EXECUTION COPY
EXHIBIT 10.7
WARRANT AGREEMENT
between
PANOLAM INDUSTRIES HOLDINGS, INC.
and
DOMTAR INDUSTRIES INC.
Dated as of June 7, 1996
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
SECTION 1.01. Certain Defined Terms................................ 2
ARTICLE II
ORIGINAL ISSUE OF WARRANTS
SECTION 2.01. Form of Warrant Certificates......................... 6
SECTION 2.02. Execution and Delivery of Warrant Certificates....... 6
ARTICLE III
EXERCISE PRICE; EXERCISE OF WARRANTS GENERALLY
SECTION 3.01. Exercise Price....................................... 6
SECTION 3.02. Exercise of Warrants................................. 6
SECTION 3.03. Expiration of Warrants............................... 6
SECTION 3.04. Method of Exercise................................... 6
ARTICLE IV
ADJUSTMENTS
SECTION 4.01. Adjustments.......................................... 7
SECTION 4.02. Determination of Adjustment.......................... 9
SECTION 4.03. Statement on Warrants................................ 10
SECTION 4.04. Fractional Interest.................................. 10
ii
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.01. Warrant Transfer Books................................... 10
SECTION 5.02. No Stock Rights.......................................... 11
SECTION 5.03. Restrictions on Transfer................................. 11
SECTION 5.04. No Registration of Warrants or Warrant Shares under
Securities Laws....................................... 11
SECTION 5.05. Reservation of Common Stock for Issuance on Exercise of
Warrants.............................................. 11
SECTION 5.06. Payment of Taxes......................................... 12
SECTION 5.07. Certain Persons to Execute Agreement..................... 12
SECTION 5.08. Prior Notice of Certain Events........................... 12
ARTICLE VI
MISCELLANEOUS
SECTION 6.01. Expenses................................................. 12
SECTION 6.02. Notices.................................................. 13
SECTION 6.03. Headings................................................. 13
SECTION 6.04. Severability............................................. 13
SECTION 6.05. Entire Agreement......................................... 13
SECTION 6.06. No Third Party Beneficiaries............................. 13
SECTION 6.07. Amendment; Waiver........................................ 13
SECTION 6.08. Governing Law............................................ 13
SECTION 6.09. Counterparts............................................. 14
WARRANT AGREEMENT
WARRANT AGREEMENT, dated as of June ___, 1996 (as hereafter amended,
supplemented or otherwise modified, this "AGREEMENT"), between PANOLAM
INDUSTRIES HOLDINGS, INC., a corporation organized and existing under the laws
of the State of Delaware (the "COMPANY"), and DOMTAR INDUSTRIES INC., a
corporation organized and existing under the laws of the State of Delaware
("DOMTAR U.S.");
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, in connection with the asset purchase agreement, dated
February 15, 1996, between Domtar U.S. and Panolam Industries, Inc. (formerly
known as PAN Acquisition, Inc.), a corporation organized and existing under the
laws of the State of Delaware ("PANOLAM U.S.") and an indirect wholly owned
subsidiary of the Company, as amended by letter agreements dated March 14, 1996,
March 21, 1996, March 28, 1996 and April 4, 1996 and by an amending agreement,
dated as of April 9, 1996, among Domtar U.S., Domtar Inc., a corporation
organized under the federal laws of Canada, Panolam Canada and Panolam U.S.,
and as further amended by an amending agreement, dated as of the date hereof,
between Domtar U.S. and Panolam U.S., and the delivery of a note (the "NOTE")
made by the Company as payment in part of the purchase price thereunder, the
Company has agreed to issue and deliver to Domtar U.S. warrant certificates (the
"WARRANT CERTIFICATES") evidencing warrants to purchase 5,000 shares of class A
common stock, par value $.01 per share, of the Company (the "CLASS A COMMON
STOCK" and, together with the non-voting class B common stock, par value $.01
per share, of the Company, the "COMMON STOCK"), representing 5.0% of the shares
of Common Stock outstanding or subject to issuance on the date hereof, subject
to adjustment as provided for herein;
WHEREAS, the Warrants (as defined below), Warrant Certificates and
Underlying Common Stock (as defined below) will be subject to the terms and
conditions of the stockholders' agreement, dated as of the date hereof (as
thereafter amended, supplemented or otherwise modified, the "STOCKHOLDERS'
AGREEMENT"), among the Company, Domtar U.S. and the other stockholders of the
Company, including, without limitation, the provisions therein related to
restrictions on transfer of the Warrants and the Underlying Common Stock; and
WHEREAS, the parties hereto desire to enter into this Agreement in
order to set forth their agreement concerning the terms and provisions of the
Warrants and the respective rights and obligations thereunder of the Company and
the registered holders of the Warrants, and such other matter as are set forth
herein;
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements and covenants hereinafter set forth and other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, and
intending to be legally bound hereby, the parties hereto hereby agree as
follows:
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ARTICLE I
DEFINITIONS
SECTION 1.01. CERTAIN DEFINED TERMS. Unless the context otherwise
requires, the following terms, when used in this Agreement, shall have the
respective meanings specified below:
"AFFILIATE" shall mean, with respect to any person, any other person
that directly, or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with, such specified person.
