the benefit of the Administrative Agent, the Secured Parties
and their respective successors, transferees and assigns. Without limiting
the generality of the foregoing clause (c), any Secured Party may assign or
otherwise transfer all or any portion of its rights and obligations under
this Agreement to any person to whom any portion of the Secured Obligations
is transferred in accordance with the Credit Agreement (including, without
limitation, all or any portion of its Commitments, the Loans owing to it
and the Note or Notes (if any) held by it to any other Person, and such
other Person shall thereupon become vested with all the benefits in respect
thereof granted to such Lender Party herein or otherwise, in each case to
the extent provided in Section 9.07 of the Credit Agreement.
X-A-19
RELEASE AND TERMINATION.
(a) Upon any sale, lease, transfer or other disposition of any item of
Collateral permitted in accordance with the terms of the Loan Documents
(other than sales of Inventory in the ordinary course of business), the
Administrative Agent will, at the Grantor's expense, execute and deliver to
the Grantor such documents as the Grantor shall reasonably request to
evidence the release of such item of Collateral from the assignment and
security interest granted hereby; provided, however, that (i) at the time
of such request and such release no Event of Default shall have occurred
and be continuing, (ii) the Grantor shall have delivered to the
Administrative Agent, at least ten Business Days prior to the date of the
proposed release, a written request for release describing the item of
Collateral and the terms of the sale, lease, transfer or other disposition
in reasonable detail, including the price thereof and any expenses in
connection therewith, together with a form of release for execution by the
Administrative Agent and a certification by the Grantor to the effect that
the transaction is permitted in compliance with the Loan Documents and as
to such other matters as the Administrative Agent may request, (iii) the
proceeds of any such sale, lease, transfer or other disposition required to
be applied in accordance with Section 2.04 of the Credit Agreement shall be
paid to, or in accordance with the instructions of the Administrative
Agent.
(b) Subject to Section 22(c) below, upon the last to occur of (i) the
payment in full in cash of the Secured Obligations, (ii) the Revolving
Commitment Termination Date, (iii) the Term A Termination Date, (iv) the
Term B Termination Date, and (v) the expiration or termination of all Bank
Hedge Agreements (as defined in the Credit Agreement), the pledge,
assignment and security interest granted hereby shall terminate and all
rights to the Collateral shall revert to the Grantor. Upon any such
termination, the Administrative Agent will, at the Grantor's expense,
execute and deliver to the Grantor such documents as the Grantor shall
reasonably request to evidence such termination.
(c) This Agreement shall continue to be effective or be reinstated, as the
case may be, if at any time any amount received by the Administrative Agent
or any Secured Party in respect of the Secured Obligations is rescinded or
must otherwise be restored or returned by the Administrative Agent or any
Secured Party upon the insolvency, bankruptcy, dissolution, liquidation or
reorganization of the Grantor or any other Person or upon the appointment
of any Receiver, intervenor, conservator, trustee or similar official for
the Grantor or any other Person or any substantial part of its assets, or
otherwise, all as though such payments had not been made.
ACKNOWLEDGEMENT RESPECTING PLEDGE AND LIEN ON SHARES OF GRANTOR
The Grantor acknowledges that it has received a copy of the Security
Agreement dated as of the date hereof executed by all of the Loan Parties
other than the Grantor in favour of the Administrative Agent and the US
Administrative Agent (as amended, supplemented, restated and otherwise
modified from time to time, the "US SECURITY AGREEMENT") and the Grantor
---------------------
hereby acknowledges and consents to all provisions of the US Security
Agreement relating to all Security Collateral (as defined in the US
Security Agreement)
X-A-20
in the Grantor which is pledged, or in which a Lien is granted, to the
Administrative Agent.
SECURITY INTEREST ABSOLUTE.
The obligations of the Grantor under this Agreement are independent of the
Secured Obligations, and a separate action or actions may be brought and
prosecuted against the Grantor to enforce this Agreement, irrespective of
whether any action is brought to enforce the Secured Obligations or whether
the Grantor is joined in any such action or actions. All rights of the
Administrative Agent and the other Secured Parties and the pledge,
assignment and security interest hereunder, and all obligations of the
Grantor hereunder, shall be absolute and unconditional, irrespective of:
(a) any lack of validity or enforceability of any Loan Document or any
other agreement or instrument relating thereto;
(b) any change in the time, manner or place of payment of, or in any other
term of, all or any of the Secured Obligations or any other amendment or
waiver of or any consent to any departure from any Loan Document,
including, without limitation, any increase in the Secured Obligations
resulting from the extension of additional credit to the Grantor or any of
its Subsidiaries or otherwise;
(c) any taking, exchange, release or non-perfection of any other
collateral, or any taking, release or amendment or waiver of or consent to
departure from any guaranty, for all or any of the Secured Obligations;
(d) any manner of application of collateral, or proceeds thereof, to all or
any of the Secured Obligations, or any manner of sale or other disposition
of any collateral for all or any of the Secured Obligations or any other
assets of the Grantor or any of its Subsidiaries;
(e) any change, restructuring or termination of the corporate structure or
existence of the Grantor or any of its Subsidiaries or any Loan Party; or
(f) any other circumstance that might otherwise constitute a defense
available to, or a discharge of, the Grantor or a third party grantor of a
security interest.
GOVERNING LAW.
This Agreement shall be governed by and construed in accordance with the
laws of the Province of Ontario except to the extent that the validity or
perfection of the security interest hereunder, or remedies hereunder, in
respect of any particular Collateral are governed by the laws of a
jurisdiction other than the Province of Ontario.
X-A-21
IN WITNESS WHEREOF, the Grantor has caused this Agreement to be duly
executed and delivered by its officer thereunto duly authorized as of the
date first above written.
PANOLAM INDUSTRIES LTD.
an Ontario corporation
By:_________________________________________
Name:
Title:
X-A-22
EXHIBIT XXXX-X
XXXX XX XXXXXXX XX XXXXXXXX'X XXXXXXXX XXXXXXX
00000
February , 1999
Credit Suisse First Boston Canada, as an - and -
Initial Lender and as
Administrative Agent Each of the US Lenders
One First Canadian Place party to the US Credit Agreement
Credit Agreement
Xxxxx 0000, X.X. Xxx 000
Xxxxxxx, Xxxxxxx X0X 0X0 - and-
- and- DLJ Capital Funding, Inc., as
Syndication Agent
Royal Bank of Canada, as an
Initial Lender and as - and-
Documentation Agent
1 Place Ville Xxxxx XxXxxxxx Xxxxx
8th Floor, East Wing Xxxxx 0000, Xxxxx Xxxxx
Xxxxxxxx, Xxxxxx X0X 0X0 Xxxxx Xxxx Xxxxx
Xxxxxxx, Xxxxxxx X0X 0X0
- and-
- and-
Each of the other Initial Lenders party to
the Credit Agreement Xxxxxx & Xxxxxxx
000 Xxxx 0xx Xxxxxx
- and - Xxxxx 0000
Xxx Xxxxxxx, XX 00000-0000
Credit Suisse First Boston, as U.S.A.
US Administrative Agent
Dear Sirs:
PANOLAM INDUSTRIES LTD.
-----------------------
We have acted as counsel to Panolam Industries Ltd. (the "Borrower")
and Canadian counsel to Panolam Industries Holdings, Inc. ("Holdings"), Panolam
Group, Inc. ("Group"), PII
XIIIA-1
Second, Inc. ("PII Second"), Panolam Industries International, Inc. ("Panolam
International"), Panolam Industries, Inc. ("Panolam U.S.") and Pioneer Plastics
Corporation ("Pioneer") (Holdings, Group, PII Second, Panolam International,
Panolam U.S. and Pioneer are collectively referred to as the "Guarantors" and
individually as a "Guarantor"), in connection with the credit agreement made as
of February 16, 1999 between the Borrower, the other Loan Parties signatory
thereto, the financial institutions and other entities listed on the signature
pages as initial Lenders ("Initial Lenders"), Credit Suisse First Boston Canada,
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") and the transactions contemplated thereby. Unless otherwise
indicated, all capitalized terms used but not otherwise defined in this opinion
letter have the respective meanings given to them in the Credit Agreement.
