<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 12, 1997
REGISTRATION NO.
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------
<TABLE>
<CAPTION>
<S> <C>
BEAR ISLAND PAPER BEAR ISLAND FINANCE
COMPANY, L.L.C. COMPANY II
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
VIRGINIA DELAWARE
(STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION) (STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION)
------------- --------------
2621 2621
(PRIMARY STANDARD INDUSTRIAL CLASSIFICATION CODE NUMBER) (PRIMARY STANDARD INDUSTRIAL CLASSIFICATION CODE NUMBER)
06-0980835 51-0378911
(I.R.S. EMPLOYER IDENTIFICATION NUMBER) (I.R.S. EMPLOYER IDENTIFICATION NUMBER)
</TABLE>
10026 OLD RIDGE ROAD
ASHLAND, VA 23005
(804) 227-3394
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
---------
EDWARD D. SHERRICK
BRANT-ALLEN INDUSTRIES, INC.
POST OFFICE BOX 3443
80 FIELD POINT ROAD
GREENWICH, CT 06830
(203) 661-3344
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA
CODE, OF AGENT FOR SERVICE)
---------
COPIES TO:
DAVID J. GOLDSCHMIDT, ESQ.
SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
919 THIRD AVENUE
NEW YORK, NY 10022
(212) 735-3000
---------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED OFFER TO EXCHANGE AND CONSENT
SOLICITATION: As soon as practicable after this Registration Statement
becomes effective. IF THE SECURITIES BEING REGISTERED ON THIS FORM ARE TO BE
OFFERED IN CONNECTION WITH THE FORMATION OF A HOLDING COMPANY AND THERE IS
COMPLIANCE WITH GENERAL INSTRUCTION G, CHECK THE FOLLOWING BOX. [ ]
---------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
======================================================================================================
PROPOSED MAXIMUM
PROPOSED MAXIMUM AGGREGATE AMOUNT OF
TITLE OF CLASS OF SECURITIES TO AMOUNT TO BE OFFERING PRICE OFFERING REGISTRATION
BE REGISTERED REGISTERED PER SECURITY(1) PRICE(1) FEE(1)
- - ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
10% Series B Senior Secured Notes
due 2007......................... $100,000,000 100% $100,000,000 $29,500
======================================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(f) promulgated under the Securities Act of
1933, as amended.
THE REGISTRANT HEREBY AMENDS THE REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS
REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION,
ACTING PURSUANT TO SUCH SECTION 8(A), MAY DETERMINE.
===============================================================================
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement
becomes effective. This prospectus shall not constitute an offer to sell or
the solicitation of an offer to buy nor shall there be any sale of these
securities in any State in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws of
any such State.
SUBJECT TO COMPLETION, DATED DECEMBER 12, 1997
PROSPECTUS
OFFER FOR ALL OUTSTANDING 10% SENIOR SECURED NOTES DUE 2007
IN EXCHANGE FOR 10% SERIES B SENIOR SECURED NOTES DUE 2007,
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OF
BEAR ISLAND PAPER COMPANY, L.L.C.
AND [LOGO]
BEAR ISLAND FINANCE COMPANY II
---------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ,
1998, UNLESS EXTENDED.
Bear Island Paper Company, L.L.C. (the "Company") and Bear Island Finance
Company II ("FinCo" and, together with the Company, the "Issuers") hereby
offer, upon the terms and subject to the conditions set forth in this
Prospectus and the accompanying Letter of Transmittal (which together
constitute the "Exchange Offer"), to exchange an aggregate principal amount
at maturity of up to $100,000,000 of 10% Series B Senior Secured Notes Due
2007 (the "New Notes") of the Issuers, which have been registered under the
Securities Act of 1933, as amended (the "Securities Act"), for a like
principal amount at maturity of the issued and outstanding 10% Senior Secured
Notes Due 2007 (the "Old Notes" and, together with the New Notes, the
"Notes") of the Issuers from the holders (the "Holders") thereof. The terms
of the New Notes are identical in all material respects to the Old Notes
except (i) that the New Notes have been registered under the Securities Act,
(ii) for certain transfer restrictions and registration rights relating to
the Old Notes and (iii) that the New Notes will not contain certain
provisions relating to additional interest to be paid to Holders of Old Notes
under certain circumstances relating to the timing of the Exchange Offer. The
Issuers issued $100,000,000 aggregate principal amount of Old Notes on
December 1, 1997, pursuant to exemptions from, or transactions not subject
to, the registration requirements of the Securities Act and applicable state
securities laws.
Interest on the Notes will be payable semi-annually in arrears on June 1
and December 1 of each year, commencing June 1, 1998. The Notes will mature
on December 1, 2007. The Notes are redeemable at the option of the Issuers,
in whole or in part, at any time on or after December 1, 2002 at the
redemption prices set forth herein, together with accrued and unpaid interest
to the date of redemption. In addition, prior to December 1, 2000, the
Issuers may redeem up to 20% of the original aggregate principal amount of
the Notes with the net proceeds of one or more public offerings of common
stock of the Company at a redemption price equal to 110% of the principal
amount thereof, plus accrued and unpaid interest, if any, to the date of
redemption; provided that at least 80% of the original aggregate principal
amount of the Notes remains outstanding thereafter. Upon a Change of Control
(as defined herein), each holder of the Notes may require the Issuers to
repurchase all or a portion of such holder's Notes at 101% of the principal
amount thereof, plus accrued and unpaid interest, if any, to the date of such
purchase.
The Notes are senior secured obligations of the Issuers, rank senior in
right of payment to all subordinated indebtedness of the Issuers and rank
pari passu in right of payment with all other existing and future senior
indebtedness of the Issuers, including, in the case of the Company,
indebtedness under the Bank Credit Facilities (as defined herein). The Notes
are secured by (i) a second priority security interest in all real property
and certain personal property of the Company (the "Company Collateral"), (ii)
a third priority security interest in 100% of the membership interests in
Bear Island Timberlands Company, L.L.C. ("Timberlands") (the "Timberlands
Collateral") and (iii) a second priority security interest (behind a shared
first priority security interest) in 65% of the issued and outstanding
capital stock of F.F. Soucy, Inc. ("Soucy Inc.") (the "Soucy Collateral" and,
together with the Company Collateral and the Timberlands Collateral, the
"Collateral"). The Soucy Collateral will be released and all of the covenants
and other provisions of the Indenture with respect to Soucy Inc. will
terminate under certain circumstances. The obligations of the Company under
the Bank Credit Facilities are secured by a first priority security interest
in the Company Collateral, a second priority security interest in the
Timberlands Collateral and a shared first priority security interest in the
Soucy Collateral. Each of the Company, Timberlands and Soucy Inc. are wholly
owned by Brant-Allen Industries, Inc. ("Brant-Allen"). At September 30, 1997,
on a pro forma basis after giving effect to the Acquisition (as defined
herein) and the financings therefor, the Company would have had indebtedness
(other than the Notes) of approximately $106.7 million, $103.9 million of
which would have represented borrowings under the Bank Credit Facilities, and
FinCo would have had no indebtedness other than the Notes.
While the Company and FinCo are jointly and severally liable for the
obligations under the Notes, FinCo, a wholly-owned subsidiary of the Company,
has only nominal assets, does not conduct any operations and was formed
solely in order to facilitate the raising of capital for the Company.
(Continued on next page)
THE NOTES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK. SEE "RISK FACTORS"
BEGINNING ON PAGE 15 FOR A DISCUSSION OF FACTORS THAT SHOULD BE CONSIDERED BY
HOLDERS WHO TENDER THEIR OLD NOTES IN THE EXCHANGE OFFER.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
---------
The date of this Prospectus is , 1998.
<PAGE>
(Continued from previous page)
For each Old Note accepted for exchange, the Holder of such Old Note will
receive a New Note having a principal amount equal to that of the surrendered
Old Note. The New Notes will bear interest from the most recent date to which
interest has been paid on the Old Notes or, if no interest has been paid on
the Old Notes, from December 1, 1997. Old Notes accepted for exchange will
cease to accrue interest from and after the date of consummation of the
Exchange Offer. Holders of Old Notes whose Old Notes are accepted for
exchange will not receive any payment in respect of accrued interest on such
Old Notes.
The New Notes are being offered hereunder in order to satisfy certain
obligations of the Issuers contained in the Registration Rights Agreement (as
defined herein). Based on interpretations by the staff of the Securities and
Exchange Commission (the "Commission"), as set forth in no-action letters
issued to third parties, the Issuers believe that New Notes issued pursuant
to the Exchange Offer in exchange for Old Notes may be offered for resale,
resold and otherwise transferred by Holders thereof (other than any Holder
which is an "affiliate" of the Issuers within the meaning of Rule 405 under
the Securities Act), without compliance with the registration and prospectus
delivery requirements of the Securities Act, provided that such New Notes are
acquired in the ordinary course of such Holder's business and such Holder,
other than broker-dealers, has no arrangement with any person to engage in a
distribution of such New Notes. However, the Commission has not considered
the Exchange Offer in the context of a no-action letter and there can be no
assurance that the staff of the Commission would make a similar determination
with respect to the Exchange Offer as in such other circumstances. Each
Holder, other than a broker-dealer, must acknowledge that it is not engaged
in, and does not intend to engage in, a distribution of such New Notes and
has no arrangement or understanding to participate in a distribution of New
Notes. If any Holder is an affiliate of the Issuers, is engaged in or intends
to engage in or has any arrangement with any person to participate in the
distribution of the New Notes to be acquired pursuant to the Exchange Offer,
such Holder (i) could not rely on the applicable interpretations of the staff
of the Commission and (ii) must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with any resale
transaction. Each broker-dealer that receives New Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such New Notes. The Letter of
Transmittal states that by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within
the meaning of the Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of New Notes received in exchange for Old Notes where such Old
Notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities. The Issuers have agreed that, for a
period of 90 days after the Expiration Date (as defined herein), they will
make this Prospectus available to any broker-dealer for use in connection
with any such resale. See "Plan of Distribution."
The Issuers will not receive any proceeds from the Exchange Offer. The
Company will pay all the expenses incident to the Exchange Offer. Tenders of
Old Notes pursuant to the Exchange Offer may be withdrawn at any time prior
to the Expiration Date. If the Issuers terminate the Exchange Offer and do
not accept for exchange any Old Notes, the Issuers will promptly return the
Old Notes to the Holders thereof. See "The Exchange Offer."
There is no existing trading market for the New Notes, and there can be no
assurance regarding the future development of a market for the New Notes. The
Initial Purchasers (as defined herein) have advised the Issuers that they
currently intend to make a market in the New Notes. The Initial Purchasers
are not obligated to do so, however, and any market-making with respect to
the New Notes may be discontinued at any time without notice. The Issuers do
not intend to apply for listing or quotation of the New Notes on any
securities exchange or stock market or register or qualify the New Notes for
offer and sale in any jurisdiction (other than the registration of the New
Notes under the Securities Act).
i
<PAGE>
AVAILABLE INFORMATION
The Issuers have filed with the Commission a registration statement on
Form S-4 (herein, together with all amendments and exhibits, referred to as
the "Registration Statement") under the Securities Act with respect to the
New Notes offered hereby. This Prospectus, which forms a part of the
Registration Statement, does not contain all of the information set forth in
the Registration Statement and the exhibits thereto, certain parts of which
are omitted in accordance with the rules and regulations of the Commission.
For further information with respect to the Issuers and the New Notes offered
hereby, reference is made to the Registration Statement. Any statements made
in this Prospectus concerning the provisions of certain documents are not
necessarily complete and, in each instance, reference is made to the copy of
such document filed as an exhibit to the Registration Statement otherwise
filed with the Commission.
Upon the effectiveness of the Registration Statement, the Issuers will
become subject to the informational requirements of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and in accordance therewith
will file reports and other information with the Commission. The Registration
Statement, the exhibits forming a part thereof and the reports and other
information filed by the Issuers with the Commission in accordance with the
Exchange Act may be inspected, without charge, at the Public Reference
Section of the Commission located at 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549 and at the following Regional Offices of the
Commission: 7 World Trade Center, 13th Floor, New York, New York 10048; and
500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of all
or any portion of the material may be obtained from the Public Reference
Section of the Commission upon payment of the prescribed fees. The Commission
also maintains a site on the World Wide Web that contains reports, proxy and
information statements and other information at http://www.sec.gov.
In the event that the Issuers are not required to be subject to the
reporting requirements of the Exchange Act in the future, the Issuers will be
required under the Indenture pursuant to which the Old Notes were, and the
New Notes will be, issued, to continue to file with the Commission, and to
furnish the Holders of the New Notes with, the information, documents and
other reports specified in Sections 13 and 15(d) of the Exchange Act.
CERTAIN REFERENCES
All references in this Prospectus to the "Company" mean Bear Island Paper
Company, L.L.C., a limited liability company organized under Virginia law,
and, for periods prior to December 1, 1997, its predecessor, Bear Island
Paper Company, L.P., a limited partnership organized under Virginia law
("BIPCO"). References to the "Acquisition" mean the acquisition by the
Company on December 1, 1997, of all the interests in BIPCO that the Company
did not then own and the related financings described in this Prospectus
under "The Acquisition".
All references in this Prospectus to "Timberlands" mean Bear Island
Timberlands Company, L.L.C., a limited liability company organized under
Virginia law and, for periods prior to December 1, 1997, its predecessor,
Bear Island Timberlands Company, L.P., a limited partnership organized under
Virginia law ("BITCO"). References to the "Timberlands Acquisition" mean the
acquisition by Brant-Allen on December 1, 1997, of all the interests in BITCO
that Brant-Allen did not then own and the related financings described in
this Prospectus under "The Timberlands Acquisition." References to the
"Transactions" refer to the Acquisition and the Timberlands Acquisition,
collectively.
Certain industry information and statistical data contained in this
Prospectus has been derived from information published by the Canadian Pulp &
Paper Association (the "CPPA"), Resource Information Systems, Inc. ("RISI")
or Miller Freeman, Inc., each of which regularly publish statistical and
other information relating to the newsprint industry. All references to
"delivered cash cost" refer to the manufacturing costs of newsprint less
depreciation plus transportation costs and, in the case of the Company's
delivered cash costs prior to December 1, 1997, as further adjusted to
reflect the market price of fiber. All references in this Prospectus to
"tonnes" are to metric tons, which equal 2,204.6 pounds. References to $ are
to United States dollars and references to Cdn $ are to Canadian dollars.
ii
<PAGE>
EXCHANGE RATE INFORMATION
The following table sets forth certain exchange rates for Canadian dollars
based on the noon buying rate in New York for cable transfers in Canadian
dollars, as certified for customs purposes by the Federal Reserve Bank of New
York (the "Noon Buying Rate"). Such rates are set forth as U.S. dollars per
Cdn$1.00 and are the inverse of rates quoted by the Federal Reserve Bank of
New York for Canadian dollars per U.S.$1.00.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
-----------------------------------------------------------------
1992 1993 1994 1995 1996 1996 1997
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
High............... 0.8756 0.8046 0.7632 0.7527 0.7513 0.7391 0.7487
Low................ 0.7761 0.7439 0.7103 0.7023 0.7235 0.7235 0.7145
Average(1)......... 0.8235 0.7729 0.7300 0.7305 0.7329 0.7342 0.7253
Rate at period
end............... 0.7865 0.7544 0.7128 0.7323 0.7301 0.7310 0.7234
</TABLE>
- - ------------
(1) The average of the exchange rate on the last day of each month during
the applicable period.
On December 11, 1997, the inverse of the Noon Buying Rate was Cdn$1.00 =
U.S.$0.70220.
iii
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and financial data,
including the financial statements and the notes thereto, appearing elsewhere
in this Prospectus.
THE COMPANY
GENERAL
The Company is a low cost producer of high quality newsprint, with a
newsprint machine that is currently, and for the past ten years has been,
ranked number one in North America by the CPPA for overall machine operating
efficiency (the ratio of salable tonnes produced to theoretical production
capacity at a machine's given speed). The Company's mill, located near
Richmond, Virginia, has an annual capacity of 225,000 tonnes with an average
delivered cash cost of $402 per tonne for the first nine months of 1997. The
Company produces high quality newsprint suitable for four-color printing,
which publishers are increasingly using for general circulation. In 1996, and
for the first nine months of 1997, the mill produced approximately 219,000
and 169,000 tonnes of newsprint, and had an estimated operating efficiency
rate of 96.2% and 96.7%, respectively. Over the past four years, the Company
has been able to increase its production by approximately 17,000 tonnes
through productivity and capital improvements, representing an annual average
increase of approximately 2.6%.
The Company's customers include leading newspaper publishers in the United
States, such as Dow Jones & Company, Inc. ("Dow Jones") (publisher of The
Wall Street Journal), The Washington Post Company ("The Washington Post"),
Advance Publications (the "Newhouse Group"), Gannett Co., Inc. (publisher of
USA Today) ("Gannett"), MediaNews Group Inc. ("MediaNews"), Knight-Ridder,
Inc. ("Knight-Ridder"), Media General, Inc. ("Media General"), The Times
Mirror Co. ("Times Mirror") and New York Times Co. ("New York Times").
Approximately 68% of the Company's newsprint production is sold on a contract
basis with the length of most contracts ranging from two to five years.
Approximately 90% of the Company's current newsprint production is purchased
by its top ten customers, eight of whom have been customers of the Company
for over 15 years.
In its manufacturing process, the Company's mill currently uses 65%
thermomechanical pulp ("TMP"), 28% de-inked pulp and 7% kraft pulp. The use
of TMP provides high wood fiber yields and higher quality newsprint than that
produced by the traditional mechanical groundwood process. The mill was the
first of its kind designed to produce newsprint from 100% TMP using Southern
Pine. The de-inked pulp is produced at the Company's recycling facility,
which is adjacent to the newsprint mill. The recycling facility commenced
operations in 1994 and features state-of-the-art technology for de-inking,
cleaning and screening of old newspapers ("ONP") and old magazines ("OMG").
The Company believes that the addition of the recycling facility increased
the mill's capacity and improved the Company's manufacturing cost structure.
Prior to the consummation of the Transactions, all the Company's wood
requirements were supplied by its affiliate, Timberlands, with approximately
30% coming from Timberlands' own land and the remainder being procured by
Timberlands from local independent wood contractors and independent sawmills.
Timberlands currently owns approximately 130,000 acres of prime timber in
Virginia. Brant-Allen may monetize all or a substantial portion of that
acreage to reduce debt incurred in connection with the Timberlands
Acquisition. However, Timberlands will retain long-term fiber supply
arrangements which management believes would allow the Company to maintain
fiber sourcing flexibility. The ONP and OMG used for the Company's recycling
facility are provided by a combination of individual processors, municipal
recovery facilities and brokers. All fiber is currently supplied from sources
within a 200 mile radius of the mill.
The Company is managed by a team of experienced industry professionals.
Executive management is provided by Brant-Allen, the owner of the Company,
pursuant to a management contract (the "Management Services Agreement").
Brant-Allen's executive management has an average of over 28 years of
experience in the newsprint industry and includes Peter Brant and Joseph
Allen, who together own 100% of the Company indirectly through Brant-Allen.
Brant-Allen's predecessor was engaged in the newsprint industry since its
formation in 1941.
Brant-Allen also manages and owns all the capital stock of Soucy Inc., a
Canadian corporation. Soucy Inc. is the general partner of, and owns a 50.1%
interest in, F. F. Soucy, Inc. & Partners, Limited Partnership ("Soucy
Partners"
1
<PAGE>
and, together with Soucy Inc., "Soucy"), a Canadian limited partnership.
Soucy Inc. owns a newsprint machine that has an annual capacity of 67,000
tonnes and Soucy Partners owns a newsprint machine that has an annual
capacity of 150,000 tonnes. Newsprint produced by the Company and Soucy is
sold through Brant-Allen, which currently markets approximately 442,000
tonnes of newsprint (225,000 tonnes for the Company and 217,000 tonnes for
Soucy). Brant-Allen intends to continue to manage the Company and Soucy to
maximize any available synergies. The Company benefits from the
centralization of marketing, financial, administrative and distribution
functions at Brant-Allen. These services are provided pursuant to the
Management Services Agreement for which a management fee of 3% of annual net
sales is payable by the Company, of which, beginning December 1, 1997, one
third is payable in cash.
COMPETITIVE STRENGTHS
The Company believes that its competitive strengths include:
LOW COST PRODUCTION CAPABILITIES. The Company estimates that over 90% of
newsprint produced in North America is produced in four regions: Eastern
Canada, Western Canada, U.S. Northwest and U.S. South. In 1996, the Company's
average delivered cash cost of $416 per tonne was lower than the average for
the U.S. Northwest, Eastern Canada and Western Canada regions.
The following are the average delivered cash costs, by region, for 1996
and the estimated 1995 percentage of North American capacity in each region
(calculated by the Company from RISI and CPPA statistics):
<TABLE>
<CAPTION>
1995 ESTIMATED % OF
1996 DELIVERED CASH NORTH AMERICAN CAPACITY
REGION (A) COST $/TONNE (B) (D)
- - --------------- ------------------- -------------------------
<S> <C> <C>
U.S. South 404 24%
U.S. Northwest 437 13%
Eastern Canada 427 46%
Western Canada 451 14%
The Company (c) 416 1%
</TABLE>
- - ------------
(a) A minimal amount of North American capacity, approximately 3% in 1995,
is located in the U.S. Northeast and U.S. Midwest regions.
(b) Based on RISI statistics for delivered cash costs for 1996, except for
the Company. All references in this Prospectus to delivered cash cost
of newsprint include manufacturing cost excluding depreciation plus
transportation costs.
(c) All references in this Prospectus to the Company's delivered cash cost
of newsprint prior to December 1, 1997, are adjusted to reflect the
market price of fiber. See "Certain Related Party Transactions."
(d) Based on latest available CPPA statistics for estimated North American
capacity.
The principal reasons for the Company's low cost structure include its
leadership in operating efficiency, the strategic location of its
manufacturing facility, its strategic fiber sourcing capabilities, its low
energy costs and its highly trained and motivated non-union workforce.
Efficient Manufacturing Facilities. For the past ten years, the Company's
paper machine has been ranked number one in North America by the CPPA for
overall machine operating efficiency. With its automated newsprint facility,
the Company has maintained its leadership in machine operating efficiency by
focusing on maximizing machine speeds, minimizing unscheduled downtime and
reducing work hours per tonne. With an average machine operating efficiency
of 96.7% for the first nine months of 1997, the Company's mill is capable of
producing an average of 620 tonnes of newsprint per day. The Company's
newsprint machine currently runs at 3,900 feet per minute.
Strategic Location of Manufacturing Facilities. The Company's mill is
located close to its major customers and fiber supplies. Currently,
approximately 75% of its total customer shipments, 100% of its wood sources
and 100% of its ONP and OMG sources are located within a 200-mile radius of
the mill. In addition, the mill's location facilitates ready access to many
major metropolitan areas, including Atlanta, Baltimore, Charlotte, New York,
Philadelphia, Richmond and Washington, D.C., via rail and major highways. As
a result, the Company was able to attain an average cash transportation cost
for 1996 of approximately $27 per tonne, which the Company estimates, based
on capacity and transportation statistics published by RISI and the CPPA, is
approximately 50% lower than the estimated North American industry average of
$54 per tonne.
2
<PAGE>
Strategic Fiber Sourcing Capabilities. In actively managing its fiber
costs, the Company has two competitive advantages: a flexible manufacturing
process and easy access to timberlands owned and managed by Timberlands. The
Company's manufacturing process allows it to vary the relative percentage of
TMP, de-inked pulp and kraft pulp, within certain limits. This allows the
Company to optimize input costs in times of high costs for wood, ONP or OMG.
Furthermore, Brant-Allen currently has the ability to direct wood
requirements from Timberlands' land to the Company depending on third-party
prices for wood, which can mitigate significant fluctuations in the Company's
raw material costs. See "Business of Timberlands."
Low Energy Costs. The Company's ability to achieve low electricity costs
has had a favorable impact on its cost structure. Its electricity supply
contract with a local utility and its efficient electrical usage patterns
have allowed the Company to obtain electricity at a rate that it believes is
approximately 40% below the national average for industrial users. The
Company has been able to achieve these results due to its ability to reduce
its energy demand at peak times.
Highly Trained and Motivated Non-union Workforce. The Company has a stable
non-union workforce that management believes is highly trained and motivated.
With the majority of employees having over 15 years of experience at the
mill, the Company has avoided the inefficiencies and re-training costs
typically associated with high workforce turnover. Management has implemented
an incentive program that rewards employees with monthly bonuses of up to 10%
of their salaries for attaining certain production and quality targets.
HIGH QUALITY PRODUCT AND STRONG CUSTOMER RELATIONSHIPS. The Company
believes that its newsprint, which is produced primarily from TMP pulp and
recycled fiber, is recognized by publishers as a high quality product in
terms of printability and runability. The high quality of the newsprint
produced by the Company is demonstrated by its suitability for four-color
printing, which publishers are increasingly using for general circulation.
The average breaks per hundred rolls for the Company's newsprint in its
customers' pressrooms was 1.9 in 1996, and 1.8 for the first nine months of
1997, which management believes is below the average for that of its
competitors. In 1996, the Company was ranked by Gannett, the largest
newspaper company in the U.S. and owner of USA Today, as the number three
certified supplier for the USA Today newspaper. In 1996, the Company was
ranked by Knight-Ridder as its number two supplier on the East Coast. Other
major customers of the Company include Dow Jones (publisher of The Wall
Street Journal), The Washington Post, The Newhouse Group, MediaNews, Media
General, Times Mirror and New York Times. The Company believes that the
quality of its product and level of its customer service have enabled it to
maintain these strong customer relationships.
EXPERIENCED AND COMMITTED MANAGEMENT TEAM. The executive officers of the
Company include Peter Brant and Joseph Allen, who together indirectly hold a
100% ownership interest in the Company through Brant-Allen. The current
executive officers of the Company formed the Company, supervised the
construction of the mill and the commencement of the mill's operations and
have managed the Company's business since that time. These executive
officers, together with the other members of the management team of the
Company, have an average of over 15 years of experience with the Company and
30 years of experience in the newsprint industry. Management believes that
the commitment and experience of the Company's management team have enabled
it to achieve its low cost position in the industry and to maintain high
product quality and strong customer relationships.
BUSINESS STRATEGY
The Company's objectives are to maximize revenues and cash flow. The key
elements of the Company's strategy are:
COST REDUCTIONS. Management believes that incremental costs savings can be
achieved with respect to its fiber sourcing, raw materials, labor costs per
tonne and shipping and handling costs. In addition, the Company intends to
focus on reducing woodyard handling costs. The Company also plans to reduce
the proportion of more expensive kraft pulp, while increasing the amount of
ONP and OMG used.
IMPROVEMENTS IN PRODUCTION. Management intends to maintain the number one
operating efficiency ranking of its newsprint machine by continuing to focus
on minimizing machine downtime, exploiting departmental efficiencies to
further reduce work hours per tonne and increasing production by increasing
machine speed. The Company believes that these improvements should favorably
impact its cost structure.
3
<PAGE>
GROWTH OPPORTUNITIES. The Company plans to evaluate opportunities to
expand production capacity through acquisitions of other newsprint businesses
or assets. Management believes that strategic expansion would provide
opportunities for further efficiencies and cost benefits due to economies of
scale, while maintaining its strong customer relationships.
FINANCIAL STRATEGY. Management intends to focus on improving the Company's
financial flexibility going forward. Management expects to accomplish this
goal by (i) using available excess cash to reduce indebtedness and (ii)
pursuing other alternatives, which may include equity financing, to fund
growth and reduce indebtedness. By improving financial flexibility,
management believes that the Company's ability to react to general economic
and industry changes would be enhanced.
BACKGROUND
The Company's predecessor, BIPCO, was formed in 1978 as a limited
partnership, with Brant-Allen as its general partner. Prior to the
Acquisition, Brant-Allen owned a 30% partnership interest in BIPCO, and
subsidiaries of The Washington Post and Dow Jones each owned 35% partnership
interests in BIPCO. See "The Acquisition" below.
Brant-Allen is a Sub Chapter S corporation jointly owned by Mr. Peter
Brant and Mr. Joseph Allen. Brant-Allen's predecessor was formed in the early
1940s when the fathers of Messrs. Brant and Allen founded a paper conversion
and newsprint sales business. In the early 1970s, Brant-Allen entered into
the newsprint manufacturing business. Messrs. Brant and Allen have been
involved in the management of Brant-Allen for over 30 years: Mr. Brant serves
as the Chairman of the Board, President and Chief Executive Officer of
Brant-Allen and Mr. Allen serves as Co-Chairman of the Board and Chief
Operating Officer of Brant-Allen. Mr. Brant also serves as the Chairman of
the Board, President and Chief Executive Officer of the Company and Mr. Allen
also serves as Vice Chairman of the Board, Executive Vice President and Chief
Operating Officer of the Company.
Prior to the Timberlands Acquisition, Brant-Allen was also the general
partner of, and owned a 30% partnership interest in, BITCO, which was
converted to Timberlands immediately prior to the closing of the Timberlands
Acquisition. See "The Timberlands Acquisition" below. BITCO was formed in
1985 and currently owns and manages approximately 130,000 acres of timberland
in Central Virginia, all within 200 miles of the Company's mill. See
"Business of Timberlands."
In addition, Brant-Allen owns all the capital stock of Soucy Inc. Soucy
Inc., a newsprint manufacturer located in Rivi|f4re-du-Loup in the Province of
Quebec, Canada, owns a newsprint machine that currently has an annual
capacity of 67,000 tonnes. Soucy Inc. is also the general partner and owns a
50.1% interest in Soucy Partners, a limited partnership formed in 1974 with
Dow Jones (39.9%) and Rexfor (a Quebec government-owned company) (10.0%).
Soucy Partners owns and operates a mill, including a newsprint machine, with
an annual production capacity of 150,000 tonnes. The two Soucy newsprint
machines are located on Soucy Partners' plant site. See "Business of Soucy."
FinCo is a wholly owned subsidiary of the Company that was incorporated in
Delaware for the purpose of serving as a co-issuer of the Notes. FinCo will
not have any operations or assets and will not have any revenues. As a
result, holders of the Notes should not expect FinCo to participate in
servicing the interest and principal obligations on the Notes.
THE ACQUISITION
On December 1, 1997, the Company purchased all the partnership interests
in BIPCO owned by subsidiaries of Dow Jones and The Washington Post for an
aggregate purchase price, which is subject to certain post-closing
adjustments, of approximately $149.8 million in cash. The Company financed
this purchase (including approximately $200,000 of transaction costs, as well
as the repayment of approximately $47.1 million of existing debt) with: (i)
borrowings of $103.9 million under the $120 million senior secured bank
credit facilities (the "Bank Credit Facilities") (of which $2.9 million is
anticipated to be drawn down for payment of deferred loan costs due at
December 1, 1997, but not yet paid by the Company); (ii) the net proceeds
from the issuance of the Old Notes; and
4
<PAGE>
(iii) $5.2 million existing cash on hand (of which approximately $1.2 million
was distributed to Brant-Allen to reimburse certain deferred loan costs paid
by Brant-Allen on behalf of the Company in connection with the Acquisition) .
The Bank Credit Facilities consist of two separate facilities: (i) a $50
million 6-year senior secured reducing revolving credit facility (the
"Revolving Credit Facility") and (ii) a $70 million 8-year senior secured
term loan facility (the "Term Loan Facility"). See "Description of Certain
Other Indebtedness -- Company Indebtedness -- The Bank Credit Facilities."
The following table summarizes the sources and uses of funds (dollars in
millions) in connection with the Acquisition:
<TABLE>
<CAPTION>
SOURCES OF FUNDS AMOUNT USES OF FUNDS (A) AMOUNT
---------------- ------ ----------------- ------
<S> <C> <C> <C>
Revolving Credit Facility Cash to purchase selling limited partners'
(a).......................... $ 33.9 interests (b)............................. 149.6
Transaction costs.......................... 0.2
Term Loan Facility ........... 70.0 Prepayment of Existing Debt and
accrued interest ......................... 47.1
The Notes (c)................. 100.0 Prepayment penalty......................... 4.0
Existing cash on hand (a) ... 5.2 Deferred loan costs........................ 8.2
-------- --------
Total ...................... $209.1 Total ................................... $209.1
======== ========
</TABLE>
- - ---------
(a) Upon consummation of the Acquisition approximately $5 million of excess
cash on-hand was used to reduce the balance outstanding under the
Revolving Credit Facility. Additional borrowings under the Revolving
Credit Facility will be used for working capital and general business
purposes.
(b) The amount paid to the subsidiaries of Dow Jones and the Washington
Post is subject to certain post-closing adjustments. Any additional
amounts required to be paid to such subsidiaries in respect of any such
post-closing adjustments are intended to be funded by additional
amounts drawn under the Revolving Credit Facility or cash on hand.
(c) After deducting the Initial Purchasers' discount of $3 million, the net
proceeds from the issuance of the Old Notes was $97 million. This
discount is included in the $8.2 million deferred loan costs shown
under "Uses of Funds."
5
<PAGE>
THE TIMBERLANDS ACQUISITION
Concurrently with the closing of the Acquisition, Brant-Allen purchased
the 70% interest in BITCO then owned by subsidiaries of Dow Jones and The
Washington Post for an aggregate purchase price, which is subject to certain
post-closing adjustments, of approximately $36 million in cash. Funding of
this purchase, including an estimated $30,000 in transaction costs, was
provided by (i) borrowings of $35 million under senior secured two-year loan
facilities consisting of a $32 million term facility and a $3 million
revolving facility (collectively, the "Timberlands Loan") borrowed by
Brant-Allen, guaranteed by Timberlands and secured by a first lien on
Brant-Allen's membership interests in Timberlands, and (ii) $1.0 million of
Brant-Allen's existing cash on hand. Brant-Allen anticipates that any
additional amounts required to be paid in respect of any post-closing
adjustments would be funded from cash on hand or advances under its revolving
credit line. Timberlands expects to distribute to Brant-Allen any cash
on-hand that exceeds its own operating and debt requirements so that
Brant-Allen can pay interest on, and reduce principal outstanding under, the
Timberlands Loan. As of September 30, 1997 on a pro forma basis after giving
effect to the Timberlands Acquisition, excess cash and short-term investments
available for such distributions would have been approximately $4.1 million.
Concurrently with the closing of the Timberlands Acquisition, Timberlands
substantially modified the terms of its $27 million loan from John Hancock
Mutual Life Insurance Company (and paid a related modification fee) (as
modified, the "Hancock Loan") and in connection with the modification,
received a $3 million advance from John Hancock Mutual Life Insurance
Company, bringing the total outstanding balance under the Hancock Loan to $30
million. The Hancock Loan matures on November 24, 1999 and is secured by
approximately 125,000 acres of Timberlands' land. Dow Jones' and The
Washington Post's pro rata portion of the modification fee was deducted from
the purchase price paid to them.
RISK FACTORS
See "Risk Factors" for a discussion of factors that should be considered
by holders of Old Notes before tendering their Old Notes in the Exchange
Offer. Most of these factors apply to the Old Notes as well as the New Notes.
---------
The principal executive offices of the Issuers are located at 10026 Old
Ridge Road, Ashland, VA 23005 (Telephone: (804) 227-3394).
6
<PAGE>
The following chart illustrates the current ownership of the Company,
Timberlands, Soucy Inc., Soucy Partners and FinCo (and their respective
principal assets and classes of indebtedness):
#############################################################################
LINE GRAPH OMITTED
#############################################################################
- - ------------
(1) The Timberlands Loan is secured by: (i) a first priority security
interest in 100% of the membership interests in Timberlands; and (ii) a
first priority security interest (pro rata with the Company's $120
million Bank Credit Facilities) in 65% of the common stock of Soucy
Inc. The remaining 35% of Soucy Inc.'s common stock is subject to a
negative pledge from Brant-Allen. The Timberlands Loan is also
guaranteed by Timberlands.
(2) The Hancock Loan is secured by a first priority security interest in
approximately 125,000 acres of timberlands owned by Timberlands.
(3) tpy = tonnes per year.
(4) The Bank Credit Agreement is secured by: (i) a first priority security
interest in a substantial portion of the assets of the Company; (ii) a
first priority security interest (pro rata along with the $35 million
Timberlands Loan to Brant-Allen) in 65% of the common stock of Soucy
Inc.; and (iii) a second priority security interest in 100% of the
membership interests in Timberlands. The remaining 35% of common stock
of Soucy Inc. is subject to a negative pledge by Brant-Allen. The Bank
Credit Agreement is also guaranteed by Brant-Allen.
(5) The Notes are secured by: (i) a second priority security interest in
substantially all of the assets of the Company; (ii) a second priority
security interest in 65% of the common stock of Soucy Inc., subject to
release in certain circumstances; and (iii) a third priority security
interest in 100% of the membership interests in Timberlands.
(6) FinCo is a joint obligor under the Notes.
(7) The Soucy credit facilities are secured by accounts receivable and
inventories. In addition, Brant-Allen has assigned its accounts
receivable and provided an unlimited guarantee and postponement of
claims against Soucy.
(8) The secured bonds are issued by Riviere du Loup Finance Ltd ("RDL"), a
wholly-owned subsidiary of Soucy Partners, in three series under a
trust indenture dated March 30, 1979 with Montreal Trust Company and
are guaranteed by Soucy Partners. This guarantee is secured by (i) a
first priority security interest in the shares of capital stock of RDL,
(ii) a first priority security interest in the immovable property of
Soucy Partners and (iii) an assignment of the rights of Soucy Partners
under certain immovable leases and newsprint sales and other contracts.
7
<PAGE>
THE EXCHANGE OFFER
On December 1, 1997 the Issuers issued $100 million principal amount of
Old Notes. The Old Notes were sold pursuant to exemptions from, or in
transactions not subject to, the registration requirements of the Securities
Act and applicable state securities laws, in order to enable the Issuers to
raise funds on a more expeditious basis than necessarily would have been
possible had the initial sale been pursuant to an offering registered under
the Securities Act. TD Securities (USA) Inc. and Salomon Brothers Inc (the
"Initial Purchasers"), as a condition to their purchase of the Old Notes,
requested that the Issuers agree to commence the Exchange Offer following the
offering of the Old Notes.
Securities Offered ............ Up to $100,000,000 principal amount of 10%
Series B Senior Secured Notes Due 2007,
which have been registered under the
Securities Act. The terms of the New Notes
and the Old Notes are identical in all
material respects, except (i) that the New
Notes have been registered under the
Securities Act, (ii) for certain transfer
restrictions and registration rights
relating to the Old Notes and (iii) that the
New Notes will not contain certain
provisions relating to additional interest
to be paid to the Holders of Old Notes under
certain circumstances relating to the timing
of the Exchange Offer described below under
"--Summary Description of the New Notes."
The Exchange Offer ............ The New Notes are being offered in exchange
for a like principal amount of Old Notes.
The issuance of the New Notes is intended to
satisfy obligations of the Issuers contained
in the Registration Rights Agreement, dated
as of December 1, 1997, among the Issuers
and the Initial Purchasers (the
"Registration Rights Agreement"). For
procedures for tendering, see "The Exchange
Offer."
Tenders, Expiration Date;
Withdrawal .................... The Exchange Offer will expire at 5:00 p.m.,
New York City time, on , 1998, or
such later date and time to which it is
extended. Each Holder tendering Old Notes
must acknowledge that he is not engaging in,
nor intends to engage in, a distribution of
the New Notes. The tender of Old Notes
pursuant to the Exchange Offer may be
withdrawn at any time prior to the
Expiration Date (as defined herein). Any Old
Note not accepted for exchange for any
reason will be returned without expense to
the tendering Holder thereof as promptly as
practicable after the expiration or
termination of the Exchange Offer.
Federal Income Tax
Considerations ................ The exchange pursuant to the Exchange Offer
should not result in any income, gain or
loss to the Holders or the Issuers for
federal income tax purposes. See "Certain
Federal Income Tax Considerations."
Use of Proceeds ............... There will be no proceeds to the Issuers
from the exchange pursuant to the Exchange
Offer. See "Use of Proceeds."
Exchange Agent ................ First Trust of New York, National
Association is serving as Exchange Agent in
connection with the Exchange Offer.
8
<PAGE>
Shelf Registration Statement .. Under certain circumstances, certain holders
of Notes (including holders who are not
permitted to participate in the Exchange
Offer or who may not freely resell New Notes
received in the Exchange Offer) may, by
giving the Issuers written notice on or
before March 30, 1998, require the Issuers
to file, and cause to become effective, a
shelf registration statement under the
Securities Act, which would cover resales of
Notes by such holders. See "Description of
the Notes--Exchange Offer; Registration
Rights."