"AGREEMENT" or "THIS AGREEMENT" shall have the meaning specified in
the preamble to this Agreement.
"BENEFICIAL OWNER" or "BENEFICIALLY OWN" shall have the meaning given
such term in Rule 13d-3 under the Exchange Act.
"BOARD" shall mean the board of directors of the Company.
"BUSINESS DAY" shall mean any day that is not a Saturday, a Sunday or
other day on which banks are required or authorized by law to be closed in Xxx
Xxxx, Xxx Xxxx, Xxxxxxxx, Xxxxxx or Toronto, Ontario.
"CLASS A COMMON STOCK" shall have the meaning specified in the
recitals to this Agreement.
"COMMISSION" shall mean the Securities and Exchange Commission, and
any successor commission or agency having similar powers.
"COMMON STOCK" shall have the meaning specified in the recitals to
this Agreement.
"COMPANY" shall have the meaning specified in the preamble to this
Agreement.
"CONTROL" (including the terms "CONTROLLED BY" and "UNDER COMMON
CONTROL WITH") shall mean, with respect to the relationship between or among
two or more persons, the possession, directly or indirectly or as trustee or
executor, of the power to direct or cause the direction of the affairs or
management of a person, whether through the ownership of voting securities, as
trustee or executor, by contract or otherwise, including, without
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limitation, the ownership, directly or indirectly, of securities having the
power to elect a majority of the board of directors or similar body governing
the affairs of such person.
"DOMTAR U.S." shall have the meaning specified in the preamble to this
Agreement.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations thereunder.
"EXERCISE PRICE" shall have the meaning specified in Section 3.01.
"EXPIRATION DATE" shall mean the earlier of (i) the date on which all
amounts outstanding under the Note are paid in full, if such payment in full
occurs prior to January 1, 2000, and (ii) July 1, 2002.
"FAIR MARKET VALUE" shall mean, with respect to any Shares as of any
date of determination, (i) if such Shares are not registered under the Exchange
Act, the fair value of such Shares (or the Common Stock into or for which such
Shares are convertible, exchangeable or exercisable) on a fully diluted basis
(A) as determined reasonably and in good faith in the most recently completed
arm's-length transaction between the Company and an unaffiliated third party in
which such determination is necessary and the closing of which shall have
occurred within the six months preceding such date of determination; or (B) if
no such transaction shall have occurred within such six-month period, as
determined reasonably and in good faith by the Board in accordance with the
Valuation Criteria; or (ii) if such Shares are registered under the Exchange
Act, the average of the daily Market Prices of such Shares (or the Common Stock
into or for which such Shares are convertible, exchangeable or exercisable) for
the 10 consecutive trading days immediately preceding such date of determination
or, if such Shares have been registered under the Exchange Act for fewer than 10
consecutive trading days before such date, then the average of the daily Market
Prices for all of the trading days before such date for which daily Market
Prices are available; provided, however, that the Fair Market Value of any
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Shares convertible, exchangeable or exercisable for Common Stock shall be
reduced by the aggregate value of the consideration, if any, payable upon the
conversion, exchange or exercise of such Shares.
"HOLDERS" shall mean the registered holders from time to time of the
Warrants and, unless otherwise provided or indicated herein, the registered
holders from time to time of the Underlying Common Stock.
"INDEPENDENT FINANCIAL EXPERT" shall mean a nationally recognized
investment banking firm that does not (and whose directors, officers, employees
and affiliates do not) have a direct or indirect financial interest in the
Company or any of its affiliates, that has not been and at the time it is called
upon to give independent financial advice to the Company, is
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not (and none of whose directors, officers, employees or affiliates is) a
promoter, director or officer of the Company or any of its affiliates or an
underwriter or placement agent with respect to any of the securities of the
Company or any of its affiliates, and that does not provide any advice or
opinions to the Company or any of its affiliates except as an Independent
Financial Expert.
"MARKET PRICE" shall mean, with respect to any Shares registered under
the Exchange Act for any specified trading day, (i) in the case of Shares listed
or admitted to trading on any securities exchange, the closing price, regular
way, on such day, or if no sale takes place on such day, the average of the
closing bid and asked prices on such day, (ii) in the case of Shares not then
listed or admitted to trading on any securities exchange, the last reported sale
price on such day, or if no sale takes place on such day, the average of the
closing bid and asked prices on such day, as reported by a reputable quotation
source designated by the Company, (iii) in the case of Shares not then listed or
admitted to trading on any securities exchange and as to which no such reported
sale price or bid and asked prices are available, the average of the reported
high bid and low asked prices on such day, as reported by a reputable quotation
service, or a newspaper of general circulation in the Borough of Manhattan, City
and State of New York, customarily published on each business day, designated by
the Company, or if there shall be no bid and asked prices on such day, the
average of the high bid and low asked prices, as so reported, on the most recent
day (not more than 10 days prior to the date in question) for which prices have
been so reported, and (iv) if there are no bid and asked prices reported during
the 10 days prior to the specified date, the Fair Market Value of such Shares as
determined as if such Shares were not registered under the Exchange Act.
"NOTE" shall have the meaning specified in the recitals to this
Agreement.