In our capacity as counsel to the Borrower and the Guarantors, we have
participated in the preparation and settlement of the following documents (the
"Documents"), each of which is dated, unless otherwise specified, on or as of
February 16, 1999:
(a) the Credit Agreement;
(b) the Notes dated February , 1999;
(c) the Security Agreement made by the Borrower in favour of the
Administrative Agent;
(d) the Agreement Respecting Intellectual Property;
(e) the Charge/Mortgage of land made by the Borrower in favour of the
Administrative Agent (the "Charge/Mortgage");
(f) the general assignment of rents made by the Borrower in favour of the
Administrative Agent (the "Assignment of Rents");
(g) the intercompany subordinated demand promissory note of the Borrower
in favour of Panolam International in the principal amount of US$
(the "Borrower Note");
(h) the Intercreditor Agreement;
(i) the Acknowledgement Respecting Sales Agreements; and
(j) the confidential fee letter dated January 4, 1999 between DLJ Capital
Funding, Inc., Xxxxxxxxx, Lufkin & Xxxxxxxx Securities Corporation,
Credit Suisse First Boston, Panolam International and the Borrower.
XXXXX-0
Xxxxx (x), (x), (x), (x), (x), (x) and (i) above are collectively
referred to below as the "Ontario Documents". The Documents other than the
Ontario Documents, together with the Guaranty and the US Security Agreement (as
hereinafter defined), are collectively referred to below as the "US Documents".
Items (a) and (c) above are referred to below as the "PPSA Security Documents".
Items (e) and (f) above are referred to below as the "Real Property Security
Documents".
We have also examined such corporate records of the Borrower,
including without limitation the unanimous shareholder agreement executed by
Panolam International in respect of the Borrower (the "USA"), such certificates
of officers of the Borrower and of other Loan Parties (copies of which have been
provided to you), public officials and others and originals, copies or
facsimiles of such other agreements, instruments, certificates and documents as
we have deemed necessary or advisable as a basis for the opinions expressed
below. In particular, as to certain matters of fact relevant to the opinions
expressed below, we have relied on a certificate of an officer of the Borrower,
a copy of which is attached hereto.
[We attended at the Land Registry Office for the Registry Division of
Muskoka (No. 35) on , 1999 and registered the Charge/Mortgage as Instrument No.
and the Assignment of Rents as Instrument No. .] In rendering the opinion below
in paragraph 6 as it relates to enforceability of the Real Property Security
Documents, we express no opinion as to title to the real property (the
"Huntsville Property") charged by the Charge/Mortgage and we have assumed that
the Borrower has good and marketable title to the Huntsville Property. In this
regard, we refer you to the lender's policies of title insurance dated February
, 1999 in respect of the Huntsville Property issued by First American Title
Insurance Company in favour of the Administrative Agent.
We have also examined the following materials in connection with the
opinions expressed below:
(a) a certificate with a currency date of February m, 1999 issued under
the Personal Property Security Act (Ontario) (the "PPSA") with respect
to the financing statement filed by or on behalf of the Administrative
Agent to perfect the security interests of the Administrative Agent
and the Lenders under the PPSA Security Documents under Reference File
No. 847650699 with Registration No. 990113 1721 1590 8915, as amended
by financing change statement Registration No. 990122 0000 0000 0000
and financing change statement Registration No. 990127 1734 1590 9174
(the "Financing Statement");
(b) for the purposes only of our opinions in paragraphs 16, 17 and 18
below, the US Credit Agreement;
XIIIA-3
(c) for the purposes only of our opinions in paragraphs 16, 17 and 18
below, the Guaranty; and
(d) for the purposes only of our opinions in paragraphs 11, 13, 14, 16, 17
and 18 below, the Security Agreement made by the Guarantors in favour
of the US Administrative Agent and the Administrative Agent (the "US
Security Agreement").
For the purposes of the opinions expressed below, we have, without
independent investigation or verification, assumed:
(a) the genuineness of all signatures, the legal capacity of all
individuals, the authenticity of all documents submitted to us as
originals and the conformity to authentic originals of all documents
submitted to us as certified or photostatic copies or as facsimiles;
(b) each of the Guarantors is a corporation incorporated and existing
under the laws of its jurisdiction of incorporation;
(c) each of the Guarantors has the corporate power to execute and deliver
each of the Ontario Documents to which it is a party and to perform
its obligations thereunder and, in the case of Panolam International,
to endorse the Pledged Shares (as hereinafter defined) and the
Borrower Note pursuant to the US Security Agreement(collectively, the
"Endorsements");
(d) all necessary corporate action has been taken by each of the
Guarantors to authorize the execution and delivery by it of each of
the Ontario Documents to which it is a party and the performance by it
of its respective obligations thereunder and, in the case of Panolam
International, the Endorsements;
(e) each of the Guarantors has duly executed and delivered each of the
Ontario Documents to which it is a party and Panolam International has
duly executed and delivered the Endorsements, under the laws of its
respective jurisdiction of incorporation and the laws of any
jurisdiction other than the Province of Ontario in which such
execution and/or delivery occurred;
(f) the execution, delivery and performance by any Guarantor of the Credit
Agreement and the other Documents to which it is a party and the
performance by it of its obligations thereunder and, in the case of
Panolam International, the Endorsements, do not contravene, result in
a breach of or constitute a default under (i) its articles or by-laws,
(ii) any resolution of its directors (or any committee of directors)
or shareholders or (iii) any laws of any jurisdiction other than the
Province of Ontario
XIIIA-4
in which any of the obligations of any Loan Party under any of the
Ontario Documents may be performed;
(g) each of the Documents has been duly authorized, executed and delivered
by, and constitutes a legal, valid, binding and enforceable obligation
of, each party thereto other than the Borrower or the Guarantors;
(h) each item of collateral referred to in the PPSA Security Documents
exists or, in the case of after-acquired property, will exist, and the
Borrower has or, in the case of after-acquired property, will have
sufficient rights in each such item for the security interest of the
Administrative Agent to attach;
(i) none of the Collateral constitutes consumer goods within the meaning
of the PPSA; and
(j) the US Security Agreement (i) constitutes a legal, valid, binding and
enforceable obligation of Panolam International, (ii) creates a
security interest in favour of the Administrative Agent for the
rateable benefit of the Administrative Agent and the Lenders in all
the issued and outstanding shares of the capital of the Borrower (the
"Pledged Shares"), (iii) subject to the security interest referred to
in (ii) above and the Intercreditor Agreement, creates a security
interest in favour of the US Administrative Agent for the rateable
benefit of the US Administrative Agent and the US Lenders in 65% of
the Pledged Shares and (iv) creates a security interest in the
Borrower Note, on the terms set out therein and in the Intercreditor
Agreement.
We understand you will receive an opinion of Xxxxxxx, Phleger &
Xxxxxxxx LLP dated this date in respect of items (b) through (f) and (j) above.