CONSEQUENCES OF EXCHANGING OLD NOTES
Holders of Old Notes who do not exchange their Old Notes for New Notes
pursuant to the Exchange Offer will continue to be subject to the
restrictions on transfer of such Old Notes as set forth in the legend thereon
as a consequence of the issuance of the Old Notes pursuant to exemptions
from, or in transactions not subject to, the registration requirements of the
Securities Act and applicable state securities laws. In general, the Old
Notes may not be offered or sold, unless registered under the Securities Act,
except pursuant to an exemption from, or in a transaction not subject to, the
Securities Act and applicable state securities laws. The Issuers do not
currently anticipate that they will register the Old Notes under the
Securities Act. See "Description of the Notes--Exchange Offer; Registration
Rights." Based on interpretations by the staff of the Commission, as set
forth in no-action letters issued to third parties, the Issuers believe that
New Notes issued pursuant to the Exchange Offer in exchange for Old Notes may
be offered for resale, resold or otherwise transferred by Holders thereof
(other than any Holder which is an "affiliate" of the Issuers within the
meaning of Rule 405 under the Securities Act) without compliance with the
registration and prospectus delivery requirements of the Securities Act,
provided that such New Notes are acquired in the ordinary course of such
Holder's business and such Holder, other than broker-dealers, has no
arrangement with any person to participate in the distribution of such New
Notes. However, the Commission has not considered the Exchange Offer in the
context of a no-action letter and there can be no assurance that the staff of
the Commission would make a similar determination with respect to the
Exchange offer as in such other circumstances. Each Holder, other than a
broker-dealer, must acknowledge that it is not engaged in, and does not
intend to engage in, a distribution of such New Notes and has no arrangement
or understanding to participate in a distribution of New Notes. Each
broker-dealer that receives New Notes for its own account in exchange for Old
Notes must acknowledge that such Old Notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities and that it will deliver a prospectus in connection with any
resale of such New Notes. See "Plan of Distribution." In addition, to comply
with the securities laws of certain jurisdictions (including any jurisdiction
in Canada), it may be necessary to qualify for sale or register thereunder
the New Notes prior to offering or selling such New Notes. The Issuers have
agreed, pursuant to the Registration Rights Agreement, subject to certain
limitations specified therein, to register or qualify the New Notes for offer
or sale under the applicable state securities laws of such United States
jurisdictions as the Majority Holders of the Old Notes reasonably request
before the time the Registration Statement (of which this Prospectus forms a
part) is declared effective by the Commission. The Issuers do not intend to
register or qualify the sale of the New Notes in any such United States
jurisdiction (unless the Issuers receive such a request) or any other
jurisdiction. See "The Exchange Offer--Consequences of Exchanging Old Notes."
9
<PAGE>
SUMMARY DESCRIPTION OF THE NEW NOTES
The terms of the New Notes and the Old Notes are identical in all material
respect, except (i) that the New Notes have been registered under the
Securities Act, (ii) for certain transfer restrictions and registration
rights relating to the Old Notes and (iii) that the New Notes will not
contain certain provisions relating to additional interest to be paid to
Holders of Old Notes under certain circumstances relating to the timing of
the Exchange Offer. The New Notes will bear interest from the most recent
date to which interest has been paid on the Old Notes or, if no interest has
been paid on the Old Notes, from December 1, 1997. Accordingly, registered
Holders of New Notes on the relevant record date for the first interest
payment date following the consummation of the Exchange Offer will receive
interest accruing from the most recent date to which interest has been paid
or, if no interest has been paid, from December 1, 1997. Old Notes accepted
for exchange will cease to accrue interest from and after the date of
consummation of the Exchange Offer. Holders whose Old Notes are accepted for
exchange will not receive any payment in respect of interest on such Old
Notes otherwise payable on any interest payment date the record date for
which occurs on or after consummation of the Exchange Offer.
Issuers ....................... Bear Island Paper Company, L.L.C. and Bear
Island Finance Company II, as co-obligors.
Notes Offered ................. Up to $100,000,000 principal amount of 10%
Series B Senior Secured Notes due 2007,
which have been registered under the
Securities Act.
Maturity Date ................. December 1, 2007.
Interest Payment Dates ........ June 1 and December 1 of each year,
commencing June 1, 1998.
Optional Redemption ........... The Notes are redeemable at the option of
the Issuers, as a whole or from time to time
in part, at any time on or after December 1,
2002, on or not less than 30 nor more than
60 days' prior notice at the redemption
prices (expressed as percentages of
principal amount) set forth herein, together
with accrued interest, if any, to the
redemption date, if redeemed during the
12-month period beginning on December 1 of
the years indicated herein (subject to the
right of holders of record on relevant
record dates to receive interest due on an
interest payment date). In addition, prior
to December 1, 2000, the Company may redeem
up to 20% of the aggregate principal amount
of the Notes within 60 days of one or more
Public Equity Offerings with the net
proceeds of such offering at a redemption
price equal to 110% of the principal amount
thereof, together with accrued and unpaid
interest, if any, to the date of redemption
(subject to the right of holders of record
on relevant record dates to receive interest
due on relevant interest payment dates);
provided that immediately after giving
effect to any such redemption, at least $80
million aggregate principal amount of the
Notes remains outstanding. See "Description
of the Notes--Optional Redemption."
Change of Control ............. Upon a Change of Control (as defined
herein), each holder of the Notes will have
the right to require that the Issuers
purchase such holder's Notes, in whole or in
part, in integral multiples of $1,000, at a
purchase price in cash in an amount equal to
101% of the principal amount thereof, plus
accrued interest, if any, to the date of
purchase. See "Description of the
Notes--Certain Covenants of the
Company--Purchase of Notes Upon a Change of
Control."
Ranking ....................... The Notes are senior secured obligations of
the Issuers and rank senior in right of
payment to all subordinated indebtedness of
the Issuers and pari passu in right of
payment with all other existing and future
senior indebtedness of the Issuers,
including, in the case of the Company,
10
<PAGE>
indebtedness under the Bank Credit Agreement
(as defined). At September 30, 1997, on a
pro forma basis after giving effect to the
Acquisition, the Timberlands Acquisition and
the financing of those acquisitions, (i) the
Company would have had indebtedness (other
than the Notes) of approximately $106.7
million, $103.9 million of which would have
represented borrowings under the Bank Credit
Agreement and FinCo would have had no
indebtedness, (ii) Brant-Allen would have
had approximately $35.0 million of
indebtedness under the Timberlands Loan and
(iii) Timberlands would have had $30.5
million of indebtedness (excluding the
guarantee under the Timberlands Loan), of
which $30 million would have been under the
Hancock Loan. See "Unaudited Pro Forma
Financial Data."
Security ...................... The Notes are secured by (i) the Company
Collateral, which consists of a second
priority security interest in (x) all real
property of the Company and (y) all personal
property of the Company, to the extent such
personal property is assignable and except
for certain other assets that are not
assignable, (ii) the Timberlands Collateral,
which consists of a third priority security
interest in 100% of the membership interests
in Timberlands, whose assets will continue
to secure the Hancock Loan and (iii) the
Soucy Collateral, which consists of a second
priority security interest in 65% of the
issued and outstanding capital stock of
Soucy Inc. The remaining 35% of the issued
and outstanding capital stock of Soucy Inc.
is subject to certain restrictions described
below. At any time when either (i) the
Company has reduced its Total Committed Debt
(as defined) to an amount that is not
greater than $145 million as of the date of
determination or (ii) the Notes are rated
Investment Grade (as defined), the Soucy
Collateral will be released and all of the
covenants and other provisions of the
Indenture with respect to Soucy Inc. will
terminate. Upon repayment by Brant-Allen of
all the outstanding indebtedness under the
Timberlands Loan, the foregoing security
interest in membership interests of
Timberlands shall become a second priority
security interest. See "Description of the
Notes--Collateral and Security."
Certain Covenants ............. The Indenture contains, among others, the
following covenants with respect to the
Company and its Subsidiaries (as defined)
(including FinCo): (i) limitation on
indebtedness; (ii) limitation on restricted
payments; (iii) limitation on liens; (iv)
guarantees by Restricted Subsidiaries of the
Company; (v) purchase of Notes upon a change
of control; (vi) limitation on issuances and
sales of capital stock of Subsidiaries;
(vii) limitation on transactions with
affiliates; (viii) limitation on sale of
assets; (ix) limitation on sale and
leaseback transactions; (x) limitation on
dividends and other payment restrictions
affecting Restricted Subsidiaries; (xi)
limitation on conduct of business; (xii)
limitation on Unrestricted Subsidiaries and
(xiii) reports. See "Description of the
Notes--Certain Covenants of the Company" and
"--Certain Covenants of All of the Credit
Parties."
The Indenture contains, among others, the
following covenants with respect to one of
or both of Timberlands and Soucy Inc.
(collectively, the "Security Parties"): (i)
limitation on indebtedness; (ii) limitation
on restricted payments by Timberlands; (iii)
limitation on certain restricted payments by
Soucy Inc. (iv) limitation on liens; (v)
limita-
11
<PAGE>
tion on guarantees of Company indebtedness
by the Security Parties and their Restricted
Subsidiaries; (vi) limitation on issuances
and sales of capital stock of Subsidiaries;
(vii) limitation on transactions with
affiliates; (viii) limitation on sale of
assets; (ix) limitation on sale and
leaseback transactions; (x) limitation on
dividends and other payment restrictions
affecting Restricted Subsidiaries; (xi)
limitation on conduct of business; (xii)
limitation on Unrestricted Subsidiaries and
(xiii) reports. See "Description of the
Notes--Certain Covenants of the Security
Parties" and "--Certain Covenants of All of
the Credit Parties."
The Indenture contains, among others, the
following covenants with respect to
Brant-Allen: (i) limitation on sales of
collateral stock and certain other
transactions and (ii) limitation on proceeds
of asset sales by Subsidiaries. See
"Description of the Notes--Certain Covenants
of Brant-Allen."
Use of Proceeds ............... The Issuers will not receive any proceeds
from the Exchange Offer. The net proceeds
from the offering of the Old Notes were used
by the Company, which is wholly owned by
Brant-Allen, to acquire the 70% interests in
BIPCO not owned by the Company from certain
subsidiaries of Dow Jones and The Washington
Post. See "The Acquisition" and "Use of
Proceeds."
12
<PAGE>
SUMMARY FINANCIAL DATA
The following summary financial data (except pro forma information and
saleable tonnes produced) are derived from the audited financial statements
of BIPCO for each of the years in the three year period ended December 31,
1996 and the unaudited financial statements of BIPCO as of September 30, 1997
and for the nine months ended September 30, 1997 and 1996, which are included
elsewhere herein. Pro forma information and saleable tonnes produced are
derived from other information provided by the Company. The unaudited
financial statements for the nine months ended September 30, 1997 and 1996,
and the unaudited financial statements of BIPCO as of September 30, 1997, in
the opinion of the Company, reflect all adjustments which are of a normal and
recurring nature, necessary for a fair presentation of the results for the
unaudited periods. The historical results of operations for the nine months
ended September 30, 1997 are not necessarily indicative of the results of
operations to be expected for the full year. The following summary financial
data should be read in conjunction with "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and the financial
statements and the notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
ACTUAL PRO FORMA (1)
---------------------------------------------------- ------------------------------
NINE MONTHS NINE MONTHS
YEARS ENDED DECEMBER 31, ENDED SEPTEMBER 30, YEAR ENDED ENDED
---------------------------------------------------- DECEMBER 31, SEPTEMBER 30,
1994 1995 1996 1996 1997 1996 1997
---------- --------- --------- --------- --------- ------------ --------------
(UNAUDITED) (UNAUDITED)
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales
Non-affiliates ................... $ 51,297 $ 70,960 $ 75,460 $ 59,353 $ 47,197 $128,820 $ 85,373
Affiliates (2) ................... 42,543 61,243 53,360 40,794 38,176 -- --
---------- --------- --------- --------- --------- -------------- ---------------
Total sales ..................... 93,840 132,203 128,820 100,147 85,373 128,820 85,373
Cost of sales ..................... 91,610 100,399 100,591 73,748 77,225 99,463 75,066
---------- --------- --------- --------- --------- -------------- ---------------
Gross profit ...................... 2,230 31,804 28,229 26,399 8,148 29,357 10,307
Selling, general & administrative:
Management fee to Brant-Allen ... 2,820 3,961 3,865 3,004 2,561 3,865 2,561
Other direct ..................... 208 224 153 569 669 453 894
---------- --------- --------- --------- --------- -------------- ---------------
Income (loss) from operations ..... (798) 27,619 24,211 22,826 4,918 25,039 6,852
---------- --------- --------- --------- --------- -------------- ---------------
Other Income (Expense):
Interest income .................. 309 603 666 487 485 666 485
Interest expense ................. (6,194) (5,986) (5,398) (4,059) (3,592) (20,303) (14,799)
Other income (expense) ........... 2,116 33 (56) 94 (7) (56) (8)
---------- --------- --------- --------- --------- -------------- ---------------
Total other expense .............. (3,769) (5,350) (4,788) (3,478) (3,114) (19,693) (14,322)
---------- --------- --------- --------- --------- -------------- ---------------
Net (loss) income ................. $ (4,567) $ 22,269 $ 19,423 $ 19,348 $ 1,804 $ 5,346 $ (7,470)
========== ========= ========= ========= ========= ============== ===============
Ratio of earnings to fixed
charges (5)(6) ................... -- 4.7x 4.6x 5.7x 1.5x 1.3x --
OTHER DATA:
EBITDA (3) ........................ $ 8,971 $ 37,357 $ 34,245 $ 30,485 $ 13,222 $ 39,427 $ 17,612
Adjusted EBITDA (4)................ 42,004 19,319
Depreciation ...................... 9,730 9,648 9,976 7,629 8,291 14,330 10,747
Depletion ......................... 39 90 58 30 13 58 13
Capital expenditures .............. 9,469 6,645 7,483 5,227 5,724 7,483 5,724
Saleable metric tonnes produced ... 203,159 208,870 218,642 162,274 168,975 218,642 168,975
Ratio of EBITDA to total interest
expense........................... 1.4x 6.2x 6.3x 7.5x 3.7x 1.9x 1.2x
Ratio of Adjusted EBITDA to
interest expense ................. 2.1x 1.3x
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
ACTUAL PRO FORMA (1)
-------------------------------------------------------- ---------------
AS OF DECEMBER 31, AS OF AS OF
----------------------------- SEPTEMBER 30, SEPTEMBER 30,
1994 1995 1996 1997 1997
-------- -------- -------- -------- --------
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and short-term
investments................... $ 7,454 $ 12,472 $ 13,625 $ 13,306 $ 7,658
Working capital ............... 14,400 23,901 22,037 22,701 25,405
Property, plant and equipment,
net .......................... 117,581 115,941 116,953 114,907 195,771
Total indebtedness(7).......... 60,025 55,368 52,171 47,757 206,686
Total assets .................. 150,269 160,523 160,460 156,235 240,143
Total partners'
equity/membership interests . 78,597 91,366 95,789 97,593 24,712
</TABLE>
- - ------------
(1) Gives pro forma effect to the Acquisition and the financings therefor
as if such transactions occurred on January 1, 1996, with respect to
the income statement and other data, and as of September 30, 1997, with
respect to the balance sheet data. See "Unaudited Pro Forma Condensed
Consolidated Financial Statements."
(2) The sales are to the Dow Jones and The Washington Post. Upon the
closing of the Acquisition and the Timberlands Acquisition, sales to
Dow Jones and The Washington Post will become sales to non-affiliates.
(3) EBITDA is defined as income (loss) from operations plus depreciation,
depletion and amortization, if any. EBITDA is generally accepted as
providing useful information regarding a company's ability to service
and/or incur debt. EBITDA should not be considered in isolation or as a
substitute for net income, cash flows from operations, or other income
or cash flow data prepared in accordance with generally accepted
accounting principles or as a measure of a company's profitability or
liquidity.
(4) Adjusted EBITDA is defined as EBITDA (as shown in note (3) above) plus
the noncash portion, or two-thirds, of the management fee paid to
Brant-Allen on a pro forma basis for the nine months ended September
30, 1997 and year ended December 31, 1996. Pursuant to the limitation
on restricted payments covenant of the Notes, payments by the Company
for management fees are limited to Brant-Allen (or any of its
Subsidiaries or Affiliates) to an amount per annum not in excess of 3%
of net sales of the Company, of which no more than one third may be in
cash.
(5) In the computation of the ratio of earnings to fixed charges, earnings
consist of income (loss) plus fixed charges. Fixed charges consist of
interest expense on indebtedness, amortization of deferred financing
costs and that portion of lease rental expense representative of the
interest factor.
(6) Earnings were insufficient to cover fixed charges by $5.0 million for
the year ended December 31, 1994. On a pro forma basis, earnings were
insufficient to cover fixed charges by $7.5 million for the nine months
ended September 30, 1997.
(7) Total indebtedness is defined as long-term debt and long-term purchase
obligations and current portions thereof.
14
<PAGE>
RISK FACTORS
Holders of Old Notes should carefully consider the following matters, as
well as the other information contained in this Prospectus, before tendering
their Old Notes in the Exchange Offer. The risk factors set forth below
(other than "--Consequences of Failure to Exchange Old Notes") are applicable
to the Old Notes as well as the New Notes. Information contained in this
Prospectus contains "forward-looking statements" which can be identified by
the use of forward-looking terminology such as "believes," "expects," "may,"
"will," "should," "projected," "contemplates" or "anticipates" or the
negative thereof or other variations thereon or comparable terminology. No
assurance can be given that the future results covered by the forward-looking
statements will be achieved. The following matters constitute cautionary
statements identifying important factors with respect to such forward-looking
statements, including certain risks and uncertainties, that could cause
actual results to vary materially from the future results covered in such
forward-looking statements. Other factors, such as the general state of the
economy, U.S. newspaper circulation, advertising lineage, the market prices
for newsprint, fiber costs, electrical rates and environmental regulation
could also cause actual results to vary materially from the future results
covered in such forward-looking statements.
SUBSTANTIAL LEVERAGE; ABILITY TO SERVICE DEBT
The Company has significant indebtedness and is highly leveraged. As of
September 30, 1997, after giving pro forma effect to the Acquisition and the
related financings, the Company would have had $206.7 million of debt
outstanding, including $103.9 million under the Bank Credit Facilities, and
equity of $24.7 million. In addition, subject to the restrictions in the Bank
Credit Facilities and the Indenture, the Company may incur additional
Indebtedness from time to time to finance capital expenditures or for other
purposes. See "Description of the Notes--Certain Covenants of the Company."
Substantially all of the Company's assets have been or will be pledged to
secure the Notes and the Bank Credit Facilities.
The significant indebtedness incurred as a result of the Acquisition will
have several important consequences to the Holders of the Notes, including,
without limitation: (i) a substantial portion of the Company's cash flow from
operations must be dedicated to service such indebtedness, and the failure of
the Company to generate sufficient cash flow to service such indebtedness
could result in a default under such indebtedness, including under the Notes;
(ii) the Company's ability to obtain additional financing in the future for
working capital, capital expenditures, acquisitions or for other purposes may
be impaired; (iii) the Company's level of indebtedness could limit its
flexibility to expand, make capital expenditures and react to changes in the
industry in which it competes and economic conditions generally; (iv) the
Bank Credit Facilities, the Indenture and the Notes contain, and future
agreements relating to the Company's indebtedness may also contain, numerous
financial and other restrictive covenants and the failure to comply with such
covenants may result in a default under such agreements, which, if not cured
or waived, could have a material adverse effect on the Company; and (v) the
ability of the Company to satisfy its obligations pursuant to such
indebtedness, including pursuant to the Notes and the Indenture, will be
dependent upon factors affecting the business and operations of the Company,
some of which are not in the control of the Company.
The ability of the Company to service its indebtedness (including, without
limitation, the Notes and the Bank Credit Facilities) will depend on the
future operating performance and financial results of the Company and, in the
case of the repayment of the principal amount of the Notes at maturity,
obtaining additional financing, either of which will be subject in part to
factors beyond the control of the Company, such as prevailing economic
conditions and financial and other factors. There can be no assurance,
however, that the Company's business will generate cash flow at the necessary
levels that, together with available additional financing, if any, will allow
the Company to meet its anticipated requirements for working capital, capital
expenditures and debt service. If the Company is unable to generate
sufficient cash flow from operations in the future or to refinance the Notes
at maturity it may be forced to adopt an alternative strategy that may
include reducing the scope of its operations, reducing or delaying capital
expenditures (including expenditures related to acquisitions), selling assets
(including all or a portion of the Collateral securing the Notes),
restructuring or refinancing all or a portion of its existing indebtedness,
seeking additional equity capital or obtaining other additional financing.
The Company currently anticipates that in order to pay the principal
amount of the Notes at maturity, the Company will be required to refinance
such Notes or adopt one or more of such alternatives. None of the affiliates
of the Company will be required to make any capital contributions or other
payments to the Company with respect to the Company's obligations on the
Notes. Although the Company currently has no reason to believe that it will
not be able to refinance the Notes at maturity, there can be no assurance
that such refinancing or any alternative strategy could be effected upon
satisfactory terms, if at all, or that any of the foregoing actions would
enable the Company to
15
<PAGE>
make such principal payments on the Notes or that any of such actions would
be permitted by the terms of any debt instruments of the Company or of any of
the Company's affiliates then in effect.
RESTRICTIVE DEBT COVENANTS
The Indenture restricts the ability of the Company and its Subsidiaries
to, among other things, incur additional indebtedness, incur liens, pay
dividends or make certain other restricted payments or investments,
consummate certain asset sales, enter into certain transactions with
affiliates, impose restrictions on the ability of a subsidiary to pay
dividends or make certain payments to the Company, merge or consolidate with
any other person or sell, assign, transfer, lease, convey or otherwise
dispose of all or substantially all of the assets of the Company. In
addition, the Bank Credit Facilities contain other and more restrictive
covenants and prohibit the Company from prepaying the Notes, except in
certain circumstances. The Bank Credit Facilities also require the Company to
maintain specified financial ratios and satisfy certain financial tests. The
Company's ability to comply with such covenants, including such financial
ratios and tests, may be affected by events beyond its control. There can be
no assurance that the Company will be able to comply with such requirements.
A breach of any of the covenants contained in the Indenture or the Bank
Credit Facilities could result in an event of default under such instruments
which could result in the acceleration of the related debt and the
acceleration of debt under other debt instruments that may contain
cross-default or cross-acceleration provisions. If such an event of default
occurs, then the lenders under the Bank Credit Facilities would also be able
to terminate all commitments under the Bank Credit Facilities. If the Company
were unable to repay all amounts declared due and payable, then the lenders
under the Bank Credit Facilities could proceed against the collateral granted
to them to satisfy such indebtedness and other obligations due and payable
under the Bank Credit Facilities. If Indebtedness under the Bank Credit
Facilities were to be accelerated, there can be no assurance that the assets
of the Company would be sufficient to repay in full such indebtedness and the
other Indebtedness of the Company, including the Notes. In addition, the
Indenture also contains covenants that restrict certain activities of
Timberlands, Soucy Inc. and their respective Subsidiaries, such as the
incurrence of debt and asset sales. See "Description of the Notes--Certain
Covenants of the Company," "--Certain Covenants of the Credit Parties" and
"Description of Bank Credit Facilities."
SECURITY FOR THE NOTES
The Notes are secured on a second priority basis by a pledge of all of the
Company's real property, on a second or lesser priority basis by a pledge of
certain of the Company's personal property, on a third priority basis by a
pledge of 100% of the membership interests in Timberlands (whose timberland
and equipment assets secure the Hancock Loan, subject to existing equipment
financings as of September 30, 1997), and, after a shared first priority
security interest that secures the Timberlands Loan and the Bank Credit
Facilities, on a second priority basis by a pledge by Brant-Allen of 65% of
the capital stock of Soucy Inc. The pledge of the capital stock of Soucy Inc.
may be released in certain circumstances. In addition, the trustee and the
agents under the Bank Credit Facilities and Timberlands Loan are party to an
Intercreditor Agreement (as defined), which provides, among other things, for
the allocation of rights among the trustee and such agents with respect to
the collateral and for enforcement provisions with respect thereto. See
"Description of the Notes--Security and Collateral" and "--Intercreditor
Agreement." In addition, the Indenture permits all or a substantial portion
of Timberlands' land, which is subject to a first priority security interest
securing the Hancock Loan, to be sold or monetized. Any such sales will
diminish the value of the Timberlands Collateral, subject to the provisions
of the Indenture that require the net after tax proceeds of any such sale to
be either reinvested in replacement assets or applied to repay indebtedness
of Timberlands, including the Timberlands Loan. The Indenture also requires
Timberlands to maintain at least 40,000 acres of timberland or contract
rights to purchase amounts of wood sufficient to replace the wood supply that
the Company anticipated receiving from the timberlands that it sells. As of
September 30, 1997, after giving pro forma effect to the consummation of the
Transactions, the Company, Timberlands and Soucy Inc., taken together, would
have had an aggregate of approximately $291.9 million of debt outstanding;
including $103.9 million with a first priority security interest in the
assets of the Company, $138.9 million with a first and second priority
interest in the membership interests of Timberlands and $138.9 million with a
shared first priority security interest in 65% of the common shares of Soucy
Inc. If an acceleration of the Bank Credit Facilities or any debt of
Brant-Allen, Timberlands or Soucy Inc. that is senior to the Notes
(collectively, the "First Priority Debt") occurs, then any payments made
thereafter in respect of proceeds of enforcement of any security will be
applied first, to repay pro rata any obligations that are First Priority
Debt.
16
<PAGE>
Additional proceeds, if any, will be applied to repay the Notes. Subject to
certain limitations, the Company, Timberlands and Soucy may also issue
additional securities which would rank pari passu with the Notes. See
"Description of the Notes--Certain Covenants of the Company." In the event of
an acceleration, there can be no assurance that there will be sufficient
funds available to repay the Notes after payment in full of all First
Priority Debt.
By its nature, some or all of the Collateral will be illiquid and may have
no readily ascertainable market value. Accordingly, there can be no assurance
that the Collateral will be able to be sold in a short period of time, if at
all. Even though the membership interests of Timberlands and the capital
stock of Soucy Inc. are privately held and do not trade on any securities
market, the value of the Timberlands Collateral and the Soucy Collateral is
subject to fluctuation and depends on the fair market value of such
collateral, which may be determined through negotiations between the buyers
and the sellers of such collateral. There can be no assurance that the
proceeds from the sale of such collateral would be sufficient to satisfy the
amounts due on the First Priority Debt and the Notes. In addition, the
ability of the Trustee or the Holders of Notes to realize the Timberlands
Collateral or the Soucy Collateral may also be subject to certain bankruptcy
law and other limitations and there can be no assurance that the Trustee or
the Holders of the Notes would be able to sell the Timberlands Collateral or
the Soucy Collateral. See "--Fraudulent Transfer Statutes."
DEPENDENCE ON SINGLE FACILITY
All the Company's revenues are derived from the operations of its single
paper mill located near Richmond, Virginia. In addition, all of that mill's
production capacity is located on one production line. As a result, the
Company's financial performance is completely dependent on the continued
operation of its newsprint machine at the mill. Accordingly, destruction of,
or damage to, the mill or its production line through acts of God or
otherwise, as well as prolonged downtime for repairs or other reasons could
materially and adversely affect the Company's business and results of
operations. The Company maintains property insurance and production
interruption insurance coverage which covers, for certain limited periods of
time, certain potential losses due to business interruption directly
resulting from certain types of casualty occurrences covered under the
policy. Notwithstanding that the Company maintains such insurance, however,
the destruction of, or damage to, the mill or its production line could have
a material adverse effect on the Company's financial position and results of
operations.
RELIANCE UPON SINGLE PRODUCT -- NEWSPRINT
The Company's operations are completely dependent on the production and
sale of a single product, newsprint. Demand for, and sale prices of,
newsprint will depend, among other things, on global newsprint demand, the
level of industry supply, purchases of advertising lineage and general
economic conditions, all of which are factors over which the Company has no
influence or control. In addition, trends in electronic data transmission and
storage could adversely impact the traditional print media, including
products of the Company's customers.
FUTURE CAPITAL REQUIREMENTS; POSSIBLE INABILITY TO OBTAIN ADDITIONAL
FINANCING
The Company will continue to require capital to fund its capital
expenditure and other ongoing operating activities. To date, the Company has
financed its capital requirements principally through cash flow from
operations and bank and other borrowings, including loans and advances from
its owners and affiliates. The Company's future expansion, if any, will be
dependent upon the capital resources available to the Company. Excluding any
additional working capital requirements that may result from acquisitions,
management believes that internally generated funds, unused available
financing under the Revolving Credit Facility will be sufficient to fund the
Company's operations for the foreseeable future, although there is no
assurance that such amounts will be sufficient. The Company's future growth
and acquisitions of additional newsprint businesses or assets will be
dependent on the Company's ability to obtain future equity or debt financing.
There can be no assurance that the Company will be able, or be permitted by
the Bank Credit Agreement and the Indenture, to obtain additional financing
for such purposes or that any additional financing will be available in
amounts required or on terms satisfactory to the Company. See
"Capitalization" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources."
NO ASSURANCE OF FUTURE GROWTH OR ACQUISITIONS
The Company's strategy is to evaluate opportunities to expand production
capacity through strategic acquisitions of other newsprint businesses or
assets. Currently, the Company has no agreements or commitments for such
17
<PAGE>
acquisitions. There can be no assurance that the Company will be successful
in identifying, negotiating and consummating such acquisitions or
arrangements, or that such acquisitions or arrangements that may be
available, if at all, will be on terms acceptable to the Company. The
covenants contained in the Bank Credit Agreement and the Indenture may
prevent certain expansion and other business activities.
CYCLICAL INDUSTRY
The North American newsprint industry is highly cyclical in nature, with
supply typically being added in large blocks and demand fluctuating with the
economy, U.S. newspaper circulation and purchases of advertising lineage. The
balance of supply and demand can significantly impact selling prices and,
therefore, the Company's profitability. Based on CPPA statistics, the Company
believes that a substantial majority (approximately 91%) of the newsprint
consumed in North America in 1996 was used by U.S. newspapers and other
publications. Newsprint demand is, therefore, particularly dependent on U.S.
newspaper circulation and purchases of advertising lineage. Newsprint prices
are typically dependent on general economic conditions, capacity additions
and inventory levels. Given the commodity nature of newsprint, the Company,
like other suppliers to this market, has little influence over the timing and
extent of price changes. The demand for newsprint is particularly sensitive
to economic cycles and, in the short term, deviations in the demand and
supply of newsprint are not uncommon. This short-term volatility has a
significant bearing on newsprint prices and on the financial performance of
the Company which results in alternating periods of financial gain and loss.
As a result of the industry's inherent supply, demand and inventory
characteristics, newsprint prices have fluctuated dramatically and management
believes they will continue to do so.
VOLATILITY OF RAW MATERIAL COSTS
The Company has some flexibility to alter its mix of raw material input to
take advantage of changing trends in raw material costs. However, the Company
remains subject to sharp increases in the cost of wood, recycled fiber and
kraft pulp. There can be no assurance that, if such sharp increases occur,
the Company will either be able to alter its mix of raw material inputs or to
pass through to its customers such raw material price increases.
DEPENDENCE ON PRINCIPAL CUSTOMERS
In 1996, and for the nine months ended September 30, 1997, approximately
90% and 93%, respectively, of the Company's total tonnage produced was sold
to its ten largest customers. During those periods, Dow Jones represented 22%
and 22% of the Company's total sales, and The Washington Post represented 19%
and 23%, respectively, of total sales. Dow Jones and The Washington Post each
have a sales contract with the Company, expiring on December 31, 2000, for
the purchase of a minimum of approximately 45,000 tonnes of newsprint per
year at prices based on prevailing market prices paid by those customers to
their non-affiliated East Coast suppliers. Before the consummation of the
Transactions, The Washington Post and Dow Jones each owned a 35% partnership
interest in both the Company and Timberlands. See "Certain
Transactions--Agreements with The Washington Post and Dow Jones." Loss of any
of the Company's key customers, particularly Dow Jones and The Washington
Post, could have a material adverse impact on the Company if it could not
secure replacement buyers on a timely basis for this tonnage. Moreover,
although the sales contracts with these customers together account for a
substantial portion of the Company's production, the prices at which those
purchases will be made are at market prices. In the past, these prices have
been subject to significant fluctuations. Any future recurrence of those
price fluctuations could have a material adverse effect on the Company's
business and results of operations and, therefore, the Company's ability to
meet its obligations under its indebtedness.
In addition, the Company's arrangements with certain of its other key
customers do not contain minimum purchase requirements or are not subject to
written contracts. Therefore, there can be no assurance that any of these
customers will continue to purchase the Company's product in the same
volumes, at the same prices or on the same terms as in the past. In addition,
there can be no assurance that the Company will be able to attract any new
customers.
CONTROL BY MESSRS. BRANT AND ALLEN; RELATED PARTY TRANSACTIONS; POTENTIAL
CONFLICTS OF INTEREST
The Company is wholly owned by Brant-Allen, which, in turn, is wholly
owned by Peter Brant and Joseph Allen. As a result of their ownership of the
Company, Messrs. Brant and Allen, the President and Executive Vice President
18
<PAGE>
of the Company, respectively, will be able to direct and control the policies
of the Company and its subsidiaries, including mergers, sales of assets and
similar transactions. In addition, a majority of the Company's Board of
Directors and all of the Company's executive officers will be representatives
of Brant-Allen. See "Management."
Brant-Allen owns all of the equity of the Company, Timberlands and Soucy
Inc., and manages each of these companies. Brant-Allen sells and markets all
or substantially all the newsprint produced by the Company and Soucy.
Conflicts of interest between the Company and Soucy could arise from such
combined sales and marketing arrangements and may include the allocation of
sales to Soucy rather than the Company. For such sales, marketing and
management activities, Brant-Allen charges the Company a management fee equal
to 3% of net revenues pursuant to the Management Services Agreement. The
Management Services Agreement has a term of five years and is automatically
renewed for successive five years terms unless terminated by either party by
giving two years' written notice. See "Certain Related Party
Transactions--Relationship with Brant-Allen, Timberlands and
Soucy--Management Services Agreement." Conflicts of interest between
Brant-Allen and the Company could arise in connection with the performance of
duties and the payment of the management fees under the Management Services
Agreement and regarding the Company's enforcement of the provisions of the
Management Services Agreement against Brant-Allen, or the amendment or
possible termination of such agreement.
Brant-Allen also markets all of Soucy's newsprint and is compensated for
these services in the form of monthly management service and royalty fees,
payable in advance, calculated at a combined rate of 9.73% of Soucy Inc.'s
consolidated net sales after transportation costs. Soucy Partners pays Soucy
Inc. a management fee of 3% of Soucy Partners' cumulative annual net sales.
See "Certain Related Party Transactions--Relationship with Brant-Allen,
Timberlands and Soucy--Brant-Allen Fees from Soucy."
A substantial portion of the Company's wood requirements will be provided
by Timberlands pursuant to the Wood Supply Agreement (as defined) between
Timberlands and the Company. See "Certain Related Party
Transactions--Relationship with Brant-Allen, Timberlands and Soucy--Wood
Supply from Timberlands and ONP and OMG Procurement." Conflicts of interest
between Timberlands and the Company could arise in connection with the
performance of duties and payment of fees under this Wood Supply Agreement
and regarding the enforcement of its terms.
The Company may also engage in a variety of other transactions with
Brant-Allen, Timberlands and Soucy. Although the Indenture provides certain
restrictions on affiliate transactions, there are conflicts of interest with
respect to certain decisions which may arise in the ordinary course of the
operation of the businesses of the Company, Timberlands and Soucy, the
resolution of which may be to the detriment of the Company and could have a
material adverse effect on the Company's business and results of operations.
See "Certain Related Party Transactions--Relationship with Brant-Allen,
Timberlands and Soucy," "The Acquisition" and "Management."
DEPENDENCE ON KEY PERSONNEL
Messrs. Brant and Allen as well as the Company's other executive officers
and key employees have substantial experience in the Company's business and
have made significant contributions to its growth. The unexpected loss of
service of one or more of these individuals could adversely affect the
Company. The Company does not have any key-man or similar insurance on any of
its executive officers or employees.
COMPETITION
The Company competes directly with a number of newsprint manufacturers,
many of which have longer histories, larger customer bases, and significantly
greater financial and marketing resources than the Company. Increased
competition could adversely affect the Company's revenues and profitability
through pricing pressure, loss of market share and other factors. Newsprint
price decreases by one or more of the major newsprint producers in North
America may effect material changes in the average price for newsprint and
have the potential adversely to affect the newsprint market in general.
Moreover, existing and prospective competitors of the Company may have
established, or may in the future establish, relationships with the Company's
existing and potential customers, which could have a material adverse effect
on the Company's ability to compete. See "Business--Competition."
ENVIRONMENTAL MATTERS
The Company's operations are subject to extensive and changing
environmental regulation by federal, state and local authorities in the
United States, including those requirements that regulate discharges into the
environment,
19
<PAGE>
waste management and remediation of environmental contamination.
Environmental permits are required for the operation of the Company's
businesses, and are subject to revocation, modification and renewal.
Governmental authorities have the power to enforce compliance with
environmental requirements and violators are subject to injunctions, civil
penalties and criminal fines. Third parties may also have the right to sue to
enforce compliance with such regulations.
The Company has in the past made significant capital expenditures to
comply with current federal, state and local environmental laws and
regulations. The Company believes that it is in substantial compliance with
such laws and regulations, although no assurance can be given that it will
not incur material liabilities and costs with respect to such laws and
regulations in the future and no assurances can be given that future
developments, such as the potential for more stringent environmental
standards (such as the proposed "Cluster Rules") or stricter enforcement of
environmental laws, will not cause the Company to incur such expenditures.
See "Business--Environmental Matters."
FRAUDULENT TRANSFER STATUTES
Under applicable provisions of the United States Bankruptcy Code or
comparable provisions of state fraudulent transfer or conveyance law, if the
Company or FinCo, at the time it issued the Notes, (a) incurred such
indebtedness with the intent to hinder, delay or defraud creditors, or (b)(i)
received less than reasonably equivalent value or fair consideration and
(ii)(A) was insolvent at the time of such incurrence, (B) was rendered
insolvent by reason of such incurrence (and the application of the proceeds
thereof), (C) was engaged or was about to engage in a business or transaction
for which the assets remaining with the Company or FinCo, respectively,
constituted unreasonably small capital to carry on its business, or (D)
intended to incur, or believed that it would incur, debts beyond its ability
to pay such debts as they mature, then, in each such case, a court of
competent jurisdiction could avoid, in whole or in part, the Company's or
FinCo's obligations to make payments on the Notes and the security interest
in the Collateral or, in the alternative, could subordinate the Notes to
existing and future indebtedness of the Company or FinCo, respectively,
notwithstanding the fact that the Notes are collateralized. All the net
proceeds of the Old Notes were used by the Company to pay a portion of the
purchase price of the interests of Dow Jones and The Washington Post
subsidiaries in the limited liability company organized under Virginia law
into which BIPCO was converted immediately prior to the closing of the
Acquisition. There is no assurance that a court would find that the
acquisition of those interests constitutes "reasonably equivalent value" or
"fair consideration" to the Company or FinCo. The measure of insolvency for
purposes of the foregoing would likely vary depending upon the law applied in
such case. Generally, however, the Company or FinCo would be considered
insolvent if the sum of its debts, including contingent liabilities, were
greater than all of its assets at a fair valuation, or if the present fair
salable value of its assets were less than the amount that would be required
to pay the probable liabilities on its existing debts, including contingent
liabilities, as such debts become absolute and matured. Additionally, under
the law of certain states, an entity that is generally not paying its debts
as they become due is presumed to be insolvent.
Management of the Company believes that the Old Notes were issued, and
that the New Notes are being issued, without the intent to hinder, delay or
defraud creditors, for proper purposes and in good faith, and that after the
issuance of the New Notes, the Company will be solvent and will have
sufficient capital for carrying on its business. The Company's ability to pay
its debts as they mature will depend, however, on (a) future operating
performance and financial results of the Company and the ability of the
Company to obtain additional financing and (b) the adoption by the Company of
one or more alternative strategies, all as described under "Substantial
Leverage; Ability to Service Debt." Furthermore, there can be no assurance
that a court passing on such issues would agree with the determination of the
Company's management. FinCo is a wholly owned subsidiary of the Company that
was incorporated in Delaware for the purpose of serving as a co-issuer of the
Notes. FinCo will not have any operations or assets and will not have any
revenues. As a result, holders of the Notes should not expect FinCo to
participate in servicing the interest and principal obligations on the Notes.
PURCHASE OF NOTES PURSUANT TO A CHANGE OF CONTROL OFFER OR EXCESS PROCEEDS
OFFER
Upon a Change of Control (as defined in the Indenture), the Issuers are
required to offer to purchase all outstanding Notes at 101% of the principal
amount thereof plus accrued and unpaid interest to the date of purchase. The
source of funds for any such purchase would be the Company's available cash
or cash generated from other sources. However, there can be no assurance that
sufficient funds would be available at the time of any Change of Control to
make any required repurchases of Notes tendered. The Bank Credit Agreement
provides that a Change of Control constitutes an Event of Default, and, upon
a Change of Control, all amounts outstanding under the Bank Credit Agreement
become due and payable. The Bank Credit Agreement also contains restrictions
on any other
20
<PAGE>
purchase or redemption of the Notes by the Company, including pursuant to an
Excess Proceeds Offer, prior to full repayment of indebtedness under the Bank
Credit Agreement. There can be no assurance that, in the event of a Change of
Control or an Excess Proceeds Offer, the Issuers will be able to obtain the
necessary consents from the lenders under the Bank Credit Agreement to
consummate a Change of Control Offer or an Excess Proceeds Offer or to repay
or refinance all the Indebtedness of the Lenders under the Bank Credit
Agreement. The failure of the Issuers to make or consummate the Change of
Control Offer or an Excess Proceeds Offer or to pay the requisite repurchase
price when due would result in an Event of Default and, subject to the
provisions of the Intercreditor Agreement, would give the holders of the
Notes the rights described under "Description of the Notes--Events of
Default." See "Description of the Notes--Certain Covenants of the
Company--Change of Control."