"PERSON" shall mean any individual, corporation, partnership,
association, joint-stock company, trust, unincorporated organization or other
entity or any government or political subdivision, agency or instrumentality
thereof, as well as any syndicate or group that would be deemed to be a person
under Section 13(d)(3) of the Exchange Act.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended,
and the rules and regulations thereunder.
"SERIES 1 DETERMINATION DATE" shall mean January 1, 2000.
"SERIES 2 DETERMINATION DATE" shall mean January 1, 2001.
"SERIES 1 WARRANTS" shall mean warrants designated Series 1 Warrants
to purchase 2,500 shares of Class A Common Stock, representing 2.5% of the
Common Stock outstanding on the date hereof.
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"SERIES 2 WARRANTS" shall mean warrants designated Series 2 Warrants
to purchase 2,500 shares of Class A Common Stock. representing 2.5% of the
Common Stock outstanding on the date hereof.
"STOCKHOLDERS' AGREEMENT" shall have the meaning specified in the
recitals to this Agreement.
"SUBSIDIARY" shall mean, with respect to any person, any affiliate of
such person controlled by such person directly, or indirectly through one or
more intermediaries.
"UNDERLYING COMMON STOCK" shall mean the shares of Class A Common
Stock issuable or issued upon the exercise of the Warrants.
"VALUATION CRITERIA" shall mean one or more valuation methods that the
Independent Financial Expert or the Board, as the case may be, in its best
professional or business judgment, as the case may be, determines to be most
appropriate for use in determining the Fair Market Value of any Shares for which
such determination is required pursuant to this Agreement, without giving effect
to any discount attributable to any lack of liquidity of such Shares or to the
fact that the Company may have no class of equity securities registered under
the Exchange Act.
"WARRANT CERTIFICATES" shall have the meaning specified in the
recitals to this Agreement.
"WARRANTS" shall mean the Series 1 Warrants and the Series 2 Warrants.
ARTICLE II
ORIGINAL ISSUE OF WARRANTS
SECTION 2.01. FORM OF WARRANT CERTIFICATES. The Warrant Certificates
shall be in registered form only and substantially in the form attached hereto
as Exhibit A, shall be dated the date on which signed by the Company and may
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have such legends and endorsements typed, stamped, printed, lithographed or
engraved thereon as the Company may deem appropriate and as are not inconsistent
with the provisions of this Agreement, or as may be required to comply with any
law or with any rule or regulation pursuant thereto, with any rule or regulation
of any securities exchange on which the Warrants may be listed or with the
Stockholders' Agreement, or to conform to usage.
SECTION 2.02. EXECUTION AND DELIVERY OF WARRANT CERTIFICATES. Warrant
Certificates evidencing Warrants to purchase initially an aggregate of up to
5,000 shares of
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Class A Common Stock shall be executed by the Company and delivered to the
purchasers thereof on the date hereof. The Warrant Certificates shall be
executed on behalf of the Company by its Chairman of the Board, Chief Executive
Officer, President or by any of its Vice Presidents, either manually or by
facsimile signature printed thereon.
ARTICLE III
EXERCISE PRICE; EXERCISE OF WARRANTS GENERALLY
SECTION 3.01. EXERCISE PRICE. Each Warrant Certificate shall entitle
the Holder thereof, subject to the provisions of the Agreement. to purchase one
share of Class A Common Stock for each Warrant represented thereby at an
exercise price (the "EXERCISE PRICE") of zero ($0.00) per share.
SECTION 3.02. EXERCISE OF WARRANTS. Subject to the terms and
conditions set forth herein, (i) the Series 1 Warrants shall be exercisable, on
or prior to the Expiration Date, at any time or from time to time after the
Series 1 Determination Date, and (ii) the Series 2 Warrants shall be
exercisable, on or prior to the Expiration Date, at any time or from time to
time after the Series 2 Determination Date.
SECTION 3.03. EXPIRATION OF WARRANTS. The Warrants shall terminate and
become void as of the close of business on the Expiration Date.
SECTION 3.04. METHOD OF EXERCISE. (a) In order to exercise a Warrant
or to sell a Warrant to the Company, the Holder thereof must surrender the
Warrant Certificate evidencing such Warrant to the Company, with one of the
forms on the reverse of or attached to the Warrant Certificate duly executed.
(b) Upon surrender of a Warrant Certificate in conformity with the
foregoing provisions, the Company shall transfer to the Holder of such Warrant
Certificate appropriate evidence of ownership of any shares of Underlying Common
Stock or other securities or property (including any money) to which the Holder
is entitled, registered or otherwise placed in, or payable to the order of, such
name or names as may be directed in writing by the Holder, and shall deliver
such evidence of ownership and any other securities or property (including any
money) to the person or persons entitled to receive the same, together with an
amount in cash in lieu of any fraction of a share as provided in Section 4.04.