The opinions expressed below are also subject to the following
limitations, qualifications and restrictions:'
(a} the enforceability of the Ontario Documents is subject to bankruptcy,
insolvency and other laws affecting the rights of creditors generally;
(b) equitable remedies, including, without limitation, specific
performance and injunction, may be granted only in the discretion of a
court of competent jurisdiction;
(c) the costs of and incidental to all proceedings authorized to be taken
in court or before a judge are in the discretion of the court or a
judge, and the court or judge has full power to determine by whom and
to what extent such costs shall be paid;
XIIIA-5
(d) a judgment of a Canadian court may be awarded only in Canadian
currency(provided, however, that an Ontario court would give effect to
Section 9.12 of the Credit Agreement in accordance with subsection 121
(4) of the Courts of Justice Act(Ontario));
(e) if the Administrative Agent or the Lenders declare any of the
indebtedness of the Borrower under the Ontario Documents to be
forthwith due and payable by reason of the occurrence of an Event of
Default or demand repayment of any indebtedness of the Borrower
expressed to be payable on demand under the Ontario Documents, the
Administrative Agent or the Lenders may be required to give the
Borrower a reasonable time to pay such indebtedness prior to taking
any action to enforce their right to repayment or before exercising
any of the rights and remedies available to the Administrative Agent
or the Lenders as a result of the occurrence of such Event of Default
or as a result of such demand, as the case may be;
(f) the Ontario Documents may be unenforceable to the extent that a court
determines that an amount payable under the Ontario Documents
constitutes a penalty and not a reasonable pre-estimate of damages;
(g) as to the ranking or priority of any of the security interests or
charges created by the PPSA Security Documents in the Collateral, or
(ii) as to the right, title and interest of any person in and to any
real or personal property;
(h) the enforceability of any provision of any of the Ontario Documents
exculpating a person from a liability or duty otherwise owed by it,
waiving legal and equitable defences, agreeing not to challenge the
validity or enforceability of remedies or that provides that a
determination or calculation made by a person is conclusive and
binding on any other person may be limited by law;
(i) notwithstanding that provisions of the Ontario Documents provide that
any receiver appointed under such Ontario Documents shall for all
purposes deemed to be the agent of the Borrower and not the agent of
the Administrative Agent or any of the Lenders, in certain
circumstances the receiver may be held by a court to be acting as an
agent of the Administrative Agent or of the Lenders and not the
Borrower;
(j) no opinion is expressed as to whether the Ontario Documents comply
with Part VII of the Financial Administration Act (Canada) in respect
of any assignment of Crown debts (as defined in such Act) and, to our
knowledge, no steps have been taken to provide the notices or obtain
the acknowledgements provided for in Part VII of that Act. An
assignment of Crown debts to which Part VII of that Act applies that
does
XIIIA-6
not comply with, that Act is ineffective as between assignor and
assignee and as against the Crown and therefore the Administrative
Agent and the Lenders would not have a valid assignment of such Crown
debts and the Ontario Documents may not create an effective security
interest in such Crown debts unless that Act is complied with;
(k) insofar as any of the security provided for in the PPSA Security
Documents consists of a mortgage, pledge, charge or assignment of or
upon any lease, agreement or other-document or any rent, income or
other interest derived from any lease, agreement or other document,
our opinion pertaining thereto is subject to the qualification that
notice of such security interest may have to be given to the obligor
thereunder, and further that the party intended to be secured thereby
may be affected by the equities between the immediate parties thereto;
(l) while registration of a financing statement pursuant to the PPSA may
perfect a security interest in the trade-marks, patents, copyrights
and industrial designs of the Borrower, the security interest therein
may be subject to the interest of a third party who registers a
transfer or assignment of a trade-xxxx, patent, copyright or
industrial design of the Borrower, or of an interest therein, pursuant
to the applicable federal statute governing such property, unless the
interest of the Administrative Agent and the Lenders has been
registered by way of a transfer or assignment pursuant to such statute
prior to the registration made by such third party;
(m) the exercise of certain remedies provided in the Documents may be
affected by the provisions of Part V of the PPSA, but such provisions
do not make the Documents legally inadequate for the practical
realization of the principal benefits of the security purported to be
provided thereby;
(n) no opinion is given as to whether it may be necessary, in connection
with the enforcement of any of the PPSA Security Documents, for any
person proposing to acquire or own all or any part of the Collateral
to obtain any licence, franchise, permit, consent, approval,
registration or other authorization or exemption;
(o) [other than with respect to the Huntsville Property against which the
Administrative Agent has registered the Real Property Security
Documents,] if the collateral subject to the security interest granted
under the PPSA Security Documents includes fixtures or goods that may
become fixtures or rights to payment under a lease, mortgage or charge
of real property to which the PPSA applies, a notice in the prescribed
form under the PPSA must be registered in the appropriate land
registry office in order to preserve the priority of the security
interest in relation to the rights of other persons with interests in
the real property;
XIIIA-7
(p) where the collateral under the PPSA Security Documents includes a
motor vehicle classified as equipment of the Borrower (other than a
motor vehicle, the vehicle identification number of which is set out
in the Financing Statement) that is sold by the Borrower out of the
ordinary course of business, the buyer of such motor vehicle will take
it free and clear of the security interest created in the PPSA
Security Documents unless the vehicle identification number of the
motor vehicle is set out in a financing statement registered by the
Administrative Agent;
(q) each of the Ontario Documents (other than the Credit Agreement) may be
subject to the provisions of the Credit Agreement, and the face amount
of the indebtedness expressed to be owing under the Charge/Mortgage,
the Notes and the Borrower Note may be greater than the actual amount
of indebtedness owing by the Borrower thereunder;
(r) our opinion expressed in paragraph 16 below is based on the provisions
of the Income Tax Act (Canada) in effect on this date and on our
understanding of the current administrative practices of Revenue
Canada; and
(s) we express no opinion on paragraphs 24, 30, 31, 33 and 36 of the
standard charge terms attached to the Charge/Mortgage.
The opinions expressed below are limited to the laws of the Province
of Ontario and the federal laws of Canada applicable in that province
(collectively, "Applicable Laws"). In particular, without limiting the
generality of the immediately preceding sentence, no opinion is expressed with
respect to the laws of any other jurisdiction to the extent such laws may govern
the validity, perfection, effect of perfection or non-perfection or enforcement
of the security interests created by the PPSA Security Documents as a result of
the application of Ontario conflict of laws rules, including, without
limitation, the provisions of the PPSA. In addition, we express no opinion as to
whether Ontario law governs the validity, perfection, effect of perfection or
non-perfection or enforcement of such security interests.
Based and relying upon and subject to the foregoing, we are of the
opinion that:
1. The Borrower is incorporated and existing under the Business
Corporations Act (Ontario).
2. The Borrower has all necessary corporate power and authority to carry
on its business as presently conducted, to own or lease its existing
property and assets, to execute and deliver each of the Documents and to
perform its obligations under the Documents.
XIIIA-8
3. The execution and delivery of each of the Documents by the Borrower
and the performance of its obligations thereunder have been duly authorized
by all necessary corporate action on the part of the Borrower.
4. The execution and delivery of the Documents by each of the Loan
Parties and the performance by each of the Loan Parties of its obligations
thereunder do not contravene, result in a breach of or constitute a default
under (i) the articles or by-laws of the Borrower, (ii) the USA, (iii) any
resolution of the directors (or any committee of directors) or shareholders
of the Borrower, (iv) any Material Contract to which the Borrower is a
party listed on Schedule 5.01(t) to the Credit Agreement, or (v) any
Applicable Laws.
5. To the extent only that delivery of the Credit Agreement by the
Guarantors is a matter of Ontario law, the Credit Agreement has been duly
delivered by each of the Guarantors.
6. Each Ontario Document has been duly executed and delivered by the
Borrower and constitutes a legal, valid and binding obligation of the
Borrower, enforceable against the Borrower by the Administrative Agent and
(to the extent applicable) the Lender Parties, in accordance with its
respective terms .
7. Each of the Ontario Documents to which any of the Guarantors is a
party constitutes a legal, valid and binding obligation of such Guarantor,
enforceable by the Administrative Agent and the Lender Parties against such
Guarantor in accordance with its terms.
8. Each PPSA Security Document creates in favour of the Administrative
Agent for itself and on behalf of the Lender Parties, a security interest
under the PPSA in all right, title and interest of the Borrower in and to
the collateral referred to therein to which the PPSA is applicable to
secure payment and performance of the obligations referred to therein.
9. The security interest created under each PPSA Security Document in the
right, title and interest of the Borrower in and to the collateral referred
to therein has, to the extent capable of perfection by registration under
the PPSA, been duly perfected, and no further registration, recording or
filing in any office of public record maintained under the laws of the
Province of Ontario is required at this time to perfect such security
interest under the PPSA.
10. The authorized capital of the Borrower consists of an unlimited
number of Class A common shares and an unlimited number of Class B non-
voting shares, of which 100,000 Class A common shares and no Class B non-
voting shares have been issued and are outstanding as fully paid and non-
assessable. The said 100,000 issued and outstanding Class
XIIIA-9
A common shares of the Borrower are registered in the books of the Borrower
in the name of Panolam International.