CONSEQUENCES OF FAILURE TO EXCHANGE OLD NOTES
The Old Notes have not been registered under the Securities Act or any
other securities laws of any jurisdiction and, therefore, may not be offered,
sold or otherwise transferred except in compliance with the registration
requirements of the Securities Act and any other applicable securities laws
or pursuant to exemptions from, or in transactions not subject to, those
requirements and, in each case, in compliance with certain other conditions
and restrictions. Holders of Old Notes who do not exchange their Old Notes
for New Notes pursuant to the Exchange Offer will continue to be subject to
such restrictions on transfer of such Old Notes as set forth in the legend
thereon. In addition, upon consummation of the Exchange Offer, holders of Old
Notes which remain outstanding will not be entitled to any rights to have
such Old Notes registered under the Securities Act or to any similar rights
under the Registration Rights Agreement (subject to certain limited
exceptions). The Issuers do not currently anticipate that they will register
or qualify any Old Notes which remain outstanding after consummation of the
Exchange Offer for offer or sale in any jurisdiction (subject to such limited
exceptions, if applicable). To the extent that Old Notes are tendered and
accepted in the Exchange Offer, a holder's ability to sell untendered Old
Notes could be adversely affected.
The New Notes and any Old Notes which remain outstanding after
consummation of the Exchange Offer will vote together as a single class for
purposes of determining whether holders of the requisite percentage thereof
have taken certain actions or exercised certain rights under the Indenture.
Upon consummation of the Exchange Offer, holders of Old Notes will not be
entitled to any increase in the interest rate thereon or any further
registration rights under the Registration Rights Agreement, except under
limited circumstances. See "Description of Notes--Exchange Offer;
Registration Rights."
ABSENCE OF PUBLIC MARKET
The Old Notes were issued to, and the Issuers believe such securities are
currently owned by, a relatively small number of beneficial owners. The Old
Notes have not been registered under the Securities Act and will be subject
to restrictions on transferability if they are not exchanged for the New
Notes. Although the New Notes may be resold or otherwise transferred by the
holders (who are not affiliates of the Issuers) without compliance with the
registration requirements under the Securities Act, they will constitute a
new issue of securities with no established trading market. There can be no
assurance that such a market will develop. In addition, the New Notes will
not be listed on any national securities exchange. The New Notes may trade at
a discount from the initial offering price of the Old Notes, depending upon
prevailing interest rates, the market for similar securities, the Company's
operating results and other factors. The Issuers have been advised by the
Initial Purchasers that they currently intend to make a market in the New
Notes, as permitted by applicable laws and regulations; however, the Initial
Purchasers are not obligated to do so, and any such market-making activities
may be discontinued at any time without notice. In addition, such
market-making activity may be limited during the Exchange Offer and the
pendency of the Shelf Registration. Therefore, there can be no assurance that
an active market for any of the New Notes will develop, either prior to or
after the Issuers' performance of their obligations under the Registration
Rights Agreement. If an active public market does not develop, the market
price and liquidity of the New Notes may be adversely affected.
If a public trading market develops for the New Notes, future trading
prices will depend on many factors, including, among other things, prevailing
interest rates, the financial condition of the Issuers, and the market for
similar securities. Depending on these and other factors, the New Notes may
trade at a discount.
Historically, the market for non-investment grade debt has been subject to
disruptions that have caused substantial volatility in the prices of such
securities. There can be no assurance that the market for the New Notes will
not be subject to similar disruptions. Any such disruptions may have an
adverse effect on holders of the New Notes.
21
<PAGE>
Notwithstanding the registration of the New Notes in the Exchange Offer,
holders who are "affiliates" (as defined under Rule 405 of the Securities
Act) of the Issuers may publicly offer for sale or resell the New Notes only
in compliance with the provisions of Rule 144 under the Securities Act.
Each broker-dealer that receives New Notes for its own account in exchange
for Old Notes, where such Old Notes were acquired by such broker-dealer as a
result of market-making activities or other trading activities, must
acknowledge that it will deliver a prospectus in connection with any resale
of such New Notes. See "Plan of Distribution."
EXCHANGE OFFER PROCEDURES
Subject to the conditions set forth under "The Exchange Offer--Conditions
to the Exchange Offer," delivery of New Notes in exchange for Old Notes
tendered and accepted for exchange pursuant to the Exchange Offer will be
made only after timely receipt by the Exchange Agent of (i) certificates for
Old Notes or a book-entry confirmation of a book-entry transfer of Old Notes
into the Exchange Agent's account at DTC, including an Agent's Message (as
defined under "The Exchange Offer--Acceptance for Exchange") if the tendering
holder does not deliver a Letter of Transmittal, (ii) a completed and signed
Letter of Transmittal (or facsimile thereof), with any required signature
guarantees, or, in the case of a book-entry transfer, an Agent's Message in
lieu of the Letter of Transmittal, and (iii) any other documents required by
the Letter of Transmittal. Therefore, holders of Old Notes desiring to tender
such Old Notes in exchange for New Notes should allow sufficient time to
ensure timely delivery. Neither of the Issuers is under a duty to give
notification of defects or irregularities with respect to the tenders of Old
Notes for exchange.
Each broker-dealer that receives New Notes for its own account in exchange
for Securities, where such Securities were acquired by such broker-dealer as
a result of market-making activities or other trading activities, must
acknowledge that it will deliver a prospectus in connection with any resale
of such New Notes. See "Plan of Distribution."
22
<PAGE>
THE ACQUISITION
The Company's predecessor, BIPCO, was formed in 1978 as a limited
partnership organized under Virginia law. Prior to the Acquisition
Brant-Allen was the general partner of, and owned a 30% partnership interest
in, BIPCO. Subsidiaries of The Washington Post and Dow Jones each owned a 35%
partnership interest in BIPCO.
On December 1, 1997, the Company purchased all the partnership interests
in BIPCO owned by subsidiaries of Dow Jones and The Washington Post for an
aggregate purchase price, which is subject to post-closing adjustments, of
approximately $149.8 million in cash. The Company financed this purchase
(including approximately $200,000 of transaction costs, as well as the
repayment of approximately $47.1 million of existing debt) with: (i)
borrowings of $103.9 million under the $120 million Bank Credit Facilities
(of which $2.9 million is anticipated to be drawn down for payment of
deferred loan costs due at December 1, 1997, but not yet paid by the
Company); (ii) the net proceeds from the issuance of the Old Notes; and (iii)
$5.2 million existing cash on hand (of which approximately $1.2 million was
distributed to Brant-Allen to reimburse certain deferred loan costs paid by
Brant-Allen on behalf of the Company in connection with the Acquisition). The
Bank Credit Facilities consist of two separate facilities: (i) a $50 million
6-year senior secured reducing Revolving Credit Facility and (ii) a $70
million 8-year senior secured Term Loan Facility. See "Description of Certain
Other Indebtedness--Company Indebtedness--The Bank Credit Facilities."
The following table summarizes the sources and uses of funds (dollars in
millions) in connection with the Acquisition:
<TABLE>
<CAPTION>
SOURCES OF FUNDS AMOUNT USES OF FUNDS (A) AMOUNT
---------------- ------ ----------------- ------
<S> <C> <C> <C>
Revolving Credit Facility Cash to purchase selling limited partners'
(a).......................... $ 33.9 interests (b)............................. $149.6
Transaction costs.......................... 0.2
Term Loan Facility ........... 70.0 Prepayment of Existing Debt and
accrued interest ......................... 47.1
The Notes (c)................. 100.0 Prepayment penalty......................... 4.0
Existing cash on hand (a) ... 5.2 Deferred loan costs........................ 8.2
-------- --------
Total ...................... $209.1 Total ................................... $209.1
======== ========
</TABLE>
- - ---------
(a) Upon consummation of the Acquisition approximately $5 million of excess
cash on-hand was used to reduce the balance outstanding under the
Revolving Credit Facility. Additional borrowings under the Revolving
Credit Facility will be used for working capital and general business
purposes.
(b) The amount paid to the subsidiaries of Dow Jones and the Washington
Post is subject to certain post-closing adjustments . Any additional
amounts required to be paid to such subsidiaries in respect of any such
post-closing adjustments are intended to be funded by additional
amounts drawn under the Revolving Credit Facility or cash on hand.
(c) After deducting the Initial Purchasers' discount of $3 million, the net
proceeds from the issuance of the Old Notes was $97 million. This
discount is included in the $8.2 million deferred loan costs shown
under "Uses of Funds."
23
<PAGE>
THE TIMBERLANDS ACQUISITION
Concurrently with the closing of the Acquisition, Brant-Allen purchased
the 70% interest in BITCO then owned by subsidiaries of Dow Jones and The
Washington Post for an aggregate purchase price, which is subject to certain
post-closing adjustments, of approximately $36 million in cash. Funding of
this purchase, including an estimated $30,000 in transaction costs, was
provided by (i) borrowings of $35 million under the Timberlands Loan borrowed
by Brant-Allen, guaranteed by Timberlands and secured by a first lien on
Brant-Allen's membership interests in Timberlands and (ii) $1.0 million of
Brant-Allen's existing cash on hand. Brant-Allen anticipates that any
additional amounts required to be paid in respect of any post-closing
adjustments would be funded from cash on hand or advances under its revolving
credit line. Timberlands expects to distribute to Brant-Allen any cash
on-hand that exceeds its own operating and debt requirements so that
Brant-Allen can pay interest on, and reduce principal outstanding under, the
Timberlands Loan. As of September 30, 1997 on a pro forma basis after giving
effect to the Timberlands Acquisition, excess cash and short-term investments
available for such distributions would have been approximately $4.1 million.
Concurrently with the closing of the Timberlands Acquisition, Timberlands
substantially modified the terms of its $27 million loan from John Hancock
Mutual Life Insurance Company (and paid the related fee) and in connection
with the modification received a $3 million advance from John Hancock Mutual
Life Insurance Company, bringing the total outstanding balance under the
Hancock Loan to $30 million. The Hancock Loan matures on November 24, 1999,
and is secured by approximately 125,000 acres of Timberlands' land. Dow
Jones' and The Washington Post's pro rata portion of the modification fee was
deducted from the purchase price paid to them.
USE OF PROCEEDS
The Issuers will not receive any proceeds from the Exchange Offer. The net
proceeds received by the Company from the issuance of the Old Notes of
approximately $97 million were used by the Company to fund a portion of the
cash purchase price required for the Acquisition. See "Acquisition."
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
September 30, 1997 and as adjusted to give effect to the issuance of the Old
Notes, the Acquisition and the other financings of the Acquisition. This
table should be read in conjunction with the other financial information,
including "Unaudited Pro Forma Condensed Financial Statements," appearing
elsewhere in this Prospectus.
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30,
1997
---------------------
(MILLIONS OF DOLLARS)
ACTUAL PRO FORMA
-------- -----------
<S> <C> <C>
Cash and short-term investments................. $ 13.3 $ 7.6
======== ===========
Revolving Credit Facility (a)................... -- $ 33.9
Term Loan Facility ............................. -- 70.0
The Notes ...................................... -- 100.0
Senior Secured Notes Due 2004................... $ 45.0 --
Other Debt (b) ................................. 1.6 1.6
Long-term purchase obligations.................. 1.2 1.2
-------- -----------
Total debt and long-term purchase
obligations.................................... $ 47.8 $206.7
Total Partners' Equity/ Members' Interests .... 97.6 24.7
-------- -----------
Total Capitalization.......................... $145.4 $231.4
======== ===========
</TABLE>
- - ------------
(a) The Revolving Credit Facility is not assumed to be reduced by the pro
forma remaining cash balance on hand of approximately $7.6 million.
Upon consummation of the closing of the Acquisition approximately $5
million of excess cash on-hand was used to reduce the balance
outstanding under the Revolving Credit Facility.
(b) Amounts outstanding under the other debt agreements were repaid in
October and November of 1997.
24
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA
The following selected historical financial data (except tonnes produced)
are derived from the audited financial statements of BIPCO, for each of the
years in the five year period ended December 31, 1996, and the unaudited
financial statements of BIPCO as of September 30, 1997, and for the nine
months ended September 30, 1997 and 1996, which in the opinion of the Company
reflect all adjustments, which are of a normal and recurring nature,
necessary for a fair presentation of the results for the unaudited periods.
The results of operations for the nine months ended September 30, 1997, are
not necessarily indicative of the results of operations to be expected for
the full year. The following selected historical financial data should be
read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the financial statements and the
notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
NINE MONTHS
YEARS ENDED DECEMBER 31, ENDED SEPTEMBER 30,
---------------------------------------------------------------------------------
1992 1993 1994 1995 1996 1996 1997
---------- ---------- ---------- --------- --------- --------- ---------------
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales ................................
Non-affiliates...........................$ 42,273 $ 41,137 $ 51,297 $ 70,960 $ 75,460 $ 59,353 $ 47,197
Affiliates (2)........................... 44,130 43,450 42,543 61,243 53,360 40,794 38,176
---------- ---------- ---------- --------- --------- --------- ---------------
86,403 84,587 93,840 132,203 128,820 100,147 85,373
Cost of sales............................. 86,190 77,836 91,610 100,399 100,591 73,748 77,225
---------- ---------- ---------- --------- --------- --------- ---------------
Gross profit.............................. 213 6,751 2,230 31,804 28,229 26,399 8,148
Selling, general & administrative:
Management fee to Brant-Allen............ 2,592 2,568 2,820 3,961 3,865 3,004 2,561
Other direct expenses.................... 158 469 208 224 153 569 669
---------- ---------- ---------- --------- --------- --------- ---------------
Income (loss) from operations............. (2,537) 3,714 (798) 27,619 24,211 22,826 4,918
---------- ---------- ---------- --------- --------- --------- ---------------
OTHER INCOME (EXPENSE):
Interest income.......................... 325 132 309 603 666 487 485
Interest expense......................... (7,716) (6,345) (6,194) (5,986) (5,398) (4,059) (3,592)
Other income (expense)................... 339 80 2,116 33 (56) 94 (7)
---------- ---------- ---------- --------- --------- --------- ---------------
Total other expense....................... (7,052) (6,133) (3,769) (5,350) (4,788) (3,478) (3,114)
---------- ---------- ---------- --------- --------- --------- ---------------
Net (loss) income.........................$ (9,589) $ (2,419) $ (4,567) $ 22,269 $ 19,423 $ 19,348 $ 1,804
========== ========== ========== ========= ========= ========= ===============
Ratio of earnings to fixed charges
(3)(4)................................... -- -- -- 4.7x 4.6x 5.7x 1.5x
OTHER DATA:
EBITDA (1)................................$ 6,229 $ 12,006 $ 8,971 $ 37,357 $ 34,245 $ 30,485 $ 13,222
Depreciation.............................. 8,531 8,109 9,730 9,648 9,976 7,629 8,291
Depletion................................. 235 183 39 90 58 30 13
Capital expenditures...................... 4,535 27,682 9,469 6,645 7,483 5,227 5,724
Saleable tonnes produced.................. 197,703 202,102 203,159 208,870 218,642 162,274 168,975
Ratio of EBITDA to total interest
expense.................................. .8x 1.9x 1.4x 6.2x 6.3x 7.5x 3.7x
AS OF
AS OF DECEMBER 31, SEPTEMBER 30,
------------------------------------------------------- ---------------
1992 1993 1994 1995 1996 1997
---------- ---------- ---------- --------- --------- ---------------
(DOLLARS IN THOUSANDS) (UNAUDITED)
BALANCE SHEET DATA:
Cash and short term investments ..........$ 4,691 $ 4,096 $ 7,454 $ 12,472 $ 13,625 $ 13,306
Working capital........................... 8,752 9,541 14,400 23,901 22,037 22,701
Property, plant and equipment, net ....... 101,080 120,921 117,581 115,941 116,953 114,907
Total indebtedness (5) ................... 72,580 76,309 60,025 55,368 52,171 47,757
Total assets.............................. 127,111 150,353 150,269 160,523 160,460 156,235
Total partners' equity.................... 44,383 61,164 78,597 91,366 95,789 97,593
</TABLE>
- - ------------
(1) EBITDA is defined as income (loss) from operations plus depreciation
and amortization, if any. EBITDA is generally accepted as providing
useful information regarding a company's ability to service and/or
incur debt. EBITDA should not be considered in isolation or as a
substitute for net income, cash flows from operations, or other income
or cash flow data prepared in accordance with generally accepted
accounting principles or as a measure of a company's profitability or
liquidity.
(2) These sales are to Dow Jones and to The Washington Post. Upon the
closing of the Acquisition and the Timberland Acquisition sales to Dow
Jones and The Washington Post will become non-affiliated sales.
(3) In the computation of the ratio of earnings to fixed charges, earnings
consist of income (loss) plus fixed charges. Fixed charges consist of
interest expense on indebtedness, amortization or financing costs and
that portion of lease rental expense representative of the interest
factor.
<PAGE>
(4) Earnings were insufficient to cover fixed charges by $9.6 million, $3.3
million and $5.0 million for the years ended December 31, 1992, 1993
and 1994, respectively.
(5) Total indebtedness is defined as long-term debt and long-term purchase
obligations and the current portions thereof.
25
<PAGE>
BEAR ISLAND PAPER COMPANY, L.L.C.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited pro forma condensed consolidated financial
statements are based on the historical financial statements of BIPCO included
elsewhere in this Offering Memorandum and the notes thereto and should be
read in conjunction with these historical statements.
The unaudited pro forma condensed consolidated balance sheet has been
prepared to give effect to the Acquisition and the relating financings as
though such transactions occurred as of September 30, 1997. The unaudited pro
forma condensed consolidated statements of operations for the twelve months
ended December 31, 1996 and for the nine months ended September 30, 1997,
give effect to the Acquisition and related financings as if such transactions
occurred on January 1, 1996. Management has allocated the estimated purchase
price based on preliminary estimates of the fair values of assets and
liabilities acquired.
The pro forma adjustments are based upon available information and certain
estimates and assumptions which management of the Company believes are
reasonable. The unaudited pro forma condensed consolidated statements of
operations do not purport to represent what the Company's results of
operations would have actually been had the transactions described in the
respective notes occurred on January 1, 1996. In addition, the unaudited pro
forma condensed consolidated financial statements do not purport to project
the Company's financial position or results of operations for any future date
or period.
26
<PAGE>
BEAR ISLAND PAPER COMPANY, L.L.C.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
September 30, 1997
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
-------------- --------------- --------------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and short-term investments..................... $ 13,305,542 $ (3,947,488)(b)
(1,700,000)(b) $ 7,658,054
Accounts receivable:
Trade.............................................. 8,045,540 4,644,964 (b) 12,690,504
Affiliates......................................... 4,718,688 (4,644,964)(b) 73,724
Other.............................................. 436,936 436,936
Inventories......................................... 13,853,125 911,002 (b) 14,764,127
Other............................................... 538,198 538,198
-------------- --------------- --------------
Total current assets.............................. 40,898,029 (4,736,486) 36,161,543
Net property, plant and equipment.................... 114,906,758 80,864,233 (b) 195,770,991
Deferred loan costs, net of accumulated
amortization........................................ 429,804 (429,804)(b)
8,210,297 (b) 8,210,297
-------------- --------------- --------------
Total assets...................................... $156,234,591 $ 83,908,240 $240,142,831
============== =============== ==============
LIABILITIES AND EQUITY
Current liabilities:
Current portion of long-term debt................... 6,591,936 700,000 (b)
(6,000,000)(b) 1,291,936
Current portion of long-term purchase obligations .. 720,064 720,064
Due to affiliate.................................... 1,672,705 1,672,705
Accounts payable and accrued expenses............... 7,072,165 7,072,165
Interest payable.................................... 2,139,844 (2,139,844)(b)
-------------- --------------- --------------
Total current liabilities......................... 18,196,714 (7,439,844) 10,756,870
Long-term debt....................................... 40,007,958 203,229,046 (b)
(39,000,000)(b) 204,237,004
Long-term purchase obligations....................... 437,381 437,381
Partners' equity..................................... 97,592,538 (97,592,538)(a)
Members' interest.................................... 97,592,538 (a)
(68,003,670)(b)
(3,947,488)(b)
(1,700,000)(b)
1,200,000 (b)
(429,804)(b) 24,711,576
-------------- --------------- --------------
Total liabilities and equity...................... $156,234,591 $ 83,908,240 $240,142,831
============== =============== ==============
</TABLE>
The accompanying notes are an integral part of the unaudited pro forma
condensed consolidated financial statements.
27
<PAGE>
BEAR ISLAND PAPER COMPANY, L.L.C.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
for the nine months ended September 30, 1997
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
------------- --------------- --------------
<S> <C> <C> <C>
Net sales..................................... $85,372,576 $ 85,372,576
Cost of sales................................. 77,224,807 $ 2,455,794 (c)
(3,159,115)(d)
(1,455,121)(e) 75,066,365
------------- --------------- --------------
Gross profit............................... 8,147,769 2,158,442 10,306,211
Selling, general and administrative expenses:
Management fee to Brant-Allen ............... 2,561,177 2,561,177
Other........................................ 668,182 225,000 (g) 893,182
------------- --------------- --------------
Income from operations..................... 4,918,410 1,933,442 6,851,852
Other income (deductions):
Interest income.............................. 485,242 485,242
Interest expense............................. (3,592,344) (10,569,056)(h)
(638,058)(f) (14,799,458)
Other expense................................ (7,585) (7,585)
------------- --------------- --------------
(3,114,687) (11,207,114) (14,321,801)
------------- --------------- --------------
Net income (loss).......................... $ 1,803,723 $ (9,273,672) $ (7,469,949)
============= =============== ==============
</TABLE>
The accompanying notes are an integral part of the unaudited pro forma
condensed consolidated financial statements.
28
<PAGE>
BEAR ISLAND PAPER COMPANY, L.L.C.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
for the year ended December 31, 1996
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
-------------- ---------------- --------------
<S> <C> <C> <C>
Net sales..................................... $128,820,301 $128,820,301
Cost of sales................................. 100,590,600 $ 5,264,708 (c)
(4,544,709)(d)
(1,847,561)(e) 99,463,038
-------------- ---------------- --------------
Gross profit............................... 28,229,701 1,127,562 29,357,263
Selling, general and administrative expenses:
Management fee to Brant-Allen ............... 3,865,000 3,865,000
Other........................................ 153,370 300,000 (g) 453,370
-------------- ---------------- --------------
Income from operations..................... 24,211,331 827,562 25,038,893
Other income (deductions):
Interest income.............................. 665,709 665,709
Interest expense............................. (5,397,959) (14,054,352)(h)
(850,744)(f) (20,303,055)
Other expense................................ (55,859) (55,859)
-------------- ---------------- --------------
(4,788,109) (14,905,096) (19,693,205)
-------------- ---------------- --------------
Net income................................. $ 19,423,222 $ (14,077,534) $ 5,345,688
============== ================ ==============
</TABLE>
The accompanying notes are an integral part of the unaudited pro forma
condensed consolidated financial statements.
29
<PAGE>
BEAR ISLAND PAPER COMPANY, L.L.C.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
The accompanying unaudited pro forma condensed consolidated financial
statements give effect to the acquisition by the Company of a 70% interest in
BIPCO for approximately $149.8 million, including estimated transaction costs
of $200,000. Subsequent to the transaction, Brant-Allen owns a 100% interest
in BIPCO, which is presented as having been merged into the Company. Funding
for the transaction was provided by proceeds from a $70 million Term Loan
Facility, $50 million Revolving Credit Facility and $100 million aggregate
principal amount of the Notes. Existing debt of $45 million at January 1,
1996, and September 30, 1997, is assumed to be repaid by the Company with
proceeds from the new debt. Additionally, at January 1, 1996, $9 million of
existing debt is considered to remain outstanding and is paid off during the
period from January 1, 1996 to September 30, 1997. In connection with the
early repayment of existing debt, a prepayment penalty of $3.9 million at
January 1, 1996, and September 30, 1997, is assumed to be paid by BIPCO using
existing cash on hand. In addition, $1.7 million is expected to be
distributed to Brant-Allen to reimburse approximately $1.2 million in
deferred loan costs paid by Brant-Allen on behalf of the Company in
connection with the Acquisition and approximately $500,000 to fund the income
tax liability for Brant-Allen's proportionate share of BIPCO's estimated
earnings for 1997 prior to closing.
The accompanying unaudited pro forma condensed consolidated financial
statements of the Company have been prepared by management and the pro forma
assumptions are described in the following notes.
The unaudited pro forma condensed consolidated financial statements have
been prepared from the historical financial statements of BIPCO for 1996 and
as of and for the nine months ended September 30, 1997. For purposes of the
unaudited pro forma condensed consolidated statements of operations, the
Acquisition, and the incurrence of debt, are assumed to have occurred at
January 1, 1996. For purposes of the September 30, 1997, unaudited pro forma
condensed consolidated balance sheet, the Acquisition and incurrence of new
debt are assumed to have occurred at September 30, 1997. The pro forma
condensed consolidated statements of operations for 1996 and for the nine
months ended September 30, 1997, are not necessarily indicative of the
results of operations that would have occurred in 1996 and for the nine
months ended September 30, 1997, had the Acquisition and debt incurrence
occurred at January 1, 1996.
In preparation of the pro forma financial statements, management has made
certain estimates and assumptions that affect the amounts reported in the
unaudited pro forma condensed consolidated financial statements. Actual
amounts recorded after final adjustments for the transactions may differ from
those estimates.
The unaudited pro forma condensed consolidated financial statements should
be read in conjunction with the historical financial statements and related
notes thereto of BIPCO which are included in this Prospectus.
(a) Adjustment to reflect the conversion of the capital structure of BIPCO
from a limited partnership to a limited liability company.
(b) Adjustments to reflect the proceeds to the Company of $100 million
from the Notes, $70 million from the Term Loan Facility and $33.9 million
under the Revolving Credit Facility, and to reflect the payoff of existing
debt of $45 million at September 30, 1997, the related prepayment penalty of
$3.9 million (from existing cash on hand) and accrued interest of $2.1
million with the proceeds from the new loans. In addition, an adjustment of
$1.7 million is recorded to reflect a distribution, concurrent with the
closing of the Offering, to provide $500,000 to fund the income tax liability
for Brant-Allen's proportionate share of BIPCO's estimated earnings for 1997
prior to closing and to reimburse Brant-Allen for $1.2 million of deferred
loan costs paid by Brant-Allen on behalf of the Company. This $1.2 million is
reflected as an increase to members' interest because the related deferred
loan costs are pushed down in the accompanying September 30, 1997 unaudited
condensed consolidated balance sheet. Also to reflect the capitalization of
deferred loan costs of $8.2 million (which includes the $1.2 million pushed
down) associated with the new debt, less the write-off of $429,804 in
deferred loan costs associated with the previous long term debt of BIPCO.
Additionally, to reflect the merger of Bear Island Mergerco, LLC (a Virginia
limited liability company into which BIPCO was converted immediately prior to
the Acquisition) with and into the Company and the allocation of the excess
over book value of the estimated purchase price paid by the Company for a 70%
interest in BIPCO acquired from subsidiaries of Dow Jones and The Washington
Post of approximately $81.8 million to inventory and property, plant and
equipment based on their approximate fair values and to reflect the
reclassification of Affiliate
30
<PAGE>
BEAR ISLAND PAPER COMPANY, L.L.C.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS--(CONTINUED)
accounts receivable to trade accounts receivable resulting from the change in
ownership. Calculation of the premium paid over the underlying book value
using amounts as of September 30, 1997 was as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30,
1997
---------------
<S> <C>
Payment to purchase selling limited partners' interest $149,603,905
Transaction costs ...................................... 200,000
---------------
Total purchase price .................................. 149,803,905
Limited partners' equity ............................... (68,003,670)
---------------
Premium paid over underlying book value ............... $ 81,800,235
===============
</TABLE>
The amount of limited partners' equity set forth above of $68,003,670 is
derived from the historical limited partners' equity of $71,067,774 at
September 30, 1997 reduced by the limited partners' 70% proportionate
interests in the (i) write-off of $429,804 of deferred loan costs and (ii)
$3,947,488 prepayment penalty.
(c) Adjustments to provide additional pro forma depreciation expense
resulting from the purchase described in note (b) above computed based on
remaining useful lives of plant and equipment ranging from 10 to 36 years. In
addition, to reflect the impact on cost of sales for the year ended December
31, 1996 of an assumed $911,002 write-up to inventory at January 1, 1996 in
connection with the allocation of the excess purchase price.
(d) Adjustments to reflect the effect on cost of goods sold from reducing
to an open market price pulpwood sold by BITCO to BIPCO during 1996 and the
nine months ended September 30, 1997 resulting from elimination of an
arrangement for the upcharge currently paid by BIPCO to BITCO resulting from
the amendment to BIPCO's and Timberlands' supply arrangement in connection
with the Acquisition. The price per cord of timber was reduced from $95.50
per cord to $65.79 and $68.52 per cord for the year ended December 31, 1996
and nine months ended September 30, 1997, respectively, for 152,969 and
117,091 cords consumed during 1996 and the nine months ended September 30,
1997, respectively.
(e) Adjustments to reflect the effect on cost of sales resulting from
termination of the recycled fiber procurement activities of BITCO on behalf
of BIPCO. Following the Acquisition, this activity will be performed by the
Company. Amounts eliminated are an upcharge for recycled fiber acquired from
BITCO less employee costs previously billed to Timberlands which are added
for procuring recycled fiber. This adjustment results from termination of the
procurement arrangement between BIPCO and BITCO upon closing of the
Acquisition.
(f) Adjustments to reflect the net effect of increased amortization for
the $8.2 million in deferred financing costs incurred to fund the
Acquisition, amortized over the respective lives of the Term Loan Facility,
the Revolving Credit Facility and the Notes.
(g) Adjustments to reflect the estimated incremental general and
administrative expenses of $300,000 annually associated with operating as a
public company.
(h) Adjustments to reflect the incremental interest expense for the year
ended December 31, 1996 and nine months ended September 30, 1997 related to
the balances assumed to be outstanding on $100 million principal amount of
the Notes, $70 million Term Loan Facility and $50 million Revolving Credit
Facility for which $33 million was assumed to be outstanding at January 1,
1996, upon consummation of the Acquisition. The total amount assumed to be
outstanding at January 1, 1996 also includes $9 million of existing debt
which is assumed not to be repaid at January 1, 1996. This amount represents
the difference between the $45 million in debt repaid at September 30, 1997,
and the same debt for which $54 million was outstanding at January 1, 1996.
Interest is calculated at LIBOR plus 2.75% for borrowings under the Revolving
Credit Facility and $70 million Term Loan Facility, and 10% for the $100
million principal amount of the Notes and 10.375% on the $9 million of
existing debt. In addition, an annual commitment fee expense of 0.5% of the
unused portion of the $50 million Revolving Credit Facility has been recorded
for the year ended December 31, 1996 and nine months ended September 30,
1997, as approximately $80,000 and $60,000, respectively.
31
<PAGE>
BEAR ISLAND TIMBERLANDS COMPANY, L.L.C.
UNAUDITED PRO FORMA CONDENSED FINANCIAL STATEMENTS
The following unaudited pro forma condensed financial statements are based
on the historical financial statements of BITCO included elsewhere in this
Offering Memorandum and should be read in conjunction with these historical
statements.
The unaudited pro forma condensed balance sheet has been prepared to give
effect to the Timberlands Acquisition and the related financings as though
such transactions occurred as of September 30, 1997. The unaudited pro forma
condensed statements of operations for the twelve months ended December 31,
1996, and for the nine months ended September 30, 1997, give effect to the
Timberlands Acquisition and the related financings as if such transactions
occurred on January 1, 1996. Management has allocated the estimated purchase
price based on preliminary estimates of the fair values of the assets and
liabilities acquired.
The pro forma adjustments are based upon available information and certain
estimates and assumptions which management believes are reasonable. The
unaudited pro forma condensed statements of operations do not purport to
represent what Timberlands' results of operations would have actually been
had the transactions described in the respective notes occurred on January 1,
1996. In addition, the unaudited pro forma condensed financial statements do
not purport to project Timberlands' financial position or results of
operations for any future date or period.
32
<PAGE>
BEAR ISLAND TIMBERLANDS COMPANY, L.L.C.
UNAUDITED PRO FORMA CONDENSED BALANCE SHEET
as of September 30, 1997
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
-------------- --------------- -------------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and short-term investments ..... $ 9,627,442 $ (347,994)(e)$
(5,300,000)(g)
(2,313,385)(f)
3,000,000 (f) 4,666,063
Restricted cash and investments ..... 341,856 (341,856)(e)
Accounts receivable .................. 410,165 410,165
Due from affiliate ................... 1,672,705 1,672,705
Inventories .......................... 1,039,910 1,039,910
Other current assets ................. 63,388 63,388
-------------- --------------- -------------
Total current assets .............. 13,155,466 (5,303,235) 7,852,231
Net property and equipment ............ 626,442 626,442
Timberlands (net) ..................... 44,056,338 17,726,779 (d) 61,783,117
Long-term notes receivable ............ 175,315 175,315
Deferred loan costs ................... 194,945 (194,945)(b)
807,500 (c) 807,500
-------------- --------------- -------------
Total assets ...................... $58,208,506 $ 13,036,099 $71,244,605
============== =============== =============
LIABILITIES AND EQUITY
Current liabilities:
Current portion of long-term debt ... 4,835,241 (4,500,000)(f) 335,241
Accounts payable and accrued expenses 403,042 403,042
Interest payable ..................... 700,864 (689,850)(e) 11,014
-------------- --------------- -------------
Total current liabilities ......... 5,939,147 (5,189,850) 749,297
Long-term debt ........................ 22,667,276 3,000,000 (f)
4,500,000 (f)
35,000,000 (c) 65,167,276
Deferred profit ....................... 15,472 15,472
Partners' equity ...................... 29,586,611 (29,586,611)(a)
Members' interest ..................... 29,586,611 (a)
(194,945)(b)
(2,313,385)(f)
(5,300,000)(g)
(36,007,432)(c)
807,500 (c)
1,007,432 (c)
17,726,779 (d) 5,312,560
-------------- --------------- -------------
Total liabilities and equity ..... $58,208,506 $ 13,036,099 $71,244,605
============== =============== =============
</TABLE>
The accompanying notes are an integral part of the unaudited pro forma
condensed financial statements.
33
<PAGE>
BEAR ISLAND TIMBERLANDS COMPANY, L.L.C.
UNAUDITED PRO FORMA CONDENSED STATEMENT OF OPERATIONS
for the nine months ended September 30, 1997
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
-------------- ----------------- -------------
<S> <C> <C> <C>
Net sales..................................... $14,507,354 $(2,846,927)(h) $11,660,427
Cost of sales ................................ 8,372,198 182,790 (i)
(185,599)(j) 8,369,389
-------------- ----------------- -------------
Gross profit ............................. 6,135,156 (2,844,118) 3,291,038
Fees for recycled fiber ...................... 1,640,695 (1,640,695)(j)
Selling, general and administrative expenses 2,086,800 112,500 (k) 2,199,300
-------------- ----------------- -------------
Income from operations ................... 5,689,051 (4,597,313) 1,091,738
Other income (deductions):
Interest income ............................. 380,333 380,333
Interest expense ............................ (2,203,106) (1,686,394)(l)
(304,688)(m) (4,194,188)
Other income ................................ 172,398 172,398
-------------- ----------------- -------------
(1,650,375) (1,991,082) (3,641,457)
-------------- ----------------- -------------
Net income (loss) ........................ $ 4,038,676 $(6,588,395) $(2,549,719)
============== ================= =============
</TABLE>
The accompanying notes are an integral part of the unaudited pro forma
condensed financial statements.
34
<PAGE>
BEAR ISLAND TIMBERLANDS COMPANY, L.L.C.
UNAUDITED PRO FORMA CONDENSED STATEMENT OF OPERATIONS
for the year ended December 31, 1996
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
-------------- ----------------- -------------
<S> <C> <C> <C>
Net sales..................................... $18,859,266 $(4,593,017)(h) $14,266,249
Cost of sales ................................ 10,528,161 321,944 (i)
(222,908)(j) 10,627,197
-------------- ----------------- -------------
Gross profit ............................. 8,331,105 (4,692,053) 3,639,052
Fees for recycled fiber ...................... 2,070,469 (2,070,469)(j)
Selling, general and administrative expenses 2,695,956 150,000 (k) 2,845,956
-------------- ----------------- -------------
Income from operations ................... 7,705,618 (6,912,522) 793,096
Other income (deductions):
Interest income ............................. 533,286 533,286
Interest expense ............................ (3,356,985) (2,097,290)(l)
(406,250)(m) (5,860,525)
Other income ................................ 339,160 339,160
-------------- ----------------- -------------
(2,484,539) (2,503,540) (4,988,079)
-------------- ----------------- -------------
Net income (loss) ........................ $ 5,221,079 $(9,416,062) $(4,194,983)
============== ================= =============
</TABLE>
The accompanying notes are an integral part of the unaudited pro forma
condensed financial statements.
35
<PAGE>
BEAR ISLAND TIMBERLANDS COMPANY, L.L.C.
NOTES TO UNAUDITED PRO FORMA CONDENSED FINANCIAL STATEMENTS
The accompanying unaudited pro forma condensed financial statements give
effect to the Timberlands Acquisition for an estimated $36 million, including
estimated transaction costs. Following the transaction, Brant-Allen owns 100%
of the membership interests in Timberlands. Funding to Brant-Allen for the
transaction was provided by proceeds from the $35 million Timberlands Loan
and existing Brant-Allen cash on hand. Existing debt of $27 million at
September 30, 1997, is assumed to be increased by $3 million at September 30,
1997, in connection with a substantial modification of the terms of the
existing senior notes agreement.
The accompanying unaudited pro forma condensed financial statements of
Timberlands have been prepared by management and the pro forma assumptions
are described in the following notes.
The unaudited pro forma condensed financial statements have been prepared
from the historical financial statements of BITCO, for 1996 and as of and for
the nine months ended September 30, 1997. For purposes of the unaudited pro
forma condensed statements of operations, the purchase by Brant-Allen is
assumed to have occurred at January 1, 1996. For purposes of the September
30, 1997, unaudited pro forma condensed balance sheet, the Timberlands
Acquisition is assumed to have occurred at September 30, 1997. The unaudited
pro forma condensed statements of operations for 1996 and for the nine months
ended September 30, 1997, are not necessarily indicative of the results of
operations that would have occurred in 1996 and for the nine months ended
September 30, 1997, had the acquisition by Brant-Allen occurred at January 1,
1996.
In preparation of the unaudited pro forma condensed financial statements,
management has made certain estimates and assumptions that affect the amounts
reported in the unaudited pro forma condensed financial statements. Actual
amounts recorded after final adjustments for the transactions may differ from
the estimates.
The unaudited pro forma condensed financial statements should be read in
conjunction with the historical financial statements and notes thereto of
BITCO, which are included in this Prospectus.
(a) Adjustment to reflect the conversion of BITCO from a limited
partnership to a limited liability company.
(b) Adjustment to write-off existing deferred loan costs at September 30,
1997, in connection with substantial modification of terms of the existing
long-term debt agreement.
(c) Adjustment to reflect (i) the push down of the amount of the
Brant-Allen $35 million Timberlands Loan, (ii) the push down of $807,500 from
Brant-Allen resulting from the payment by Brant-Allen of associated deferred
loan costs and (iii) the excess of the estimated purchase price of
$36,007,432 over the $35 million Timberlands Loan. These amounts are pushed
down into the accompanying September 30, 1997 balance sheet of Timberlands
because of the pledge of the membership interests in Timberlands as
collateral for the Timberlands Loan and the guarantee by Timberlands of the
Timberlands Loan.
(d) Adjustment to reflect purchase accounting impacts in connection with
the purchase by Brant-Allen of the membership interests of Timberlands not
already owned by Brant-Allen. This adjustment is required since Brant-Allen
owns 100% of the membership interests in Timberlands following the
Timberlands Acquisition. Calculation of the premium paid over the underlying
book value, assuming the purchase closed on September 30, 1997, was as
follows:
<TABLE>
<CAPTION>
SEPTEMBER 30,
1997
---------------
<S> <C>
Payment to purchase selling limited partners' interest $ 35,977,432
Transaction costs ..................................... 30,000
---------------
Total purchase price .............................. 36,007,432
Limited partners' equity .............................. (18,280,653)
---------------
Premium paid over underlying book value .......... $ 17,726,779
===============
</TABLE>
The amount of limited partners' equity set forth above of $18,280,652 is
different from the historical limited partners' equity of $20,036,484 as of
September 30, 1997 because it has been reduced by the limited partners' 70%
proportionate interests in the (i) write-off of $194,945 of deferred loan
costs and (ii) $2,313,385 in modification fee.
36
<PAGE>
BEAR ISLAND TIMBERLANDS COMPANY, L.L.C.
NOTES TO UNAUDITED PRO FORMA CONDENSED FINANCIAL STATEMENTS--(CONTINUED)
(e) Adjustment to reflect the required payment of accrued interest in
connection with the substantial modification of the terms of the $27 million
of senior notes.
(f) Adjustment to reflect the advance of $3,000,000 in connection with the
substantial modification of the terms of the $27 million senior notes
agreement, a related fee of $2,313,385, and the reclass of the current
portion of the modified debt to long-term.
(g) Adjustment to record a distribution to Brant-Allen necessary to fund
(i) the one year interest escrow requirement of the $35 million Timberlands
Loan of approximately $2,954,000 recorded in the accounts of Brant-Allen,
(ii) the income tax liability for Brant-Allen's proportionate share of
BITCO's earnings for 1997 prior to closing, and (iii) certain other costs.
(h) Adjustments to reflect the effect on net sales from reducing to an
open market price the price of timber sold by BITCO to BIPCO during 1996 and
the nine months ended September 30, 1997, resulting from the amendment to
BITCO's and BIPCO's supply arrangement resulting from the Timberlands
Acquisition. The price per cord of timber was reduced from $95.50 per cord to
$65.79 and $68.52 per cord for the year ended December 31, 1996, and nine
months ended September 30, 1997, respectively, for 154,595 and 105,520 cords
sold during 1996 and the nine months ended September 30, 1997, respectively.
(i) Adjustments to reflect the incremental depletion expense related to
the allocation to Timberlands of the excess purchase price over book value of
the prior interests of Dow Jones and The Washington Post in Timberlands.