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ARTICLE IV
ADJUSTMENTS
SECTION 4.01. ADJUSTMENTS. The number of shares of Common Stock
issuable upon exercise of each Warrant shall be subject to adjustment from time
to time as follows:
(a) STOCK DIVIDENDS; STOCK SPLITS; REVERSE STOCK SPLITS;
RECLASSIFICATIONS. In the event that the Company shall (i) pay a dividend
or make any other distribution with respect to its Common Stock in shares
of its capital stock, (ii) subdivide its outstanding Common Stock, (iii)
combine its outstanding Common Stock into a smaller number of shares, or
(iv) issue any shares of its capital stock in a reclassification of the
Common Stock (including any such reclassification in connection with a
merger, consolidation or other business combination in which the Company is
the continuing corporation) the number of shares of Common Stock issuable
upon exercise of each Warrant immediately prior to the record date for such
dividend or distribution or the effective date of such subdivision or
combination shall be adjusted so that the Holder of each Warrant shall
thereafter be entitled to receive the kind and number of shares of Common
Stock or other securities of the Company that such Holder would have owned
or have been entitled to receive after the happening of any of the events
described above, had such Warrant been exercised immediately prior to the
happening of such event or any record date with respect thereto. An
adjustment made pursuant to this Section 4.01(a) shall become effective
immediately after the effective date of such event retroactive to the
record date, if any, for such event.
(b) ISSUANCE OF COMMON STOCK, RIGHTS, OPTIONS OR WARRANTS AT
LOWER VALUES. (i) In the event that the Company shall issue or sell shares
of Common Stock, or rights, options, warrants or convertible or
exchangeable securities containing the right to subscribe for or purchase
shares of Common Stock, at a price per share of Common Stock (determined in
the case of such rights, options, warrants or convertible or exchangeable
securities, by dividing (x) the total amount receivable by the Company in
consideration of the issuance and sale of such rights, options, warrants or
convertible or exchangeable securities, plus the total consideration, if
any, payable to the Company upon exercise, conversion or exchange thereof,
by (y) the total number of shares of Common Stock covered by such rights,
options, warrants or convertible or exchangeable securities) that is lower
than the then Fair Market Value per share of the Common Stock immediately
prior to such sale or issuance, then the number of shares of Common Stock
thereafter issuable upon the exercise of each Warrant then outstanding
shall equal the Pre-Issuance Value per Warrant divided by
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the Unadjusted Post-Issuance Value per Warrant. Such adjustment shall be
made successively whenever any such sale or issuance is made.
(ii) For purposes of this Section 4.01(b), (A) "PRE-ISSUANCE VALUE"
shall mean (1) the total number of shares of Common Stock then issuable
upon exercise of each Warrant, multiplied by (2) the Fair Market Value per
share of Common Stock immediately prior to any issuance or sale described
in Section 4.01(b)(i); and (B) "UNADJUSTED POST-ISSUANCE VALUE" shall mean
(1) the sum of (x) the total number of shares of Common Stock outstanding
immediately prior to any issuance or sale described in Section 4.01(b)(i),
multiplied by the Fair Market Value per share of Common Stock immediately
prior to such issuance or sale, plus (y) the total number of additional
shares of Common Stock issued or sold by the Company, multiplied by the
price per share for which such additional shares of Common Stock were
issued or sold, divided by (2) the total number of shares of Common Stock
outstanding immediately after such issuance or sale.
(iii) In the event that the Company shall issue and sell shares of
Common Stock or rights, options, warrants or convertible or exchangeable
securities containing the right to subscribe for or purchase shares of
Common Stock for consideration consisting, in whole or in part, of property
other than cash or its equivalent, then in determining the "price per share
of Common Stock" and the "consideration" receivable by or payable to the
Company for purposes of the first sentence of Section 4.01(b)(i), the Board
shall determine, in good faith, the fair value of such property. In the
event that the Company shall issue and sell rights, options, warrants or
convertible or exchangeable securities containing the right to subscribe
for or purchase shares of Common Stock, together with one or more other
securities as part of a unit at a price per unit, then in determining the
"price per share of Common Stock" and the "consideration" receivable by or
payable to the Company for purposes of the first sentence of Section
4.01(b)(i), the Board shall determine, in good faith, the fair value of the
rights, options, warrants or convertible or exchangeable securities then
being sold as part of such unit.
(iv) Any adjustment to the number of shares of Common Stock issuable
upon exercise of all Warrants then outstanding made pursuant to this
Section 4.01(b) shall be allocated among each Warrant then outstanding on a
pro rata basis.
(v) Notwithstanding anything herein to the contrary, the provisions
of this Section 4.01(b) shall not apply to (A) options or other similar
rights issued pursuant to an employee stock option plan or similar plan
providing for options or other similar rights to purchase (or issuances
pursuant to incentive bonus plans) covering in the aggregate not in excess
of 10% of the fully-diluted shares of Common Stock
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outstanding from time to time, or (B) shares issued on the exercise of any
such options or rights.
(c) EXPIRATION OF RIGHTS, OPTIONS AND CONVERSION PRIVILEGES. Upon
the expiration of any rights, options, warrants or conversion or exchange
privileges that have previously resulted in an adjustment hereunder, if any
thereof shall not have been exercised, the number of shares of Common Stock
issuable upon the exercise of each Warrant shall, upon such expiration, be
readjusted and shall thereafter, upon any future exercise, be such as they
would have been had they been originally adjusted (or had the original
adjustment not been required, as the case may be) as if (i) the only shares
of Common Stock so issued were the shares of Common Stock, if any, actually
issued or sold upon the exercise of such rights, options, warrants or
conversion or exchange rights and (ii) such shares of Common Stock, if any,
were issued or sold for the consideration actually received by the Company
upon such exercise plus the consideration, if any, actually received by the
Company for issuance, sale or grant of all such rights, options, warrants
or conversion or exchange rights whether or not exercised.