11. All consents, approvals or authorizations required under the articles
or by- laws of the Borrower or Applicable Laws and all necessary action by
the Borrower or its shareholders or directors has been obtained or taken to
authorize the transfer on the share register of the Borrower of all of the
Pledged Shares to the Administrative Agent or its nominee, or of up to 65%
of the Pledged Shares to the US Administrative Agent or its nominee, and a
subsequent transfer on the share register of the Borrower by the
Administrative Agent or its nominee, or (as to up to 65% of the Pledged
Shares) by the US Administrative Agent or its nominee, to any other party
the Administrative Agent or the US Administrative Agent may determine in
connection with any sale or other proceedings in respect of the Pledged
Shares pursuant to the US Security Agreement.
12. Other than filings required to preserve or perfect the security
interests granted under the Ontario Documents (as to which we refer to our
opinion in paragraph 9 above), no authorization, consent, approval, or
licence of, or other action by, or filing with, any Ontario or Canadian
federal government or regulatory authority or agency is required to be
obtained by the Borrower at this time in connection with the execution and
delivery by the Borrower of the Documents and the performance of its
obligations thereunder.
13. Assuming that the Administrative Agent has given value to Panolam
International in respect of the Pledged Shares pursuant to the US Security
Agreement and the Administrative Agent is acting in good faith (as such
term is defined in the Business Corporations Act (Ontario)) and has no
notice of any adverse claim (as defined in the Business Corporations Act
(Ontario)) affecting the Pledged Shares, upon delivery to the
Administrative Agent by Panolam International of share certificates
evidencing the Pledged Shares bearing the applicable Endorsement, the
Administrative Agent will acquire a security interest in the Pledged Shares
free from any adverse claim. To the extent that the Endorsement of the
Pledged Shares is governed by Ontario law, such Endorsement has been duly
made.
14. Assuming that the US Administrative Agent has given value to Panolam
International in respect of the Borrower Note pursuant to the US Security
Agreement and the US Administrative Agent is acting in good faith (as such
term is defined in the Business Corporations Act (Ontario)) and has no
notice of any adverse claim (as defined in the Business Corporations Act
(Ontario)) affecting the Borrower Note, upon delivery to the US
Administrative Agent by Panolam International of a security certificate
evidencing the Borrower Note bearing the applicable Endorsement, the US
Administrative Agent will acquire a security interest in the Borrower Note
free from any adverse claim. To the extent
XIIIA-10
that the Endorsement of the Borrower Note is governed by Ontario law, such
Endorsement has been duly made.
15. The form of the share certificates representing the Pledged Shares
complies with the provisions of the Business Corporations Act (Ontario).
16. Under the Income Tax Act (Canada), the Borrower is not required to
deduct or withhold tax from interest paid or credited by the Borrower to
any non-resident Lender with whom the Borrower is dealing at arm's length
within the meaning of such Act on the principal of Term B Loans, whether or
not evidenced by Term B Notes, under the Credit Agreement.
17. In any proceeding brought by the US Administrative Agent or the
Administrative Agent (or Panolam International, in the case of the Borrower
Note) before a court of competent jurisdiction in the Province of Ontario
for the enforcement of any of the US Documents that is expressed to be
governed by the laws of the State of New York, the laws of the State of New
York would, to the extent specifically pleaded and proven as a fact by
expert evidence, be applied by such court, in accordance with the parties'
choice of the laws of the State of New York as the governing law of such US
Document, to all issues which under the conflict of laws rules of the
Province of Ontario are to be determined in accordance with the proper or
governing law of a contract, except that in any such proceeding such court:
(i) will apply those laws of the Province of Ontario which such court
would characterize as procedural and will not apply those laws of
the State of New York which such court would characterize as
procedural;
(ii) will not apply those laws of the State of New York which such
court would characterize as revenue, expropriatory, penal or
similar laws; and
(iii) will not apply those laws of the State of New York the application
of which would be inconsistent with public policy, as such term is
interpreted under the law of the Province of Ontario.
18. The courts of the Province of Ontario would give a judgment in
Canadian dollars based upon a final and conclusive in personam judgment for
a sum certain obtained in a New York court by the US Administrative Agent
or the Administrative Agent against a Guarantor with respect to a claim
pursuant to any of the US Documents that contains an express submission by
such Guarantor in such US Document to the jurisdiction of the courts of New
York, in accordance with such submission, without reconsideration of the
merits, if:
XIIIA-11
(a) such judgment was'
(i) not obtained by fraud or in any manner contrary to the
principles of natural justice;
(ii) not for a claim in respect of any laws of the State of New York
or of any other jurisdiction other than the Province of Ontario
which a court of the Province of Ontario would characterize as
revenue, expropriatory, penal or similar laws;
(iii) not contrary to public policy, as such term is interpreted
under the laws of the Province of Ontario, or contrary to any
order made by the Attorney General of Canada under the Foreign
Extraterritorial Measures Act (Canada) or by the Competition
Tribunal under the Competition Act (Canada) in respect of
certain judgments referred to therein; and (iv) not impeachable
as void or voidable under New York law;
(b) there has been compliance with the Limitations Act (Ontario), which
has the effect that any action to enforce a foreign judgment must be
commenced within six years of the date of the foreign judgment; and
(c) no new admissible evidence relevant to the action is discovered prior
to the rendering of judgment by an Ontario court.
____________________________
We have conducted or caused to be conducted the searches against the
Borrower and its assets under the statutes and at the offices of public record
set out in Schedule A annexed to this opinion letter. No registrations or
entries were discovered as a result of such searches that gave notice of any
lien against, encumbrance on or security interest in the assets of the Borrower
under its present name except as set out in Schedule A.
In addition to the foregoing opinions, we wish to draw to your
attention the fact that a security interest perfected by registration under the
PPSA will remain effective only for the registration period specified (or deemed
to be specified) in a financing statement filed in respect thereof under the
PPSA. The registration period of a security interest may be extended by
successive registrations under the PPSA of an appropriate form of financing
change statement, in each case, effected prior to the expiry of a then current
registration. In addition, the PPSA requires (subject to certain exceptions)
that if there is a change in the name of the debtor (as defined in the PPSA) or
a
XIIIA-12
transfer of the debtor's interest in the collateral subject to a security
interest, timely registration must be effected of a financing change statement
in prescribed form. Failure to comply with any of the foregoing requirements
will result in a security interest becoming unperfected under the PPSA.
The opinions and advice expressed herein are provided solely for the
benefit of the addressees in connection with the Loan Documents and may not be
used, relied upon or referred to by the addressees for any other purpose or by
any other person for any purpose whatsoever, in each case, without our prior
written consent; provided any permitted assignee or participant of the rights of
the Lenders under the Credit Agreement and any future agent of the Lenders
pursuant to the Credit Agreement and Xxxxxxxxx, Xxxxxx & Xxxxxxxx Securities
Corporation and Credit Suisse First Boston Corporation, as the initial
purchasers of certain 11 1/2% Series A Senior Subordinated Notes due 2009 of
Panolam International, may rely upon such opinions and advice as if this letter
were addressed to them.
Yours very truly,
XIIIA-13
CERTIFICATE
TO: XXXXXX, XXXX & XXXX
Reference is made to the credit agreement dated as of February 18,
1999 between Panolam Industries Ltd. (the "Corporation"), the other Loan Parties
signatory thereto, the Initial Lenders named therein, Credit Suisse First Boston
Canada, as Initial Lender and as Administrative Agent, and Royal Bank of Canada,
as Initial Lender and as Documentation Agent (the "Credit Agreement"). The
capitalized terms used in paragraphs 7, 8 and 9 below and not otherwise defined
herein have the respective meanings given to them in the Credit Agreement.
The undersigned, being the Secretary of the Corporation, hereby
certifies for and on behalf of the Corporation and not in her personal capacity
that'
1. The undersigned has reviewed such books and records of the Corporation and
other documents and has made such inquiries and investigations as the
undersigned considered necessary or advisable for the purpose of verifying
the matters set out below.