(j) Adjustments to reflect the effect on cost of sales and fees from
recycled fiber resulting from termination of the fiber procurement
arrangement between BITCO and BIPCO during 1996 and the nine months ended
September 30, 1997. This entry eliminates revenue from sales of recycled
fiber and eliminates employee costs associated with procuring recycled fiber.
This adjustment resulted from termination of the procurement arrangement
between BIPCO and BITCO upon completion of the closing of the Timberlands
Acquisition.
(k) Adjustments to reflect the estimated incremental general and
administrative expenses of $150,000 per year associated with having to file
Timberlands' financial statements in connection with the Company's required
public company disclosure.
(l) Adjustments to reflect the incremental interest expense for the year
ended December 31, 1996 and nine months ended September 30, 1997 related to
the $35 million Timberlands Loan and $30 million outstanding under the
Hancock Loan. Interest is calculated at September 30, 1997, at LIBOR plus
2.75% for borrowings under the Timberlands Loan and at LIBOR plus 1.75% for
the $30 million Hancock Loan. Additionally, at January 1, 1996, the
additional $6 million outstanding, which is in excess of the balance of $30
million assumed to be outstanding at September 30, 1997, is assumed to bear
interest at the historical rate of 10.22% applied under the senior notes loan
agreement prior to the substantial modification of terms.
(m) Adjustment to reflect the net effect of increased amortization for the
$807,500 in deferred financing costs incurred to fund the purchase
transaction, amortized over the life of the $35 million Timberlands Loan.
37
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of financial condition and results
of operations should be read in conjunction with the "Selected Historical
Financial Data" and the financial statements of the Company and related notes
thereto included elsewhere in this Prospectus.
GENERAL
The Company manufactures and is dependent on one product, newsprint, which
is used in general printing and the newspaper publishing industry and for
advertising circulars. Accordingly, demand for newsprint fluctuates with the
economy, newspaper circulation and purchases of advertising lineage and
significantly impacts the Company's selling price of newsprint and,
therefore, its revenues and profitability. In addition, variation in the
balance between supply and demand as a result of global capacity additions
have an increasing impact on both selling prices and inventory levels in the
North American markets. Capacity is typically added in large blocks because
of the scale of new newsprint machines.
As a result, the newsprint market is highly cyclical, depending on changes
in global supply, demand and inventory levels. These factors significantly
impact the Company's sales volume and newsprint prices and, therefore, the
Company's revenues and profitability. Given the commodity nature of
newsprint, the Company, like other suppliers to this market, has little
influence over the timing and extent of price changes. Sales are recognized
at the time of shipment from the Company's mill. However, significant
fluctuations in revenue can and do occur as a result of the timing of
shipments caused by increases and decreases in mill inventory levels.
The table below summarizes the annual volumes and net selling prices of
the Company's newsprint during the periods indicated below:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------ --------------------
1994 1995 1996 1996 1997
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Tonnes sold ............... 215,900 206,800 217,230 159,000 169,300
Average net selling price $ 435 $ 639 $ 593 $ 630 $ 504
</TABLE>
The Company's primary cost components consist of raw materials (wood, ONP,
OMG, kraft pulp and chemicals), electrical energy, direct labor and certain
fixed costs. Fixed costs consist of indirect labor and other plant related
costs including maintenance expenses and mill overhead.
For the first nine months of 1997, raw materials, which are subject to
significant price fluctuations based on supply and demand, represented 27.2%
of the total cost of manufacturing. Electrical energy currently represents
13.8% and direct and indirect labor currently represented 20.5% of total cost
of manufacturing. Historically, the Company's cost of manufacturing has also
included an upcharge (a margin in excess of the market price of the fiber)
paid to Timberlands with respect to wood, and a procurement fee per tonne of
ONP and OMG, supplied or provided by Timberlands to the Company. This
upcharge and procurement fee was eliminated upon consummation of the
Transactions. See "Certain Related Party Transactions." The Company currently
uses a raw material mix of 65% TMP, 28% recycled fiber and 7% kraft pulp in
its production process. As a result of eliminating the upcharge and the
procurement fee and adjusting for the market price of fiber, certain costs
included in the historical financial statements are expected to be
eliminated. See "Unaudited Pro Forma Condensed Consolidated Statements of
Operations."
The Company's product is marketed by Brant-Allen, which also provides
senior management, treasury, financial and administrative services for the
Company pursuant to the Management Services Agreement. Brant-Allen is
compensated for these services in the form of a fee calculated at the rate of
3% of the Company's sales less transportation costs. This fee amounted to
$2,820,000, $3,961,000 and $3,865,000 for the years ended 1994, 1995 and
1996, and $3,004,410 and $2,561,177 for the nine months ended September 30,
1996 and 1997, respectively.
The Company's customers include prestigious newspaper publishers in the
United States such as Dow Jones (publisher of The Wall Street Journal) and
The Washington Post. Following the Acquisition, both Dow Jones and The
Washington Post continue to have a contract to purchase a minimum 45,000
tonnes of newsprint per year
38
<PAGE>
(approximately 40% of the Company's total output) at prices based on the
average prices paid by those customers to East Coast suppliers not affiliated
with those customers. These contracts expire in December 2000, unless
extended by mutual agreement. See "Certain Related Party Transactions
- - --Purchase Agreements with The Washington Post and Dow Jones." Approximately
90% of the Company's current newsprint production is purchased by its top ten
customers, eight of whom have been customers of the Company for over 15
years.
RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, NINE MONTHS ENDED SEPTEMBER 30,
--------------------------------------------------------- ------------------------------------
1994 1995 1996 1996 1997
----------------- ----------------- ----------------- ----------------- -----------------
(UNAUDITED)
PERCENT PERCENT PERCENT PERCENT PERCENT
OF NET OF NET OF NET OF NET OF NET
AMOUNT SALES AMOUNT SALES AMOUNT SALES AMOUNT SALES AMOUNT SALES
------- ------- -------- ------- -------- ------- -------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales ............... $93,840 100.0% $132,203 100.0% $128,820 100.0% $100,147 100.0% $85,373 100.0%
Cost of sales ........... 91,610 97.6 100,399 75.9 100,591 78.1 73,748 73.6 77,225 90.4
------- ------ -------- ----- -------- ----- -------- ----- ------- -----
Gross Profit ............ 2,230 2.4 31,804 24.1 28,229 21.9 26,399 26.4 8,148 9.6
Selling, general and
administrative expenses 3,028 3.3 4,185 3.2 4,018 3.1 3,573 3.6 3,230 3.8
------- ------ -------- ----- -------- ----- -------- ----- ------- -----
Income from operations . (798) (.9) 27,619 20.9 24,211 18.8 22,826 22.8 4,918 5.8
Interest expense ........ (6,194) (6.6) (5,986) (4.5) (5,398) (4.2) (4,059) (4.1) (3,592) (4.2)
Other income ............ 2,425 2.6 636 .4 610 .5 581 .6 478 .5
------- ------ -------- ----- -------- ----- -------- ----- ------- -----
Net income (loss) .......($ 4,567) (4.9) $ 22,269 16.8 $ 19,423 15.1 $ 19,348 19.3 $ 1,804 2.1
======= ====== ======== ===== ======== ===== ======== ===== ======= =====
</TABLE>
NINE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED WITH NINE MONTHS ENDED
SEPTEMBER 30, 1996
Net sales decreased by $14.8 million, or 14.7%, to $85.4 million for the
nine months ended September 30, 1997, from $100.1 million for the nine months
ended September 30, 1996. This decrease was attributable to a 20% decrease in
the average net selling price of the Company's products and was offset in
part by an increase in sales volumes to approximately 169,000 tonnes in the
nine months ended September 30, 1997, from approximately 159,000 tonnes in
the nine months ended September 30, 1996. The Company's net selling price for
newsprint decreased from an average of $630 per tonne in the nine months
ended September 30, 1996 to an average of $504 per tonne in the nine months
ended September 30, 1997. The Company's selling price for newsprint increased
approximately 10% from January 1, 1997, to September 30, 1997.
Cost of sales increased by $3.5 million, or 4.7 %, to $77.2 million in
1997 from $73.7 million in the nine months ended September 30, 1996. This
increase was attributable primarily to a 6.5% increase in sales volume net of
1.5% decrease in unit costs attributable to reduction in fiber costs. Cost of
sales as a percentage of net sales increased to 90.4% in the nine months
ended September 30, 1997, from 73.6% in the nine months ended September 30,
1996, due to depressed newsprint selling prices. However, cost of sales on a
per tonne basis decreased in the nine months ended September 30, 1997 from
the nine months ended September 30, 1996, primarily due to lower fiber costs.
Selling, general and administrative expenses decreased by $0.3 million, or
9.6%, to $3.2 million in the nine months ended September 30, 1997 from $3.6
million in the nine months ended September 30, 1996. This decrease was
primarily attributable to a decrease in the management fee paid by the
Company to Brant-Allen that resulted from lower net sales.
As a result of the above factors, income from operations decreased by
$17.9 million, or 78.5%, in the nine months ended September 30, 1997 from
$22.8 million in the nine months ended September 30, 1996.
Interest expense decreased by $0.5 million, or 11.5%, to $3.6 million in
the nine months ended September 30, 1997 from $4.1 million in the nine months
ended September 30, 1996, due to scheduled amortization of the Company's
indebtedness.
As a result of the above factors, the Company's net income decreased by
$17.5 million, or 90.7% to $1.8 million in the nine months ended September
30, 1997 from $19.3 million in the nine months ended September 30, 1996.
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1996 COMPARED WITH 1995
Net sales decreased by $3.4 million, or 2.6%, to $128.8 million in 1996
from $132.2 million in 1995. This decrease was attributable to a 7.2%
decrease in the average net selling price of the Company's products and was
offset in part by a 5.0% increase in sales volumes to approximately 217,230
tonnes in 1996 from approximately 206,800 tonnes in 1995.
Cost of sales was relatively flat at $100.6 million in 1996 versus $100.4
million in 1995. The primary offsetting factors were a 5.0% increase in sales
volume and a 4.5% decrease in unit costs attributable to reductions in fiber
costs. Cost of sales as a percentage of net sales increased to 78.1% in 1996
from 75.9% in 1995 primarily due to the net sales decrease resulting from
pricing declines, despite higher sales volumes.
Selling, general and administrative expenses decreased by $0.2 million, or
3.9%, to $4.0 million in 1996 from $4.2 million in 1995. This decrease was
primarily attributable to lower management fees paid by the Company to
Brant-Allen as a result of a decrease in net sales.
Income from operations decreased by $3.4 million, or 12.3%, to $24.2
million in 1996 from $27.6 million in 1995, primarily as a result of decline
in sales.
Interest expense decreased by $0.6 million, or 9.8%, to $5.4 million in
1996 from $6.0 million in 1995, due to scheduled amortization of the
Company's indebtedness outstanding, which reduced principal by $6 million
during 1996.
As a result of the above factors, the Company's net income decreased by
$2.9 million, or 12.8%, to $19.4 million in 1996 from $22.3 million in 1995.
1995 COMPARED WITH 1994
Net sales increased by $38.4 million, or 40.9%, to $132.2 million in 1995
from $93.8 million in 1994. The net sales increase was principally due to a
47% increase in average net selling prices for the Company's product, from an
average net selling price of $435 per tonne in 1994 to an average net selling
price of $639 per tonne in 1995, offset in part as a result of a 4.2%
decrease in sales volume to approximately 206,800 tonnes in 1995 from
approximately 215,900 tonnes in 1994, as a result of larger than normal 1993
inventories which were liquidated in 1994.
Cost of sales increased by $8.8 million, or 9.6%, to $100.4 million in
1995 from $91.6 million in 1994. This increase was attributable primarily to
the increase in both cost and usage of chemical pulp, which is purchased from
outside vendors. Chemical pulp usage was increased in order to achieve
quality improvements in the Company's newsprint. However, costs of sales as a
percentage of net sales decreased from 97.6% in 1994 to 75.9% in 1995 as a
result of an increase in average selling prices.
As a result of the above factors, income from operations increased by
$28.4 million to $27.6 million in 1995 from a net loss of $.8 million in
1994.
The Company's selling, general and administrative expenses increased by
$1.2 million, or 38.2%, to $4.2 million in 1995 from $3.0 million in 1994
primarily because of higher management fees paid by the Company to
Brant-Allen, which resulted directly from increased net sales.
The Company's interest expense decreased by $0.2 million, or 3.4%, to $6.0
million in 1995 from $6.2 million in 1994, due to scheduled amortization of
the Company's indebtedness outstanding, which reduced principal by $6.0
million during 1995, partially offset by the $0.4 million reduction in
capitalized interest in 1995 resulting from the 1994 completion of the
Company's recycling facility.
The Company's other income decreased by $1.8 million, or 73.8%, to $0.6
million in 1995 from $2.4 million in 1994, due to a one-time land sale during
1994.
As a result of the above factors, the Company's net income increased by
$26.8 million to $22.3 million in 1995 from a net loss of $4.6 million in
1994.
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LIQUIDITY AND CAPITAL RESOURCES
Historical
Historically, the Company's principal liquidity requirements have been for
working capital, capital expenditures and debt service. These requirements
have been met through cash flows from operations and/or loans and equity
contributions from either Brant-Allen or the Company's limited partners,
subsidiaries of Dow Jones and The Washington Post. Following the Acquisition,
the Company's principal liquidity requirements are expected to be principally
for working capital, debt service under the Bank Credit Facilities and the
Notes and the funding of capital expenditures. These requirements are
expected to be met through cash flows from operations and borrowings under
the Revolving Credit Facility.
The Company's cash provided by operating activities increased to $30.4
million in 1996 from $27.2 million in 1995 primarily due to the decrease in
working capital requirements. The Company's cash provided by operating
activities improved in 1995 to $27.2 million from $4.4 million in 1994
primarily as a result of increased net income due primarily to higher selling
prices for the Company's product. For the nine-month period ending September
30, 1997, the Company's cash provided by operating activities decreased by
60.2% to $10.2 million from $25.6 million during the nine-month period ending
September 30, 1996, primarily due to lower selling prices resulting in lower
net income.
Cash used in investing activities increased to $7.4 million in 1996 from
$6.5 million in 1995 as a result of increased capital expenditures. Cash used
in investing activities increased to $6.5 million in 1995 from $4.0 million
in 1994 on a net basis, although capital expenditures in 1995 approximated
$6.6 million compared to $9.5 million during 1994. Asset sales generated $5.5
million of net proceeds in 1994 and reduced net cash used in investing
activities to $4.0 million. Asset sales in 1995 only approximated $0.1
million. Cash used in investing activities for the nine-month period ended
September 30, 1997 increased by $0.4 million to $5.6 million from $5.2
million for the nine-month period ended September 30, 1996 resulting from an
increase in capital expenditures.
The Company made capital expenditures of $7.5 million, $6.6 million and
$9.5 million in 1996, 1995 and 1994, respectively, in connection with
upgrading and maintaining its manufacturing facility. For the nine months
ended September 30, 1997, the Company made capital expenditures of $5.7
million. Management anticipates that the Company's total capital expenditures
for 1997 and 1998 will be relatively consistent with the 1996 capital
expenditure level, and primarily will relate to maintenance of its newsprint
facilities and cost reduction projects, allowing the Company to improve
quality and increase capacity, and, therefore, enhance its competitive
position.
Following the Acquisition and Related Financings
At the completion of the Acquisition and the related financings on
December 1, 1997, the Company had approximately $201.1 million of
indebtedness, consisting of borrowings of $31 million under the Revolving
Credit Facility, $70.0 million under the Term Loan Facility, $100 million
under the Notes and approximately $130,000 in long-term purchase
obligations. The primary difference between the actual borrowings of $31
million on December 1, 1997, and the pro-forma borrowings of $33.9 million
results from (i) differences in accrued interest paid at the closing of the
Acquisition and (ii) transaction costs which were presented as advances under
the Company's Revolving Credit Facility in the pro-forma statements, but
treated as accounts payable by the Company on the closing date. In addition,
$19 million was available in unused borrowing capacity under the Revolving
Credit Facility. Immediately following the closing of the Acquisition, the
Company used $5 million of cash on hand to reduce the outstanding balance of
the Revolving Credit Facility. The Company's interest expense and
indebtedness following the consummation of the Acquisition and related
financings are significantly greater than they have been historically. Pro
forma interest expense for the year ended December 31, 1996 and nine months
ended September 30, 1997 were approximately $20.3 million and $14.8 million,
respectively. See "Unaudited Pro Forma Condensed Consolidated Financial
Statements." To the extent that the Company borrows additional funds under
the Revolving Credit Facility, additional interest and principal payments
will be required.
Although there can be no assurances, the Company believes that cash
generated from operations together with cash on-hand and amounts available
under the Revolving Credit Facilities will be sufficient to meet its debt
service requirements, capital expenditures needs and working capital needs
for the foreseeable future. The Company's future operating performance and
ability to service the Bank Credit Facilities and the Notes and repay other
indebtedness of the Company will be subject to future economic conditions and
the financial success of the Company's business
41
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and other factors, many of which are not in the Company's control, including
changes in market prices for newsprint, fiber costs, electrical rates and
future government requirements as to environmental discharges and recycling
content in newsprint. The Company currently anticipates that in order to pay
the principal amount of the Notes at maturity, the Company will be required
to refinance such Notes or adopt one or more alternatives, including reducing
or delaying capital expenditures, selling assets or seeking additional equity
capital or other additional financing. None of the affiliates of the Company
will be required to make any capital contributions or other payments to the
Company with respect to the Issuer's obligations on the Notes (except to the
extent that Timberlands or Soucy are required under the Indenture to make an
Excess Proceeds Offer to the Holders of the Notes and the consummation of any
such Excess Proceeds Offer is deemed to be a payment to the Company).
Although the Company currently has no reason to believe that it will not be
able to refinance the Notes at maturity, there can be no assurance that such
refinancing or any alternative strategy could be effected upon satisfactory
terms, if at all, or that any of the foregoing actions would enable the
Company to make such principal payments on the Notes or that any of such
actions would be permitted by the terms of any debt instruments of the
Company or of any of the Company's affiliates then in effect. See "Risk
Factors -- Substantial Leverage; Ability to Service Debt."
Historically, the Company has had relatively few foreign sales, all of
which have been denominated in U.S. dollars. To date, the Company has not
used derivative financial instruments.
Environmental Expenditures
The operation of the Company's mill is subject to extensive and changing
environmental regulation by federal, state and local authorities, including
those requirements that regulate discharges into the environment, waste
management, and remediation of environmental contamination. Environmental
permits are required for the operation of the Company's businesses, and are
subject to revocation, modification and renewal. Governmental authorities
have the power to enforce compliance with environmental requirements and
violators are subject to fines, injunctions, civil penalties and criminal
fines. Third parties may also have the right to sue to enforce compliance
with such regulations.
The Company has in the past made significant capital expenditures to
comply with current federal, state and local environmental laws and
regulations. The Company believes that it is in substantial compliance with
such laws and regulations, although no assurance can be given that it will
not incur material liabilities and costs with respect to such laws and
regulations in the future. Although the Company does not currently believe
that it will be required to make significant expenditures for pollution
control in the near future, no assurances can be given that future
developments, such as the potential for more stringent environmental
standards or stricter enforcement of environmental laws, will not cause the
Company to incur such expenditures. The Company anticipates incurring the
following environmental expenditures (over and above routine operating
expenditures) over the next two years, including (i) $125,000 (budgeted for
fiscal year 1998) for the acquisition of new aerators, sludge trucks, and
road paving; (ii) $550,000 (anticipated for fiscal year 1999) for the opening
of a new landfill cell; and (iii) $200,000 and $250,000 for the closure of
two landfills for 1998 and 1999, respectively.
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THE EXCHANGE OFFER
TERMS OF THE EXCHANGE OFFER; PERIOD FOR TENDERING OLD NOTES
Upon the terms and conditions set forth in this Prospectus and in the
accompanying Letter of Transmittal (which together constitute the Exchange
Offer), the Issuers will accept for exchange Old Notes which are properly
tendered on or prior to the Expiration Date and not withdrawn as permitted
below. As used herein, the term "Expiration Date" means 5:00 p.m., New York
City time, on , 1998; provided, however, that if the Issuers, in their
sole discretion, have extended the period of time for which the Exchange
Offer is open, the term "Expiration Date" means the latest time and date to
which the Exchange Offer is extended.
As of the date of this Prospectus, $100,000,000 aggregate principal amount
of the Old Notes is outstanding. This Prospectus, together with the Letter of
Transmittal, is first being sent on or about the date hereof, to all Holders
of Old Notes known to the Issuers. The Issuers' obligation to accept Old
Notes for exchange pursuant to the Exchange Offer is subject to certain
conditions as set forth under "--Certain Conditions to the Exchange Offer"
below.
The Issuers expressly reserve the right, at any time or from time to time,
to extend the period of time during which the Exchange Offer is open, and
thereby delay acceptance for exchange of any Old Notes, by giving oral or
written notice of such extension to the Holders thereof as described below.
During any such extension, all Old Notes previously tendered will remain
subject to the Exchange Offer and may be accepted for exchange by the
Issuers. Any Old Notes not accepted for exchange for any reason will be
returned without expense to the tendering Holder thereof as promptly as
practicable after the expiration or termination of the Exchange Offer.
Old Notes tendered in the Exchange Offer must be in denominations of
principal amount of $1,000 and any integral multiple thereof.
The Issuers expressly reserve the right to amend or terminate the Exchange
Offer, and not to accept for exchange any Old Notes not theretofore accepted
for exchange, upon the occurrence of any of the conditions of the Exchange
Offer specified below under "--Certain Conditions to the Exchange Offer." The
Issuers will give oral or written notice of any extension, amendment,
non-acceptance or termination to the Holders of the Notes as promptly as
practicable, such notice in the case of any extension to be issued by means
of a press release or other public announcement no later than 9:00 a.m., New
York City time, on the next business day after the previously scheduled
Expiration Date.
PROCEDURES FOR TENDERING OLD NOTES
The tender to the Issuers of Old Notes by a Holder thereof as set forth
below and the acceptance thereof by the Issuers will constitute a binding
agreement between the tendering Holder and the Issuers upon the terms and
subject to the conditions set forth in this Prospectus and in the
accompanying Letter of Transmittal. Except as set forth below, a Holder who
wishes to tender Old Notes for exchange pursuant to the Exchange Offer must
transmit a properly completed and duly executed Letter of Transmittal,
including all other documents required by such Letter of Transmittal or (in
the case of a book-entry transfer) an Agent's Message in lieu of such Letter
of Transmittal, to First Trust of New York, National Association (the
"Exchange Agent") at the address set forth below under "Exchange Agent" on or
prior to the Expiration Date. In addition, either (i) certificates for such
Old Notes must be received by the Exchange Agent along with the Letter of
Transmittal, or (ii) a timely confirmation of a book-entry transfer (a
"Book-Entry Confirmation") of such Old Notes, if such procedure is available,
into the Exchange Agent's account at The Depository Trust Company (the
"Book-Entry Transfer Facility") pursuant to the procedure for book-entry
transfer described below, must be received by the Exchange Agent prior to the
Expiration Date with the Letter of Transmittal or an Agent's Message in lieu
of such Letter of Transmittal, or (iii) the Holder must comply with the
guaranteed delivery procedures described below. The term "Agent's Message"
means a message, transmitted by the Book-Entry Transfer Facility to and
received by the Exchange Agent and forming a part of a Book-Entry
Confirmation, which states that the Book-Entry Transfer Facility has received
an express acknowledgment from the tendering participant, which
acknowledgment states that such participant has received and agrees to be
bound by the Letter of Transmittal and that the Issuers may enforce such
Letter of Transmittal against such participant. THE METHOD OF DELIVERY OF OLD
NOTES, LETTERS OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS IS AT THE
ELECTION AND RISK OF THE HOLDERS. IF SUCH DELIVERY IS BY MAIL, IT
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<PAGE>
IS RECOMMENDED THAT REGISTERED MAIL, PROPERLY INSURED, WITH RETURN RECEIPT
REQUESTED, BE USED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE
TIMELY DELIVERY. NO LETTERS OF TRANSMITTAL OR OLD NOTES SHOULD BE SENT TO THE
ISSUERS.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed unless the Old Notes surrendered for exchange
pursuant thereto are tendered (i) by a Holder of the Old Notes who has not
completed the box entitled "Special Issuance Instructions" or "Special
Delivery Instructions" on the Letter of Transmittal or (ii) for the account
of an Eligible Institution (as defined below). In the event that signatures
on a Letter of Transmittal or a notice of withdrawal, as the case may be, are
required to be guaranteed, such guarantees must be by a firm which is a
member of a registered national securities exchange or a member of the
National Association of Securities Dealers, Inc. or by a commercial bank or
trust company having an office or correspondent in the United States
(collectively, "Eligible Institutions"). If Old Notes are registered in the
name of a person other than a signer of the Letter of Transmittal, the Old
Notes surrendered for exchange must be endorsed by, or be accompanied by a
written instrument or instruments of transfer or exchange, in satisfactory
form as determined by the Issuers in their sole discretion, duly executed by
the registered national securities exchange with the signature thereon
guaranteed by an Eligible Institution.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of Old Notes tendered for exchange will be determined
by the Issuers in their sole discretion, which determination shall be final
and binding. The Issuers reserve the absolute right to reject any and all
tenders of any particular Old Note not properly tendered or to not accept any
particular Old Note which acceptance might, in the judgment of the Issuers or
their counsel, be unlawful. The Issuers also reserve the absolute right to
waive any defects or irregularities or conditions of the Exchange Offer as to
any particular Old Note either before or after the Expiration Date (including
the right to waive the ineligibility of any Holder who seeks to tender Old
Notes in the Exchange Offer). The interpretation of the terms and conditions
of the Exchange Offer as to any particular Old Note either before or after
the Expiration Date (including the Letter of Transmittal and the instructions
thereto) by the Issuers shall be final and binding on all parties. Unless
waived, any defects or irregularities in connection with tenders of Old Notes
for exchange must be cured within such reasonable period of time as the
Issuers shall determine. Neither the Issuers, the Exchange Agent nor any
other person shall be under any duty to give notification of any defect or
irregularity with respect to any tender of Old Notes for exchange, nor shall
any of them incur any liability for failure to give such notification.
If the Letter of Transmittal is signed by a person or persons other than
the registered Holder or Holders of Old Notes, such Old Notes must be
endorsed or accompanied by powers of attorney, in either case signed exactly
as the name or names of the registered Holder or Holders that appear on the
Old Notes.
If the Letter of Transmittal or any Old Notes or powers of attorneys are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and, unless waived by
the Issuers, proper evidence satisfactory to the Issuers of their authority
to so act must be submitted with the Letter of Transmittal.
By tendering, each Holder will represent to the Issuers that, among other
things, the New Notes acquired pursuant to the Exchange Offer are being
obtained in the ordinary course of business of the person receiving such New
Notes, whether or not such person is the Holder and that neither the Holder
nor such other person has any arrangement or understanding with any person to
participate in the distribution of the New Notes. If any Holder or any such
other person is an "affiliate", as defined under Rule 405 of the Securities
Act, of the Issuers, is engaged in or intends to engage in or has an
arrangement or understanding with any person to participate in a distribution
of such New Notes to be acquired pursuant to the Exchange Offer, such Holder
or any such other person (i) could not rely on the applicable interpretations
of the staff of the Commission and (ii) must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with any
resale transaction. Each broker-dealer that receives New Notes for its own
account in exchange for Old Notes, where such Old Notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such New Notes. See "Plan of Distribution." The Letter of
Transmittal states that by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within
the meaning of the Securities Act.
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ACCEPTANCE OF OLD NOTES FOR EXCHANGE; DELIVERY OF NEW NOTES
Upon satisfaction or waiver of all of the conditions to the Exchange
Offer, the Issuers will accept, promptly after the Expiration Date, all Old
Notes properly tendered and will issue the New Notes promptly after
acceptance of the Old Notes. See "--Certain Conditions to the Exchange Offer"
below. For purposes of the Exchange Offer, the Issuers shall be deemed to
have accepted properly tendered Old Notes for exchange when, as and if the
Issuers have given oral (promptly confirmed in writing) or written notice
thereof to the Exchange Agent.
For each Old Note accepted for exchange, the Holder of such Old Note will
receive a New Note having a principal amount equal to that of the surrendered
Old Note. Accordingly, registered Holders of New Notes on the relevant record
date for the first interest payment date following the consummation of the
Exchange Offer will receive interest accruing from the most recent date to
which interest has been paid or, if no interest has been paid, from December
1, 1997. Old Notes accepted for exchange will cease to accrue interest from
and after the date of consummation of the Exchange Offer. Pursuant to the
Registration Rights Agreement, certain additional payments are required to be
made to Holders of Old Notes under certain circumstances relating to the
timing of the Exchange Offer.
In all cases, issuance of New Notes for Old Notes that are accepted for
exchange pursuant to the Exchange Offer will be made only after timely
receipt by the Exchange Agent of (i) certificates for such Old Notes or a
timely Book-Entry Confirmation of such Old Notes into the Exchange Agent's
account at the Book-Entry Transfer Facility, (ii) a properly completed and
duly executed Letter of Transmittal or an Agent's Message in lieu thereof and
(iii) all other required documents. If any tendered Old Notes are not
accepted for any reason set forth in the terms and conditions of the Exchange
Offer or if Old Notes are submitted for a greater principal amount than the
Holder desires to exchange, such unaccepted or non-exchanged Old Notes will
be returned without expense to the tendering Holder thereof (or, in the case
of Old Notes tendered by book-entry transfer into the Exchange Agent's
account at the Book-Entry Transfer Facility pursuant to the book-entry
procedures described below, such non-exchanged Old Notes will be credited to
an account maintained with such Book-Entry Transfer Facility) as promptly as
practicable after the expiration or termination of the Exchange Offer.
BOOK-ENTRY TRANSFERS
The Exchange Agent will make a request to establish an account with
respect to the Old Notes at the Book-Entry Transfer Facility for purposes of
the Exchange Offer within two business days after the date of this
Prospectus. Any financial institution that is a participant in the Book-Entry
Transfer Facility systems must make book-entry delivery of Old Notes by
causing the Book-Entry Transfer Facility to transfer such Old Notes into the
Exchange Agent's account at the Book-Entry Transfer Facility in accordance
with such Book-Entry Transfer Facility's Automated Tender Offer Program
("ATOP") procedures for transfer. Such participant using ATOP should transmit
its acceptance to the Book-Entry Transfer Facility on or prior to the
Expiration Date or comply with the guaranteed delivery procedures described
below. The Book-Entry Transfer Facility will verify such acceptance, execute
a book-entry transfer of the tendered Old Notes into the Exchange Agent's
account at the Book-Entry Transfer Facility and then send to the Exchange
Agent confirmation of such book-entry transfer, including an Agent's Message
confirming that the Book Entry Transfer Facility has received an express
acknowledgement from such participant that such participant has received and
agrees to be bound by the Letter of Transmittal and that the Issuers may
enforce the Letter of Transmittal against such participant. However, although
delivery of Old Notes may be effected through book-entry transfer at the
Book-Entry Transfer Facility, an Agent's Message and any other required
documents, must, in any case, be transmitted to and received by the Exchange
Agent at the address set forth below under "--Exchange Agent" on or prior to
the Expiration Date or the guaranteed delivery procedures described below
must be complied with.
GUARANTEED DELIVERY PROCEDURES
If a Holder of the Old Notes desires to tender such Old Notes and the Old
Notes are not immediately available, or time will not permit such Holder's
Old Notes or other required documents to reach the Exchange Agent before the
Expiration Date, or the procedure for book-entry transfer cannot be completed
on a timely basis, a tender may be effected if (i) the tender is made through
an Eligible Institution, (ii) prior to the Expiration Date, the Exchange
Agent received from such Eligible Institution a Notice of Guaranteed
Delivery, substantially in the form provided by the Issuers (by telegram,
telex, facsimile transmission, mail or hand delivery), setting forth the name
and address of the Holder of the Old Notes and the amount of Old Notes
tendered, stating that the tender is being made thereby and guaranteeing that
within five New York Stock Exchange ("NYSE") trading days after the date of
execution of the Notice of Guaranteed Delivery, the certificates for all
physically tendered Old Notes, in proper form for transfer, or
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<PAGE>
a Book-Entry Confirmation, as the case may be, together with a properly
completed and duly executed appropriate Letter of Transmittal (or facsimile
thereof or Agent's Message in lieu thereof) with any required signature
guarantees and any other documents required by the Letter of Transmittal will
be deposited by the Eligible Institution with the Exchange Agent, and (iii)
the certificates for all physically tendered Old Notes, in proper form for
transfer, or a Book-Entry Confirmation, as the case may be, together with a
properly completed and duly executed appropriate Letter of Transmittal (or
facsimile thereof or Agent's Message in lieu thereof) with any required
signature guarantees and all other documents required by the Letter of
Transmittal, are received by the Exchange Agent within five NYSE trading days
after the date of execution of the Notice of Guaranteed Delivery.
WITHDRAWAL RIGHTS
Tenders of Old Notes may be withdrawn at any time prior to 5:00 p.m., New
York City time, on the Expiration Date. For a withdrawal to be effective, a
written notice of withdrawal must be received by the Exchange Agent at one of
the addresses set forth below under "--Exchange Agent." Any such notice of
withdrawal must (i) specify the name of the person having tendered the Old
Notes to be withdrawn, (ii) identify the Old Notes to be withdrawn (including
the principal amount of such Old Notes), and (iii) (where certificates for
Old Notes have been transmitted) specify the name in which such Old Notes are
registered, if different from that of the withdrawing Holder. If certificates
for Old Notes have been delivered or otherwise identified to the Exchange
Agent, then, prior to the release of such certificates the withdrawing Holder
must also submit the serial numbers of the particular certificates to be
withdrawn and a signed notice of withdrawal with signatures guaranteed by an
Eligible Institution unless such Holder is an Eligible Institution. If Old
Notes have been tendered pursuant to the procedure for book-entry transfer
described above, any notice of withdrawal must specify the name and number of
the account at the Book-Entry Transfer Facility to be credited with the
withdrawn Old Notes and otherwise comply with the procedures of such
facility. All questions as to the validity, form and eligibility (including
time of receipt) of such notices will be determined by the Issuers, whose
determination shall be final and binding on all parties. Any Old Notes so
withdrawn will be deemed not to have been validly tendered for exchange for
purposes of the Exchange Offer. Any Old Notes which have been tendered for
exchange but which are not exchanged for any reason will be returned to the
Holder thereof without cost to such Holder (or, in the case of Old Notes
tendered by book-entry transfer into the Exchange Agent's account at the
Book-Entry Transfer Facility pursuant to the book-entry transfer procedures
described above, such Old Notes will be credited to an account maintained
with such Book-Entry Transfer Facility for the Old Notes) as soon as
practicable after withdrawal, rejection of tender or termination of the
Exchange Offer. Properly withdrawn Old Notes may be retendered by following
one of the procedures described under "--Procedures for Tendering Old Notes"
above at any time on or prior to 5:00 p.m., New York City time, on the
Expiration Date.
CERTAIN CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provision of the Exchange Offer, the Issuers
shall not be required to accept for exchange, or to issue New Notes in
exchange for, any Old Notes and may terminate or amend the Exchange Offer, if
at any time before the acceptance of such Old Notes, any of the following
events shall occur:
(a) there shall be threatened, instituted or pending any action or
proceeding before, or any injunction, order or decree shall have been
issued by, any court or governmental agency or other governmental
regulatory or administrative agency or commission, (i) seeking to restrain
or prohibit the making or consummation of the Exchange Offer or any other
transaction contemplated by the Exchange Offer, or assessing or seeking
any damages as a result thereof, or (ii) resulting in a material delay in
the ability of the Issuers to accept for exchange or exchange some or all
of the Old Notes pursuant to the Exchange Offer; or any statute, rule,
regulation, order or injunction shall be sought, proposed, introduced,
enacted, promulgated or deemed applicable to the Exchange Offer or any of
the transactions contemplated by the Exchange Offer by any government or
governmental authority, domestic or foreign, or any action shall have been
taken, proposed or threatened, by any government, governmental authority,
agency or court, domestic or foreign, that in the sole judgment of the
Issuers might directly or indirectly result in any of the consequences
referred to in clauses (i) or (ii) above or, in the sole judgment of the
Issuers, might result in the holders of New Notes having obligations with
respect to resales and transfers of New Notes which are greater than those
described in the interpretation of the Commission referred to on the cover
page of this Prospectus, or would otherwise make it inadvisable to proceed
with the Exchange Offer; or
(b) there shall have occurred (i) any general suspension of or general
limitation on prices for, or trading in, securities on any national
securities exchange or in the over-the-counter market, (ii) any limitation
by a
46
<PAGE>
governmental agency or authority which may adversely affect the ability of
the Issuers to complete the transactions contemplated by the Exchange
Offer, (iii) a declaration of a banking moratorium or any suspension of
payments in respect of banks in the United States or any limitation by any
governmental agency or authority which adversely affects the extension of
credit or (iv) a commencement of a war, armed hostilities or other similar
international calamity directly or indirectly involving the United States,
or, in the case of any of the foregoing existing at the time of the
commencement of the Exchange Offer, a material acceleration or worsening
thereof; or
(c) any change (or any development involving a prospective change) shall
have occurred or be threatened in the business, properties, assets,
liabilities, financial condition, operations, results of operations or
prospects of the Issuers that, in the sole judgment of the Issuers, is or
may be adverse to the Issuers, or the Issuers shall have become aware of
facts that, in the sole judgment of the Issuers, have or may have adverse
significance with respect to the value of the Old Notes or the New Notes;
which in the sole judgment of the Issuers in any case, and regardless of the
circumstances (including any action by the Issuers) giving rise to any such
condition, makes it inadvisable to proceed with the Exchange Offer and/or
with such acceptance for exchange or with such exchange.
The foregoing conditions are for the sole benefit of the Issuers and may
be asserted by the Issuers regardless of the circumstances giving rise to any
such condition or may be waived by the Issuers in whole or in part at any
time and from time to time in its sole discretion. The failure by the Issuers
at any time to exercise any of the foregoing rights shall not be deemed a
waiver of any such right and each such right shall be deemed an ongoing right
which may be asserted at any time and from time to time.
In addition, the Issuers will not accept for exchange any Old Notes
tendered, and no New Notes will be issued in exchange for any such Old Notes,
if at such time any stop order shall be threatened or in effect with respect
to the Registration Statement of which this Prospectus constitutes a part or
the qualification of the Indenture under the Trust Indenture Act of 1939, as
amended.
EXCHANGE AGENT
First Trust of New York, National Association ("First Trust of New York")
has been appointed as the Exchange Agent for the Exchange Offer. All executed
Letters of Transmittal should be directed to the Exchange Agent at the
address set forth below. Questions and requests for assistance, requests for
additional copies of this Prospectus or of the Letter of Transmittal and
requests for Notices of Guaranteed Delivery should be directed to the
Exchange Agent addressed as follows:
Delivery to: First Trust of New York,
As Exchange Agent
<TABLE>
<CAPTION>
<S> <C>
By Hand: By Mail:
First Trust of New York, National Association First Trust National Association
100 Wall Street, Suite 2000 P.O. Box 64485
New York, New York 10005 St. Paul, Minnesota 55164-9549
Attn: Cathy Donohue
By Overnight Courier: By Facsimile:
First Trust National Association (612) 244-1537
Attn: Specialized Finance Attn: Specialized Finance
180 East Fifth Street Telephone: (800) 934-6802
St. Paul, Minnesota 55101
</TABLE>
DELIVERY OF THE LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE OR TRANSMISSION OF SUCH LETTER OF TRANSMITTAL VIA FACSIMILE OTHER
THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE A VALID DELIVERY OF SUCH LETTER
OF TRANSMITTAL.
47
<PAGE>
FEES AND EXPENSES
The Issuers will not make any payment to brokers, dealers, or others
soliciting acceptances of the Exchange Offer except for reimbursement of
mailing expenses.
The estimated cash expenses to be incurred in connection with the Exchange
Offer will be paid by the Company and are estimated in the aggregate to be
$ .
TRANSFER TAXES
Holders who tender their Old Notes for exchange will be obligated to pay
any transfer taxes in connection with that exchange, as well as any other
sale or disposition of the Old Notes. Holders who instruct the Issuers to
register New Notes in the name of, or request that Old Notes not tendered
or not accepted in the Exchange Offer be returned to, a person other than
the registered tendering Holder will be responsible for the payment of any
applicable transfer tax thereon.
CONSEQUENCES OF NOT EXCHANGING OLD NOTES
Holders of Old Notes who do not exchange their Old Notes for New Notes
pursuant to the Exchange Offer will continue to be subject to the provisions
in the Indenture regarding transfer and exchange of the Old Notes and the
restrictions on transfer of such Old Notes as set forth in the legend thereon
as a consequence of the issuance of the Old Notes pursuant to exemptions
from, or in transactions not subject to, the registration requirements of the
Securities Act and applicable state securities laws. In general, the Old
Notes may not be offered or sold, unless registered under the Securities Act,
except pursuant to an exemption from, or in a transaction not subject to, the
Securities Act and applicable state securities laws. The Issuers do not
currently anticipate that they will register under the Securities Act any Old
Notes which remain outstanding after consummation of the Exchange Offer
(subject to such limited exceptions, if applicable). To the extent that Old
Notes are tendered and accepted in the Exchange Offer, a holder's ability to
sell untendered Old Notes could be adversely affected.
Holders of the New Notes and any Old Notes which remain outstanding after
consummation of the Exchange Offer will vote together as a single class for
purposes of determining whether holders of the requisite percentage thereof
have taken certain actions or exercised certain rights under the Indenture.