(d) DE MINIMIS ADJUSTMENTS. No adjustment in the number of shares
of Common Stock issuable hereunder shall be required unless such adjustment
would require an increase or decrease of at least one percent in the number
of share of Common Stock purchasable upon an exercise of each Warrant;
provided, however, that any adjustments which by reason of this Section
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4.01(d) are not required to be made shall be carried forward and taken into
account in any subsequent adjustment. All calculations shall be made to
the nearest one-tenth of a share.
SECTION 4.02. DETERMINATION OF ADJUSTMENT. Whenever the number of
shares of Common Stock issuable upon the exercise of each Warrant is adjusted as
herein provided, a certificate of a senior officer of the Company setting forth
the number of shares of Common Stock issuable upon the exercise of each Warrant
after such adjustment, setting forth a brief statement of the facts requiring
such adjustment and setting forth the computation by which such adjustment was
made, shall, absent manifest error, be conclusive evidence of such adjustment.
The Company shall be entitled to rely on such certificate and shall exhibit the
same from time to time to any Holder desiring an inspection thereof during
reasonable business hours.
SECTION 4.03. STATEMENT ON WARRANTS. Irrespective of any adjustment
in the number or kind of shares issuable upon the exercise of the Warrants,
Warrants theretofore or thereafter issued may continue to express the same price
and number and kind of shares as are stated in the Warrants initially issuable
pursuant to the Agreement.
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SECTION 4.04. FRACTIONAL INTEREST. The Company shall not be required
to issue fractional shares of Common Stock on the exercise of Warrants. If more
than one Warrant shall be presented for exercise in full at the same time by the
same Holder, the number of full shares of Common Stock which shall be issuable
upon such exercise thereof shall be computed on the basis of the aggregate
number of shares of Common Stock acquirable on exercise of the Warrants so
presented. If any fraction of a share of Common Stock would, except for the
provisions of this Section, be issuable on the exercise of any Warrant (or
specified portion thereof), the Company shall pay an amount in cash calculated
by it to be equal to the then Fair Market Value per share of Common Stock
multiplied by such fraction computed to the nearest whole cent.
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.01. WARRANT TRANSFER BOOKS. (a) The Warrant Certificates
shall be issued in registered form only. The Company shall keep at its executive
office a register in which, subject to such reasonable regulations as it may
prescribe, the Company shall provide for the registration of Warrant
Certificates and of transfers or exchanges of Warrant Certificates as herein
provided.
(b) Every Warrant Certificate surrendered for registration of transfer
or exchange shall (if so required by the Company) be duly endorsed, or be
accompanied by a written instrument of transfer in form satisfactory to the
Company, duly executed by the Holder thereof or his attorney duly authorized in
writing.
(c) No service charge shall be made for any registration of transfer
or exchange of Warrant Certificates.
SECTION 5.02. NO STOCK RIGHTS. Prior to the exercise of the
Warrants, no holder of a Warrant Certificate, as such, shall be entitled to vote
or be deemed the holder of Common Stock or any other securities of the Company
which may at any time be issuable on the exercise hereof, nor shall anything
contained herein be construed to confer upon any holder of a Warrant
Certificate, as such, the rights of a stockholder of the Company or the right to
vote for the election of directors or upon any matter submitted to stockholders
at any meeting thereof, or to give or withhold consent to any corporate action,
to exercise any preemptive right, to receive notice of meetings or other actions
affecting stockholders (except as provided herein), or to receive dividends or
subscription rights or otherwise.
SECTION 5.03. RESTRICTIONS ON TRANSFER. The Holder of any Warrant
Certificate, by acceptance thereof, acknowledges and agrees that each Warrant
Certificate,
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the Warrants evidenced thereby and the Underlying Common Stock issuable upon
exercise of such Warrants shall be subject to the terms and conditions of the
Stockholders' Agreement in effect from time to time, including, without
limitation, the provisions therein relating to restrictions on transfer.
SECTION 5.04. NO REGISTRATION OF WARRANTS OR WARRANT SHARES UNDER
SECURITIES LAWS. (a) Neither the Warrants nor the Underlying Common Stock have
been registered under the Securities Act or any state securities laws.
(b) The Holder of any Warrant Certificate, by acceptance thereof,
represents that it is acquiring the Warrants to be issued to it for its own
account and not with a view to the distribution thereof, and agrees not to sell.
transfer, pledge or hypothecate any Warrants or any Underlying Common Stock
unless (i) (A) such transfer is made in connection with an effective
registration statement under the Securities Act and any applicable state
securities laws or (B) the Holder thereof has furnished the Company a
satisfactory opinion of counsel for such Holder to the effect that such
transaction is exempt from the registration requirements of the Securities Act,
the rules and regulations in effect thereunder and any applicable state
securities laws, and (ii) such transfer is made in accordance with terms and
conditions set forth in the Stockholders' Agreement relating to restrictions on
transfer to the extent the Warrants or Underlying Common Stock are subject
thereto.