2. The minute books and corporate records of the Corporation in the possession
of Xxxxxx, Xxxx & Xxxx are the original minute books and corporate records
of the Corporation and contain all articles and by-laws of the Corporation
and all resolutions and minutes of all meetings or other proceedings of the
shareholders and directors (or any committee thereof) of the Corporation to
the date hereof. Such minute books and corporate records are true and
complete in all respects.
3. The Corporation has not taken any steps to terminate its existence, to
amalgamate, to continue into any other jurisdiction or to change its
corporate existence in any way.
4. The Corporation is not insolvent and no acts or proceedings have been taken
by or against the Corporation in connection with, the Corporation has not
received any notice in respect of and the Corporation is not in the course
of, liquidation, winding-up, dissolution, bankruptcy or reorganization.
5. The Corporation has not received any notice or other communication from any
governmental authority or other person indicating that there exists any
situation which, unless remedied, could result in the termination of the
existence of the Corporation.
6. The Corporation is subject to a declaration dated February 11, 1999 made by
Panolam International, in its capacity as the beneficial owner of all the
issued shares of the Corporation, which declaration is a unanimous
shareholder agreement within the meaning of subsection 108(3) of the
Business Corporations Act (Ontario).
XIIIA-14
7. No director or officer of the Corporation is a director or officer
of, or has a material interest in, any party to any of the Loan Documents other
than the Loan Parties.
8. The only motor vehicles owned or leased by the Corporation are those
identified by vehicle identification numbers in the financing statement filed by
or on behalf of the Administrative Agent to perfect the security interests of
the Administrative Agent and the Lenders under reference file no. 847650699 with
registration no. 990113 1721 1590 8915, as amended by financing change statement
with registration no. 9900122 0000 0000 0000 and as further amended by financing
change statement with registration no. 990127 1734 1590 9174.
9. The Events of Default set out in Sections 7.01(1), (m) and (n) of the
Credit Agreement were agreed upon as a result of arm's length negotiations and
bargaining between the Corporation and the Administrative Agent, each of whom
was represented by counsel, and each is an event which would have a material
adverse effect on the creditworthiness of Panolam International and its
Subsidiaries.
The undersigned acknowledges that this certificate is to be relied
upon by you for purposes of the opinion to be given by you today pursuant to the
Credit Agreement.
DATED the day of February, 1999.
By ____________________________
Xxxx X. Xxxxxx,
Secretary
XIIIA-15
SPEAR STREET TOWER
TELEPHONE: (000) 000-0000 ONE MARKET
FACSIMILE: (000) 000-0000 XXX XXXXXXXXX
XXXXXXXXXX 00000
xxx.xxxxxxx.xxx
February 18, 1999
DLJ Capital Funding, Inc., as an Initial Lender and as Syndication Agent
Credit Suisse First Boston, as an Initial Lender and as Administrative Agent
Royal Bank of Canada, as an Initial Lender and as Documentation Agent
Each of the Initial Lenders party to the
Credit Agreement referred to below
Credit Suisse First Boston Canada, as an Initial Lender and as Administrative
Agent
Royal Bank of Canada, as an Initial Lender and Documentation Agent
Each of the Initial Lenders party to the
Canadian Credit Agreement referred to below
Re: Panolam Industries International, Inc.
Ladies and Gentlemen:
This opinion letter is furnished to you pursuant to Section
4.01(k)(xxv)of the Credit Agreement, dated as of February 18, 1999 (the "Credit
Agreement"), among Panolam Industries International, Inc., a Delaware
corporation, as borrower (the "Borrower"), the financial institutions party
thereto (the "Lenders"), DLJ Capital Funding, Inc., as a Lender and as
syndication agent (the "Syndication Agent"), Royal Bank of Canada, as Initial
Lender and documentation agent, and Credit Suisse First Boston, as a Lender and
as administrative agent (the "Administrative Agent," and together with the
Syndication Agent, the "Agents"). We have acted as counsel for the Borrower,
Panolam Industries Holdings, Inc., a Delaware corporation ("Holdings"), Panolam
Group, Inc., a Delaware corporation ("Group"), PII Second, Inc., a Delaware
corporation ("PII Second"), Panolam Industries, Inc., a Delaware corporation
("Panolam US"), and Pioneer Plastics Corporation, a Delaware corporation
("Pioneer" and together with the Borrower, Holdings, Group, PII Second, and
Panolam US, the "Credit Parties") in connection with the Credit Agreement.
Unless otherwise defined herein, terms used herein shall have the meanings
assigned to them in the Credit Agreement.
In connection with this opinion letter, we have examined originals, or
copies certified or otherwise identified to our satisfaction, of such documents,
corporate records, certificates, including certificates of public officials, and
other instruments as we have deemed necessary or advisable for purposes of this
opinion letter. In addition, we have examined the following documents (the items
referred to in subclauses (i) through (vi) below herein referred to as the
"Credit Party Agreements," the items referred to in subclauses (i) through
(viii) below
XIIIA-16
February 18, 1999
Page 2
herein referred to as the "Credit Documents," the items referred to in
subclauses (vii) and (viii) below herein referred to as the "Financing
Statements," and the item referred to in subclause (xiii) below herein referred
to as the "Pioneer Acquisition Agreement"):
(i) an executed copy of the Credit Agreement and the Notes executed
in connection therewith;
(ii) an executed copy of the Guaranty;
(iii) an executed copy of the Security Agreement;
(iv) US Guaranty among the Canadian Administrative Agent, Holdings,
Group, PII Second, Borrower, Panolam US and Pioneer;
(v) an executed copy of the Intercreditor Agreement;
(vi) an executed copy of each of the Mortgages;
(vii) the financing statements, on Form UCC-1, each executed by a
Credit Party as debtor, naming the Administrative Agent as secured party, to be
filed in the Office of the Secretary of State of the State of California and the
Office of the Secretary of State of Connecticut (the "Filing Offices"), attached
hereto as Annex A;
-------
(viii) the financing statements, on Form UCC-1, each executed by a
Credit Party as debtor, naming the Canadian Administrative Agent as secured
party, to be filed in the Filing Offices, attached hereto as Annex B;
-------
(ix) the stock certificates (the "Pledged Shares") set forth on
Annex C;
-------
(x) the Intercompany Note (the "Pledged Debt") set forth on Annex
-----
D;
-
(xi) an executed copy of the certificate of the secretary of each
Credit Party, dated February 18, 1999, certifying, among other things: (A) a
tree copy of the resolutions of the Board of Directors of each Credit Party
authorizing, among other things, the execution, delivery and performance of the
Credit Documents and Canadian Loan Documents to which it is a party, and (B) the
incumbency, authority and tree signatures of the officers of each Credit Party
authorized to sign the Credit Documents and Canadian Loan Documents to which
such Credit Party is a party and any other documents and certificates delivered
in connection therewith;
(xii) an executed copy of the certificate (each an "Officers'
Certificate") of the secretary and president of each Credit Party, dated
February 18, 1999, copies of which are attached hereto as Annex E;
-------
XIIIA-17
February 18, 1999
Page 3
(xiii) the Stock Purchase Agreement, dated as of July 17, 1998,
between Panolam Industries, Inc. and Rugby U.S.A., Inc., as amended by Amendment
No. 1, dated as of September 16, 1998, Amendment No. 2, dated as of October 16,
1998 and Amendment No. 3, dated as of November 30, 1998;
(xiv) an executed copy of the Panolam Industries Ltd. Credit
Agreement, dated as of February 16, 1999, among Panolam Industries Ltd. and the
other parties thereto (the "Canadian Credit Agreement"); and
(xv) such other documents as we have deemed necessary or appropriate
as a basis for the opinions hereinafter expressed.
For the purposes of this opinion, the term "Canadian Loan Documents"
means the "Loan Documents" as defined in the Canadian Credit Agreement.