Upon consummation of the Exchange Offer, holders of Old Notes will not be
entitled to any increase in the interest rate thereon or any further
registration rights under the Registration Rights Agreement, except under
limited circumstances. See "Description of Notes--Exchange Offer;
Registration Rights."
CONSEQUENCES OF EXCHANGING OLD NOTES
Based on interpretations by the staff of the Commission, as set forth in
no-action letters issued to third parties, the Issuers believe that New Notes
issued pursuant to the Exchange Offer in exchange for Old Notes may be
offered for resale, resold or otherwise transferred by Holders thereof (other
than any such Holder which is an "affiliate" of the Issuers within the
meaning of Rule 405 under the Securities Act) without compliance with the
registration and prospectus delivery requirements of the Securities Act,
provided that such New Notes are acquired in the ordinary course of such
Holder's business and such Holder has no arrangement or understanding with
any person to participate in the distribution of such New Notes. However, the
Commission has not considered the Exchange Offer in the context of a
no-action letter and there can be no assurance that the staff of the
Commission would make a similar determination with respect to the Exchange
Offer as in such other circumstances. Each Holder, other than a
broker-dealer, must acknowledge that it is not engaged in, and does not
intend to engage in, a distribution of such New Notes and has no arrangement
or understanding to participate in a distribution of New Notes. If any Holder
is an affiliate of the Issuers, is engaged in or intends to engage in or has
any arrangement or understanding with respect to the distribution of the New
Notes to be acquired pursuant to the Exchange Offer, such Holder (i) could
not rely on the applicable interpretations of the staff of the Commission and
(ii) must comply with the registration and prospectus delivery requirements
of the Securities Act in connection with any resale transaction. Each
broker-dealer that receives New Notes for its own account in exchange for Old
Notes must acknowledge that such Old Notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities and that it will deliver a prospectus in connection with any
resale of such New Notes. See "Plan of Distribution." In addition, to comply
with the securities laws of certain jurisdictions (including any jurisdiction
in Canada or any other jurisdiction outside the United States), the New Notes
may not be offered or sold unless they have been registered or qualified for
sale in such jurisdiction or an exemption from registration or qualification
is available and is complied with. The Issuers have agreed, pursuant to the
Registration Rights Agreement, subject to certain limitations specified
therein, to register or qualify the New Notes for offer or sale under the
applicable state securities laws of such United States jurisdictions as the
Majority Holders of the Old Notes reasonably request by the time the
Registration Statement (of which this Prospectus forms a part) is declared
effective by the Commission. The Issuers do not intend to register or qualify
the sale of the New Notes in any such United States jurisdictions (unless
they receive such a request) or any other jurisdiction.
48
<PAGE>
BUSINESS OF THE COMPANY
GENERAL
The Company is a low cost producer of high quality newsprint, with a
newsprint machine that is currently, and for the past ten years has been,
ranked number one in North America by the CPPA for overall machine operating
efficiency (the ratio of salable tonnes produced to theoretical production
capacity at a machine's given speed). The Company's mill, located near
Richmond, Virginia, has an annual capacity of 225,000 tonnes with an average
delivered cash cost of $402 per tonne for the first nine months of 1997. The
Company produces high quality newsprint suitable for four-color printing,
which publishers are increasingly using for general circulation. In 1996, and
for the first nine months of 1997, the mill produced approximately 219,000
and 169,000 tonnes of newsprint, and had an estimated operating efficiency
rate of 96.2% and 96.7%, respectively. Over the past four years, the Company
has been able to increase its production by approximately 17,000 tonnes,
through productivity and capital improvements, representing an annual average
increase of approximately 2.6%.
The Company's customers include leading newspaper publishers in the United
States, such as Dow Jones (publisher of The Wall Street Journal), The
Washington Post, the Newhouse Group, Gannett (publisher of USA Today),
MediaNews, Knight-Ridder, Media General, Times Mirror and New York Times.
Approximately 68% of the Company's newsprint production is sold on a contract
basis with the length of most contracts ranging from two to five years.
Approximately 90% of the Company's current newsprint production is purchased
by its top ten customers, eight of whom have been customers of the Company
for over 15 years.
In its manufacturing process, the Company's mill currently uses 65% TMP,
28% de-inked pulp and 7% kraft pulp. The use of TMP provides high wood fiber
yields and higher quality newsprint than that produced by the traditional
mechanical groundwood process. The mill was the first of its kind designed to
produce newsprint from 100% TMP using Southern Pine. The de-inked pulp is
produced at the Company's recycling facility, which is adjacent to the
newsprint mill. The recycling facility commenced operations in 1994 and
features state-of-the-art technology for de-inking, cleaning and screening of
ONP and OMG. The Company believes that the addition of the recycling facility
increased the mill's capacity and improved the Company's manufacturing cost
structure.
Prior to the consummation of the Transactions, all the Company's wood
requirements were supplied by its affiliate, Timberlands, with approximately
30% coming from Timberlands' own land and the remainder being procured by
Timberlands from local independent wood contractors and independent sawmills.
Timberlands currently owns approximately 130,000 acres of prime timber in
Virginia. Brant-Allen may monetize all or a substantial portion of that
acreage to reduce debt incurred in connection with the Timberlands
Acquisition. However, Timberlands will retain long-term fiber supply
arrangements which management believes would allow the Company to maintain
fiber sourcing flexibility. The ONP and OMG used for the Company's recycling
facility are provided by a combination of individual processors, municipal
recovery facilities and brokers. All fiber is currently supplied from sources
within a 200 mile radius of the mill.
The Company is managed by a team of experienced industry professionals.
Executive management is provided by Brant-Allen, the owner of the Company,
pursuant to the Management Services Agreement. Brant-Allen's executive
management has an average of over 28 years of experience in the newsprint
industry and includes Peter Brant and Joseph Allen, who together own 100% of
the Company indirectly through Brant-Allen. Brant-Allen's predecessor was
engaged in the newsprint industry since its formation in 1941.
Brant-Allen also manages and owns all the capital stock of Soucy Inc., a
Canadian corporation. Soucy Inc. is the general partner of, and owns a 50.1%
interest in, Soucy Partners, a Canadian limited partnership. Soucy Inc. owns
a newsprint machine that has an annual capacity of 67,000 tonnes and Soucy
Partners owns a newsprint machine that has an annual capacity of 150,000
tonnes. Newsprint produced by the Company and Soucy is sold through
Brant-Allen, which currently markets approximately 442,000 tonnes of
newsprint (225,000 tonnes for the Company and 217,000 tonnes for Soucy).
Brant-Allen intends to continue to manage the Company and Soucy to maximize
any available synergies. The Company benefits from the centralization of
marketing, financial, administrative and distribution functions at
Brant-Allen. These services are provided pursuant to the Management Services
Agreement for which a management fee of 3% of annual net sales is payable by
the Company, of which, beginning December 1, 1997, one third is payable in
cash.
49
<PAGE>
COMPETITIVE STRENGTHS
The Company believes that its competitive strengths include:
LOW COST PRODUCTION CAPABILITIES. The Company estimates that over 90% of
newsprint produced in North America is produced in four regions: Eastern
Canada, Western Canada, U.S. Northwest and U.S. South. In 1996, the Company's
average delivered cash cost of $416 per tonne prices were lower than the
average for the U.S. Northwest, Eastern Canada and Western Canada regions.
The following are the average delivered cash costs, by region, for the
periods indicated, and the estimated 1995 percentage of North American
capacity in each region (calculated by the Company from RISI and CPPA
statistics):
<TABLE>
<CAPTION>
1996 DELIVERED 1995 ESTIMATED %
CASH COST OF NORTH AMERICAN
REGION (A) $/TONNE (B) CAPACITY (D)
- - --------------- -------------- -----------------
<S> <C> <C>
U.S. South 404 24%
U.S. Northwest 437 13%
Eastern Canada 427 46%
Western Canada 451 14%
The Company (c) 416 1%
</TABLE>
- - ------------
(a) A minimal amount of North American capacity, approximately 3% in 1995,
is located in the U.S. Northeast and U.S. Midwest regions.
(b) Based on RISI statistics for delivered cash costs for 1996, except for
the Company. All references in this Prospectus to delivered cash cost
of newsprint include manufacturing cost excluding depreciation plus
transportation costs.
(c) All references in this Prospectus to the Company's delivered cash cost
of newsprint prior to December 1, 1997, are adjusted to reflect the
market price of fiber. See "Certain Related Party Transactions."
(d) Based on latest available CPPA statistics for estimated North American
capacity.
The principal reasons for the Company's low cost structure include its
leadership in operating efficiency, the strategic location of its
manufacturing facility, its strategic fiber sourcing capabilities, its low
energy costs and its highly trained and motivated non-union workforce.
Efficient Manufacturing Facilities. For the past ten years, the Company's
paper machine has been ranked number one in North America by the CPPA for
overall machine operating efficiency. With its automated newsprint facility,
the Company has maintained its leadership in machine operating efficiency by
focusing on maximizing machine speeds, minimizing unscheduled downtime and
reducing work hours per tonne. With an average machine operating efficiency
of 96.7% for the first nine months of 1997, the Company's mill is capable of
producing an average of 620 tonnes of newsprint per day. The Company's
newsprint machine currently runs at 3,900 feet per minute.
Strategic Location of Manufacturing Facilities. The Company's mill is
located close to its major customers and fiber supplies. Currently,
approximately 75% of its total customer shipments, 100% of its wood sources
and 100% of its ONP and OMG sources are located within a 200-mile radius of
the mill. In addition, the mill's location facilitates ready access to many
major metropolitan areas, including Atlanta, Baltimore, Charlotte, New York,
Philadelphia, Richmond and Washington, D.C. via rail and major highways. As a
result, the Company was able to attain an average cash transportation cost
for 1996 of approximately $27 per tonne, which the Company estimates, based
on capacity and transportation statistics published by RISI and the CPPA, is
approximately 50% lower than the estimated North American industry average of
$54 per tonne.
Strategic Fiber Sourcing Capabilities. In actively managing its fiber
costs, the Company has two competitive advantages: a flexible manufacturing
process and easy access to timberlands owned and managed by Timberlands. The
Company's manufacturing process allows it to vary the relative percentage of
TMP, de-inked pulp and kraft pulp, within certain limits. This allows the
Company to optimize input costs in times of high costs for wood, ONP or OMG.
Furthermore, Brant-Allen currently has the ability to direct wood
requirements from Timberlands' land to the Company depending on third-party
prices for wood, which can mitigate significant fluctuations in the Company's
raw material costs. See "Business of Timberlands."
Low Energy Costs. The Company's ability to achieve low electricity costs
has had a favorable impact on its cost structure. Its electricity supply
contract with a local utility and its efficient electrical usage patterns
have allowed the
50
<PAGE>
Company to obtain electricity at a rate that it believes is approximately 40%
below the national average for industrial users. The Company has been able to
achieve these results due to its ability to reduce its energy demand at peak
times.
Highly Trained and Motivated Non-union Workforce. The Company has a stable
non-union work force that management believes is highly trained and
motivated. With the majority of employees having over 15 years of experience
at the mill, the Company has avoided the inefficiencies and re-training costs
typically associated with high workforce turnover. Management has implemented
an incentive program that rewards employees with monthly bonuses of up to 10%
of their salaries for attaining certain production and quality targets.
HIGH QUALITY PRODUCT AND STRONG CUSTOMER RELATIONSHIPS. The Company
believes that its newsprint, which is produced primarily from TMP pulp and
recycled fiber, is recognized by publishers as a high quality product in
terms of printability and runability. The high quality of the newsprint
produced by the Company is demonstrated by its suitability for four-color
printing, which publishers are increasingly using for general circulation.
The average breaks per hundred rolls for the Company's newsprint in its
customers' pressrooms was 1.9 in 1996, and 1.8 for the first nine months of
1997, which management believes is below the average for that of its
competitors. In 1996, the Company was ranked by Gannett, the largest
newspaper company in the U.S. and owner of USA Today, as the number three
certified supplier for the USA Today newspaper. In 1996, the Company was
ranked by Knight-Ridder as its number two supplier on the East Coast. Other
major customers of the Company include Dow Jones (publisher of The Wall
Street Journal), The Washington Post, The Newhouse Group, MediaNews, Media
General, Times Mirror and New York Times. The Company believes that the
quality of its product and level of its customer service have enabled it to
maintain these strong customer relationships.
EXPERIENCED AND COMMITTED MANAGEMENT TEAM. The executive officers of the
Company include Peter Brant and Joseph Allen, who together indirectly hold a
100% ownership interest in the Company through Brant-Allen. The current
executive officers of the Company formed the Company, supervised the
construction of the mill and the commencement of the mill's operations and
have managed the Company's business since that time. These executive
officers, together with the other members of the management team of the
Company, have an average of over 15 years of experience with the Company and
30 years of experience in the newsprint industry. Management believes that
the commitment and experience of the Company's management team have enabled
it to achieve its low cost position in the industry and to maintain high
product quality and strong customer relationships.
BUSINESS STRATEGY
The Company's objectives are to maximize revenues and cash flow. The key
elements of the Company's strategy are:
COST REDUCTIONS. Management believes that incremental costs savings can be
achieved with respect to its fiber sourcing, raw materials, labor costs per
tonne and shipping and handling costs. In addition, the Company intends to
focus on reducing woodyard handling costs. The Company also plans to reduce
the proportion of more expensive kraft pulp, while increasing the amount of
ONP and OMG used.
IMPROVEMENTS IN PRODUCTION. Management intends to maintain the number one
operating efficiency ranking of its newsprint machine by continuing to focus
on minimizing machine downtime, exploiting departmental efficiencies to
further reduce work hours per tonne and increasing production by increasing
machine speed. The Company believes that these improvements should favorably
impact its cost structure.
GROWTH OPPORTUNITIES. The Company plans to evaluate opportunities to
expand production capacity through acquisitions of other newsprint businesses
or assets. Management believes that strategic expansion would provide
opportunities for further efficiencies and cost benefits due to economies of
scale, while maintaining its strong customer relationships.
FINANCIAL STRATEGY. Management intends to focus on improving the Company's
financial flexibility going forward. Management expects to accomplish this
goal by (i) using available excess cash to reduce indebtedness and (ii)
pursuing other alternatives, which may include equity financing, to fund
growth and reduce indebtedness. By improving financial flexibility,
management believes that the Company's ability to react to general economic
and industry changes would be enhanced.
51
<PAGE>
BACKGROUND
The Company's predecessor, BIPCO, was formed in 1978 as a limited
partnership, with Brant-Allen as its general partner. Prior to the
Acquisition, Brant-Allen owned a 30% partnership interest in BIPCO, and
subsidiaries of The Washington Post and Dow Jones each owned 35% partnership
interests in BIPCO.
Brant-Allen is a Sub Chapter S corporation jointly owned by Mr. Peter
Brant and Mr. Joseph Allen. Brant-Allen's predecessor was formed in the early
1940s when the fathers of Messrs. Brant and Allen founded a paper conversion
and newsprint sales business. In the early 1970s, Brant-Allen entered into
the newsprint manufacturing business. Messrs. Brant and Allen have been
involved in the management of Brant-Allen for over 30 years: Mr. Brant serves
as the Chairman of the Board, President and Chief Executive Officer of
Brant-Allen and Mr. Allen serves as Co-Chairman of the Board and Chief
Operating Officer of Brant-Allen. Mr. Brant also serves as the Chairman of
the Board, President and Chief Executive Officer of the Company and Mr. Allen
also serves as Vice Chairman of the Board, Executive Vice President and Chief
Operating Officer of the Company.
Prior to the Timberlands Acquisition Brant-Allen was also the general
partner of, and owned a 30% partnership interest in, BITCO, which was
converted to Timberlands immediately prior to the closing of the Timberlands
Acquisition. BITCO was formed in 1985 and currently owns and manages
approximately 130,000 acres of timberland in Central Virginia, all within 200
miles of the Company's mill. See "Business of Timberlands."
In addition, Brant-Allen owns all the capital stock of Soucy Inc. Soucy
Inc., a newsprint manufacturer located in Rivi|f4re-du-Loup in the Province of
Quebec, Canada, owns a newsprint machine that currently has an annual
capacity of 67,000 tonnes. Soucy Inc. is also the general partner and owns a
50.1% interest in Soucy Partners, a limited partnership formed in 1974 with
Dow Jones (39.9%) and Rexfor (a Quebec government-owned company) (10.0%).
Soucy Partners owns and operates a mill, including a newsprint machine, with
an annual production capacity of 150,000 tonnes. The two Soucy newsprint
machines are located on Soucy Partners' plant site. See "Business of Soucy."
FinCo is a wholly owned subsidiary of the Company that was incorporated in
Delaware for the purpose of serving as a co-issuer of the Notes. FinCo will
not have any operations or assets and will not have any revenues. As a
result, holders of the Notes should not expect FinCo to participate in
servicing the interest and principal obligations on the Notes.
THE NEWSPRINT INDUSTRY
The industry information presented below was compiled from published data
provided by the Canadian Pulp and Paper Association, Resource Information
Systems, Inc. and Miller Freeman, Inc.
OVERVIEW
Newsprint represents 15% of all paper and paperboard produced in North
America and is used primarily by newspaper publishers and commercial
printers. Newsprint is produced from a combination of mechanical,
thermomechanical and/or chemical-thermomechanical pulp, and, increasingly,
recycled paper (i.e., ONP and OMG). Although North American consumption of
newsprint has generally declined over the past 5 years, the 1997 demand to
date has increased over 1996 levels, primarily due to factors such as
increased Sunday newspaper circulation, modest publisher inventories and a
more robust advertising environment. International newsprint consumption over
the last several years has been growing more rapidly than in North America
due to the economic growth and demographic trends in selected emerging
markets. Due to the decline in North American newsprint consumption and
substantial increase in foreign consumption, North American newsprint
producers have dramatically increased exports over the last five years.
The newsprint industry is cyclical, with consumption highly dependent on
the economy, purchases of advertising lineage, newspaper circulation and the
price of newsprint. Newsprint prices are in turn dependent on general
economic conditions, capacity additions, inventory levels, foreign currency
fluctuations and to a lesser extent, raw material and energy costs. After
prices escalated rapidly in 1995, they dropped in 1996 despite a period of
strong economic growth, primarily due to a build up in consumer and producer
inventories and reductions in consumption by publishers. In order to
strengthen pricing, newsprint producers rationalized production capacity,
actively managed existing capacity and focused on cost reduction strategies.
Due to the consolidation of the North American newsprint industry during the
past three years, the top 5 newsprint producers now account for over 50% of
North American newsprint capacity. As a result of the changes implemented by
newsprint producers and increasing consumption by newspaper companies,
inventory levels have declined and pricing has increased during 1997.
52
<PAGE>
The following table sets forth North American newsprint shipments,
capacity, capacity utilization, inventories and average Eastern U.S.
transaction prices per tonne in U.S. dollars for North America:
<TABLE>
<CAPTION>
(.000 TONNES) 1996 1995 1994 1993 1992
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Newsprint Shipments .................... 15,069 15,590 15,784 15,506 15,424
Production Capacity .................... 16,294 16,035 16,290 16,221 16,295
Shipments/Capacity Ratio ............... 92.5% 97.2% 96.9% 95.6% 94.7%
Average Eastern U.S. transaction price $ 632 $ 658 $ 466 $ 453 $ 440
U.S. Consumer Inventories .............. 1,289 1,548 1,216 1,355 1,324
</TABLE>
NEWSPRINT CONSUMPTION AND DEMAND
The North American consumption of newsprint is principally driven by the
performance of U.S. daily newspapers, which is closely linked to circulation
and advertising trends. Although the aggregate circulation of U.S. daily
newspapers has been on the decline over the past several years, the aggregate
consumption for newsprint has declined only marginally as a result of growth
in consumption from other sources. U.S. daily newspapers are the largest
consumers of newsprint in the world. Of the 12.0 million tonnes of newsprint
consumed in North America during 1996, U.S. daily newspapers accounted for
8.8 million tonnes or 73%. Other major uses for newsprint in North America
are weekly newspapers, commercial printers for directories, inserts, flyers
and newspaper supplements, and other publications. Competition from
alternative media has been a factor that the Company believes has for many
years contributed to the changing patterns of newspaper consumption and which
has retarded the overall growth of newspaper consumption in North America and
will continue to do so in the future.
North America, the largest consumer of newsprint in the world, consumed
12.0 million tonnes of newsprint in 1996, which represents 34% of the world's
consumption. The U.S. accounted for 10.9 million tonnes or 91% of the total
North American consumption in 1996. North American newsprint consumption over
the past five years declined by approximately 1.2% on a compound annual
growth rate (CAGR) basis with a 3.9% decline from 1995 to 1996 alone. This
decline in North American newsprint consumption is attributable to the
proliferation of alternative media, declines in newspaper circulation,
capacity additions overseas (which negatively impact exports) and the
consolidation of the retail industry. The decline in 1996 North American
consumption coincided with an even larger drop in newsprint demand. The
decline in 1996 North American demand was caused by an increase in the
inventory of U.S. daily newspapers from approximately 32 days in November
1994 to 53 days in February 1996. The increase in days supply was caused by
U.S. daily newspapers accumulating large inventories in 1995 to avoid
purchasing newsprint at higher prices, as well as U.S. daily newspapers
reducing page widths, high cost circulation and editorial content. However,
the industry has recovered thus far in 1997 with the consumption of newsprint
in the U.S. increasing by approximately 4.4% through August 1997 over 1996
levels. Notwithstanding the decline in newsprint consumption over the past
five years, North American newsprint demand in 1997 and 1998 is expected to
increase over the 1996 level.
NEWSPRINT PRICES
Newsprint prices are highly dependent on general economic conditions,
inventory levels and capacity additions. General economic conditions can
cause increases or decreases in advertising spending, which in turn would
impact newsprint consumption levels. Customer and producer inventory levels
also drive newsprint demand and prices by causing lower prices when
inventories are high and higher prices when inventories are low. Newsprint
capacity levels are also critical in the assessment of demand/supply
imbalances, with excess capacity having downward pressure on transaction
prices.
Newsprint prices have been extremely volatile over the past three years.
After hitting a low of $420 per tonne in the first quarter of 1994, newsprint
prices increased to a high of $750 per tonne ($765 per tonne on the West
Coast) in the fourth quarter of 1995 and held at those levels through the
first quarter of 1996. However, the sharp rise in prices and the expectation
of further price increases caused newspaper publishers and newsprint
companies to build inventories. This inventory buildup had significant
negative consequences for newsprint demand, with resulting downward pressure
on pricing. Newsprint producers moved quickly to resolve the supply/demand
imbalance. Actions taken included taking market related downtime, abandoning
plans to add capacity, converting old machines to higher-value added grades,
expanding business internationally, and seeking less expensive ways to
produce newsprint. The increase in North American newsprint consumption
during 1997, along with the counteractive
53
<PAGE>
measures taken by newsprint producers, helped reduce the average days of
supply to 37 days earlier this year. Newsprint prices in 1997 recovered from
a level of $510 per tonne in the first quarter of 1997 to $560 per tonne in
the third quarter. Several major newsprint producers have announced price
increases for the fourth quarter which would increase newsprint prices to
$610 and $600 per tonne on the West Coast and East Coast, respectively.
NORTH AMERICAN PRODUCTION AND CAPACITY
Approximately 15.3 million of the 34.9 million tonnes of newsprint
produced worldwide in 1996 were produced in North America at 58 mills. North
America's share of worldwide newsprint production has declined from 46% to
44% since 1991. Canada, the largest producer of newsprint in the world,
shipped approximately 60% (5.2 million tonnes) of its production to the U.S.
in 1996, while 12% (1.1 million tonnes) was consumed in Canada and 28% (2.5
million tonnes) was exported to international markets.
The North American newsprint industry's last round of significant capacity
expansion was in the late 1980s, with approximately 3.0 million tonnes of
annual capacity coming online between 1988 and 1993. This capacity expansion
led to an oversupply of newsprint in the North American market, which forced
producers to manage available capacity/production by taking downtime,
converting newsprint machines to other grades of paper or shutting down
newsprint machines. This oversupply was principally responsible for the low
transaction prices that prevailed for newsprint during this period. However
since that time, there have been no major capacity additions that have come
on-line in North America. In fact, the removal of newsprint capacity has
effectively offset the annual capacity creep of existing newsprint machines,
resulting in no significant change in North American newsprint capacity
during the past 5 years. Management believes North American newsprint
capacity expansion will be negligible over the next few years. The only
significant capacity additions are expected to be made overseas as other
countries try to meet the growing demand for the product.
The Company believes that the consolidation in the newsprint industry over
the past three years has contributed to more prudent management of
capacity/production levels through the scheduling of downtime when required
and keeping capacity additions to a minimum. For example, on a pro forma
basis, Abitibi-Consolidated, the largest newsprint producer in the world,
took approximately 345,000 tonnes of downtime in 1996, which represents over
10% of its capacity. Management believes that the effective management of
capacity by the large industry players should reduce the volatility of the
cycles in the future.
FOREIGN MARKETS
The growth in consumption for newsprint in foreign markets has exceeded
that in the North American market in recent years. Consumption in the North
American market declined at a CAGR of approximately 1.2% over the 5 year
period ended in 1996 in comparison to an average increase of approximately
3.7% per year for foreign markets over the same time period. North American
exports over the five year period ended 1996 grew at a CAGR of approximately
3.5%, with a growth rate of 18.6% for the period 1995 to 1996. Asia is the
fastest growing newsprint market in the world with consumption increasing by
11.5% (on a CAGR basis) from 1992 to 1996. The impact of this international
consumption growth on demand from North American companies has been somewhat
mitigated by capacity additions in local markets.
RECYCLED FIBER CONTENT
Recycled fiber content newsprint has increased during the 1990's. Driving
demand is existing and anticipated state and federal legislation that would
require the use of newsprint with minimum levels of recycled fiber content.
In addition, the public at large increasingly prefers to purchase products
that are perceived to be environmentally friendly.
Approximately 28 states have either enacted legislation requiring a
specified percentage of total newsprint consumed to contain specified minimum
levels of recycled fiber (typically not more than 40%, although some states
require levels as high as 50%) or had adopted voluntary guidelines
recommending the use of newsprint with a certain percentage of recycled fiber
content. Pending Federal legislation would establish minimum requirements for
recycled fiber content newsprint. This proposed legislation, if adopted in
its current form, would initially require all participants in the U.S.
printing and publishing industry to purchase newsprint with an aggregate 20%
recycled fiber content. For the first nine months of 1997, the average
recycled fiber content of the Company's newsprint was approximately 28%.
54
<PAGE>
THE MILL AND THE PRODUCTION PROCESS
The Company's mill, which began operations in 1979, is located on an
approximately 700 acre site near Richmond, Virginia, which is approximately
100 miles south of Washington, D.C., and 30 miles north of Richmond,
Virginia. The mill's operations consist of a woodyard, a pulping system, a
paper machine and related utility, recycling, storage and transportation
facilities. The Company's mill can produce 225,000 tonnes of newsprint per
year. The mill site is large enough to accommodate a second newsprint machine
and the Company presently has the necessary permits, subject to periodical
renewal, that would allow it to construct a new machine should it decide to
do so.
A combination of pulp material is used to feed the Company's newsprint
machine. Currently, approximately 65% of the Company's pulp requirements are
derived from the Company's TMP process using wood and woodchips,
approximately 28% of the Company's fiber requirements are de-inked pulp from
the mill's recycling facility and approximately 7% is purchased kraft pulp.
The process of creating these pulps from virgin timber and ONP and OMG and
transforming them into newsprint is outlined below.
The Company's mill has a wood requirement of approximately 150,000 cords
per year. All wood is currently supplied from sources within a 200 mile
radius of the Company's mill. See "Supply Requirements" and "Certain Related
Party Transactions." Currently, the Company's wood needs are supplied 50%
from wood harvested by local independent wood contractors, 30% from acreage
owned by Timberlands and 20% from non-Timberlands owned acreage, in chip
form, by independent sawmills.
The Company's mill was the first newsprint mill to use pulp derived from
100% TMP using Southern Pine. In the TMP process, woodchips are first washed
to remove foreign particles, then transported over a dewatering screen to
remove surface water, and eventually softened by exposure to pressurized
steam. The next step is to refine the chips using refiners that reduce the
chips in size and "fiberize" them. The advantage of this process is that it
develops a strong, clean fiber, with minimal chemical additions. Additional
advantages include higher quality pulp than that produced by the traditional
groundwood pulping process, low water use, lack of an unpleasant odor, major
reduction of environmental pollutants and the relative ease of treatment for
the resulting wastewater. The TMP process permits the production of a
superior quality wood fiber pulp produced in a cleaner, more environmentally
friendly manner than the traditional pulping process.
Before pulp or stock, as produced by the TMP refiners, can be used on the
paper machine, it must be screened and thickened to be completely uniform.
Once this treatment is complete, it is blended with de-inked pulp and
purchased kraft pulp. The blended stock is then further diluted and pumped to
the newsprint machine.
The Company's woodroom is where the wood is reduced from log form into a
uniform woodchip that can be used by the TMP process. The bark is removed by
the tumbling action of the logs inside a debarking drum. The bark is
pulverized in a bark shredder and is pneumatically conveyed to the powerhouse
to be used as fuel. The debarked wood is fed into a chipper containing
rotating razor-sharp blades that reduce the logs to chips within seconds. The
chips are then transported to the chip pile where they are cured. When cured
they are then transported pneumatically to a silo in the TMP plant where they
await processing.
The mill's newsprint machine produces newsprint at an average speed of
approximately 3,900 feet per minute. The paper is formed as the pulp travels
vertically upward between two continuous fine mesh fabrics, with water
drainage occurring by means of gravity and vacuum. The paper is then
calendared to its final thickness by heavy iron rollers and wound into reels.
Each reel is then cut to the width and wound to the diameter required by the
customer. The finished rolls are given one final quality inspection before
being sent to a finishing line, where an average of 900 rolls per day are
weighed, coded, and wrapped with a kraft liner to protect them in transit.
They are then either stored or shipped directly to customers.
Given the high capital cost associated with operating a newsprint mill, it
is essential for newsprint manufacturers to manage their facilities with a
high rate of utilization in order to provide an adequate return. Since the
Company's mill was built, the Company has been able to operate the mill with
a high rate of utilization. In North America in each of the past ten years,
the CPPA has ranked the Company's newsprint machine number one in North
America for overall machine operating efficiency (defined as the ratio of
salable tonnes produced to theoretical production capacity at a machine's
given speed). Downtime at the mill for maintenance (the replacement of wires,
felts, etc.) and inspection, is scheduled every 21 to 23 days for about four
hours. Additional downtime of between eight and sixteen
55
<PAGE>
hours per occasion for more complex maintenance and repairs is scheduled four
times a year to coincide with the ordinary maintenance schedule. While
unscheduled downtime of between 24 and 36 hours typically occurs once or
twice per year, the mill has rarely experienced an extended period of
unscheduled downtime. For the past four years, the mill has operated for an
average of 361 days per year.
The Company's recycling plant, located adjacent to the newsprint mill,
began operation in March 1994. The recycling plant features advanced
technologies for the re-pulping, de-inking, cleaning and screening of ONP and
OMG. The recycling facility turns ONP and OMG into high-grade de-inked pulp.
ONP and OMG is currently procured from a combination of individual
processors, municipal recovery facilities and brokers. After delivery to the
plant, the ONP and OMG are mixed by operators into a blend with a ratio of
ONP to OMG of 85:15, which is then fed into a pulper which mixes in additives
and prepares the stock for ink separation. At full capacity, the recycling
facility processes approximately 80,000 tonnes per year of ONP and OMG. The
stock is diluted and contaminants are removed using screens and coarse
cleaning agents. Ink is removed by creating foam to which the ink attaches.
After being thickened, the stock is again diluted and washed to remove
microscopic particles. Finally, recycled water from the paper machine is
added to the pulp to lower the pH to the proper level and to create the right
consistency to combine with the virgin fiber.
The recycling facility has the capacity to produce a minimum of 180 tonnes
of recycled fiber per day. The recycling mill enables the Company to produce
approximately 620 tonnes per day of newsprint containing a minimum of 20%
recycled fiber and a maximum of 40%. The recycling facility also includes a
50,000 square foot warehouse that holds a thirteen day supply of ONP and OMG.
PRODUCT
While newsprint is essentially a commodity, product characteristics such
as brightness and consistency can differentiate the product in the eyes of
newspaper publishers. The newsprint sheet produced by the Company is suitable
for four-color printing that requires newsprint to be bright and consistent
enough to ensure colors are reproduced clearly and accurately. Publishers are
increasingly using four-color printing for general circulation editions. The
trend towards higher-quality, four-color printing has accelerated since the
debut of USA Today in 1982. In 1996, the Company was ranked the number three
supplier of only ten newsprint producers certified as suppliers to Gannett
for use in USA Today.
Another newsprint sheet quality measure, extremely important to
publishers, is the number of breaks per hundred rolls that occurs in the
publishers' pressroom while running the presses. Breaks per hundred rolls for
the Company's product have declined from an average of 3.2 in 1992 to 1.8 for
the first nine months of 1997, which management believes is below the average
for that of its competitors in their customers' pressrooms.
MARKETS AND CUSTOMERS
The Company's marketing objective is to become a preferred supplier to
each of its newsprint customers. To achieve this goal, the Company focuses on
service, product quality and long term relationships. Eight of the Company's
top ten customers have been customers for over 15 years. In 1996,
approximately 41% of the production of the Company's mill was sold to Dow
Jones and The Washington Post under purchase agreements (the "Purchase
Agreements") that obligate each of those customers to purchase a minimum of
approximately 45,000 tonnes of newsprint per year at prices based on
prevailing market prices paid by those customers to their non-affiliated East
Coast suppliers. The Purchase Agreements are currently scheduled to expire on
December 31, 2000, but are extendable to December 31, 2004, subject to
agreement on a pricing formula. See "Certain Related Party Transactions --
Purchase Agreements with Dow Jones and The Washington Post." The Company has
sold newsprint to Dow Jones since 1980 and The Washington Post since 1979.
The Company, through Brant-Allen, also has a contract with Media General
requiring Media General to purchase a minimum of 10,000 tonnes per year at
market prices, which is scheduled to expire on December 31, 1997, and a
contract with Times Mirror requiring Times Mirror to purchase a minimum of
24,000 tonnes per year at market prices, which is scheduled to expire on
December 31, 1999. Each of these agreements has automatic one year renewal
options. In addition, the Company, through Brant-Allen, has recently entered
into a contract with Gannett requiring Gannett to purchase 36,000 tonnes of
its newsprint requirements from the Company at market prices with an option
for Gannett to purchase up to an additional 5,400 tonnes from the Company.
This contract is scheduled to expire on December 31, 1999, and
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<PAGE>
thereafter is renewable at either party's option for two terms of two years
each. In 1996, and for the nine months ended September 30, 1997, the
Company's ten largest customers represented an aggregate of 90% and 93%,
respectively, of the Company's total sales. Other than the agreements with
Dow Jones, The Washington Post, Media General, Times Mirror and Gannett, the
balance of the Company's production is sold on the basis of written or oral
understandings whereby customers purchase a minimum volume amount for short
periods up to one year based on market prices at the time of purchase. For
1996, the Company's top ten customers, ranked by volume of newsprint
purchased, were:
<TABLE>
<CAPTION>
PERCENT OF
TONNES TOTAL TONNES PURCHASED
CUSTOMER CUSTOMER SINCE PURCHASED IN 1996 IN 1996
- - --------------------- -------------- ----------------- ----------------------
<S> <C> <C> <C>
Dow Jones ............ 1980 45,600 21%
The Washington Post . 1979 40,200 19%
Newhouse Group (a) ... 1980 24,900 11%
Gannett (a) .......... 1980 21,500 10%
MediaNews (a) ........ 1980 17,200 8%
Knight-Ridder ........ 1992 10,700 5%
Media General ........ 1980 10,000 5%
Times Mirror (a) .... 1980 9,500 4%
New Jersey Press
Inc.................. 1980 8,500 4%
New York Times........ 1994 7,500 3%
----------------- ----------------------
Total............... 195,600 90%
================= ======================
</TABLE>
- - ------------
(a) Includes their respective predecessors.
Brant-Allen markets all of the Company's production and is able to offer
its customers newsprint from either the Company's mill or from Soucy's mills
in order to satisfy customer demand, which enables Brant-Allen to optimize
shipping costs from each of these mills. Brant-Allen employs three full-time
salesmen and three customer service representatives at the mills, and Messrs.
Brant and Allen are actively involved in its sales and marketing efforts.
Brant-Allen also performs all sales, invoicing, account receivable
maintenance, cash management and treasury functions for the Company pursuant
to the Management Services Agreement. Other than the management fee paid by
the Company to Brant-Allen under the Management Services Agreement, the
Company does not pay Brant-Allen any additional fees for its marketing
services. See "Certain Transactions--Relationship with Brant-Allen,
Timberlands and Soucy."
The Company has developed the BearTracker software package, a newsprint
roll tracking system that tracks newsprint from the origin of shipment
through the pressroom. This software package enables the Company's customers
to control newsprint inventory by monitoring inventory value, weight and size
and identifying its location, and by reporting purchasing, consumption,
newsprint runnability and waste management. The BearTracker software package
is used by many of the Company's customers, including Gannett, Charleston
Newspapers and Chesapeake Publishing Corporation.
DISTRIBUTION
The Company sells approximately 90% of its production to customers in the
ten states surrounding its mill in Virginia, with the balance being sold
elsewhere in the U.S. The Company's mill is situated in a geographically
strategic location to serve its customers, being close to major metropolitan
areas, including Atlanta, Baltimore, Charlotte, New York, Philadelphia,
Richmond and Washington, D.C. The Company has the flexibility to ship its
products to these areas via rail or major highways, as specified by customers
(such as by way of the nearby I-95 and I-64 inter-state highways). For the
first nine months of 1997, the Company shipped its newsprint for an average
transportation cost of $27 per tonne, which the Company estimates, based on
statistics of RISI and the CPPA, is approximately 50% lower than the
estimated North American industry average of $54 per tonne. Timely and
economical delivery of finished products to customers are important factors
in the Company's ability to compete effectively.
57
<PAGE>
SUPPLY REQUIREMENTS
The Company's mill has a wood requirement of approximately 150,000 cords
per year of Southern Pine. Although the Company currently owns approximately
4,900 acres of pine timberlands, historically, the Company's wood
requirements have been supplied principally by Timberlands. Timberlands had
supplied all wood to the Company at market prices plus an upcharge which
include both the value of the wood and the costs of harvesting, hauling and
profit. Concurrently with the consummation of the Transactions, the Company
and Timberlands terminated these arrangements and entered into a 10 year wood
supply agreement (the "Wood Supply Agreement") that provides for Timberlands
to sell to the Company 40,000 cords of wood fiber annually at market prices
determined by reference to the prices paid by the Company for wood fiber
purchased from non-affiliated wood suppliers. Currently, approximately 100%
of the Company's wood needs are satisfied by timber harvested within a 200
mile radius of the mill by local independent wood contractors. Approximately
30% of the Company's wood requirements are provided from Timberlands' land.
The Company procures all its wood fiber requirements in excess of that
supplied by Timberlands under the Wood Supply Agreement. The Company's
recycled fiber requirements are provided by its own state-of-the-art
recycling facility. Prior to the consummation of the Transactions, the
Company relied on Timberlands to procure the Company's ONP and OMG
requirements for its recycling facility from a combination of individual
processors, municipal recovery facilities and brokers and paid Timberlands a
fee per tonne of ONP and OMG procured. These procurement arrangements were
terminated with effect from the consummation of the Transactions. The Company
now purchases its ONP and OMG requirements directly.
In actively managing its fiber costs, the Company has two competitive
strengths: a flexible manufacturing process and easy access to timberlands
owned and managed by Timberlands. The Company's manufacturing process allows
it to vary the relative percentages of TMP, de-inked pulp and kraft pulp,
within certain limits. This allows the Company to optimize input costs in
times of high costs for wood or ONP and OMG. Furthermore, Brant-Allen has the
ability to direct less or more wood from Timberlands' land to the Company
depending on prices of third-party timber and ONP and OMG, which tends to
mitigate the Company's raw materials costs. See "Business of Timberlands."
ENERGY AND WATER REQUIREMENTS
The Company's mill utilizes two forms of energy: steam, which is primarily
used within the paper machine's dryer section to dry the newsprint sheet as
it is being produced, and electricity, which is used to power the remaining
processes, particularly the refining of the woodchips.
All of the mill's process steam (on average, 165,000 pounds per hour) is
generated by an on-site boiler rated at 243.0 million Btu per hour heat
input. The boiler is fired using pulverized coal, as a primary fuel, and bark
and wood wastes as secondary fuels. In addition, a natural gas fired package
boiler, with a capacity of 190,000 pounds per hour, is used as a backup if
the main boiler malfunctions or is down for maintenance.
Through Rapahannock Electrical Cooperative, which is the Company's local
utility, the Company purchases 100% of its electrical power indirectly from
Virginia Electric and Power Company ("VEPCO") and Old Dominion Electric
Cooperative. The Company is, indirectly, VEPCO's third largest customer,
accounting for approximately 1% of VEPCO's normal system load.
Because the Company's electricity usage has an impact on both electricity
generation requirements and costs of VEPCO and Old Dominion Electric,
especially in periods of high demand (i.e., periods of high air conditioning
or heating loads), the Company has been able to negotiate favorable
electricity rates by demonstrating an ability to reduce demand during peak
times by adjustments to its production process. The Company believes that it
is able to obtain its electricity at a rate that is 40% below the national
average for industrial users. The Company's relatively low electricity
expense has been achieved through a combination of the Company's successful
electricity demand management efforts and a lower contractual rate for
electricity.