SECTION 5.05. RESERVATION OF COMMON STOCK FOR ISSUANCE ON EXERCISE OF
WARRANTS. The Company shall at all times reserve and keep available, free from
preemptive rights, out of its authorized but unissued Class A Common Stock,
solely for the purpose of issue upon exercise of Warrants as herein provided,
such number of shares of Class A Common Stock as shall then be issuable upon the
exercise of all outstanding Warrants. All shares of Class A Common Stock which
shall be so issuable shall, upon such issue, be duly and validly issued and
fully paid and non-assessable.
SECTION 5.06. PAYMENT OF TAXES. The Company shall pay all taxes and
other governmental charges that may be imposed on the Company or on the Warrants
or on any securities deliverable upon exercise of Warrants with respect thereto.
The Company shall not be required, however, to pay any tax or other charge
imposed in connection with any transfer involved in the issue of any certificate
for shares of Common Stock or other securities underlying the Warrants or
payment of cash to any person other than the Holder of a Warrant Certificate
surrendered upon the exercise or purchase of a Warrant, and in case of such
transfer or payment, the Company shall not be required to issue any stock
certificate or pay any cash until such tax or charge has been paid or it has
been established to the Company's satisfaction that no such tax or other charge
is due.
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SECTION 5.07. CERTAIN PERSONS TO EXECUTE AGREEMENT. Without in any
way limiting any transfer restrictions contained elsewhere herein or in the
Stockholders' Agreement, no Holder shall sell or otherwise dispose of any
Warrants held by such Holder, unless, prior to the consummation of any such sale
or other disposition, the person to whom such sale or other disposition is
proposed to be made executes and delivers to the Company an agreement, in form
and substance satisfactory to the Company, whereby such prospective transferee
confirms that, with respect to the Warrants that are the subject of such sale or
other disposition, it shall be deemed to be a "Holder" for the purposes of this
Agreement and agrees to be bound by all the terms of this Agreement. Upon the
execution and delivery by such prospective transferee of the agreement referred
to in the next preceding sentence, and subject to all applicable transfer
restrictions, such prospective transferee shall be deemed a "Holder" for the
purposes of this Agreement, and shall have thc rights and be subject to the
obligations of a Holder hereunder with respect to the Warrants held by such
prospective transferee.
SECTION 5.08. PRIOR NOTICE OF CERTAIN EVENTS. In case at any time
the Company proposes to take any action which may result in an adjustment
pursuant to Section 4.01, the Company shall give prior notice thereof. Such
notice shall be given at least three Business Days prior to the earlier of the
action in question and, if applicable, any record date or date on which the
Company's transfer books are closed with respect thereto.
ARTICLE VI
MISCELLANEOUS
SECTION 6.01. EXPENSES. Except as otherwise specified in this
Agreement, all costs and expenses, including, without limitation, fees and
disbursements of counsel, financial advisors and accountants, incurred in
connection with this Agreement and the transactions contemplated hereby shall be
paid by the party incurring such costs and expenses.
SECTION 6.02. NOTICES. All notices, requests, claims, demands and
other communications hereunder shall be in writing and shall be given or made
(and shall be deemed to have been duly given or made upon receipt) by delivery
in person, or by courier service, cable, telecopy, telegram, or registered or
certified mail (postage prepaid, return receipt requested) to the respective
parties hereto at their addresses set forth on the signature pages to this
Agreement (or at such other address for a party hereto as shall be specified in
a notice given in accordance with this Section 6.02).
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SECTION 6.03. HEADINGS. The descriptive headings contained in this
Agreement are for convenience of reference only and shall not affect in any way
the meaning, construction or interpretation of this Agreement.
SECTION 6.04. SEVERABILITY. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any law or
public policy, all other terms and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in an acceptable manner in
order that the transactions contemplated hereby are consummated as originally
contemplated to the greatest extent possible,
SECTION 6.05. ENTIRE AGREEMENT. This Agreement and the Stockholders'
Agreement constitute the entire agreement of the parties hereto with respect to
the subject matter hereof and supersede all prior agreements and undertakings,
both written and oral, between or among the parties with respect to the subject
matter hereof.
SECTION 6.06. NO THIRD PARTY BENEFICIARIES. This Agreement shall be
binding upon and inure solely to the benefit of the parties hereto and their
respective successors and permitted assigns. Nothing in this Agreement, whether
express or implied, is intended to or shall confer upon any person other than
the parties hereto and their respective successors and permitted assigns, any
legal or equitable right, benefit or remedy of any nature whatsoever, under or
by reason of this Agreement.
SECTION 6.07. AMENDMENT; WAIVER. ThiS Agreement may not be amended,
modified, supplemented or waived except by an instrument in writing signed by,
or on behalf of, each of the parties hereto or, in the case of a waiver, the
party to be bound thereby.
SECTION 6.08. GOVERNING LAW. IN ALL RESPECTS, INCLUDING ALL MATTERS
OF CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS AGREEMENT AND THE OBLIGATIONS OF
EACH PARTY ARISING HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE APPLICABLE TO CONTRACTS
EXECUTED IN AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE, WITHOUT REGARD TO
THE PRINCIPLES THEREOF REGARDING CONFLICT OF LAWS.
SECTION 6.09. COUNTERPARTS. This Agreement may be executed in one or
more counterparts, and by the different parties hereto in separate counterparts,
each of which
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when executed shall be deemed to be an original but all of which taken together
shall constitute one and the same agreement.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date fast above written.