We have also examined photostatic or facsimile copies of the
agreements identified in Exhibit B to each of the Officers' Certificates (the
---------
"Material Agreements"). In our examination and review we have assumed the
genuineness of all signatures, the legal capacity of natural persons, the
authenticity of the documents submitted to us as originals, the conformity to
the original documents of all documents submitted to us as certified, facsimile
or photostatic copies, and the authenticity of the originals of such copies. As
to any facts material to the opinions hereinafter expressed which we did not
independently establish or verify, we have relied without investigation upon
certificates, statements and representations of representatives of each Credit
Party. Regarding documents executed by parties other than the Credit Parties, we
have assumed (i) that each such other party had the power to enter into and
perform all its obligations thereunder, (ii) the due authorization, execution
and delivery of such documents by each such party, and (iii) that such documents
constitute the legal, valid, binding and enforceable obligations of each such
party.
With respect to our opinion in paragraph 1 (a) below, we are relying
solely on our review and examination of the certificates received from the
Secretary of State of the State of Delaware without further investigation of the
corporate records of any Credit Party.
With respect to our opinion in paragraph 2 below, we are relying
solely on the representations of such Credit Party set forth in the Officers'
Certificate and the good standing certificates issued by the states specified in
Annex F hereto, without further investigation as to the criteria for
-------
qualification or any related legal issues with respect to those states or any
other jurisdictions.
Based upon and subject to the foregoing, and subject to the further
assumptions, limitations, qualifications and exceptions set forth herein, we are
of the opinion that:
XIIIA-18
February 18, 1999
Page 4
1. Each Credit Party (a) is a corporation, validly existing and in
good standing under the laws of the State of Delaware and Co) has the corporate
power and authority to own its properties and to carry on its business as, to
our knowledge, it is now conducted.
2. Each Credit Party is duly qualified and in good standing as a
foreign corporation under the laws of the states listed on Annex F attached
-------
hereto.
3. Each Credit Party has the corporate power and corporate authority
to enter into and perform the Credit Documents and Canadian Loan Documents to
which it is a party, and has taken all necessary corporate action to authorize
the execution, delivery and performance of such Credit Documents and such
Canadian Loan Documents.
4. No consents, approvals or authorizations of, or notices to or
filings with, any governmental authority or agency under the Delaware General
Corporation Law, the laws of the State of New York or the laws of the United
States are required or necessary on the part of any Credit Party in connection
with the execution, delivery and performance by such Credit Party of the Credit
Documents and Canadian Loan Documents to which it is a party, except for such
filings as are necessary in connection with the security interests in the
Collateral granted by such Credit Party to the Administrative Agent and the
Canadian Administrative Agent (as to which we express no opinion in this
paragraph 4).
5. Each of the Credit Documents and Canadian Loan Documents has been
duly executed and delivered by each Credit Party that is a party thereto. Each
of the Credit Party Agreements is a legal, valid and binding obligation of each
Credit Party that is a party thereto, enforceable against such Credit Party in
accordance with its respective terms.
6. Neither the execution, delivery nor performance by each Credit
Party of the Credit Documents and Canadian Loan Documents to which it is a party
will (i) violate or be in conflict with any provision of the certificate of
incorporation or bylaws of such Credit Party, (ii) violate or be in conflict
with any federal or New York law having applicability to such Credit Party,
(iii) to our knowledge, violate or contravene any judgment, decree, injunction
or order of any federal or New York court, or any arbitrator or governmental
agency or authority, having jurisdiction over such Credit Party or its
properties or by which such Credit Party may be bound, or (iv) constitute a
material breach of, or result in a material default under or the creation of any
Lien pursuant to, any term or provision of the Material Agreements.
7. We have no knowledge of any pending litigation or other
proceedings against any Credit Party or the properties of any Credit Party
before any court, arbitrator or governmental agency or authority that challenge
the legality, validity or enforceability of the Credit Documents and the
Canadian Loan Documents, or any of the transactions contemplated by the Pioneer
Acquisition Agreement.
XIIIA-19
February 18, 1999
Page 5
8. The Security Agreement creates in favor of the Administrative
Agent and the Canadian Administrative Agent, each as a secured party, as
security for the obligations of each Credit Party purported to be secured in the
Security Agreement, a security interest in the Collateral described therein to
which Article 9 of the New York Uniform Commercial Code ("NYUCC") is applicable
(the "UCC Collateral").
9. (a) The Financing Statements are in appropriate form for filing in
the respective Filing Offices, and upon the filing of the Financing Statements
with the respective Filing Offices, the Administrative Agent and the Canadian
Administrative Agent, each as a secured party, will have a perfected security
interest in that portion of the UCC Collateral in which a security interest may
be perfected by the filing of financing statements under the Uniform Commercial
Code as in effect on the date hereof in the State of California and the State of
Connecticut, respectively (the "Relevant UCC"), with respect to Financing
Statements filed in such states.
(b) At the request of the Administrative Agent under the Canadian
Credit Agreement, we have reviewed the financing statements on Form UCC-1,
naming the Canadian Administrative Agent as secured party and purporting to be
executed by certain obligors under the Security Agreement (as defined in the
Canadian Credit Agreement, the "Canadian Security Agreement"), to be filed in
the Office of the Secretary of State of the State of Connecticut, attached
hereto as Annex G (the "Canadian UCCs"). The Canadian UCCs are in appropriate
form for filing with the Secretary of State of Connecticut, and upon the filing
of the Canadian UCCs therewith, the Canadian Administrative Agent will have a
perfected security interest in that portion of the collateral covered by the
Canadian Security Agreement that constitutes "accounts" and "general
intangibles" as defined in the Connecticut UCC and which can be perfected by the
filing of the Canadian UCCs with the Secretary of State of Connecticut. We
express no opinion regarding the validity or enforceability of the Canadian
Security Agreement, nor with regard to the creation of any security interest
thereunder or the law purportedly governing the creation, perfection and
priority of any lien purported to be created thereby. For the purposes of our
assumptions, limitations and exceptions that follow at the close of this opinion
letter, please review these as if the collateral covered by the Canadian
Security Agreement were "Collateral" and as if the Canadian UCCs were governed
by the "Relevant UCC."
10. The provisions of the Security Agreement create in favor of the
Administrative Agent and the Canadian Administrative Agent, as a secured party,
a security interest in the Pledged Shares and the Pledged Debt to the extent
provided for in the Security Agreement. Upon delivery to and possession by the
Administrative Agent of the certificates representing the Pledged Shares and the
Pledged Debt in New York, the Administrative Agent will have a perfected, first
priority security interest in the Pledged Shares and Pledged Debt, as security
for the obligations of each Credit Party to the Administrative Agent and Lenders
purported to be secured in the Security Agreement.
XIIIA-20
February 18, 1999
Page 6
11. To the extent that the Xxxxxx Act, 15 U.S.C. (S)(S) 1051 et seq.,
-- ---
is interpreted to require recordation with the United States Patent and
Trademark Office (the "PTO") in order to perfect the security interest of the
Administrative Agent and the Canadian Administrative Agent in Collateral
consisting of federally registered trademarks described in the schedules to the
Security Agreement (the "Trademark Collateral"), and each Credit Party has duly
registered such Trademark Collateral with the PTO, then the recordation of the
Security Agreement in accordance with recording requirements of the PTO
(together with the filings referred to in paragraph 9 above) is sufficient for
such purpose of perfection with respect to such Trademark Collateral.
12. The Loans and other extensions of credit under the Credit
Agreement and any extensions of credit under the Canadian Loan Documents do not
violate the provisions of Regulations U, T or X of the Board of Governors of the
Federal Reserve System.
13. No Credit Party is (i) an "investment company," as such term is
defined in the Investment Company Act of 1940, as amended, or (i) a "holding
company," a "subsidiary company" of a holding company, or an "affiliate" of a
holding company, as such terms are defined in the Public Utility Holding Act of
1935, as amended.
14. The "Closing" under the Pioneer Acquisition Agreement has
occurred.
15. The authorized capital stock of Holdings consists of 150,000 shares of
class A common stock, par value $0.01 per share, and 150,000 shares of class B
common stock, par value $0.01 per share. As of the date hereof, there are
110,814 shares of class A common stock and no shares of class B stock of
Holdings issued and outstanding. The authorized capital stock of Group consists
of 1,000 shares of common stock, par value $0.01 per share. As of the date
hereof, there are 1,000 shares of common stock of Group issued and outstanding.