The mill's water is supplied by the Hanover County public utility system
and by the mill's own river intake structure and pumping system on the North
Anna River. The mill operates a wastewater treatment facility which connects
to the Hanover County wastewater treatment plant. The mill has its own
on-site industrial landfill for solid waste.
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<PAGE>
ENVIRONMENTAL MATTERS
The Company's operations are subject to extensive and changing
environmental regulation by federal, state, and local authorities in the
United States, including those requirements that regulate discharges into the
environment, waste management, and remediation of environmental
contamination. Environmental permits are required for the operation of the
Company's businesses, and are subject to revocation, modification and
renewal. Governmental authorities have the power to enforce compliance with
environmental requirements and violators are subject to injunctions, civil
penalties and criminal fines. Third parties may also have the right to sue to
enforce compliance with such regulations.
The Company has in the past made significant capital expenditures to
comply with current federal, state and local environmental laws and
regulations. The Company believes that it is in substantial compliance with
such laws and regulations, although no assurance can be given that it will
not incur material liabilities and costs with respect to such laws and
regulations in the future. Although the Company does not currently believe
that it will be required to make significant expenditures for pollution
control in the near future, no assurances can be given that future
developments, such as the potential for more stringent environmental
standards or stricter enforcement of environmental laws, will not cause the
Company to incur such expenditures. The Company anticipates incurring the
following environmental expenditures (over and above routine operating
expenditures) over the next two years: (i) $125,000 (budgeted for fiscal year
1998) for the acquisition of new aerators, sludge trucks, and road paving;
(ii) $550,000 (anticipated for fiscal year 1999) for the opening of a new
landfill cell; and (iii) $200,000 and $250,000 for the estimated cost of
closing two landfills for 1998 and 1999, respectively.
The Company's mill was designed and is operated with one of the most
stringent water use and wastewater flow requirements of any paper mill in the
U.S. At full production of 620 tonnes of newsprint per day, water usage is
approximately 3.5 million gallons per day. Mill effluent is approximately
3.25 million gallons per day. Extensive recycling and reuse of machine
whitewater, thickener and Saveall filtrates and other processed waters enable
the mill to maintain a low fresh water make-up requirement.
The wastewater treatment facility for the mill discharges effluent through
the outfall line of the Hanover County wastewater treatment plant to the
North Anna River. The effluent limits that must be maintained in accordance
with the discharge permit require continuous monitoring and extensive
reporting of numerous tests. The treatment facility consists of primary and
secondary clarification, aerated equalization and activated sludge treatment
including an oxygen-enriched activated sludge treatment system (the UNOX
System). With this degree of sophisticated equipment, the mill is able to
continually produce effluent that meets its permit requirements.
The Company maintains valid and current air and water permits and believes
it is currently in substantial compliance with respect to all such permits.
The Company believes that it has good relations with the federal, state and
local regulatory authorities, and management is not aware of any material
problems or costs that might jeopardize the Company's scheduled permit
renewals. A summary of the Company's key environmental permits is shown
below:
<TABLE>
<CAPTION>
- - ----------------------------------------------------------------
PERMIT TYPE EXPIRATION DATE
- - ----------------------------------------------------------------
<S> <C>
Air ............. No expiration date.
Wastewater ...... 5 year permit; renews in 2000.
Solid Waste ..... No expiration date (30 year life minimum).
Water ........... No expiration date for river withdrawal.
Storm Water ..... 5 year permit; renews in 1999.
- - ----------------------------------------------------------------
</TABLE>
The U.S. Environmental Protection Agency (the "EPA") has proposed that
pulp and paper mills be required to meet currently proposed new air emissions
and revised wastewater discharge standards for toxic and hazardous pollutants
by early 2000. These proposed standards are commonly known as the "Cluster
Rules" since the EPA has proposed standards for a "cluster" of related air
emission and wastewater sources. The exact requirements of the EPA's proposed
new air and wastewater standards will not be known until the final
regulations are adopted and it is anticipated that compliance will not be
required earlier than 2000. While management does not expect the Cluster
Rules to have an impact on its TMP and recycling operations, the impact on
other aspects of the manufacturing process is still uncertain. In any event,
management does not anticipate that a material amount of capital expenditures
will be required in order to comply with such regulations.
59
<PAGE>
On July 12, 1996, the Company entered into a Reasonably Available Control
Technology ("RACT") Agreement with the Virginia Department of Environmental
Quality ("VDEQ"). Under the RACT Agreement, the Company is not required to
incur any significant capital expenditures for the purchase and installation
of pollution control equipment.
On September 30, 1994, the EPA issued a Notice of Violation (the "Notice")
to the Company alleging that the Company had violated two conditions of its
federally enforceable state air permit. First, the EPA alleged that since at
least October 1, 1993, the Company had been burning coal with a sulfur
content in excess of limits specified in its permit. The Company had
previously notified the EPA and the VDEQ that in April 1994, it had
discovered, through on-site testing of its coal supplies, that coal with
excessive sulfur content had been delivered to the Company, notwithstanding
that the Company had received test results from its supplier that indicated
that the coal met required specifications (including the sulfur content
specification). The Company instituted corrective actions to ensure that this
situation was not repeated. The EPA also alleged that the Company had removed
a sulfur dioxide continuous emissions monitor required by the Company's state
air permit. The Company had received verbal authorization from the VDEQ to
remove this monitor in 1988. This monitoring requirement was deleted from the
Company's air permit when the permit was reissued in October 1992. Although
the EPA has not assessed any penalties since the issuance of the Notice for
either alleged violation, there can be no assurance that the EPA will not
seek administrative or civil penalties with respect to the above-referenced
matters. However, management believes that these matters will not materially
affect the financial position and results of operations of the Company.
COMPETITION
The newsprint industry is highly competitive and is comprised of many
participants. The Company competes directly with a number of newsprint
manufacturers, many of which have longer histories, larger customer bases,
closer geographical proximity to customers and significantly greater
financial and marketing resources than the Company. The Company faces
significant competition from both large, vertically integrated companies and
numerous smaller companies. The Company competes with several other newsprint
manufacturers in Canada, as well as regional manufacturers in the Southern
United States. Competition in the newsprint market is generally based on
price, quality and customer service. Newsprint price decreases announced by
one or more of the major newsprint producers in North America have effected
and may continue to effect material changes in the average price for
newsprint and have the potential to adversely effect the newsprint market in
general.
PROPERTIES
The Company owns approximately 700 acres of land near Richmond, Virginia
on which the mill is located and approximately 4,900 acres of timberland. As
security for the Bank Credit Facilities, the Company has granted the lenders
under the Bank Credit Facilities a first priority security interest mortgage
on all of its real property and, subject to existing security interests, the
improvements thereon, and as security for the Notes, the Company has granted
the Trustee under the Indenture a second priority security interest mortgage
on all of its real property and, subject to existing security interests, the
improvements thereon. See "Description of the Notes -- Collateral and
Security."
EMPLOYEES
As of September 30, 1997, the Company had approximately 260 employees,
approximately 68% of which have been employed by the Company since its
inception in 1979. The Company has a very low employee turnover and believes
it enjoys excellent labor relations with its employees. The workforce is
non-unionized and has been very receptive to flexible working conditions and
requirements.
LEGAL PROCEEDINGS
From time to time the Company is involved in legal proceedings relating to
claims arising out of its operations in the normal course of business. The
Company believes that there are no material legal proceedings pending or
threatened against the Company or any of its properties.
60
<PAGE>
BUSINESS OF SOUCY
Soucy is a low cost newsprint manufacturer located in Rivi|f4re-du-Loup in
the Province of Quebec, Canada. Soucy Inc. owns a newsprint machine that has
an annual production capacity of 67,000 tonnes and is the general partner of,
and owns a 50.1% interest in, Soucy Partners, a limited partnership formed in
1974 with Dow Jones and Rexfor (a Quebec government-owned company), which own
partnership interests of 39.9% and 10%, respectively. Soucy Partners owns and
operates a mill, including a newsprint machine with an annual production
capacity of 150,000 tonnes. The two Soucy newsprint machines are located on
Soucy Partners' plant site. The marketing of Soucy's products is managed by
Brant-Allen, which also markets the Company's newsprint production.
Soucy, in conjunction with an equipment manufacturer, developed the first
commercially successful TMP refining system used in the production of
newsprint. This process is the preferred technology used industry-wide to
provide mechanical furnish to newsprint mills. In addition, Soucy was the
first Canadian mill to successfully run 100% TMP as a furnish. These
modernizations not only improved the quality of Soucy's finished product, but
increased the mills' production rate and efficiency. Furthermore, Soucy was
the first mill in North America to receive an ISO 9001 certification.
For the year ended December 31, 1996, and the nine months ended September
30, 1997, Soucy had total sales of approximately Cdn$168.7 million and
Cdn$106.4 million, respectively, and net earnings of approximately Cdn$12.4
million and Cdn$1.6 million, respectively. See accompanying "Consolidated
Financial Statements of F.F. Soucy, Inc." and the notes thereto.
BUSINESS OF TIMBERLANDS
Timberlands currently owns and manages approximately 130,000 acres of
timberland in Central Virginia, within 200 miles of the Company's mill. The
land is intensively managed to produce a superior pine fiber. Timberlands'
timber forest is a renewable source which is being replanted and grown as a
crop at rates that exceed usage. Currently, Timberlands' forest is
approximately 85% pine, and maintains an approximate 27-year growth cycle.
Prior to the consummation of the Transactions, Timberlands supplied all the
Company's wood requirements. Under the Wood Supply Agreement there will be no
upcharge and Timberlands will supply to the Company 40,000 cords of wood
fiber annually at market prices determined by reference to the prices paid by
the Company for wood fiber purchased from non-affiliated wood suppliers.
Almost all of Timberlands' sales are currently made to the Company. See
"Certain Related Party Transactions -- Relationship with Brant-Allen,
Timberlands and Soucy."
The majority of the timberlands in the State of Virginia are located in
privately held tracts. The wood supply in Virginia is primarily Virginiana
and Loblolly pine with a high percentage in plantation stands. Plantation
stands are timberlands that have been planted and managed to enhance the
future volume and yield per acre. Plantations in much of Virginia have been
actively managed since the mid-1950's on a sustained-yield basis, and through
continual reforestation efforts, the Company believes, these lands should
maintain the current supply levels.
Brant-Allen may monetize all or a substantial portion of Timberlands' land
to repay the Hancock Loan and the Timberlands Loan, while retaining long-term
fiber supply arrangements that would allow the Company to maintain fiber
sourcing flexibility.
61
<PAGE>
MANAGEMENT
The following table sets forth certain information about the Company's
directors and executive officers:
<TABLE>
<CAPTION>
NAME AGE POSITION
- - ----- ----- ----------
<S> <C> <C>
Peter M. Brant....... 50 President, Chairman of the Board of Directors and Chief
Executive Officer of the Company and Timberlands; Chairman,
President and Chief Executive Officer of Brant-Allen; and
Chief Executive Officer of Soucy Inc.
Joseph Allen......... 56 Executive Vice President, Co-Chairman of the Board of
Directors, Chief Operating Officer and Secretary of the
Company and Timberlands; Co-Chairman and Chief Operating
Officer of Brant-Allen; and Chief Operating Officer of Soucy
Inc.
Edward D. Sherrick .. 52 Vice President of Finance and Director of the Company and
Timberlands; Senior Vice President and Chief Financial
Officer of Brant-Allen; and Vice President of Soucy Inc.
Thomas E. Armstrong . 60 Vice President of Sales and Manufacturing and Director of
the Company and Timberlands; Executive Vice President of
Brant-Allen; and Vice President of Soucy Inc.
Michael Conroy....... 58 Director
Robert Flug.......... 50 Director
</TABLE>
The following table sets forth certain information about the Company's key
employees:
<TABLE>
<CAPTION>
NAME AGE POSITION
- - ------ ----- ----------
<S> <C> <C>
Robert Snyder .. 49 Vice President and General Manager
Wilton Godwin .. 53 Production Manager
Robert Jackson . 58 Human Resources Manager
David Jones .... 57 Financial Manager
Donald August .. 51 Woodlands Manager and Recycle Fiber Procurement
Manager
Robert Ellis ... 46 Manager, Engineering Services and Government Affairs
of the Company
</TABLE>
PETER M. BRANT. Mr. Brant is the President, Chairman of the Board of
Directors and Chief Executive Officer of the Company and Timberlands, the
Chairman, President and Chief Executive Officer of Brant-Allen and Chief
Executive Officer of Soucy Inc. Mr. Brant jointly owns Brant-Allen with Mr.
Allen. Mr. Brant has served as executive officer of the Company since its
inception and has served as executive officer of Brant-Allen for over 30
years.
JOSEPH ALLEN. Mr. Allen is Executive Vice President, Co-Chairman of the
Board of Directors, Chief Operating Officer and Secretary of the Company and
Timberlands, Co-Chairman and Chief Operating Officer of Brant-Allen and Chief
Operating Officer of Soucy Inc. Mr. Allen jointly owns Brant-Allen with Mr.
Brant. Mr. Allen has served as an executive officer of the Company since its
inception and has served as executive officer of Brant-Allen for over 30
years.
EDWARD D. SHERRICK. Mr. Sherrick is Vice President of Finance and Director
of the Company and Timberlands, Senior Vice President and Chief Financial
Officer of Brant-Allen and Vice President of Soucy Inc. He has been with the
Company and Brant-Allen for over 20 years.
62
<PAGE>
THOMAS E. ARMSTRONG. Mr. Armstrong is Vice President of Sales and
Manufacturing and Director of the Company and Timberlands, Executive Vice
President of Brant-Allen and Vice President of Soucy Inc. He has been an
executive officer of the Company and Brant-Allen for 27 years and has been
involved in the sale and marketing of the Company's newsprint as well as
overseeing mill operations.
MICHAEL CONROY. Mr. Conroy was appointed as a Director of the Company in
November 1997. Mr. Conroy is the President of the International Herald
Tribune Company US, Inc. He has been with that company for 12 years. Before
joining the International Herald Tribune, he was publisher at Newsweek
Atlantic.
ROBERT FLUG. Mr. Flug was appointed a Director of the Company in November
1997. Mr. Flug has been the President and Chief Executive Officer of S.I.
Danielle, Inc. since 1987.
ROBERT SNYDER. Mr. Snyder has been the Vice President and General Manager
of the Company since 1992. Prior to joining the Company in 1985, Mr. Snyder
was the General Superintendent of the Coated North Mill with Boise Cascade
Corporation from 1983 to 1985, and General Coating Superintendent with Mead
Corporation from 1977 to 1983.
WILTON GODWIN. Mr. Godwin has been Production Manager of the Company since
1992 and has been with the Company since 1979.
ROBERT JACKSON. Mr. Jackson has been the Human Resources Manager of the
Company since 1979.
DAVID JONES. Mr. Jones has been the Financial Manager of the Company since
1979.
DONALD AUGUST. Mr. August has been the Woodlands Manager and Recycle Fiber
Procurement Manager of the Company since 1984.
ROBERT ELLIS. Mr. Ellis has been the Manager of Engineering Services and
Governmental Affairs of the Company since 1992 and has been with the Company
since 1980.
In 1990, Messrs. Brant and Allen pleaded guilty to charges relating to the
improper deduction as business expenses of certain personal expenses with
respect to activities between 1980 and 1984. Messrs. Brant and Allen each
pleaded guilty to a misdemeanor charge of willful failure to maintain tax
records and conspiracy. Mr. Brant paid the government taxes owed, penalties
and a fine, and received a sentence involving community service, 84 days in a
federal facility and probation. Mr. Allen received a fine, probation and
performed community service. Each of them has satisfactorily completed the
term of his probation. Brant-Allen's predecessor company pleaded guilty to
the felony charge of willfully filing false tax returns and was fined. Since
the events leading to the charges, Brant-Allen has improved its system of
internal accounting controls. In 1989, Brant-Allen changed its accounting
firm.
EXECUTIVE COMPENSATION
No executive officer of Brant-Allen was paid any compensation by the
Company between 1994 and 1997. All officers of the Company who also serve as
officers of Brant-Allen have received and will continue to receive
compensation from and participate in employee benefit plans and arrangements
sponsored by Brant-Allen, including, but not limited to, Brant-Allen's
defined contribution retirement plan, employee insurance, long term
disabilities, medical and other plans which are maintained by Brant-Allen or
which may be established by Brant-Allen in the future. These officers are not
entitled to participate in the Company's employee benefit plans and
arrangements.
63
<PAGE>
SECURITY OWNERSHIP
Brant-Allen beneficially owns all the equity of each of the Company,
Timberlands and Soucy Inc. Brant-Allen, in turn, is jointly owned by Peter
Brant and Joseph Allen.
CERTAIN RELATED PARTY TRANSACTIONS
RELATIONSHIP WITH BRANT-ALLEN, TIMBERLANDS AND SOUCY
Brant-Allen owns all of the equity in the Company, Timberlands and Soucy
Inc. See "Risk Factors -- Control by Messrs. Brant and Allen; Related Party
Transactions; Potential Conflict of Interest." Brant-Allen is a Sub Chapter S
corporation jointly owned by Mr. Peter Brant and Mr. Joseph Allen. Mr. Brant
serves as Brant-Allen's Chairman of the Board, President and Chief Executive
Officer and also as President, Chairman of the Board of Directors and Chief
Executive Officer of the Company and Timberlands and Chief Executive Officer
of Soucy Inc. Mr. Allen serves as Brant-Allen's Co-Chairman of the Board and
Chief Operating Officer and also as Executive Vice President, Vice Chairman
of the Board of Directors and Chief Operating Officer of the Company and
Timberlands and Chief Operating Officer of Soucy Inc. The other officers of
Brant-Allen, Mr. Edward Sherrick and Mr. Tom Armstrong, are also directors of
the Company and Timberlands.
Brant-Allen may engage in a variety of transactions with the Company,
Timberlands and/or Soucy. These transactions are expected to include the sale
and marketing of the newsprint produced by the Company and Soucy and the
provision of management and other services described below to the Company and
Soucy.
Management Services Agreement
Concurrently with the closing of the Acquisition, the Company entered into
the Management Services Agreement with Brant-Allen. Pursuant to the
Management Services Agreement, Brant-Allen will continue to provide the
Company with senior management treasury, financial and administrative
(including marketing and sales) services. For these services, Brant-Allen
will continue to be entitled to a monthly fee, payable in advance, calculated
at the rate of 3% of the Company's net sales less transportation costs. This
fee amounted to $2,820,000, $3,961,000 and $3,865,000 for the years ended
1994, 1995 and 1996, and $3,004,410 and $2,561,177 for the nine months ended
September 30, 1996 and 1997, respectively. See the accompanying financial
statements of the Company. The Management Services Agreement has a term of
five years and is automatically renewable for successive five year terms
unless earlier terminated by either party giving two years written notice.
The Management Services Agreement contains customary indemnification
provisions.
Brant-Allen Fees from Soucy
Brant-Allen also markets all of Soucy's newsprint and is, and will
continue to be, compensated for these services in the form of monthly
management service and royalty fees, payable in advance, calculated at a
combined rate of 9.73% of Soucy Inc.'s consolidated net sales after
transportation costs. Soucy Partners pays Soucy Inc. approximately 3% of
Soucy Partners' cumulative annual net sales. More specifically, for
cumulative annual net sales under Cdn$100 million, the fee is comprised of a
sales and management fee at 6% of net sales, plus a royalty fee at 3.73% of
net sales. For cumulative annual net sales over Cdn$100 million, the fee is
comprised of a sales and management fee at 3.5% of net sales, plus a royalty
fee at 6.23%. For the nine months ended September 30, 1997 and 1996, and for
the years ended December 31, 1996, 1995 and 1994, Soucy Inc. paid Brant-Allen
approximately Cdn$9,255,000 and Cdn$12,048,000, Cdn$14,951,000,
Cdn$19,935,000 and Cdn$10,577,000, respectively, for management and selling
services. See Note 3 to the accompanying consolidated financial statements of
Soucy Inc.
During the period from October 1 to December 1, 1997, Soucy Partners
distributed Cdn$8,505,000 to its partners. In addition, on December 1, 1997
Soucy Inc. distributed Cdn$6.0 million to Brant-Allen.
Wood Supply from Timberlands and ONP and OMG Procurement
Prior to the consummation of the Transactions, Timberlands supplied all
the Company's wood requirements at prices, including an upcharge (a margin in
excess of the market price of wood) that were negotiated annually.
Concurrently with the consummation of the Transactions, the Company and
Timberlands terminated these arrangements and entered into the Wood Supply
Agreement. Under the Wood Supply Agreement there will be no upcharge and
Timberlands will supply to the Company 40,000 cords of wood fiber annually at
market prices determined by reference to the prices paid by the Company for
wood fiber purchased from non-affiliated wood suppliers. Almost all of
Timberlands' sales are currently made to the Company. Timberlands' wood sales
to the Company were $10,982,000, $10,702,000, $14,744,000, $13,003,000 and
$11,896,000 during the nine-month periods ended September 30, 1997 and 1996,
and the years ended December 31, 1996, 1995 and 1994, respectively. See Note
3 to the accompanying financial statements of the Company.
64
<PAGE>
Prior to the consummation of the Transactions, Timberlands procured
recycled paper for the Company in exchange for a procurement fee based on the
ONP and OMG tonnage procured. The Company recognized costs of $1,640,695,
$1,554,854, $2,070,469, $147,340 and $122,307 for such fees during the
nine-month periods ended September 30, 1997 and 1996, and the years ended
December 31, 1996, 1995 and 1994, respectively. For the year ended December
31, 1994, the Company processed 50,671 tonnes. See Note 7 to the accompanying
financial statements of BITCO. The Company terminated this procurement
arrangement concurrently with consummation of the Transactions and now
procures ONP and OMG itself.
The amount of the upcharge paid by the Company in 1996 and 1995 was $33.44
per tonne of newsprint and $17.15 per tonne of newsprint, respectively.
Other Arrangements with Timberlands
The Company shares employees, facilities and recordkeeping systems with
Timberlands, and the Company charges Timberlands monthly for its share of
these costs. Accordingly, these shared employees receive benefits under the
Company's defined contribution retirement plan and are eligible to
participate in the Company's thrift plan. Costs associated with these plans
are reimbursed monthly by Timberlands. Amounts paid to the Company for shared
costs, which are included in selling, general and administrative expenses,
approximated $1,068,000, $1,039,000, $1,370,000, $1,276,000 and $1,128,000
during the nine-month periods ended September 30, 1997 and 1996, and the
years ended December 31, 1996, 1995 and 1994, respectively. Timberlands also
manages the Company's timberlands for which the Company paid Timberlands fees
of approximately $44,500, $43,000, $57,750, $56,000 and $133,000 during the
nine-month periods ended September 30, 1997 and 1996, and the years ended
December 31, 1996, 1995 and 1994, respectively. See Note 3 to the
accompanying financial statements of the Company.
In 1988 the Company and Timberlands entered into an agreement for certain
marketing and consulting services with The Elebash Company ("Elebash"), a
real estate broker, whereby Timberlands, in the case of sales of
Timberlands-owned land, or the Company, in the case of sales of Company-owned
land, has agreed to pay Elebash two percent of the gross sales price of any
land purchased or sold pursuant to the terms of the agreement. In this
connection, Timberlands paid Elebash approximately $19,000, $71,000, $34,000,
$71,000 and $229,000 for the nine month periods ended September 30, 1997 and
1996, and the years ended December 31, 1996, 1995 and 1994, respectively.
Amounts paid to Elebash are included in selling, general and administrative
expenses in the accompanying statements of income. This agreement is
cancelable by any party by providing 60 days' written notice. Notice of
cancelation of this agreement was given by the Company and Timberlands on
November 6, 1997, and will take effect on January 6, 1998.
PURCHASE AGREEMENTS WITH DOW JONES AND THE WASHINGTON POST
The Company has contracted to sell newsprint to Dow Jones and The
Washington Post pursuant to the Purchase Agreements. The Purchase Agreements
will terminate on December 31, 2000; however, they will be extended for four
years if, prior to January 1, 2000, the parties agree to pricing formulas for
that four-year period. Each of Dow Jones and The Washington Post is obligated
to purchase a minimum of approximately 45,000 tonnes of newsprint per year
under the Purchase Agreements. The price payable under the Purchase
Agreements is defined in the Purchase Agreements, as amended, and during 1996
and 1995 represented the average price paid by Dow Jones and The Washington
Post to East Coast suppliers of those customers that are not affiliates of
those customers. In addition, the parties to the Purchase Agreements have the
option to purchase additional quantities of newsprint as available.
The Company's sales to Dow Jones represented approximately 22%, 23%, 22%,
24% and 23% of total sales of the Company during the nine-month periods ended
September 30, 1997 and 1996, and the years ended December 31, 1996, 1995 and
1994, respectively. The Company's sales to The Washington Post represented
approximately 23%, 18%, 19%, 22% and 22% of total sales of the Company during
the nine-month periods ended September 30, 1997 and 1996, and the years ended
December 31, 1996, 1995 and 1994, respectively.
Soucy also sells newsprint to Dow Jones and its subsidiaries. During the
nine-month periods ended September 30, 1997 and 1996, and the years ended
December 31, 1996, 1995 and 1994, these sales amounted to Cdn$20,804,000,
Cdn$28,668,000, Cdn$35,004,000, Cdn$35,646,000 and Cdn$26,825,000, net of
discounts, respectively.
65
<PAGE>
LIMITED LIABILITY COMPANY OPERATING AGREEMENT
The Company is a limited liability company organized under the Virginia
Limited Liability Company Act (the "LLC Act") and governed by an Operating
Agreement (the "Operating Agreement") between the Company and Brant-Allen.
Brant-Allen is the Company's sole member and as such controls the policies
and operations of the Company. The Company was formed on November 3, 1997,
and is the surviving limited liability company of the merger of BIPCO with
and into the Company. See "The Acquisition."
The Company is managed by its Board of Directors, which consists of not
less than one and not more than eight directors. The initial directors and
executive officers of the Company are Messrs. Peter Brant, Joseph Allen,
Edward Sherrick, Thomas Armstrong, Michael Conroy and Robert Flug. See
"Management."
Under the Operating Agreement, the Board of Directors has exclusive
authority and full discretion with respect to the management of the Company,
subject to certain approval rights reserved to Brant-Allen as sole member.
The approval rights reserved to Brant-Allen include the right to designate
and to remove the directors. In addition, the consent of Brant-Allen is
required for the adoption of a plan of merger or consolidation, the sale,
lease, exchange or other disposition of all, or substantially all, of the
property of the Company, otherwise than in the usual and ordinary course of
business of the Company, dissolution of the Company or amendment of the
Operating Agreement.
The Board of Directors is authorized to delegate general or specific
authority to the officers of the Company, but must retain authority with
respect to appointing or removing any officer, determining the compensation
to be paid to any officer or entering into any agreement with respect to the
employment of an officer, borrowing or incurring indebtedness on behalf of
the Company, assigning, transferring, pledging or compromising any debts due
to the Company, except on full payment, acquiring or starting up any business
activity or venture or interest therein, pledging, assigning, or otherwise
encumbering any property or assets of the Company, selling or otherwise
disposing of, or contracting to sell or otherwise dispose of, any of the
Company's assets in any one transaction or in any series of transactions out
of the ordinary course of the business of the Company, entering into any
contract or commitment obligating the Company to make aggregate capital or
other expenditures of more than $100,000 other than in the ordinary course of
business, reorganizing or restructuring the Company, voluntarily taking any
action that would cause bankruptcy of the Company, and acquiring any equity
or debt securities of any member or any of its affiliates, or otherwise
making loans to any member or any of its affiliates.
Brant-Allen, as the sole member of the Company, and the directors and
officers of the Company, are indemnified by the Company for actions taken in
such capacity pursuant to the Operating Agreement to the fullest extent
permitted under the LLC Act. In addition, the liability of Brant-Allen, as
sole member of the Company, and of the directors and officers of the Company,
is limited to their willful wrongdoing or intentional disregard of the terms
of the Operating Agreement. The liability of Brant-Allen, as sole member, for
obligations of the Company is limited to the amount of its capital
contribution (i.e., $5,000), plus its share of undistributed profits of the
Company.
The interest of Brant-Allen in the Company is transferable upon notice to
the Board of Directors and execution of an amendment to the Operating
Agreement (and execution of such other documents as the Board may reasonably
require). Any transferee shall have the right to participate only in the tax
allocations and distributions to which the transferring member was entitled,
unless it is admitted to the Company as a "Substitute Member" under the
Operating Agreement.
The Company will be dissolved upon the earliest to occur of: (i) December
31, 2028; (ii) the election of its Member; or (iii) the expiration of 30 days
following the sale or transfer of all the assets of the Company, or as
otherwise required by the LLC Act.
Both the Bank Credit Agreement and the Indenture limit the ability of the
Company to pay cash distributions to Brant-Allen other than distributions in
amounts approximately equal to the federal, state, local and foreign tax
liability of its direct and indirect owners arising as a result of their
direct or indirect ownership of interests in the Company.
66
<PAGE>
DESCRIPTION OF THE NOTES
The New Notes offered hereby will be issued under an indenture dated as of
December 1, 1997 (the "Indenture") among the Issuers, as joint and several
obligors, the Security Parties, Brant-Allen and Crestar Bank, as trustee (the
"Trustee"), a copy of the form of which is filed as an exhibit to the
Registration Statement of which this Prospectus forms a part. The following
summary of the material provisions of the Indenture does not purport to be
complete and is subject to, and qualified in its entirety by reference to,
the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"), and
to all of the provisions of the Indenture and the Notes, including the
definitions of certain terms contained therein and those terms made part of
the Indenture by reference to the Trust Indenture Act. For definitions of
certain capitalized terms used in the following summary, see "--Certain
Definitions."
FinCo is a wholly owned subsidiary of the Company that was incorporated in
Delaware for the purpose of serving as a co-issuer of the Notes. FinCo will
not have any substantial operations or assets and will not have any revenues.
As a result, holders of the Notes should not expect FinCo to participate in
servicing the interest and principal obligations on the Notes.
GENERAL
The Notes will mature on December 1, 2007 and will be limited to $100
million aggregate principal amount. Each Note bears interest at 10% per annum
from December 1, 1997 or from the most recent interest payment date to which
interest has been paid or duly provided for, payable on June 1, 1998 and
semiannually thereafter on June 1 and December 1 in each year until the
principal thereof is paid or duly provided for to the Person in whose name
the Note (or any predecessor Note) is registered at the close of business on
the May 15 or November 15 next preceding such interest payment date. Interest
will be computed on the basis of a 360-day year comprised of twelve 30-day
months. Accordingly, registered holders of New Notes on the relevant record
date for the first interest payment date following the consummation of the
Exchange Offer will receive interest accruing from the most recent date to
which interest has been paid or, if no interest has been paid, from December
1, 1997. Old Notes accepted for exchange will cease to accrue interest from
and after the date of consummation of the Exchange Offer. Holders whose Old
Notes are accepted for exchange will not receive any payment in respect of
interest on such Old Notes otherwise payable on any interest payment date the
record date for which occurs on or after the consummation of the Exchange
Offer.
For each Old Note accepted for exchange, the Holder of such Old Note will
receive a New Note having a principal amount equal to that of the surrendered
Old Note.
The interest rate on the Old Notes is subject to increase in certain
circumstances if the Registration Statement is not declared effective on a
timely basis or if certain other conditions are not satisfied, all as further
described under "--Registered Exchange Offer; Registration Rights".
Principal of, premium, if any, and interest on the Notes will be payable,
and the Notes will be exchangeable and transferable, at the office or agency
of the Issuers in The City of New York maintained for such purposes (which
initially will be the Trustee); provided, however, that, at the option of the
Issuers, interest may be paid by check mailed to the address of the Person
entitled thereto as such address shall appear on the security register or by
wire transfer to an account located in the United States maintained by the
payee. The Notes will be issued only in registered form without coupons and
only in denominations of $1,000 and any integral multiple thereof. No service
charge will be made for any registration of transfer or exchange or
redemption of Notes, but the Issuers may require payment in certain
circumstances of a sum sufficient to cover any tax or other governmental
charge that may be imposed in connection therewith.
SINKING FUND
The Notes will not be entitled to the benefit of any sinking fund.
OPTIONAL REDEMPTION
The Notes will be redeemable at the option of the Issuers, as a whole or
from time to time in part, at any time on or after December 1, 2002, on not
less than 30 nor more than 60 days' prior notice at the redemption prices
(expressed as percentages of principal amount) set forth below, together with
accrued interest, if any, to the
67
<PAGE>
redemption date, if redeemed during the 12-month period beginning on December
1 of the years indicated below (subject to the right of holders of record on
relevant record dates to receive interest due on an interest payment date):
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
------ ------------
<S> <C>
2002................ 105.000%
2003................ 103.333%
2004................ 101.667%
2005 and
thereafter......... 100.000%
</TABLE>
In addition, notwithstanding the foregoing, at any time prior to December
1, 2000, the Company may redeem up to 20% of the aggregate principal amount
of the Notes within 60 days of one or more Public Equity Offerings with the
net proceeds of such offering at a redemption price equal to 110% of the
principal amount thereof, together with accrued and unpaid interest, if any,
to the date of redemption (subject to the right of holders of record on
relevant record dates to receive interest due on relevant interest payment
dates); provided that immediately after giving effect to any such redemption,
at least $80 million aggregate principal amount of the Notes originally
issued remains outstanding.
If less than all the Notes are to be redeemed, the particular Notes to be
redeemed will be selected prior to the redemption date by the Trustee, if the
Notes are listed on a national securities exchange, in accordance with the
rules of that exchange or, if the Notes are not so listed, either on a pro
rata basis, by lot or by such other method as the Trustee will deem fair and
appropriate; provided, however, that no such partial redemption will reduce
the principal amount of a Note not redeemed to be held by a holder to less
than $1,000. Notice of redemption will be mailed, first-class postage
prepaid, at least 30 but not more than 60 days before the redemption date to
each holder of Notes to be redeemed at its registered address. On and after
the redemption date, interest will cease to accrue on Notes or portions
thereof called for redemption and accepted for payment.
COLLATERAL AND SECURITY
The Notes are secured by (i) the Company Collateral, which consists of a
second priority security interest in (x) all of the real property of the
Company and (y) all of the personal property of the Company, to the extent
such personal property is assignable, and except for any personal property
that is not assignable; (ii) the Timberlands Collateral, which consists of a
third priority security interest in 100% of the membership interests in
Timberlands; and (iii) the Soucy Collateral, which consists of a second
priority security interest in 65% of the issued and outstanding capital stock
of Soucy Inc. The remaining 35% of the issued and outstanding capital stock
of Soucy Inc. will be subject to certain restrictions described below. See
"--Certain Covenants of Brant-Allen." At any time when either (i) the Company
has reduced its Total Committed Debt to an amount that is not greater than
$145 million, or (ii) the Notes are rated Investment Grade, the foregoing
security interest in the capital stock of Soucy Inc. will be released and all
of the covenants and other provisions of the Indenture with respect to Soucy
Inc. shall terminate. Upon repayment of all the outstanding indebtedness
under the Timberlands Loan, the foregoing security interest in the membership
interest in Timberlands shall become a second priority security interest.
The Notes are senior secured obligations of the Issuers, rank senior in
right of payment to all subordinated indebtedness of the Issuers and rank
pari passu in right of payment with all other existing and future senior
indebtedness of the Issuers, including, in the case of the Company,
indebtedness under the Bank Credit Agreement. However, the obligations of the
Company under the Bank Credit Agreement are secured by a first priority
security interest in the Company Collateral, a second priority security
interest in the Timberlands Collateral and a first priority security interest
in the Soucy Collateral. The obligations of Brant-Allen under the Timberlands
Loan are secured by a first priority security interest in the Timberlands
Collateral, a first priority security interest in the Soucy Collateral (pari
passu with the obligations of the Company under the Bank Credit Agreement)
and a first priority security interest in cash in an amount on any date equal
to the amount of interest payable during the next succeeding 12 months under
term loans made under the Bank Credit Agreement. In addition, the obligations
of Timberlands under the Hancock Loan are secured by a first priority
security interest in approximately 125,000 acres of land owned by
Timberlands. At September 30, 1997, on a pro forma basis after giving effect
to the Transactions: (i) the Company would have had indebtedness (other than
the Notes) of approximately $106.7 million, including borrowings under the
Bank Credit Agreement (and FinCo would have had no indebtedness other than
the Notes),
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(ii) Brant-Allen would have had approximately $35 million of indebtedness
under the Timberlands Loan, (iii) Timberlands would have had $30 million of
indebtedness under the Hancock Loan and (iv) Soucy Inc. had Cdn$27.3 million
of indebtedness. Subject to certain restrictions that are described below,
each of the Issuers and the Security Parties may issue certain additional
Indebtedness pursuant to the terms of the Indenture.
The Collateral securing the obligations of Issuers in respect of the Notes
may be sold or disposed of free and clear of the security interests referred
to above in connection with (i) sales of inventory and collection of accounts
receivable in the ordinary course of business, (ii) sales and other
dispositions of assets permitted under "--Certain Covenants of All of the
Credit Parties--Limitation on Sales of Assets" or under "--Certain Covenants
of Brant-Allen--Sales of Collateral Stock and Certain Other Transactions"
where the Net Cash Proceeds (as defined) are applied in accordance with the
relevant covenant and (iii) the release of Collateral with the consent of
66 2/3% of the holders of the outstanding Notes. Upon the payment of all
principal, premium, if any, and interest under the Indenture and the Notes,
the Collateral Documents shall terminate and the Collateral shall be released
from the security interests created by the Collateral Documents.
Company Collateral consisting of real property (the "Real Property
Collateral") was pledged to the Trustee for the benefit of the Holders
pursuant to a deed of trust. The deed of trust encumbers the Company's fee
interests in the real property and fixtures constituting the Real Property
Collateral, and all proceeds thereof and additions, improvements,
alterations, replacements and repairs thereto, whether now owned or hereafter
acquired by the Company. Company Collateral constituting personal property
(including all equipment and machinery owned by the Company and the Company's
leasehold interest in certain equipment and machinery leased by the Company)
and the Timberlands Collateral and the Soucy Collateral were pledged by the
Company and Brant-Allen, as the case may be, pursuant to the other Collateral
Documents.
If the Notes become due and payable prior to the final Stated Maturity
thereof for any reason or are not paid in full at the final Stated Maturity
thereof, the Trustee has (after the repayment of the creditors under the Bank
Credit Agreement, the Timberlands Loan or the Hancock Loan, as the case may
be) the right to foreclose or otherwise realize upon the Collateral in
accordance with instructions from the Holders of a majority in aggregate
principal amount of the Notes or, in the absence of such instructions, in
such manner as the Trustee deems appropriate in its absolute discretion. The
proceeds received by the Trustee will be applied by the Trustee first to pay
the expenses of such foreclosure or realization and fees and other amounts
then payable to the Trustee under the Indenture and the Collateral Documents,
and, thereafter, to pay all amounts owing to the Holders under the Indenture,
the Notes and the Collateral Documents (with any remaining proceeds to be
payable to the Company or as may otherwise be required in the Intercreditor
Agreement, the Collateral Documents or by law). See "--Intercreditor
Agreement."
By its nature, some or all of the Collateral will be illiquid and may have
no readily ascertainable market value. Accordingly, there can be no assurance
that the Collateral will be able to be sold in a short period of time, if at
all. To the extent that third parties lease real or personal property to the
Company, defaults by the Company under such leases may adversely affect the
value of the respective leasehold interests and may result in the loss of
such leasehold interests. In addition, the ability of the Holders to realize
upon the Collateral may be subject to certain bankruptcy law limitations in
the event of a bankruptcy. See "Risk Factors--Security for the Notes."
INTERCREDITOR AGREEMENT
On the Closing Date, the Trustee, on behalf of the Holders, entered into
an intercreditor agreement (the "Intercreditor Agreement") with the Company,
Brant-Allen and Toronto Dominion (Texas), Inc., as administrative agent under
the Bank Credit Agreement (in such capacity, the "Bank Agent"), and as
administrative agent under the Timberlands Loan (in such capacity, the
"Timberlands Agent"). The Intercreditor Agreement provides, among other
things, for the allocation of rights between the Bank Agent, the Timberlands
Agent and the Trustee with respect to Collateral and for enforcement
provisions with respect thereto.
The Intercreditor Agreement includes provisions in which the Trustee
acknowledges that (i) the relevant lenders under the Bank Credit Agreement
and the Timberlands Loan have been granted senior priority security interests
in the relevant parts of the Collateral, (ii) the Trustee will not have any
claims to the Collateral on a parity with or prior to these of such lenders,
and (iii) so long as the obligations of the Company or Brant-Allen under the
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Bank Credit Agreement and/or the Timberlands Loan have not been satisfied,
the Trustee will not have any right or claims in respect of the rights and
remedies of such lenders, nor will any such lenders have any obligation
regarding the exercise of such rights, or any other obligation or duty in
respect of the Trustee.
The Intercreditor Agreement provides that as long as the obligations or
commitments under the Bank Credit Agreement or the Timberlands Loan have not
been paid in full or terminated, as the case may be, the Trustee will not (i)
exercise any remedies with respect to the relevant Collateral, (ii) institute
any action or proceeding with respect to such rights or remedies, including
without limitation, any action of foreclosure, (iii) contest, protest or
object to any foreclosure proceeding or action brought by the Bank Agent, the
Timberlands Agent or any lender, or any other exercise by any such party, of
any rights and remedies relating to the relevant Collateral under the
Collateral Documents or otherwise, or (iv) object to the forbearance by such
lenders from bringing or pursuing any foreclosure proceeding or action or any
other exercise of any rights or remedies relating to the relevant Collateral.