PANOLAM INDUSTRIES
HOLDINGS, INC.
By: /s/ Xxxxxxx X. XxxXxxxxx
---------------------------------
Name: XXXXXXX X. XXXXXXXXX
Title: PRESIDENT
By: /s/ [SIGNATURE ILLEGIBLE]
---------------------------------
Name:
Title:
Metro Tower, Suite 1170
000 Xxxxx Xxxx
Xxxxxx Xxxx, Xxxxxxxxxx 00000-0000
Attention: Xxxxxxx X. Xxxxxxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
DOMTAR INDUSTRIES INC.
By: /s/ Y. G. Katsuyama
---------------------------------
Name: Y. G. KATSUYAMA
Title: ASST. GENERAL COUNSEL
c/o Domtar Inc.
000 xx Xxxxxxxxxxx Xxxx. Xxxx
Xxxxxxxx, Xxxxxx, Xxxxxx
X0X 0X0
Attention: Xxxxxx Xxxxxxxxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
EXHIBIT A
[FORM OF WARRANT CERTIFICATE]
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS AND
MAY NOT BE TRANSFERRED, SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE
DISPOSED OF, AND NO REGISTRATION OF TRANSFER OF SUCH SECURITIES WILL BE MADE ON
THE BOOKS OF THE ISSUER, UNLESS (i) SUCH TRANSFER IS MADE IN CONNECTION WITH AN
EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND ANY APPLICABLE STATE
SECURITIES LAWS OR (ii) THE COMPANY HAS BEEN FURNISHED WITH A SATISFACTORY
OPINION OF COUNSEL FOR THE HOLDER HEREOF THAT SUCH TRANSFER IS EXEMPT FROM THE
REGISTRATION REQUIREMENTS OF SUCH ACT, THE RULES AND REGISTRATIONS IN EFFECT
THEREUNDER AND ANY APPLICABLE STATE SECURITIES LAWS.
THE SECURITIES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
RESTRICTIONS ON TRANSFER AS SET FORTH IN A STOCKHOLDERS' AGREEMENT, DATED AS OF
JUNE ___, 1996, AS THEREAFTER AMENDED, SUPPLEMENTED OR OTHERWISE MODIFIED FROM
TIME TO TIME, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL EXECUTIVE OFFICES OF
THE ISSUER. NO REGISTRATION OF TRANSFER OF SUCH SECURITIES WILL BE MADE ON THE
BOOKS OF THE ISSUER UNLESS AND UNTIL SUCH RESTRICTIONS SHALL HAVE BEEN COMPLIED
WITH.
PANOLAM INDUSTRIES HOLDINGS, INC.
SERIES [1] [2] WARRANT CERTIFICATE
Dated as of June ___, 1996
SERIES [1] [2] WARRANTS TO PURCHASE 2,500 SHARES
OF CLASS A COMMON STOCK
Certificate No. [1] Certificate for 2,500 Warrants
A-2
PANOLAM INDUSTRIES HOLDINGS, INC., a corporation organized and
existing under the laws of the State of Delaware (the "COMPANY"), hereby
certifies that, for value received, DOMTAR INDUSTRIES INC., a corporation
organized and existing under the laws of the State of Delaware ("DOMTAR"), or
registered assigns, is the registered holder of the number of Series [1] [2]
Warrants set forth above (the "WARRANTS"). Each Warrant entitles the registered
holder thereof (the "HOLDER"), subject to the provisions contained herein and in
the Warrant Agreement (as defined below), to receive from the Company one share
of common stock, par value $.01 per share, of the Company ("COMMON STOCK"),
subject to adjustment upon the occurrence of certain events, at an exercise
price of zero ($.00) per share. This Warrant Certificate shall terminate and
become void as of the close of business on the earlier of (i) the date on which
all amounts outstanding under the Note (as defined in the Warrant Agreement (as
defined below)) are paid in full, if such payment in full occurs prior to
January 1, 2000, and (ii) June 30, 2002 (the "EXPIRATION DATE" ).
This Warrant Certificate is issued under and in accordance with the
warrant agreement, dated as of June ___, 1996 (as thereafter amended, modified
or supplemented, the "WARRANT AGREEMENT"), between the Company and Domtar, and
is subject to the terms and provisions contained in the Warrant Agreement and
the stockholders' agreement, dated as of June ___ 1996 (as thereafter amended,
supplemented or otherwise modified, the "STOCKHOLDERS" AGREEMENT"), among the
Company, Domtar and the other stockholders of the Company, to all of which terms
and provisions the Holder of this Warrant Certificate consents by acceptance
hereof. The Warrant Agreement and the Stockholders' Agreement are hereby
incorporated herein by reference and made a part hereof. Reference is hereby
made to the Warrant Agreement and the Stockholders' Agreement for a full
statement of the respective rights, limitations of rights, duties and
obligations thereunder of the Company and the Holders of the Warrants.
The number of shares of Common Stock issuable upon the exercise of
each Warrant is subject to adjustment as provided in the Warrant Agreement.
All shares of Common Stock issuable by the Company upon the exercise
of Warrants shall, upon such issue, be duly and validly issued and fully paid
and non-assessable.