The authorized capital stock of PII Second consists of 200 shares of common
stock, par value $0.01 per share. As of the date hereof, there are 200 shares of
common stock of PII Second issued and outstanding. The authorized capital stock
of the Borrower consists of 200 shares of common stock, par value $0.01 per
share. As of the date hereof, there are 200 shares of common stock of the
Borrower issued and outstanding. The authorized capital stock of Panolam US
consists of 1,000 shares of common stock, par value $0.01 per share. As of the
date hereof, there are 1,000 shares of common stock of Panolam US issued and
outstanding. Except as set forth in Schedule 5.01 Co) to the Credit Agreement,
(i) to our knowledge, there are no outstanding securities of any Credit Party
convertible into, or evidencing the right to purchase or subscribe for, any
shares of capital stock of any Credit Party; (ii) to our knowledge, there are no
outstanding or authorized options, warrants, calls, subscriptions, rights,
commitments or any other agreements of any character obligating any Credit Party
to issue any shares of its capital stock or any securities convertible into or
evidencing the right to purchase or subscribe for any shares of such capital
stock; and (iii) there are no restrictions upon voting or transfer of shares of
XIIIA-21
February 18, 1999
Page 7
capital stock of any Credit Party pursuant to any certificate of incorporation
or bylaws, or to our knowledge, any agreements or instruments of such Credit
Party.
16. Except as set forth on Schedule I to the Security Agreement,
Holdings or a wholly-owned Subsidiary of Holdings owns of record in the
aggregate 100% of the capital stock of each Subsidiary of Holdings. All such
capital stock has been duly authorized and validly issued and is fully paid and
nonassessable.
17. The Obligations (as defined in the Credit Agreement and Canadian
Credit Agreement) of the Credit Parties under the Credit Agreement and the
Canadian Credit Agreement, and the payment obligations of the Credit Parties
under the Guaranty and US Guaranty, constitute "Senior Debt" within the
definition of that term contained in the Subordinated Note Indenture.
Whenever a statement herein is qualified by the expressions "known to
us," "to our knowledge," "we are not aware" or a similar phrase or expression
with respect to our knowledge of matters of fact, it is intended to mean that
our knowledge is based upon the records, documents, instruments and certificates
described above and the current actual knowledge of the attorneys in this Finn
who have devoted substantive attention to the transactions contemplated by the
Credit Documents (but not including any constructive or imputed notice of any
information) and that we have not otherwise undertaken any independent
investigations for the purpose of rendering this opinion letter. Without
limiting the generality of the foregoing, in rendering the opinion set forth in
paragraph 6 above, we have not verified or otherwise reviewed the compliance by
any Credit Party with any financial covenants or other financial tests contained
in the Material Agreements.
This opinion letter is limited to the laws of the State of New York,
the General Corporation Law of the State of Delaware, applicable federal laws of
the United States and, with respect to our opinion in paragraph 9, Division 9 of
the California Uniform Commercial Code and, subject to the succeeding sentence,
Article 9 of the Connecticut Uniform Commercial Code (as defined below), and we
express no opinion herein with respect to the effect or applicability of the
laws of other jurisdictions. With your permission, we have based our opinions
set forth in paragraph 9 above with respect to the Financing Statements to be
filed with the Office of the Secretary of State of Connecticut, solely upon our
review of Article 9 (as enumerated under the Connecticut UCC) of the Uniform
Commercial Code as in effect on the date hereof in the State of Connecticut as
set forth in the CCH Secured Transactions Guide, which is referred to herein as
------------------------------
the "Connecticut UCC." We have assumed that the provisions of the Connecticut
UCC are in effect on the date hereof in the State of Connecticut and have not
been modified in any respect by any other statute, regulation or decision with
respect to the laws of the State of Connecticut; and we call to your attention
that we are not licensed to practice in the State of Connecticut, nor do we
profess expertise with respect to the laws thereof. Our opinion in the second
sentence of paragraph 5 is expressed only under New York law.
XIIIA-22
February 18, 1999
Page 8
Our opinions in paragraph 4 above and in clause (ii) of paragraph 6
above are limited to laws and regulations normally applicable to transactions of
the type contemplated in the Credit Documents and do not extend to licenses,
permits and approvals necessary for the conduct of any Credit Party's business.
In addition and without limiting the previous sentence, we express no opinion
herein with respect to the effect of any pension, employee benefit or tax laws,
any land use, environmental or similar law, any state or federal antitrust law,
state or federal securities laws, or any local law. Further, we express no
opinion as to compliance or noncompliance by the Agents or any Lender with any
federal, state or other law (i) requiting the Agents or any Lender to be
licensed as a bank, finance company or other type of financial institution, (ii)
pertaining to matters regulating the assets held by the Agents or any Lender on
the basis of portfolio requirements or the Lender's capitalization, such as loan
limits and capital adequacy requirements, and (iii) otherwise applicable to the
Agents or any Lender and relating to its legal or regulatory status or the
nature of its business (other than Regulations T, U and X of the Board of
Governors of the Federal Reserve Board).
The opinions set forth above are subject to the following
qualifications, assumptions, limitations and exceptions:
(a) The enforceability of each Credit Party's obligations under
the Credit Party Agreements may be subject to or limited by (i) bankruptcy,
insolvency, reorganization, arrangement, moratorium, fraudulent transfer and
other similar laws affecting the rights of creditors generally; and (ii) general
equitable principles (whether relief is sought in a proceeding at law or in
equity), including, without limitation, concepts of materiality, reasonableness,
good faith, and fair dealing.
(b) We express no opinion as to provisions of the Credit Party
Agreements purporting to establish an evidentiary standard or to authorize
conclusive determinations by the Agents, any Lender or any other Person or
allowing the Agents, any Lender or any other Person to make determinations in
its sole discretion.
(c) We call to your attention that under the NYUCC and Relevant
UCC events occurring subsequent to the date hereof may affect any security
interest subject thereto. Without limiting the generality of the foregoing,
additional filings with respect to the Collateral may be necessary to continue
perfection of all or certain of the Collateral if a Credit Party changes its
name so as to cause the Financing Statements to become seriously misleading (or
the Financing Statements otherwise become seriously misleading), if any item of
Collateral located in the State of California or the State of Connecticut is
removed from that state or if a Credit Party changes the jurisdiction in which
its chief executive office is located to a jurisdiction other than the State of
Connecticut.
XIIIA-23
February 18, 1999
Page 9
(d) To the extent that any of the Collateral consists of or
constitutes "proceeds" as such term is defined in (S) 9-306 of the NYUCC or the
Relevant UCC, the security interest therein is limited and conditioned as set
forth in such section.
(e) We wish to advise you that the effectiveness of the
Financing Statements will lapse five years from the date they are filed unless
continuation statements are filed within six months prior to the expiration of
that five year period.
(f) The opinions expressed in paragraphs 8 through 10 above are
limited to the Collateral specifically described therein which is governed by
relevant provisions as currently in effect of Articles 8 and 9 of the NYUCC or
the Relevant UCC. Further, except to the extent expressly stated in paragraphs 8
through 11 of this opinion letter, the opinions given above as to the perfection
of the security interests apply only to Collateral with respect to which
security interests may be perfected by the filing of financing statements. We
have assumed that the Financing Statements will be duly accepted for filing.
(g) We also express no opinion as to the title of any Credit
Party to any Collateral, the description or classification of the Collateral or,
except as expressly stated in this opinion letter, regarding the creation,
attachment, perfection or priority of any security interests in any Collateral.
(h) We have assumed for purposes of the opinions in paragraphs 8
through 11 that each Credit Party has "rights" in the Collateral within the
meaning of Section 9-203 of the NYUCC, that, subject to our opinions in
paragraph 6(iv), all required consents of third parties to the grant of security
interests in the Collateral have been obtained, that the Agent and the Lenders
have given "value" within the meaning of Section 9-203 of the NYUCC, that the
Pledged Shares and the Pledged Debt will be "located" in New York for purposes
of Section 9-103(6) of the NYUCC, and that the Administrative Agent as secured
party will acquire its interest in the Pledged Shares and the Pledged Debt in
good faith and without notice or knowledge of any adverse claims.