The Bank Agent or the Timberlands Agent, as the case may be, will be
required, pursuant to the terms of the Intercreditor Agreement, to apply all
proceeds from the sale of the Collateral first to satisfy in full the claims
of the lenders under the Bank Credit Agreement and/or the Timberlands Loan,
as the case may be, and, after all commitments of such lenders to make loans
under the relevant agreements have been terminated, to deliver any remaining
proceeds to the Trustee to be applied to the claims of the Holders of the
Notes. The Uniform Commercial Code (which may not be applicable in a
bankruptcy context) imposes for the benefit of the Trustee and the Holders a
requirement that any foreclosure sale of the Collateral be conducted in a
commercially reasonable manner, which requirement may be modified, but not
waived, by contract. Pursuant to the terms of the Intercreditor Agreement,
the Bank Agent and the Timberlands Agent disclaim any obligation to consider
the interest of the Holders of the Notes in any such foreclosure sale. These
agents are required to act in the interest of the lenders pursuant to the
relevant financing agreement. Neither the Trustee nor the Holders of the
Notes may hold the Collateral or initiate or participate in negotiations
regarding any remedial actions in respect of the Collateral or to contest any
senior lien granted by the Company to the lenders under the relevant
financing agreements.
CERTAIN COVENANTS OF THE COMPANY
The Indenture contains, among others, the following covenants with respect
to the Company and its Restricted Subsidiaries (including FinCo):
Limitation on Indebtedness. The Company will not, and will not permit any
Restricted Subsidiary of the Company to, create, issue, assume, guarantee or
in any manner become directly or indirectly liable for the payment of, or
otherwise incur (collectively, "incur"), any Indebtedness (including any
Acquired Indebtedness), other than Permitted Indebtedness, except for
Indebtedness (including Acquired Indebtedness) of the Company so long as at
the time of such incurrence or issuance the Consolidated Fixed Charge
Coverage Ratio for the Company for the four full fiscal quarters immediately
preceding the incurrence of such Indebtedness, taken as one period (and after
giving pro forma effect to (i) the incurrence of such Indebtedness and (if
applicable) the application of the net proceeds therefrom, including to
refinance other Indebtedness, as if such Indebtedness were incurred, and the
application of such proceeds had occurred, on the first day of such
four-quarter period, (ii) the incurrence, repayment or retirement of any
other Indebtedness by the Company and its Restricted Subsidiaries since the
first day of such four-quarter period as if such Indebtedness were incurred,
repaid or retired on the first day of such four-quarter period (except that,
in making such computation, the amount of Indebtedness under any revolving
credit facility shall be computed based upon the average daily balance of
such Indebtedness during such four-quarter period) and (iii) the acquisition
(whether by purchase, merger or otherwise) or disposition (whether by sale,
merger or otherwise) of any company, entity or business acquired or disposed
of by the Company or its Restricted Subsidiaries, as the case may be, since
the first day of such four-quarter period, as if such acquisition or
disposition had occurred on the first day of such four-quarter period), would
have been at least equal to 2.0 to 1.0.
Limitation on Restricted Payments. (a) The Company will not, and will not
permit any Restricted Subsidiary of the Company to, directly or indirectly,
make any Restricted Payment unless at the time of, and immediately after
giving effect to, the proposed Restricted Payment (the amount of any such
Restricted Payment, if other than cash, as determined by the Board of
Directors of the Company, whose determination shall be conclusive and
evidenced by a Board Resolution), (1) no Default or Event of Default shall
have occurred and be continuing, (2) the Company could
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incur at least $1.00 of additional Indebtedness (other than Permitted
Indebtedness) pursuant to the "Limitation on Indebtedness" covenant in the
preceding paragraph and (3) the aggregate amount of all Restricted Payments
declared or made after the date of the Indenture shall not exceed the sum of:
(A) 50% of the Consolidated Adjusted Net Income of the Company accrued on
a cumulative basis during the period beginning on the first day of the
Company's first fiscal quarter after the date of the Indenture and ending
on the last day of the Company's last fiscal quarter ending prior to the
date of such proposed Restricted Payment (or, if such aggregate cumulative
Consolidated Adjusted Net Income shall be a loss, minus 100% of such
loss); plus
(B) 75% of the aggregate net cash proceeds received after the date of the
Indenture by the Company as capital contributions or from the issuance or
sale (other than to any Subsidiary) of shares of Qualified Capital Stock
of the Company (including upon the exercise of options, warrants or
rights) or warrants, options or rights to purchase shares of Qualified
Capital Stock of the Company; provided that, after the date upon which the
Company shall have reduced its Total Committed Debt to an amount that is
not greater than $105 million, such calculation shall be adjusted to 100%
of the aggregate net cash proceeds of such transactions occurring after
such date; plus
(C) 75% of the aggregate net cash proceeds received after the date of the
Indenture by the Company from the issuance or sale (other than to any
Subsidiary) of debt securities or shares of Redeemable Capital Stock that
have been converted into or exchanged for shares of Qualified Capital
Stock of the Company, to the extent such securities were originally sold
for cash, together with the aggregate net cash proceeds received by the
Company at the time of such conversion or exchange; provided that, after
the date upon which the Company shall have reduced its Total Committed
Debt to an amount that is not greater than $105 million, such calculation
shall be adjusted to 100% of the aggregate net proceeds of such
transactions occurring after such date; plus
(D) to the extent not otherwise included in the Consolidated Adjusted Net
Income of the Company, an amount equal to the net reduction in Investments
(other than reductions in Permitted Investments) in Unrestricted
Subsidiaries resulting from the payments in cash of interest on
Indebtedness, dividends, repayments of loans or advances, or other
transfers of assets, in each case to the Company or a Restricted
Subsidiary after the date of the Indenture from any Unrestricted
Subsidiary or from the redesignation of an Unrestricted Subsidiary as a
Restricted Subsidiary (valued in each case as provided in the definition
of Investment), not to exceed the total amount of Investments (other than
Permitted Investments) made in such Unrestricted Subsidiary by the Company
and its Restricted Subsidiaries.
(b) Notwithstanding paragraph (a) above, the Company may take the
following actions so long as no Default or Event of Default shall have
occurred and be continuing:
(i) the payment of any dividend or the making of any distribution within
60 days after the date of declaration thereof, if at such date of
declaration the payment of such dividend or distribution would have
complied with the provisions of paragraph (a) above and such payment will
be deemed to have been paid on such date of declaration for purposes of
the calculation required by paragraph (a) above;
(ii) the purchase, redemption or other acquisition or retirement for
value of any shares of Capital Stock of the Company by conversion into, or
by or in exchange for, or out of the net cash proceeds of a substantially
concurrent issuance and sale (other than to a Subsidiary) of, shares of
Qualified Capital Stock of the Company;
(iii) the purchase, redemption, defeasance or other acquisition or
retirement for value of any Subordinated Indebtedness of the Company by
conversion into, or by or in exchange for, or out of the net cash proceeds
of a substantially concurrent issuance and sale (other than to a
Subsidiary) of, shares of Qualified Capital Stock of the Company;
(iv) the purchase of any Subordinated Indebtedness of the Company at a
purchase price not greater than 101% of the principal amount thereof in
the event of a "change of control" in accordance with provisions
substantially similar to the "Purchase of Notes upon Change of Control"
covenant; provided that prior to such purchase the Change of Control Offer
as provided in such covenant has been made with respect to the Notes and
all Notes validly tendered for payment in connection with such Change of
Control Offer have been purchased;
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(v) the purchase, redemption, defeasance or other acquisition or
retirement for value of Subordinated Indebtedness of the Company in
exchange for, or out of the net cash proceeds of a substantially
concurrent incurrence (other than to a Subsidiary) of, new Subordinated
Indebtedness of the Company so long as (A) the principal amount of such
new Subordinated Indebtedness does not exceed the principal amount (or, if
such Subordinated Indebtedness being refinanced provides for an amount
less than the principal amount thereof to be due and payable upon a
declaration of acceleration thereof, such lesser amount as of the date of
determination) of the Subordinated Indebtedness being so purchased,
redeemed, defeased, acquired or retired, plus the lesser of the amount of
any premium required to be paid in connection with such refinancing
pursuant to the terms of the Subordinated Indebtedness being refinanced or
the amount of any premium reasonably determined by the Company as
necessary to accomplish such refinancing, plus, in either case, the amount
of expenses of the Company incurred in connection with such refinancing,
(B) such new Subordinated Indebtedness is subordinated to the Notes to the
same extent as such Subordinated Indebtedness so purchased, redeemed,
defeased, acquired or retired and (C) such new Subordinated Indebtedness
has (x) an Average Life either (I) longer than the Average Life of the
Notes or (II) equal to or greater than the Average Life of the
Subordinated Indebtedness that is being purchased, redeemed, defeased,
acquired or retired and (y) a final Stated Maturity of principal either
(I) later than the final Stated Maturity of the principal of the Notes or
(II) no earlier than the Subordinated Indebtedness being purchased,
redeemed, defeased, acquired or retired;
(vi) the payment by the Company of certain amounts on account of that
portion of the federal, state, local and foreign income tax liability of
the direct and indirect equityholders that is attributable to their
interests in the Company;
(vii) the payment of a distribution by the Company on the Closing Date
for Brant-Allen to recover expenses incurred on behalf of the Credit
Parties in connection with the Acquisition, the Timberlands Acquisition
and the related financings; provided that such dividend shall not exceed
an aggregate of $2.0 million;
(viii) the payment by the Company of management fees to Brant-Allen (or
any of its Subsidiaries or Affiliates) in an amount per annum not in
excess of 3% of the revenues (less tranportation costs) of the Company in
the applicable fiscal year, of which no more than one third may be in
cash; and
(ix) the payment of a distribution by the Company on the Closing Date to
Brant-Allen in an amount equal to the total federal, state, local and
foreign tax liabilities of Peter Brant and Joseph Allen arising as a
result of their indirect ownership of equity interests in the Company's
predecessor during 1997 through the Closing Date, as calculated by the
Company's Vice President of Finance and recalculated by the Company's
independent accountants; provided, however, that the amount of the payment
pursuant to this clause (ix) shall not exceed the product of the taxable
income of the Company multiplied by the highest combined marginal federal,
state and local tax rates applicable in the United States during 1997.
The actions described in clauses (i), (ii), (iii), (iv) and (viii) (to the
extent that the fees paid in cash referred to in clause (viii) exceed 1% of
the revenues (less transportation costs) of the Company) of this paragraph
(b) shall be Restricted Payments that shall be permitted to be taken in
accordance with this paragraph (b) but shall reduce the amount that would
otherwise be available for Restricted Payments under clause (3) of paragraph
(a) above and the actions described in clauses (v), (vi), (vii), (viii) (to
the extent that the fees paid in cash referred to in clause (viii) do not
exceed 1% of the revenues (less transportation costs) of the Company) and
(ix) of this paragraph (b) shall be Restricted Payments that shall be
permitted to be taken in accordance with this paragraph (b) and shall not
reduce the amount that would otherwise be available for Restricted Payments
under clause (3) of paragraph (a).
(c) In computing Consolidated Adjusted Net Income of the Company under
paragraph (a) above, (1) the Company shall use audited financial statements
for the portions of the relevant period for which audited financial
statements are available on the date of determination and unaudited financial
statements and other current financial data based on the books and records of
the Company for the remaining portion of such period and (2) the Company
shall be permitted to rely in good faith on the financial statements and
other financial data derived from the books and records of the Company that
are available on the date of determination. In addition, in computing the
amounts under clauses (B) and (C) under paragraph (a) above, to the extent
that the Company issues shares of Qualified Capital Stock to Brant-Allen in
exchange for management fees under the Management Services Agreement, the
value of such shares shall be excluded.
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Limitation on Liens. The Company will not, and will not permit any
Restricted Subsidiary of the Company to, directly or indirectly, create,
incur, assume or suffer to exist any Lien of any kind (other than Permitted
Liens) on or with respect to any of its property or assets, including any
shares of stock or indebtedness of any Restricted Subsidiary of the Company,
whether owned at the date of the Indenture or thereafter acquired, or any
income, profits or proceeds therefrom, or assign or otherwise convey any
right to receive income thereon, unless (x) in the case of any Lien securing
Subordinated Indebtedness, the Notes are secured by a Lien on such property,
assets or proceeds that is senior in priority to such Lien and (y) in the
case of any other Lien, the Notes are equally and ratably secured with the
obligation or liability so secured by such Lien, in each case, for so long as
such obligation is secured by such Lien.
Guarantees by Restricted Subsidiaries of the Company. (a) If, after the
Closing Date, the Company or any of its Subsidiaries acquires or forms a
Restricted Subsidiary, the Company will cause any such Restricted Subsidiary
to (i) execute and deliver to the Trustee a supplemental indenture in form
and substance reasonably satisfactory to such Trustee pursuant to which such
Restricted Subsidiary shall guarantee all of the obligations of the Company
with respect to the Notes issued under such Indenture on a senior basis and
(ii) deliver to such Trustee an opinion of counsel reasonably satisfactory to
such Trustee to the effect that such supplemental indenture has been duly
executed and delivered by such Restricted Subsidiary and is in compliance
with the terms of the Indenture. As of the Closing Date, the Company will
have no Subsidiaries other than FinCo, and FinCo will have no Subsidiaries.
(b) Notwithstanding the foregoing, any Guarantee of the Notes created
pursuant to the provisions described in the foregoing paragraph (a) shall
provide by its terms that it shall be automatically and unconditionally
released and discharged upon any sale, exchange or transfer, to any Person
not a Restricted Subsidiary of the Company, of all of the Capital Stock in,
or all or substantially all the assets of, such Restricted Subsidiary (which
sale, exchange or transfer is not prohibited by the Indenture).
Purchase of Notes upon a Change of Control. If a Change of Control shall
occur at any time, then each holder of Notes will have the right to require
that the Issuers purchase such holder's Notes, in whole or in part in
integral multiples of $1,000, at a purchase price (the "Change of Control
Purchase Price") in cash in an amount equal to 101% of the principal amount
thereof, plus accrued interest, if any, to the date of purchase (the "Change
of Control Purchase Date"), pursuant to the offer described below (the
"Change of Control Offer") and the other procedures set forth in the
Indenture.
Within 20 days following any Change of Control, the Issuers shall notify
the Trustee thereof and give written notice of such Change of Control to each
holder of Notes by first-class mail, postage prepaid, at the address of such
holder appearing in the security register, stating, among other things, (i)
the purchase price and the purchase date, which shall be a Business Day no
earlier than 30 days nor later than 60 days from the date such notice is
mailed, or such later date as is necessary to comply with requirements under
the Exchange Act or any applicable securities laws or regulations; (ii) that
any Note not tendered will continue to accrue interest; (iii) that, unless
the Issuers default in the payment of the purchase price, any Notes accepted
for payment pursuant to the Change of Control Offer shall cease to accrue
interest after the Change of Control Purchase Date; and (iv) certain other
procedures that a holder of Notes must follow to accept a Change of Control
Offer or to withdraw such acceptance.
If a Change of Control Offer is made, there can be no assurance that the
Issuers will have available funds sufficient to pay the Change of Control
Purchase Price for all of the Notes that might be delivered by holders of the
Notes seeking to accept the Change of Control Offer. The Bank Credit
Agreement prohibits the purchase of the Notes by the Company prior to full
repayment of indebtedness under the Bank Credit Agreement, and, upon a Change
of Control, an event of default arises and the lenders may demand that all
amounts outstanding under the Bank Credit Agreement become due and payable.
There can be no assurance that in the event of a Change of Control the
Issuers will be able to obtain the necessary consents from the lenders under
the Bank Credit Agreement to consummate a Change of Control Offer or to repay
or refinance all the Indebtedness of the lenders under the Bank Credit
Agreement. The failure of the Issuers to make or consummate the Change of
Control Offer or pay the Change of Control Purchase Price when due would
result in an Event of Default and would give the Trustee and the holders of
the Notes the rights described under "--Events of Default."
Except as described above with respect to a Change of Control, the
Indenture does not contain provisions that permit the holders of the Notes to
require that the Issuers repurchase or redeem the Notes in the event of a
takeover, recapitalization or similar transaction.
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The Issuers will not be required to make a Change of Control Offer if a
third party makes the Change of Control Offer in the manner, at the times and
otherwise in compliance with the requirements set forth in the Indenture
applicable to a Change of Control Offer made by the Issuers and purchases all
Notes validly tendered and not withdrawn under such Change of Control Offer.
One of the events which constitutes a Change of Control under the
Indenture is the disposition of "all or substantially all" of the Company's
assets. This term has not been interpreted under New York law (which is the
governing law of the Indenture) to represent a specific quantitative test. As
a consequence, in the event holders of the Notes elect to require the Issuers
to purchase the Notes and the Issuers elect to contest such election, there
can be no assurance as to how a court interpreting New York law would
interpret the phrase.
The Issuers will comply with the applicable tender offer rules, including
Rule l4e-l under the Exchange Act, and any other applicable securities laws
and regulations in connection with a Change of Control Offer.
CERTAIN COVENANTS OF THE SECURITY PARTIES
The Indenture contains, among others, the following covenants with respect
to the Security Parties:
Limitation on Indebtedness. Each of the Security Parties will not, and
will not permit any of its Restricted Subsidiaries to, incur Indebtedness
(including any Acquired Indebtedness), other than Permitted Security Party
Indebtedness.
Limitation on Restricted Payments by Timberlands. (a) Timberlands will
not, and will not permit any of its Restricted Subsidiaries to, directly or
indirectly, make any Restricted Payment, unless at the time of, and
immediately after giving effect to, the proposed Restricted Payment (the
amount of any such Restricted Payment, if other than cash, as determined by
the Board of Directors of Timberlands, whose determination shall be
conclusive and evidenced by a Board Resolution), (1) no Default or Event of
Default shall have occurred and be continuing, (2) the Company could incur at
least $1.00 of additional Indebtedness (other than Permitted Indebtedness)
pursuant to the "Limitation on Indebtedness" covenant relevant to the Company
and (3) the aggregate amount of all Restricted Payments by Timberlands
declared or made after the date of the Indenture shall not exceed the sum of:
(A) 50% of the Consolidated Adjusted Net Income of Timberlands accrued on
a cumulative basis during the period beginning on the first day of
Timberlands' first fiscal quarter after the date of the Indenture and
ending on the last day of Timberlands' last fiscal quarter ending prior to
the date of such proposed Restricted Payment (or, if such aggregate
cumulative Consolidated Adjusted Net Income shall be a loss, minus 100% of
such loss); plus
(B) 75% of the aggregate net cash proceeds received after the date of the
Indenture by Timberlands as capital contributions or from the issuance or
sale (other than to any Subsidiary) of shares of Qualified Capital Stock
of Timberlands (including upon the exercise of options, warrants or
rights) or warrants, options or rights to purchase shares of Qualified
Capital Stock of Timberlands; provided that, after the date upon which the
Company shall have reduced its Total Committed Debt to an amount that is
not greater than $105 million, such calculation shall be adjusted to 100%
of the aggregate net cash proceeds of such transactions occurring after
such date; plus
(C) 75% of the aggregate net cash proceeds received after the date of the
Indenture by Timberlands from the issuance or sale (other than to any
Subsidiary) of debt securities or shares of Redeemable Capital Stock that
have been converted into or exchanged for shares of Qualified Capital
Stock of Timberlands, to the extent such securities were originally sold
for cash, together with the aggregate net cash proceeds received by
Timberlands at the time of such conversion or exchange; provided that,
after the date upon which the Company shall have reduced its Total
Committed Debt to an amount that is not greater than $105 million, such
calculation shall be adjusted to 100% of the aggregate net proceeds of
such transactions occurring after such date; plus
(D) to the extent not otherwise included in the Consolidated Adjusted Net
Income of Timberlands, an amount equal to the net reduction in Investments
(other than reductions in Permitted Investments) in Unrestricted
Subsidiaries resulting from the payments in cash of interest on
Indebtedness, dividends, repayments of loans or advances, or other
transfers of assets, in each case to Timberlands or a Restricted
Subsidiary
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after the date of the Indenture from any Unrestricted Subsidiary or from
the redesignation of an Unrestricted Subsidiary as a Restricted Subsidiary
(valued in each case as provided in the definition of Investment), not to
exceed the total amount of Investments (other than Permitted Investments)
in such Unrestricted Subsidiary by Timberlands and its Restricted
Subsidiaries.
(b) Notwithstanding paragraph (a) above, Timberlands may take the
following actions so long as no Default or Event of Default shall have
occurred and be continuing:
(i) the payment of any dividend or the making of any distribution within
60 days after the date of declaration thereof, if at such date of
declaration the payment of such dividend or such distribution would have
complied with the provisions of paragraph (a) above and such payment will
be deemed to have been paid on such date of declaration for purposes of
the calculation required by paragraph (a) above;
(ii) the purchase, redemption or other acquisition or retirement for
value of any shares of Capital Stock of Timberlands in exchange for, or
out of the net cash proceeds of a substantially concurrent issuance and
sale (other than to any Subsidiary) of, shares of Qualified Capital Stock
of Timberlands;
(iii) the purchase, redemption, defeasance or other acquisition or
retirement for value of any Subordinated Indebtedness of Timberlands in
exchange for, or out of the net cash proceeds of a substantially
concurrent issuance and sale (other than to any Subsidiary) of, shares of
Qualified Capital Stock of Timberlands;
(iv) the purchase, redemption, defeasance or other acquisition or
retirement for value of Subordinated Indebtedness of Timberlands in
exchange for, or out of the net cash proceeds of a substantially
concurrent incurrence (other than to a Subsidiary) of, new Subordinated
Indebtedness of Timberlands so long as (A) the principal amount of such
new Indebtedness does not exceed the principal amount (or, if such
Subordinated Indebtedness being refinanced provides for an amount less
than the principal amount thereof to be due and payable upon a declaration
of acceleration thereof, such lesser amount as of the date of
determination) of the Subordinated Indebtedness being so purchased,
redeemed, defeased, acquired or retired, plus the lesser of the amount of
any premium required to be paid in connection with such refinancing
pursuant to the terms of the Subordinated Indebtedness being refinanced or
the amount of any premium reasonably determined by Timberlands as
necessary to accomplish such refinancing, plus, in either case, the amount
of expenses of Timberlands incurred in connection with such refinancing,
(B) such new Subordinated Indebtedness is subordinated to the Notes to the
same extent as such Subordinated Indebtedness so purchased, redeemed,
defeased, acquired or retired and (C) such new Subordinated Indebtedness
has (x) an Average Life either (I) longer than the Average Life of the
Notes or (II) equal to or greater than the Average Life of the
Subordinated Indebtedness that is being purchased, redeemed, defeased,
acquired or retired and (y) a final Stated Maturity of principal either
(I) later than the final Stated Maturity of principal of the Notes or (II)
no earlier than the Subordinated Indebtedness being purchased, redeemed,
defeased, acquired or retired;
(v) the payment by Timberlands of certain amounts on account of that
portion of the federal, state, local and foreign income tax liability of
the direct and indirect equityholders that is attributable to their
interests in Timberlands;
(vi) the payment by Timberlands of any dividend or distribution to
Brant-Allen (A) to enable Brant-Allen to repay or prepay all or a portion
of principal, premium or interest on the Indebtedness under the
Timberlands Loan or (B) from the proceeds of any Asset Sale by Timberlands
to enable Brant-Allen to repay or prepay all or a portion of the
principal, premium or interest on Indebtedness under the Timberlands Loan
or Indebtedness of the Company in accordance with paragraph (b) under the
"Limitation on Sale of Assets" covenant; and
(vii) the payment of a distribution by Timberlands on the Closing Date to
Brant-Allen (A) to cover or recover expenses incurred on behalf of the
Credit Parties and the escrow deposit by Brant-Allen in connection with
the Acquisition, the Timberlands Acquisition and the related financings
and (B) in an amount equal to the total federal, state, local and foreign
tax liabilities of Peter Brant and Joseph Allen arising as a result of
their indirect ownership of equity interests in Timberlands' predecessor
during 1997 through the Closing Date, as calculated by Timberlands' Vice
President of Finance and recalculated by Timberlands' independent
accountants; provided that such distribution shall not exceed an aggregate
of $5.3 million.
The actions described in clauses (i), (ii) and (iii) of this paragraph (b)
shall be Restricted Payments that shall be permitted to be taken in
accordance with this paragraph (b) but shall reduce the amount that would
otherwise be
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available for Restricted Payments under clause (3) of paragraph (a) above and
the actions described in clauses (iv), (v), (vi) and (vii) of this paragraph
(b) shall be Restricted Payments that shall be permitted to be taken in
accordance with this paragraph (b) and shall not reduce the amount that would
otherwise be available for Restricted Payments under clause (3) of paragraph
(a).
(c) In computing Consolidated Adjusted Net Income of Timberlands under
paragraph (a) above, (1) Timberlands shall use audited financial statements
for the portions of the relevant period for which audited financial
statements are available on the date of determination and unaudited financial
statements and other current financial data based on the books and records of
Timberlands for the remaining portion of such period and (2) Timberlands
shall be permitted to rely in good faith on the financial statements and
other financial data derived from the books and records of Timberlands that
are available on the date of determination.
Limitation on Certain Restricted Payments by Soucy Inc. Soucy Inc. will
not make any Soucy Restricted Payment unless, immediately after giving effect
to such Soucy Restricted Payment, the Consolidated Tangible Net Worth of
Soucy Inc. will be equal to or greater than Cdn$32.0 million; provided that
this covenant shall not apply to (i) any dividends or distributions by Soucy
Inc. to Brant-Allen in order to repay Indebtedness of Brant-Allen in
accordance with the "Limitation on Sales of Collateral Stock and Certain
Other Transactions" covenant or the "Limitation on Sale of Assets" covenant
or (ii) the payment by Soucy Inc. of management, transportation, sales and
royalty fees to Brant-Allen in accordance with clause (b)(v) under the
"Limitation on Transactions with Affiliates" covenant.
Limitation on Liens. Each of the Security Parties will not, and will not
permit any of its Restricted Subsidiaries to, directly or indirectly, create,
incur, assume or suffer to exist any Lien of any kind (other than Permitted
Liens) on or with respect to any of its property or assets, including any
shares of stock or indebtedness of any Restricted Subsidiary, whether owned
at the date of the Indenture or thereafter acquired, or any income, profits
or proceeds therefrom, or assign or otherwise convey any right to receive
income thereon.
Limitation on Guarantees of Company Indebtedness by the Security Parties
and Their Restricted Subsidiaries. (a) Each of the Security Parties will not,
and will not permit any of its Restricted Subsidiaries, directly or
indirectly, to guarantee, assume or in any other manner become liable for the
payment of any Indebtedness of the Company; provided that such Security Party
or such Restricted Subsidiary may do so if (i) (A) in any case when such
entity is not then already a Guarantor, such entity simultaneously executes
and delivers a supplemental indenture to the Indenture providing for a
Guarantee of payment of the Notes by such entity and (B) with respect to any
guarantee of Subordinated Indebtedness of the Company by any such entity, any
such guarantee shall be subordinated to such entity's Guarantee with respect
to the Notes at least to the same extent as such Subordinated Indebtedness of
the Company is subordinated to the Notes and (ii) such Restricted Subsidiary
waives and will not in any manner whatsoever claim or take the benefit or
advantage of, any rights of reimbursement, indemnity or subrogation or any
other rights against the Company or any other Restricted Subsidiary of the
Company as a result of any payment by such Restricted Subsidiary under its
Guarantee.
(b) Notwithstanding the foregoing, any Guarantee of the Notes created
pursuant to the provisions described in the foregoing paragraph (a) shall
provide by its terms that it shall be automatically and unconditionally
released and discharged upon the release by the holders of the Indebtedness
of the Company described in the preceding paragraph of their guarantee by
such Restricted Subsidiary (including any deemed release upon payment in full
of all obligations under such Indebtedness), at a time when (A) no other
Indebtedness of the Company has been guaranteed by such Restricted Subsidiary
or (B) the holders of all such other Indebtedness which is guaranteed by such
Restricted Subsidiary also release their guarantee by such Restricted
Subsidiary (including any deemed release upon payment in full of all
obligations under such Indebtedness).
CERTAIN COVENANTS OF BRANT-ALLEN
The Indenture contains, among others, the following covenants with respect
to Brant-Allen:
Limitation on Sales of Collateral Stock and Certain Other
Transactions. (a) Brant-Allen will not, and will not permit any of its
Subsidiaries or other Affiliates to, directly or indirectly, (i) sell, or
agree to sell, any of the shares of Capital Stock of Timberlands or Soucy
Inc., (ii) create, incur, assume, or suffer to exist any Lien of any kind
(other than Liens incurred in connection with the Bank Credit Agreement, the
Timberlands Loan or the Notes) on or with
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respect to the shares of Capital Stock of Timberlands or Soucy Inc. or (iii)
permit Timberlands or Soucy Inc., in a single transaction or through a series
of related transactions, to consolidate with or merge with or into any other
Person or sell, assign, convey, transfer, lease or otherwise dispose of all
or substantially all of its properties and assets to any other Person or
Persons.
(b) Notwithstanding the foregoing, Brant-Allen may allow the following:
(i) Brant-Allen may, directly or indirectly, sell, convey, transfer or
otherwise dispose of all of (but not less than all of) the shares of
Capital Stock of either of the Security Parties for cash;
(ii) Brant-Allen may, directly or indirectly, sell, convey, transfer or
otherwise dispose of all or any portion of its shares of Capital Stock in
Timberlands (and Brant-Allen may permit Timberlands to sell, convey,
transfer or otherwise dispose of all or substantially all of its assets)
in exchange for consideration consisting of the shares of Capital Stock of
another entity or of a combination of cash and the shares of Capital Stock
of another entity, but only if (A) such entity is required to file (and is
filing) reports pursuant to Section 12 or Section 15 of the Securities
Exchange Act of 1934, (B) such shares of Capital Stock are freely
tradeable on a national securities exchange (as such term is defined in
Section 6 of the Exchange Act) or automated quotation system, or can
become freely tradeable on such exchange or quotation system within 90
days of receipt by Brant-Allen of such Capital Stock, (C) such entity has
a Total Market Value of Equity of not less than $250 million and (D) the
Indebtedness, if any, of such entity is rated Investment Grade; and
(iii) Any transaction or transactions (other than those specified in (i)
and (ii) above) complying with the provisions of "Consolidation, Merger
and Sale of Assets" below; provided that the consideration to Brant-Allen
for such transaction is cash and/or shares of Capital Stock of the
Surviving Entity;
provided that (x) the Net Cash Proceeds, if any, of any such transaction
shall be utilized to repay Indebtedness of the Credit Parties in the same
order of priority as provided for the Net Cash Proceeds of the Asset Sales of
Timberlands or Soucy Inc., as the case may be, under paragraph (b) of the
"Limitations on Sale of Assets" covenant (and that any such Net Cash Proceeds
that are not so utilized shall be treated as Excess Proceeds of an Asset Sale
by the relevant Security Party under such covenant); (y) if the Surviving
Entity of such transaction is not one of the Security Parties, Brant-Allen
causes the shares of Capital Stock of the Surviving Entity that are
beneficially owned, directly or indirectly, by Brant-Allen or the Permitted
Holders to become subject to a Lien in favor of the Trustee on behalf of the
Noteholders that is at least of the same ranking as the Lien securing the
shares of Capital Stock of the applicable Security Party prior to such
transaction or series of transactions; provided that Brant-Allen may
subsequently sell, convey, transfer or otherwise dispose of all or a portion
of such shares of Capital Stock (and the Trustee shall release the Lien
secured by such shares of Capital Stock immediately prior to such sale,
conveyance, transfer or other disposal) if the Net Cash Proceeds of such
transactions are utilized in accordance with clause (x) of this proviso; and
(z) no transaction may be concluded in accordance with the foregoing if any
such transaction shall involve the two Security Parties and the Surviving
Entity shall be Soucy Inc.
Limitation on Proceeds of Asset Sales by Subsidiaries. Brant-Allen shall
utilize all dividends or distributions made to it from the Credit Parties
from the Net Cash Proceeds of Asset Sales by such Credit Parties, after
deducting the amount of any federal, state, local and foreign taxes owed by
Brant-Allen or its owners as a result of such Asset Sales, dividends or
distributions, to repay Indebtedness of the Credit Parties as provided in
clause (b) or (c) under the "Limitations on Sale of Assets" covenant.
CERTAIN COVENANTS OF ALL OF THE CREDIT PARTIES
Limitation on Issuances and Sales of Capital Stock of Subsidiaries. Each
of the Credit Parties (i) will not permit any of its Subsidiaries to issue
any Capital Stock (other than to such Credit Party or a wholly owned
Subsidiary) and (ii) will not permit any Person (other than such Credit Party
or a wholly owned Subsidiary) to own any Capital Stock of any of its
Subsidiaries; provided that this covenant shall not apply to the ownership by
the partners of Soucy Inc. of their partnership interests in Soucy Partners
or any joint venture established by Timberlands pursuant to paragraph (d) of
the "Limitation on Sale of Assets" covenant.
Limitation on Transactions with Affiliates. (a) Each of the Credit Parties
will not, and will not permit any of its Restricted Subsidiaries to, directly
or indirectly, enter into or suffer to exist any transaction or series of
related transactions (including, without limitation, the sale, purchase,
exchange or lease of assets, property or services) with,
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or for the benefit of, any Affiliate of such Credit Party or any of its
Restricted Subsidiaries (other than such Credit Party or a wholly owned
Restricted Subsidiary of such Credit Party) unless (i) such transaction or
series of transactions is on terms that are no less favorable to such Credit
Party or such Restricted Subsidiary, as the case may be, than those that
could have been obtained in an arm's-length transaction with third parties
that are not Affiliates, (ii) with respect to any transaction or series of
related transactions involving aggregate consideration equal to or greater
than $1.0 million, such Credit Party delivers an officers certificate to the
Trustee certifying that such transaction or series of transactions complies
with clause (i) above and such transaction or series of related transactions
has been approved by a majority of the Disinterested Directors of such Credit
Party or, in the event no members of the Board of Directors of such Credit
Party are Disinterested Directors with respect to any transaction or series
of transactions included in this clause (ii), such Credit Party will obtain a
written opinion from a nationally recognized investment banking firm
certifying that such transaction or series of related transactions is fair to
such Credit Party or its Restricted Subsidiary, as the case may be, from a
financial point of view and (iii) with respect to any transaction or series
of related transactions including aggregate consideration in excess of $5.0
million, such Credit Party will obtain a written opinion from a nationally
recognized investment banking firm to the effect set forth in the preceding
clause (ii).
(b) The foregoing provisions in paragraph (a) will not restrict (i) any
Credit Party from paying reasonable and customary regular compensation and
fees, expense reimbursement and customary indemnification to directors of
such Credit Party or any of its Restricted Subsidiaries who are not employees
of such Credit Party or any such Restricted Subsidiary; (ii) transactions
pursuant to the Wood Supply Agreement and the Elebash Agreement, in each
case, as in effect on the date of the Indenture which (A) comply with clause
(i) of the foregoing paragraph (a) and (B) are in the ordinary course of
business; (iii) transactions pursuant to the Management Services Agreement
for aggregate payments by the Company to Brant-Allen (or any of its
Subsidiaries or Affiliates) in an amount per annum not in excess of 3% of the
revenues (net of transportation costs) of the Company in the applicable
fiscal year; provided that (A) at all times, up to 33 1/3% of such fees may
be paid by the Company to Brant-Allen in cash and (B) the remainder of such
fees may be paid by the Company to Brant-Allen in cash only at such times as
such payment is permitted under the "Limitation on Restricted Payments"
covenant relevant to the Company and, at all other times, only in the form of
Capital Stock of the Company or Indebtedness of the Company if such
Indebtedness shall (w) be subordinated in right of payment to the Notes, (x)
bear no interest, (y) not require principal payments of any kind on such
Indebtedness to be repaid prior to the Stated Maturity of the Notes, and (z)
contain no provisions for remedies (including, without limitation, any
defaults or any other provisions that would result in the acceleration of the
maturity of such Indebtedness); (iv) the payment by Soucy Inc. of management,
transportation, sales and royalty fees to Brant-Allen (or any of its
Subsidiaries or Affiliates) in an amount per annum not in excess of 9.73% of
the consolidated sales (net of transportation costs) of Soucy Inc. in the
applicable year; (v) the payment by Soucy Partners of management,
transportation, sales and royalty fees to Soucy Inc. in an amount per annum
not in excess of 3% of the cumulative annual sales (net of transportation
costs) of Soucy Partners; (vi) the sales and marketing of newsprint by
Brant-Allen for, or on behalf of, Soucy Inc. and its Subsidiaries consistent
with past practice or in the ordinary course of business; and (vii)
Restricted Payments that are permitted by the provisions of the Indenture
described above under the "Limitation on Restricted Payments" covenant
applicable to the Company or Timberlands, as the case may be.
Limitation on Sale of Assets. (a) Each of the Credit Parties will not, and
will not permit any of its Restricted Subsidiaries to, consummate any Asset
Sale unless (i) the consideration received by such Credit Party or such
Restricted Subsidiary for such Asset Sale is not less than the Fair Market
Value of the assets sold (as determined by the Board of Directors of such
Credit Party, whose determination shall be conclusive and evidenced by a
Board Resolution) and (ii) the consideration received by such Credit Party or
the relevant Restricted Subsidiary in respect of such Asset Sale consists of
at least 75% cash or Cash Equivalents; provided that the amount of (x) any
liabilities (as shown on the most recent balance sheet of such Credit Party)
of such Credit Party or any of its Restricted Subsidiaries (other than
contingent liabilities and liabilities that are by their terms subordinated
to the Notes or any guarantee thereof) that are assumed by the transferee of
any such assets pursuant to a customary novation agreement that releases such
Credit Party or such Restricted Subsidiary from further liability and (y) any
securities, notes or other obligations received by such Credit Party or any
such Restricted Subsidiary from such transferee that are promptly converted
by such Credit Party or such Restricted Subsidiary into cash or Cash
Equivalents (to the extent of the cash or Cash Equivalents received), shall
be deemed to be cash or Cash Equivalents, as the case may be, for purposes of
this provision; and provided further that (A) as Asset Sales reduce
Timberlands' timberlands below 40,000 acres, the
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Company shall obtain contract rights to purchase amounts of wood sufficient
to replace the wood supply which the Company anticipated receiving from the
timberlands subject to such further sales and (B) Timberlands may consummate
Asset Sales of timberlands in exchange for securities, notes or other
obligations of the transferee in such Asset Sales, so long as it does not
hold, at any one time, in excess of $1.0 million of such securities, notes or
obligations.
(b) If any Credit Party or any Restricted Subsidiary consummates an Asset
Sale, such Credit Party or such Restricted Subsidiary may use the Net Cash
Proceeds thereof, within 12 months after such Asset Sale, (i) to invest (or
enter into a legally binding agreement to invest) in properties and assets to
replace the properties and assets that were the subject of the Asset Sale or
in properties and assets (including Capital Stock or other securities
purchased in connection with the acquisition of Capital Stock or property of
another Person) that will be used in businesses of such Credit Party or such
Restricted Subsidiary and any of their respective Restricted Subsidiaries, as
the case may be, existing on the Closing Date, and that will be reflected as
non-current assets on the balance sheet of the relevant Credit Party or
Restricted Subsidiary, as the case may be, in accordance with GAAP; provided
that, in the case of the Company, such properties and assets shall become
subject to a Lien in favor of the Trustee on behalf of the Noteholders that
is of at least the same ranking as the Lien securing the assets that were
subject to such Asset Sale; or (ii) to repay certain Indebtedness, as
follows:
(A) in the case of the Company or its Restricted Subsidiaries, to
permanently repay or prepay any then outstanding unsubordinated
Indebtedness of the Company or any Indebtedness of its Restricted
Subsidiaries;
(B) in the case of Timberlands or its Restricted Subsidiaries, to make
payments in the following order of priority: (i) to repay or prepay all or
part of the principal, premium, if any, and interest on the Hancock Loan
or to make a dividend payment or a distribution to enable Brant-Allen to
repay or prepay all or part of the principal, premium, if any, and
interest on the Timberlands Loan; and (ii) if the Hancock Loan and the
Timberlands Loan shall have been repaid, to the extent permitted by
applicable law, to make a dividend payment or distribution to enable
Brant-Allen to make a capital contribution to the Company to enable the
Company to permanently reduce Total Committed Debt of the Company under
the Bank Credit Agreement; and
(C) in the case of Soucy Inc. or its Restricted Subsidiaries, to make
payments in the following order of priority: (i) to permanently reduce the
Total Committed Debt of Soucy Inc. or its Restricted Subsidiaries or (ii)
to the extent permitted by applicable law, to make a dividend payment or
distribution, directly or indirectly, to enable Brant-Allen (x) to make a
capital contribution to the Company to enable the Company to permanently
reduce the Total Committed Debt of the Company under the Bank Credit
Agreement, (y) to repay or prepay all or part of the Timberlands Loan, or
(z) to make a capital contribution to Timberlands to enable Timberlands to
repay or prepay all or part of the Hancock Loan.
With respect to clause (i) of this paragraph (b), if any such legally binding
agreement to invest such Net Cash Proceeds is terminated, then such Credit
Party or its Restricted Subsidiary, as the case may be, may, within 90 days
of such termination or within 12 months of such Asset Sale, whichever is
later, invest such Net Cash Proceeds as provided in clause (i) (without
regard to the parenthetical contained in such clause (i) above). The amount
of such Net Cash Proceeds or, in the case of any Asset Sale by Soucy Partners
or its Subsidiaries, Soucy Inc.'s pro rata share of such Net Cash Proceeds
not so used as set forth above in this paragraph (b) constitutes "Excess
Proceeds."