In order to exercise a Warrant, the Holder hereof must surrender this
Warrant Certificate at the office of the Company, with the Form of Election to
Purchase attached hereto appropriately filled in and duly executed by the Holder
hereof, with signature guaranteed as therein specified, all subject to the terms
and conditions hereof and of the Warrant Agreement.
A-3
THIS WARRANT CERTIFICATE, THE WARRANTS EVIDENCED HEREBY AND THE
UNDERLYING COMMON STOCK ISSUABLE UPON EXERCISE OF SUCH WARRANTS ARE SUBJECT TO
THE TERMS AND CONDITIONS OF THE STOCKHOLDERS' AGREEMENT, INCLUDING, WITHOUT
LIMITATION, THE PROVISIONS THEREIN RELATING TO RESTRICTIONS ON TRANSFER.
All terms used in this Warrant Certificate that are defined in the
Warrant Agreement shall have the meanings assigned to them in the Warrant
Agreement.
Copies of the Warrant Agreement are on file at the office of the
Company and may be obtained by writing to the Company at Metro Tower, Suite
1170, 000 Xxxxx Xxxx, Xxxxxx Xxxx, Xxxxxxxxxx 00000-0000, Attention: Xxxxxxx X.
Xxxxxxxx.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
A-4
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be executed by its officers thereunto duly authorized as of the date first
written above.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date fast above written.
PANOLAM INDUSTRIES
HOLDINGS, INC.
By: ________________________________
Name:
Title:
By: ________________________________
Name:
Title:
A-5
FORM OF ELECTION TO PURCHASE
(To Be Executed by the Holder if the Holder Desires to Exercise Warrants
Evidenced by the Foregoing Warrant Certificate)
To: Panolam Industries Holdings, Inc.
The undersigned hereby irrevocably elects to exercise the Warrants
evidenced by the foregoing Warrant Certificate for, and to acquire thereunder,
one full share (subject to adjustment) of Class A Common Stock issuable upon
exercise of each such Warrant, all on the terms and conditions specified in the
within Warrant Certificate and the Warrant Agreement therein referred to. The
undersigned hereby surrenders this Warrant Certificate and all right, title and
interest therein to the Company and directs that the shares of Class A Common
Stock deliverable upon the exercise of such Warrants be registered or placed in
the name of the undersigned at the address specified below and delivered
thereto.
Address: _________________________________________________
_________________________________________________
_________________________________________________
(Include Zip Code)
Taxpayer Identification or
Social Security Number: _________________________________________________
Dated: ___________________
Name of
Holder: _________________________________________________
(Please Print)
_________________________________________________
(Signature)*
_________________________________________________
_______________
* The signature must correspond with the name as written upon the face of the
foregoing Warrant Certificate in every particular, without alteration or
enlargement or any change whatever, and must be guaranteed by a financial
institution satisfactory to the Company.
A-6
(By:)_______________________________________________
(Please Print)
(Name:)__________________________________________
(Title:)_________________________________________
Signature
Guaranteed
By:______________________________________________
(Please Print)
A-7
FORM OF ASSIGNMENT
FOR VALUE RECEIVED, the undersigned Holder of the foregoing Warrant
Certificate hereby sells, assigns and transfers* unto each assignee set forth
below (including the undersigned with respect to any Warrants constituting a
part of the Warrants evidenced by the foregoing Warrant Certificate not being
assigned hereby) all of the rights of the undersigned in and to the number of
Warrants (as defined in and evidenced by the foregoing Warrant Certificate) set
forth opposite the name of such assignee below and in and to the foregoing
Warrant Certificate with respect to said Warrants and the shares of Common Stock
issuable upon exercise of said Warrants:
Name of
Assignee: ________________________________________________
(Please Print)
Address: _________________________________________________
_________________________________________________
_________________________________________________
(Include Zip Code)
Number of
Warrants: _________________________________________________
and does hereby irrevocably constitute and appoint the Company the undersigned's
attorney to make such transfer on the books of the Company maintained for that
purpose, with full power of substitution in the premises.
If the total of said Warrants shall not be all the Warrants evidenced
by the foregoing Warrant Certificate, the undersigned requests that a new
Warrant Certificate
________________________
* THE SECURITIES EVIDENCED BY THE FOREGOING WARRANT CERTIFICATE ARE SUBJECT
TO CERTAIN RESTRICTIONS ON TRANSFER AS SET FORTH IN THE STOCKHOLDERS'
AGREEMENT, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL EXECUTIVE OFFICES OF
THE ISSUER. NO REGISTRATION OF TRANSFER OF SUCH SECURITIES WILL BE MADE ON
THE BOOKS OF THE ISSUER UNLESS AND UNTIL SUCH RESTRICTIONS SHALL HAVE BEEN
COMPILED WITH.
A-8
evidencing the Warrants not so assigned be issued in the name of and delivered
to the undersigned.
Dated: _______________
Name of
Holder: _________________________________________________
(Please Print)
_________________________________________________
(Signature)*
(By:) _________________________________________________
(Please Print)
(Name:)__________________________________________
(Title:)_________________________________________
Signature
Guaranteed
By: _________________________________________________
(Please Print)
________________________
* The signature must correspond with the name as written upon the face of the
foregoing Warrant Certificate in every particular, without alteration or
enlargement or any change whatever, and must be guaranteed by a financial
institution satisfactory to the Company.