(i) Our opinions in paragraph 10 above are also subject to the
qualification that we express no opinions as to the priority of the security
interests in the Pledged Shares and the Pledged Debt as against any lien
creditor (as defined in Section 9-301 (3) of the NYUCC) to the extent set forth
in Section 9-301(4) of the NYUCC.
(j) Our opinion in paragraph 11 is limited to the Collateral
specifically identified in Schedule III to the Security Agreement as federally
registered trademarks and in connection with such opinion we assume that the
Administrative Agent and the Canadian Administrative Agent will comply with all
applicable recording requirements of the PTO and the statutes and regulations
related thereto.
XIIIA-24
February 18, 1999
Page 10
(k) We express no opinion (i) with respect to any UCC Collateral
of a type described in Section 9-401(1)(a) or 9-401(1)(a) or (b) of the
Connecticut UCC or California Uniform Commercial Code, respectively, or
represented by any certificate of title and (ii) regarding the accuracy of the
descriptions or locations of the Collateral or any real property in the
Financing Statements and the Security Agreement.
(l) The enforceability of certain remedial and other provisions
of the Credit Party Agreements, including, without limitation, certain of the
waivers therein, may be limited by applicable state and federal laws (including
judicial decisions), but such laws do not, in our opinion, render the Credit
Party Agreements, taken as a whole, invalid or unenforceable, and each Credit
Party Agreement, taken as a whole, contains adequate provisions for the
practical realization by the Administrative Agent and the Canadian
Administrative Agent of the material rights and benefits afforded thereby.
(m) We also express no opinion as to:
(1) the enforceability of provisions of the Credit Party
Agreements pursuant to which any Credit Party which is a party thereto
agrees to make payments without set-off, defense or counterclaim;
(2) the enforceability of provisions relating to
indemnification, contribution or exculpation, to the extent any such
provision is contrary to public policy or prohibited by federal or New
York law (including, without limitation, federal and New York
securities laws);
(3) any provision providing for the exclusive jurisdiction
of a particular court or purporting to waive rights to trial by jury,
service of process or objections to the laying of venue or to forum on
the basis of forum non conveniens, in connection with any litigation
--------------
arising out of or pertaining to the Credit Documents;
(4) any Collateral which is an accession to, or commingled
or processed with, other goods to the extent that the priority of the
security interest of the Administrative Agent and the Canadian
Administrative Agent are limited by Section 9-314 or 9-315 of the
Relevant UCC;
(5) provisions contained in the Credit Party Agreements
purporting to waive either illegality as a defense to the performance
of contract obligations or any other defense to such performance which
cannot, as a matter of law, be effectively waived;
XIIIA-25
XXXXXXX
PHLEGER &
XXXXXXXX FEBRUARY 18, 1999
LLP Page 11
ATTORNEYS AT LAW
(6) any provision of any Credit Party Agreement insofar as
it provides that any Person purchasing a participation from either
Agent, any Lender or other Person may exercise set-off or similar
rights with respect to such participation or that either Agent, any
Lender or other Person may exercise set-off or similar rights other
than in accordance with applicable law;
(7) provisions of the Security Agreement purporting to
limit the standards imposed upon the Administrative Agent and the
Canadian Administrative Agent for the care of Collateral in the
Administrative Agent's possession to the extent such provisions are
not permissible under applicable provisions of Article 9 of the NYUCC;
(8) any provision of the Credit Party Agreements permitting
modification thereof only by means of an agreement in writing signed
by the parties thereto;
(9) any provision of the Credit Party Agreements requiting
payment of attorneys' fees, except to the extent a court determines
such fees to be reasonable; and
(10) the effect of the law of any jurisdiction other than
the State of New York which limits the rates of interest legally
chargeable or collectible.
(n) The enforceability of any provisions of the Credit Party
Agreements which are deemed to constitute a subordination of the rights of any
Credit Party may be limited by exoneration and other defenses similar to those
that may be asserted by a guarantor.
(o) Provisions of the Guaranty and Security Agreement, which
provide, in each case, that certain liabilities of the Credit Parties party
thereto shall not be affected by amendments to or waivers of any Credit Party
Agreements, may be enforceable only to the extent that such amendments or
waivers are not so material as to constitute a new contract among the parties.
(p) Our opinion expressed in Paragraph 12 above assumes that the
proceeds of the Loans will be used in accordance with Section 2.11 of the Credit
Agreement.
(q) We wish to point out that any Lender, as holder of any Note,
may be required to prove the outstanding amount thereof.
XIIIA-26
XXXXXXX
PHLEGER &
XXXXXXXX FEBRUARY 18, 1999
LLP Page 12
ATTORNEYS AT LAW
(r) Except as is set forth in opinions in Paragraphs 3 through 7
above, we express no opinion regarding the Mortgages (including, without
limitation, regarding the perfection or priority of any Lien purported to be
created thereby), and we understand that you are receiving separate opinions
from local counsel regarding matters related to the Mortgages.
The opinions expressed herein are solely for your benefit and for the
benefit of your successors and assigns pursuant to the Credit Agreement and the
Canadian Credit Agreement and any permitted participant thereunder in connection
with the above transactions, and such opinions may not be relied on in any
manner or for any purpose by any other Person. In addition, this opinion is
rendered as of the date hereof, and it shall not be deemed to have been updated
to any date upon which any Person may rely. Further, we do not undertake to
advise you or any other Person of matters which occur subsequent to the date
hereof and which affect the opinions expressed herein.
Very truly yours,
XXXXXXX, PHLEGER & XXXXXXXX LLP
XIIIA-27
Annex A
-------
Financing Statements
--------------------
XIIIA-28
Annex B
-------
Financing Statements
--------------------
XIIIA-29
XXXXXXX
PHLEGER &
XXXXXXXX FEBRUARY 18, 1999
LLP Page 2
ATTORNEYS AT LAW
Annex C
-------
Stock Certificates
------------------
--------------------------------------------------------------------------------------------
Class Stock Number
of Par Certificate of
Stock Issuer Stock Value Numbers Shares
------------ ------------------ ------------ ------------ --------
--------------------------------------------------------------------------------------------
Panolam Group, Inc. Common Stock $0.01 2 1,000
------------------------------------------------------------------------ -------------
PII Second, Inc. Common Stock $0.01 2 200
------------------------------------------------------------------------ -------------
Panolam Industries Common Stock $0.01 2 200
International, Inc.
------------------------------------------------------------------------ -------------
Panolam Industries, Inc. Common Stock $0.01 4 1,000
------------------------------------------------------------------------ -------------
Panolam Industries Ltd. Class A -- CA-4 65,000
Common Stock
Class A -- CA-5 35,000/1/
Common Stock
------------------------------------------------------------------------ -------------
Pioneer Plastics Corporation Common Stock $1.00 [_] 1,000
--------------------------------------------------------------------------------------------
___________________
/1/Borrower is not required to pledge to the Administrative Agent, it its
capacity as such, the shares of Class A Common Stock represented by this
certificate.
XIIIA-30
Annex D
-------
Intercompany Notes
------------------
-------------------------------------------------------------------------------------------------
Debt Issuer Original
-----------
Description Note Principal
of Debt Number Amount
---------------------------------- ------------ -----------------
-------------------------------------------------------------------------------------------------
Panolam Industries Ltd. $10,594,374.90 owed to 1 $10,594,374.90
Panolam Industries
International, Inc.
-------------------------------------------------------------------------------------------------
XIIIA-31
Annex E
-------
Officers' Certificates
----------------------
XIIIA-32
Annex F
-------
Foreign Qualifications
----------------------
Panolam Industries Holdings, Inc.: Connecticut
Panolam Group, Inc.: Connecticut
PII Second, Inc.: California, Connecticut
Panolam Industries International, Inc.: Connecticut
Panolam Industries, Inc.: Arizona, California, Connecticut, Florida, Georgia,
Oregon
Pioneer Plastics Corporation: California, Connecticut, Georgia, Indiana, Maine,
Tennessee
XIIIA-33
EXHIBIT XIII-B
FORM OF OPINION OF BORROWER'S US LOCAL COUNSEL
See attached
XIIIB-1