(c) When the aggregate amount of Excess Proceeds with respect to any of
the Credit Parties and its Restricted Subsidiaries exceeds $15.0 million, the
relevant Credit Party shall, within 15 business days, make an offer to
purchase (an "Excess Proceeds Offer") from all holders of Notes, on a pro
rata basis, in accordance with the procedures set forth below, but only if
the consummation of such offer is permitted by applicable law, the maximum
principal amount (expressed as a multiple of $1,000) of Notes that may be
purchased with the Excess Proceeds. The offer price as to each Note shall be
payable in cash in an amount equal to 101% of the principal amount of such
Note plus accrued interest, if any, to the date such Excess Proceeds Offer is
consummated. To the extent that the aggregate principal amount of Notes
tendered pursuant to an Excess Proceeds Offer is less than the Excess
Proceeds, the relevant Credit Party may use such deficiency for general
corporate purposes. If the aggregate principal amount of Notes validly
tendered and not withdrawn by holders thereof exceeds the Excess Proceeds,
Notes to be purchased will be selected on a pro rata basis. Upon completion
of such Exceeds Proceeds Offer, the amount of Excess Proceeds shall be reset
to zero.
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(d) Notwithstanding the foregoing provisions of this covenant, Timberlands
may contribute, sell, convey, transfer, lease or otherwise dispose of all or
a portion of its properties or assets into a joint venture with another
entity in exchange for Capital Stock of such joint venture, but only if (i)
the Indebtedness of the entity that is the joint venture partner of
Timberlands is rated Investment Grade; (ii) an Independent Valuation Agent
shall provide a valuation that, on a pro forma basis, the total amount of the
Indebtedness of such joint venture following the contributions by the joint
venture partners shall not exceed 50% of an amount equal to the sum of its
Equity Value and such total Indebtedness; (iii) dividends or distributions on
the Capital Stock of the joint venture held, directly or indirectly, by
Brant-Allen shall be utilized, after deducting the amount of any federal,
state and local taxes owed by Brant-Allen or its owners as a result of such
dividends or distributions, to repay Indebtedness of Timberlands and the
Company in the same order of priority as provided for the proceeds of Asset
Sales of Timberlands under clause (B) under paragraph (b) of this "Limitation
on Sale of Assets" covenant; (iv) if, following the establishment of the
joint venture it will not be a "Subsidiary" for purposes of the Indenture,
then the joint venture shall nonetheless be required to adhere to the
limitation on the incurrence of Indebtedness by joint ventures provided for
in clause (vii) of paragraph (b) under the definition of Permitted Security
Party Indebtedness; and (v) the Capital Stock in such joint venture owned by
Timberlands become subject to the security interest of the Timberlands
Collateral.
Limitation on Sale and Leaseback Transactions. Each of the Credit Parties
will not, and will not permit any of its Restricted Subsidiaries to, directly
or indirectly, enter into any Sale and Leaseback Transaction with respect to
any property or assets (whether now owned or hereafter acquired), unless (i)
the sale or transfer of such property or assets to be leased is treated as an
Asset Sale and all of the relevant parties comply with the "Limitation on
Sale of Assets" covenant, (ii) such Credit Party or such Restricted
Subsidiary would be permitted to incur Indebtedness under the "Limitation on
Indebtedness" covenant relevant to the applicable Credit Party in the amount
of the Attributable Value of the Indebtedness incurred in respect of such
Sale and Leaseback Transaction and (iii) such Credit Party or such Restricted
Subsidiary would be permitted to grant a Lien under the "Limitation on Liens"
covenant relevant to the applicable Credit Party to secure the amount of the
Attributable Debt in respect of such Sale and Leaseback Transaction.
Limitation on Dividends and Other Payment Restrictions Affecting
Restricted Subsidiaries. Each of the Credit Parties other than Soucy Inc.
will not, and will not permit any of its Restricted Subsidiaries to, directly
or indirectly, create or otherwise cause or suffer to exist or become
effective any encumbrance or restriction of any kind on the ability of any
Restricted Subsidiary to (a) pay dividends, in cash or otherwise, or make any
other distributions on or in respect of its Capital Stock, (b) pay any
Indebtedness owed to such Credit Party or any other Restricted Subsidiary of
such Credit Party, (c) make loans or advances to such Credit Party or any
other Restricted Subsidiary of such Credit Party, (d) transfer any of its
properties or assets to such Credit Party or any other Restricted Subsidiary
of such Credit Party (other than customary restrictions on transfers of
property subject to a Lien permitted under the Indenture that would not
materially adversely affect such Credit Party's ability to satisfy its
obligations under the Notes and the Indenture) or (e) guarantee any
Indebtedness of such Credit Party or any other Restricted Subsidiary of such
Credit Party, except for such encumbrances or restrictions existing under or
by reason of (i) the Indenture, the Bank Credit Agreement, as originally
executed, the Timberlands Loan, the Hancock Loan and any documents or
agreements entered into pursuant thereto or securing obligations thereunder
and any other agreement in effect on the date of the Indenture and listed on
a schedule attached to the Indenture, (ii) applicable law, (iii) customary
provisions restricting subletting or assignment of any lease or assignment of
any other contract to which such Credit Party or any Restricted Subsidiary of
such Credit Party is a party or to which any of their respective properties
or assets are subject, (iv) any agreement or other instrument of a Person
acquired by such Credit Party or any Restricted Subsidiary of such Credit
Party in existence at the time of such acquisition (but not created in
contemplation thereof), which encumbrance or restriction is not applicable to
any Person, or the properties or assets of any Person, other than the Person,
or the property or assets of the Person, so acquired, (v) any encumbrance or
restriction contained in contracts for sales of assets permitted by the
"Limitation on Sale of Assets" covenant with respect to the assets to be sold
pursuant to such contract and (vi) any encumbrance or restriction existing
under any agreement that extends, renews, refinances or replaces the
agreements containing the encumbrances or restrictions in the foregoing
clauses (i) and (iv); provided that the terms and conditions of any such
encumbrances or restrictions are not materially less favorable to the holders
of the Notes than those under or pursuant to the agreement so extended,
renewed, refinanced or replaced.
Limitation on Conduct of Business. Each of the Credit Parties will not,
and will not permit any of its Subsidiaries to, conduct any business other
than the business such Credit Party and its Subsidiaries was conducting on
the Closing Date or businesses reasonably similar or related thereto.
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Limitation on Unrestricted Subsidiaries. Each of the Credit Parties will
not make, and will not permit any of its Restricted Subsidiaries to make, any
Investments in any of its Unrestricted Subsidiaries if, at the time thereof,
the aggregate amount of such Investments would exceed the amount of
Restricted Payments then permitted to be made pursuant to the "Limitation on
Restricted Payments" covenant relevant to such Credit Party. Any Investments
in Unrestricted Subsidiaries permitted to be made pursuant to this covenant
(i) will be treated as the making of a Restricted Payment in calculating the
amount of Restricted Payments made by such Credit Party and (ii) may be made
in cash or property.
Reports. The Company will file on a timely basis with the Commission, to
the extent such filings are accepted by the Commission, and whether or not
the Company has a class of securities registered under the Exchange Act, the
annual reports, quarterly reports and other documents that the Company would
be required to file if it were subject to Section 13 or 15 of the Exchange
Act. The Company will also be required (a) to provide to the Trustee, and to
make available to each holder of Notes promptly upon request, without cost to
such holder, copies of such reports and documents within 15 days after the
date on which the Company files such reports and documents with the
Commission or the date on which the Company would be required to file such
reports and documents if the Company were so required, and (b) if filing such
reports and documents with the Commission is not accepted by the Commission
or is prohibited under the Exchange Act, to make available, at the Company's
cost, copies of such reports and documents to any prospective holder of Notes
promptly upon request.
In addition, the Company will be required to provide to the Trustee, and
to make available to each holder of the Notes promptly upon request, without
cost to such holder, as soon as possible, but in any event within 90 days
after the end of the relevant fiscal year, a copy of the audited financial
statements of each of the Security Parties.
CONSOLIDATION, MERGER AND SALE OF ASSETS
Each of the Credit Parties will not, in a single transaction or through a
series of related transactions, consolidate with or merge with or into any
other Person or sell, assign, convey, transfer, lease or otherwise dispose of
all or substantially all of its properties and assets to any other Person or
Persons or permit any of its Restricted Subsidiaries to enter into any such
transaction or series of related transactions if such transaction or series
of related transactions, in the aggregate, would result in the sale,
assignment, conveyance, transfer, lease or other disposition of all or
substantially all of the properties and assets of such Credit Party and its
Restricted Subsidiaries on a consolidated basis to any other Person or
Persons, unless at the time and immediately after giving effect thereto (i)
either (A) such Credit Party will be the continuing corporation (or limited
liability company) or (B) the Person (if other than such Credit Party) formed
by such consolidation or into which such Credit Party or such Restricted
Subsidiary is merged or the Person that acquires by sale, assignment,
conveyance, transfer, lease or disposition all or substantially all the
properties and assets of such Credit Party and its Restricted Subsidiaries on
a consolidated basis (the "Surviving Entity") (1) will be a corporation,
partnership, limited liability company or trust duly organized and validly
existing under the laws of the United States of America, any state thereof or
the District of Columbia, and (2) will expressly assume, by a supplemental
indenture in form satisfactory to the Trustee, the performance and observance
of every covenant and other obligation of the Indenture on the part of such
Credit Party to be performed or observed; (ii) immediately after giving
effect to such transaction or series of transactions on a pro forma basis
(and treating any obligation of such Credit Party or any Subsidiary incurred
in connection with or as a result of such transaction or series of
transactions as having been incurred at the time of such transaction), no
Default or Event of Default will have occurred and be continuing; (iii)
immediately after giving effect to such transaction or series of transactions
on a pro forma basis (and treating any obligation of such Credit Party or any
Subsidiary incurred in connection with or as a result of such transaction or
series of transactions as having been incurred at the time of such
transaction), the Consolidated Net Worth of such Credit Party (or of the
Surviving Entity if such Credit Party is not the continuing obligor under the
Indenture) is equal to or greater than the Consolidated Net Worth of such
Credit Party immediately prior to such transaction or series of transactions;
(iv) with respect to the Company and Soucy Inc., immediately after giving
effect to such transaction or series of transactions on a pro forma basis (on
the assumption that the transaction or series of transactions occurred on the
first day of the four-quarter period immediately prior to the consummation of
such transaction or series of transactions with the appropriate adjustments
with respect to the transaction or series of transactions being included in
such pro forma calculation), (I) in the case of the Company, the Company (or
the Surviving Entity, if as a result of such transaction or transactions, the
Company does not continue as an obligor under the Indenture) could incur at
least $1.00 of additional Indebtedness (other than Permitted Indebtedness)
under the provisions of the "Limitation on Indebtedness" covenant relevant to
the Company and (II) in the case of Soucy Inc.,
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Soucy Inc. (or the Surviving Entity, if as a result of such transaction or
transactions, Soucy Inc. does not continue as a party under the Indenture)
could incur $1.00 of additional Indebtedness under clause (c)(v) of the
definition of "Permitted Security Party Indebtedness"; (v) each Guarantor, if
any, unless it is the other party to the transactions described above, shall
have by supplemental indenture confirmed that its Guarantee will apply to
such Person's obligations under the Indenture and the Notes; and (vi) if any
of the property or assets of such Credit Party or any of its Subsidiaries
would thereupon become subject to any Lien, the provisions of the "Limitation
on Liens" covenant relevant to the applicable Credit Party are complied with;
provided that the provisions of this "Consolidation, Merger and Sale of
Assets" covenant will not apply to any transaction consummated under (x)
clause (i) or (ii) of paragraph (b) under the "Limitation on Sales of
Collateral Stock and Certain Other Transactions" covenant and (y) paragraph
(d) under the "Limitation on Sale of Assets" covenant.
In connection with any such consolidation, merger, sale, assignment,
conveyance, transfer, lease or other disposition, the relevant Credit Party
or the Surviving Entity shall have delivered to the Trustee, in form and
substance reasonably satisfactory to the Trustee, an officers' certificate
(attaching the authentic computations to demonstrate compliance with clauses
(iii) and (iv) above) and an opinion of counsel, each stating that such
consolidation, merger, sale, assignment, conveyance, transfer, lease or other
disposition, and if a supplemental indenture is required in connection with
such transaction, such supplemental indenture, complies with the requirements
of the Indenture and that all conditions precedent therein provided for
relating to such transaction have been complied with.
EVENTS OF DEFAULT
The following are "Events of Default" under the Indenture:
(i) default in the payment of any interest on any Note when it becomes
due and payable and continuance of such default for a period of 30 days;
(ii) default in the payment of the principal of or premium, if any, on
any Note at its Maturity (upon acceleration, optional redemption, required
purchase or otherwise);
(iii) default in the performance, or breach, of the provisions described
in "Consolidation, Merger and Sale of Assets," the failure to make or
consummate a Change of Control Offer in accordance with the provisions of
the "Purchase of Notes upon a Change of Control" covenant or the failure
to make or consummate an Excess Proceeds Offer in accordance with the
provisions of the "Limitation on Disposition of Proceeds of Asset Sales"
covenant;
(iv) default in the performance, or breach, of any covenant or warranty
of the Company, any Security Party, Brant-Allen or any Guarantor contained
in the Indenture or any Guarantee (other than a default in the
performance, or breach, of a covenant or warranty which is specifically
dealt with in clauses (i), (ii) or (iii) above) and continuance of such
default or breach for a period of 30 days after written notice shall have
been given to the Company by the Trustee or to the Company and the Trustee
by the holders of at least 25% in aggregate principal amount of the Notes
then outstanding;
(v) (A) one or more defaults in the payment of principal of or premium,
if any, on Indebtedness of the Company, any Security Party, any Guarantor
or any of their respective Restricted Subsidiaries aggregating $5.0
million or more, when the same becomes due and payable at the stated
maturity thereof, and such default or defaults shall have continued after
any applicable grace period and shall not have been cured or waived or (B)
Indebtedness of the Company, any Security Party, any Guarantor or any of
their respective Restricted Subsidiaries aggregating $5.0 million or more
shall have been accelerated or otherwise declared due and payable, or
required to be prepaid or repurchased (other than by regularly scheduled
required prepayment prior to the stated maturity thereof);
(vi) any holder of any Indebtedness in excess of $5.0 million in the
aggregate of the Company, any Security Party, any Guarantor or any of
their respective Restricted Subsidiaries shall notify the Trustee of the
intended sale or disposition of any assets of any such party that have
been pledged to or for the benefit of such Person to secure such
Indebtedness or shall commence proceedings, or take action (including by
way of set-off) to retain in satisfaction of any such Indebtedness, or to
collect on, seize, dispose of or apply, any such assets of the Company,
any Security Party, any Guarantor or any of their respective Restricted
Subsidiaries pursuant to the terms of any agreement or instrument
evidencing any such Indebtedness or in accordance with applicable law;
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(vii) one or more final judgments or orders shall be rendered against the
Company, any Security Party, any Guarantor or any of their respective
Restricted Subsidiaries for the payment of money, either individually or
in an aggregate amount, in excess of $5.0 million and shall not be
discharged and either (A) an enforcement proceeding shall have been
commenced by any creditor upon such judgment or order or (B) there shall
have been a period of 30 consecutive days during which a stay of
enforcement of such judgment or order, by reason of a pending appeal or
otherwise, was not in effect;
(viii) any Guarantee ceases in any material respect to be in full force
and effect or is declared null and void or any Guarantor denies that it
has any further liability under any Guarantee, or gives notice to such
effect (other than by reason of the termination of the Indenture or the
release of any such Guarantee in accordance with the Indenture);
(ix) the occurrence of certain events of bankruptcy, insolvency or
reorganization with respect to the Company, any Security Party, any
Guarantor or any of their respective Restricted Subsidiaries;
(x) any of the Collateral Documents shall cease in any material respect
to be in full force and effect or shall cease in any material respect to
give the Collateral Trustee the Liens, rights, powers and privileges
purported to be created thereby; or
(xi) default in the performance, or breach, of any covenant or warranty
of the Issuers, the Security Parties or Brant-Allen under the Collateral
Documents and continuance of such default for a period of 30 days after
written notice thereof shall have been given as provided in clause (iv)
above.
If an Event of Default (other than as specified in clause (ix) above)
shall occur and be continuing, the Trustee, by written notice to the Company,
or the holders of not less than 25% in aggregate principal amount of the
Notes then outstanding may, and the Trustee, upon the written request of such
holders, shall declare the principal of, premium, if any, and accrued
interest on all of the outstanding Notes immediately due and payable, and
upon any such declaration all such amounts payable in respect of the Notes
shall become immediately due and payable. If an Event of Default specified in
clause (ix) above occurs and is continuing, then the principal of, premium,
if any, and accrued interest on all of the outstanding Notes shall ipso facto
become and be immediately due and payable without any declaration or other
act on the part of the Trustee or any holder of Notes.
At any time after a declaration of acceleration under the Indenture, but
before a judgment or decree for payment of the money due has been obtained by
the Trustee, the holders of a majority in aggregate principal amount of the
outstanding Notes, by written notice to the Company and the Trustee, may
rescind such declaration and its consequences if (a) the Issuers have paid or
deposited with the Trustee a sum sufficient to pay (i) all overdue interest
on all Notes, (ii) all unpaid principal of and premium, if any, on any
outstanding Notes that has become due otherwise than by such declaration of
acceleration and interest thereon at the rate borne by the Notes, (iii) to
the extent that payment of such interest is lawful, interest upon overdue
interest and overdue principal at the rate borne by the Notes and (iv) all
sums paid or advanced by the Trustee under the Indenture and the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel; and (b) all Events of Default, other than the non-payment of
amounts of principal of, premium, if any, or interest on the Notes that has
become due solely by such declaration of acceleration, have been cured or
waived. No such rescission shall affect any subsequent default or impair any
right consequent thereon.
The holders of not less than a majority in aggregate principal amount of
the outstanding Notes may, on behalf of the holders of all the Notes, waive
any past or existing defaults under the Indenture, except a continuing
default in the payment of the principal of, premium, if any, or interest on
any Note, or in respect of a covenant or provision which under the Indenture
cannot be modified or amended without the consent of the holder of each Note
outstanding.
If a Default or an Event of Default occurs and is continuing and is known
to the Trustee, the Trustee will mail to each holder of the Notes notice of
the Default or Event of Default within five days after the occurrence
thereof. Except in the case of a Default or an Event of Default in payment of
principal of, premium, if any, or interest on any Notes, the Trustee may
withhold the notice to the holders of such Notes if a committee of its trust
officers in good faith determines that withholding the notice is in the
interests of the holders of the Notes.
The Company is required to furnish to the Trustee annual statements as to
the performance by each of the Credit Parties of its obligations under the
Indenture and as to any default in such performance. The Company is also
required to notify the Trustee within five days of the occurrence of any
Default.
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DEFEASANCE OR COVENANT DEFEASANCE OF INDENTURE
The Issuers may, at their option and at any time, elect to have the
obligations of the Issuers, the Security Parties and any Guarantor upon the
Notes discharged with respect to the outstanding Notes ("defeasance"). Such
defeasance means that the Issuers and any such Guarantor will be deemed to
have paid and discharged the entire Indebtedness represented by the
outstanding Notes and that the Issuers, the Security Parties and any
Guarantor will be deemed to have satisfied all their other obligations under
such Notes and the Indenture insofar as such Notes are concerned except for
(i) the rights of holders of outstanding Notes to receive payments in respect
of the principal of, premium, if any, and interest on such Notes when such
payments are due from the trust referred to below, (ii) the Company's
obligations to issue temporary Notes, register the transfer or exchange of
any Notes, replace mutilated, destroyed, lost or stolen Notes, maintain an
office or agency for payments in respect of the Notes and segregate and hold
such payments in trust, (iii) the rights, powers, trusts, duties and
immunities of the Trustee and (iv) the defeasance provisions of the
Indenture. In addition, the Issuers may, at their option and at any time,
elect to have the obligations of the Issuers, the Security Parties and any
Guarantor released with respect to certain covenants set forth in the
Indenture, and any omission to comply with such obligations will not
constitute a Default or an Event of Default with respect to the Notes
("covenant defeasance"). If covenant defeasance occurs, then certain events
described under "--Events of Default" will no longer constitute an Event of
Default with respect to the Notes.
In order to exercise either defeasance or covenant defeasance, (i) the
Issuers must irrevocably deposit or cause to be deposited with the Trustee,
as trust funds in trust, specifically pledged as security for, and dedicated
solely to, the benefit of the holders of the Notes, cash in United States
dollars, or U.S. Government Obligations (as defined in the Indenture), or a
combination thereof, in such amounts as will be sufficient, in the opinion of
a nationally recognized firm of independent public accountants, to pay and
discharge the principal of, premium, if any, and interest on the outstanding
Notes on the Stated Maturity (or upon redemption, if applicable) of such
principal, premium, if any, or installment of interest; (ii) no Default or
Event of Default with respect to the Notes will have occurred and be
continuing on the date of such deposit or, insofar as an event of bankruptcy
under clause (ix) of "--Events of Default" above is concerned, at any time
during the period ending on the 91st day after the date of such deposit;
(iii) such defeasance or covenant defeasance will not result in a breach or
violation of, or constitute a default under, the Indenture or any material
agreement or instrument to which the Issuers, the Security Parties or any
Guarantor is a party or by which it is bound; (iv) in the case of defeasance,
the Company shall have delivered to the Trustee an opinion of counsel or a
copy of a private letter ruling to the Company from the Internal Revenue
Service, substantially to the effect that the holders of the outstanding
Notes will not recognize income, gain or loss for federal income tax purposes
as a result of such defeasance and will be subject to federal income tax on
the same amounts, in the same manner and at the same times as would have been
the case if such defeasance had not occurred; (v) in the case of covenant
defeasance, the Company shall have delivered to the Trustee an opinion of
counsel or a copy of a private letter ruling to the Company from the Internal
Revenue Service substantially to the effect that the holders of the Notes
outstanding will not recognize income, gain or loss for federal income tax
purposes as a result of such covenant defeasance and will be subject to
federal income tax on the same amounts, in the same manner and at the same
times as would have been the case if such covenant defeasance had not
occurred; and (vi) the Company shall have delivered to the Trustee an
officers certificate and an opinion of counsel, each stating that all
conditions precedent provided for relating to either the defeasance or the
covenant defeasance, as the case may be, have been complied with.
SATISFACTION AND DISCHARGE
The Indenture will cease to be of further effect (except as to surviving
rights of registration of transfer or exchange of the Notes as expressly
provided for in the Indenture) and the Trustee, at the expense of the
Company, will execute proper instruments acknowledging satisfaction and
discharge of the Indenture when (a) either (i) all the Notes theretofore
authenticated and delivered (other than destroyed, lost or stolen Notes which
have been replaced or paid) and (ii) Notes for whose payment money has been
deposited in trust with the Trustee or any Paying Agent or segregated and
held in trust by the Company and thereafter repaid to the Company or
discharged from such trust as provided for in the Indenture have been
delivered to the Trustee for cancellation or (b) all Notes not theretofore
delivered to the Trustee for cancellation (x) have become due and payable,
(y) will become due and payable at Stated Maturity within one year or (z) are
to be called for redemption within one year under arrangements satisfactory
to the Trustee for the giving of notice of redemption by the Trustee in the
name of the Issuers, at the expense of the Company, and the Company, FinCo or
any Guarantor has irrevocably deposited or caused to be deposited with the
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Trustee as trust funds in trust for such purpose an amount sufficient to pay
and discharge the entire Indebtedness on such Notes not theretofore delivered
to the Trustee for cancellation, for principal of, premium, if any, and
interest on the Notes to the date of such deposit (in the case of Notes which
have become due and payable) or to the Stated Maturity or Redemption Date, as
the case may be; (ii) the Company, FinCo or any Guarantor has paid or caused
to be paid all sums payable under the Indenture by the Issuers; and (iii) the
Company has delivered to the Trustee an Officers Certificate and an Opinion
of Counsel, each stating that all conditions precedent provided in the
Indenture relating to the satisfaction and discharge of the Indenture have
been complied with.
AMENDMENTS AND WAIVERS
Modifications and amendments of the Indenture may be made by a
supplemental indenture entered into by the Issuers, the Security Parties,
each Guarantor, if any, and the Trustee with the consent of the holders of a
majority in aggregate outstanding principal amount of the Notes then
outstanding; provided, however, that no such modification or amendment may,
without the consent of the holder of each outstanding Note affected thereby:
(i) change the Stated Maturity of the principal of, or any installment of
interest on, any Note, or reduce the principal amount thereof (or premium, if
any) or the rate of interest thereon or change the coin or currency in which
the principal of any Note or any premium or the interest thereon is payable,
or impair the right to institute suit for the enforcement of any such payment
after the Stated Maturity thereof (or, in the case of redemption, on or after
the Redemption Date); (ii) amend, change or modify the obligation of the
Issuers to make and consummate an Excess Proceeds Offer with respect to any
Asset Sale in accordance with the "Limitation on Sale of Assets" covenant or
the obligation of the Issuers to make and consummate a Change of Control
Offer in the event of a Change of Control in accordance with the "Purchase of
Notes upon a Change of Control" covenant, including, in each case, amending,
changing or modifying any definition relating thereto; (iii) reduce the
percentage in principal amount of outstanding Notes, the consent of whose
holders is required for any such supplemental indenture or the consent of
whose holders is required for any waiver of compliance with certain
provisions of the Indenture; (iv) modify any of the provisions relating to
supplemental indentures requiring the consent of holders or relating to the
waiver of past defaults or relating to the waiver of certain covenants,
except to increase the percentage of outstanding Notes required for such
actions or to provide that certain other provisions of the Indenture cannot
be modified or waived without the consent of the holder of each Note affected
thereby; (v) except as otherwise permitted under "Consolidation, Merger and
Sale of Assets", consent to the assignment or transfer by the Issuers, the
Security Parties or any Guarantor of any of their rights or obligations under
the Indenture; or (vi) amend or modify any of the provisions of the Indenture
or the Notes or any Guarantee of the Notes or any of the Collateral Documents
relating to the Collateral in any manner adverse to the holders of the Notes.
Notwithstanding the foregoing, without the consent of any holder of the
Notes, the Issuers, the Security Parties, Brant-Allen, any Guarantor and the
Trustee may modify or amend the Indenture: (a) to evidence the succession of
another Person to the Issuers, the Security Parties, a Guarantor or any other
obligor on the Notes, and the assumption by any such successor of the
covenants of the Issuers, the Security Parties, Brant-Allen or a Guarantor in
the Indenture and in the Notes and in any Guarantee in accordance with
"--Consolidation, Merger and Sale of Assets"; (b) to add to the covenants of
the Issuers, the Security Parties, Brant-Allen, any Guarantor or any other
obligor upon the Notes for the benefit of the holders of the Notes or to
surrender any right or power conferred upon the Issuers, the Securities
Parties, or any Guarantor or any other obligor upon the Notes, as applicable,
in the Indenture, in the Notes or in any Guarantee; (c) to cure any
ambiguity, or to correct or supplement any provision in the Indenture, the
Notes or any Guarantee which may be defective or inconsistent with any other
provision in the Indenture, the Notes or any Guarantee or make any other
provisions with respect to matters or questions arising under the Indenture,
the Notes or any Guarantee; provided that, in each case, such provisions
shall not adversely affect the interest of the holders of the Notes; (d) to
comply with the requirements of the Commission in order to effect or maintain
the qualification of the Indenture under the Trust Indenture Act; (e) to add
a Guarantor under the Indenture; (f) to evidence and provide the acceptance
of the appointment of a successor Trustee under the Indenture; or (g) to
mortgage, pledge, hypothecate or grant a security interest in favor of the
Trustee for the benefit of the holders of the Notes as additional security
for the payment and performance of obligations of the Issuers, the Security
Parties and any Guarantor under the Indenture, in any property, or assets,
including any of which are required to be mortgaged, pledged or hypothecated,
or in which a security interest is required to be granted to the Trustee
pursuant to the Indenture or otherwise.
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The holders of a majority in aggregate principal amount of the Notes
outstanding may waive compliance with certain restrictive covenants and
provisions of the Indenture.
THE TRUSTEE
The Indenture provides that, except during the continuance of an Event of
Default, the Trustee will perform only such duties as are specifically set
forth in the Indenture. If an Event of Default has occurred and is
continuing, the Trustee will exercise such rights and powers vested in it
under the Indenture and use the same degree of care and skill in its exercise
as a prudent Person would exercise under the circumstances in the conduct of
such Person's own affairs.
The Indenture and provisions of the Trust Indenture Act incorporated by
reference therein contain limitations on the rights of the Trustee
thereunder, should it become a creditor of the Company, to obtain payment of
claims in certain cases or to realize on certain property received by it in
respect of any such claims, as security or otherwise. The Trustee is
permitted to engage in other transactions; provided, however, that if it
acquires any conflicting interest (as defined) it must eliminate such
conflict or resign.
GOVERNING LAW
The Indenture, the Notes, the Collateral Documents (other than the Deed of
Trust and the Hypothec Agreement) are governed by, and will be construed in
accordance with, the laws of the State of New York. The Deed of Trust and the
Hypothec Agreement are governed by, and will be construed in accordance with,
the laws of the Commonwealth of Virginia and the Province of Quebec,
respectively.
ENFORCEABILITY OF JUDGMENTS
Since substantially all of the assets of Soucy Inc. are outside the United
States, any judgment obtained in the United States against Soucy Inc. may not
be collectible within the United States.
The Issuers have been advised by their Canadian counsel, McCarthy
Tetrault, that the laws of the Province of Quebec would permit an action to
be brought in the appropriate courts of the Province of Quebec on a final and
conclusive judgment in personam of any federal or state court located in the
Borough of Manhattan in the City of New York ("New York Court") which is not
impeachable as void or voidable under the internal laws of the State of New
York, for a definite sum of money provided that (i) the New York Court
rendering such judgment had jurisdiction according to Quebec conflicts of
laws rules over the judgment debtor, (ii) such judgment was not obtained by
fraud, was not rendered in contravention of the "fundamental principles of
procedure" and the outcome thereof would not be manifestly inconsistent with
"public order," as such terms are applied by the courts in Quebec or contrary
to any order made by the Attorney General of Canada under the Foreign
Extraterritorial Measures Act (Canada) or any order made by the Competition
Tribunal under the Competition Act (Canada) in respect of certain judgments
(as defined therein); (iii) the procedural rules of commencement and
maintenance of the enforcement proceedings in the Province of Quebec are
observed; (iv) the enforcement of such a judgment does not constitute,
directly or indirectly, the enforcement of foreign revenue, penal or public
laws; (v) there has been compliance with Article 2924 of the Civil Code of
Quebec which provides that a right arising from a judgment must be exercised
within ten years of the date of such judgment; (vi) the enforceability of
such judgment may be limited by applicable bankruptcy, insolvency,
reorganization, arrangement, winding-up, moratorium, or other laws generally
affecting the enforceability of creditors' rights; (vii) pursuant to the
provisions of the Currency Act (Canada), no court in Canada may make an order
expressed in any currency other than lawful money of Canada and a Quebec
court will convert a sum expressed in a foreign currency in a foreign
judgment into Canadian currency at the rate of exchange prevailing on the
date the judgment became enforceable at the place where it was rendered; and
(viii) a Quebec court would retain some residual equitable jurisdiction which
might limit the enforcement of remedies which may have been granted by the
New York Court.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND MEMBERS
No director, officer, employee, incorporator or member of the Issuers, as
such, shall have any liability for any obligations of the Issuers under the
Notes or the Indenture or for any claim based on, in respect of, or by reason
of,
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such obligations or their creation. Each holder of the Notes by accepting a
Note waives and releases all such liability. The waiver and release are part
of the consideration for issuance of the Notes. Such waiver may not be
effective to waive liabilities under the federal securities laws and it is
the view of the Commission that such a waiver is against public policy.
LIMITED RECOURSE
Each of the Soucy Pledge Agreement, the Hypothec Agreement and the
Timberlands Pledge Agreement provide that, anything therein to the contrary
notwithstanding, the Trustee shall have recourse in respect of the Secured
Obligations solely to, in the case of the Soucy Pledge Agreement and the
Hypothec Agreement, the Soucy Collateral (for the purposes of this paragraph
only, as defined in the Soucy Pledge Agreement) and, in the case of the
Timberlands Pledge Agreement, the Timberlands Collateral (for the purposes of
this paragraph only, as defined in the Timberlands Pledge Agreement) and, in
each case, not to Brant-Allen personally or to assets of Brant-Allen other
than the Soucy Collateral or the Timberlands Collateral, as the case may be.
"Secured Obligations" are defined in each such Pledge Agreement (and for the
purposes of this paragraph only) to mean (a) the obligations of the Issuers
under the Indenture and (b) all obligations and liabilities of Brant-Allen
that may arise under or in connection with any Collateral Document to which
Brant-Allen is a party, whether on account of fees, indemnities, cost,
expenses or otherwise that are required to be paid by Brant-Allen pursuant to
the terms thereof.
The Company Pledge and Security Agreement provides that, anything therein
to the contrary notwithstanding, the Trustee shall have recourse in respect
of the Secured Obligations (as defined in the Company Pledge and Security
Agreement) solely to the Collateral (for the purposes of this paragraph only,
as defined in the Company Pledge and Security Agreement) and not to the
Company and each Restricted Subsidiary that becomes a Guarantor
(collectively, the "Grantors" and, each, a "Grantor") personally or to assets
of the Grantors other than the Collateral. "Secured Obligations" are defined
in the Company Pledge and Security Agreement (and for the purposes of this
paragraph only) to mean (a) the obligations of the Issuers under the
Indenture and (b) all obligations and liabilities of the Grantors that may
arise under or in connection with any Collateral Document to which the
Grantors are a party, whether on account of fees, indemnities, cost, expenses
or otherwise that are required to be paid by the Grantor pursuant to the
terms thereof.
CERTAIN DEFINITIONS
"Acquired Indebtedness" means Indebtedness of a Person (a) existing at the
time such Person becomes a Subsidiary or (b) assumed in connection with the
acquisition of assets from such Person. Acquired Indebtedness shall be deemed
to be incurred on the date of the related acquisition of assets from any
Person or the date the acquired Person becomes a Restricted Subsidiary.
"Affiliate" means, with respect to any specified Person, (a) any other
Person directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified Person or (b) any other Person
that owns, directly or indirectly, 5% or more of such specified Person's
Capital Stock or any executive officer or director of any such specified
Person or other Person or, with respect to any natural Person, any Person
having a relationship with such Person by blood, marriage or adoption not
more remote than first cousin. For the purposes of this definition,
"control," when used with respect to any specified Person, means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Asset Sale" means, with respect to any Credit Party, any sale, issuance,
conveyance, transfer, lease or other disposition (including, without
limitation, by way of merger or consolidation) (collectively, a "transfer"),
directly or indirectly, in one or a series of related transactions, of (a)
any Capital Stock of any Restricted Subsidiary of such Credit Party; (b) all
or substantially all of the properties and assets of such Credit Party or its
Restricted Subsidiaries; or (c) any other properties or assets of any
division or line of business of such Credit Party or any Restricted
Subsidiary of such Credit Party, other than in the ordinary course of
business (including, without limitation, transfers of newsprint or other
inventory in the ordinary course of business). For the purposes of this
definition, the term "Asset Sale" shall not include any transfer of
properties or assets or Capital Stock of Restricted Subsidiaries (i) that is
governed by the provisions of the Indenture described under "Consolidation,
Merger, Conveyance, Transfer or Lease" and under "Limitation on Sales of
Collateral Stock and Certain Other Transactions," (ii) between or among any
Credit
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Party and any of its Restricted Subsidiaries in accordance with the terms of
the Indenture or (iii) to an Unrestricted Subsidiary, if permitted under the
relevant "Limitation on Restricted Payments" covenant.
"Attributable Value" means, with respect to any lease of any Person, at
the time of determination, the present value (discounted at the interest rate
implicit in the lease or, if not known, at the incremental borrowing rate of
such Person) of the obligations of the lessee of the property subject to such
lease for rental payments during the remaining term of the lease included in
such transaction, including any period for which such lease has been extended
or may, at the option of the lessor, be extended, or until the earliest date
on which the lessee may terminate such lease without penalty or upon payment
of penalty (in which case the rental payments shall include such penalty),
after excluding from such rental payments all amounts required to be paid on
account of maintenance and repairs, insurance, taxes, assessments, water,
utilities and similar charges.
"Average Life" means, as of the date of determination with respect to any
Indebtedness, the quotient obtained by dividing (a) the sum of the products
of (i) the number of years from the date of determination to the date or
dates of each successive scheduled principal payment (including, without
limitation, any sinking fund requirements) of such Indebtedness multiplied by
(ii) the amount of each such principal payment by (b) the sum of all such
principal payments.
"Bank Credit Agreement" means the credit agreement dated as of the Closing
Date among the Company, the Banks and Toronto Dominion (Texas), Inc., as
agent, as such agreement may be amended, renewed, extended, substituted,
restated, refinanced, restructured, supplemented or otherwise modified from
time to time (including, without limitation, any successive amendments,
renewals, extensions, substitutions, restatements, refinancings,
restructurings, supplements or other modifications of the foregoing);
provided that with respect to any agreement providing for the refinancing of
Indebtedness under the Bank Credit Agreement, such agreement shall be the
Bank Credit Agreement for the purposes of this definition only if a notice to
that effect is delivered by the Company to the Trustee and there shall be at
any time only one instrument that is the Bank Credit Agreement under the
Indenture.
"Bankruptcy Law" means Title 11, United States Bankruptcy Code of 1978, as
amended, or any similar United States federal or state law relating to
bankruptcy, insolvency, receivership, winding-up, liquidation, reorganization
or relief of debtors or any amendment to, succession to or change in any such
law.
"Banks" means the banks and other financial institutions from time to time
that are lenders under the Bank Credit Agreement.
"Brant-Allen" means Brant-Allen Industries, Inc.
"Capital Stock" means, with respect to any Person, any and all shares,
interests, partnership interests, membership interests, participations,
rights in or other equivalents (however designated) of such Person's capital
stock, and any rights (other than debt securities convertible into capital
stock), warrants or options exchangeable for or convertible into such capital
stock, whether now outstanding or issued after the date of the Indenture.
"Capitalized Lease Obligation" means, with respect to any Person, any
obligation of such Person or a Subsidiary of such Person, under a lease of
(or other agreement conveying the right to use) any property (whether real,
personal or mixed) that is required to be classified and accounted for as a
capital lease obligation under GAAP, and, for the purpose of the Indenture,
the amount of such obligation at any date shall be the capitalized amount
thereof at such date, determined in accordance with GAAP.
"Cash Equivalents" means (a) any evidence of Indebtedness with a maturity
of 180 days or less issued or directly and fully guaranteed or insured by the
United States of America or any agency or instrumentality thereof (provided
that the full faith and credit of the United States of America is pledged in
support thereof); (b) certificates of deposit or acceptances or Eurodollar
time deposits with a maturity of 180 days or less of, and overnight bank
deposits with, any financial institution that is a member of the Federal
Reserve System having combined capital and surplus and undivided profits of
not less than $500 million; (c) commercial paper with a maturity of 180 days
or less issued by a corporation that is not an Affiliate of the Company and
is organized under the laws of any state of the United States or the District
of Columbia and rated at least A-1 by S&P or at least P-l by Moody's; and (d)
funds which invest in any of the foregoing.
"Change of Control" means the occurrence of any of the following events:
(a) prior to the initial Public Equity Offering of the Company the gross
proceeds of which shall exceed $100 million, the Permitted Holders are or
become
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the "beneficial owners" (as defined in Rules 13d-3 and l3d-5 under the
Exchange Act, except that a Person shall be deemed to have "beneficial
ownership" of all securities that such Person has the right to acquire,
whether such right is exercisable immediately or only after the passage of
time), directly or indirectly, of less than 51% of the total outstanding
Voting Stock of the Company; or (b) after the initial Public Equity Offering
of the Company referred to in clause (a) above, (i) a "person" or a "group"
(as such terms are defined in Sections 13(d) and 14(c) of the Exchange Act)
other than the Permitted Holders are or become the "beneficial owners" (as
defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that a Person
shall be deemed to have "beneficial ownership" of all securities that such
Person has the right to acquire, whether such right is exercisable
immediately or only after the passage of time), directly or indirectly, of
35% or more of the total outstanding Voting Stock of the Company; or (ii)
during any consecutive two-year period, individuals who at the beginning of
such period constituted the Board of Directors of the Company (together with
any new directors whose election to such Board of Directors, or whose
nomination for election by the stockholders of the Company, was approved by a
vote of more than 50% 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 Company then in office; or (c) the
Company is liquidated or dissolved or adopts a plan of liquidation or
dissolution other than in a transaction which complies with the provisions
described under "Consolidation, Merger, and Sale of Assets."
"Closing Date" means December 1, 1997.
"Collateral" means the Company Collateral, the Timberlands Collateral and
the Soucy Collateral.
"Collateral Documents" means (i) the deed of trust dated as of December 1,
1997 among the Company, the Trustee and the collateral trustee thereunder
(the "Deed of Trust"), (ii) the pledge and security agreement dated as of
December 1, 1997 between the Company and the Trustee (the "Company Pledge and
Security Agreement"), (iii) the pledge agreement concerning the Capital Stock
of Soucy Inc. dated as of December 1, 1997 between Brant-Allen and the
Trustee governed by the law of the State of New York (the "Soucy Pledge
Agreement"), (iv) the hypothec agreement concerning the Capital Stock of
Soucy Inc. dated as of December 1, 1997 between Brant-Allen and the Trustee
governed by Quebec law (the "Hypothec Agreement") and (v) the pledge
agreement concerning the membership interests of Timberlands dated as of
December 1, 1997 between Brant-Allen and the Trustee (the "Timberlands Pledge
Agreement").
"Commodity Hedge Agreements" means any commodity futures contract,
commodity option or other similar agreement or arrangement entered into by
any Credit Party or any of its Subsidiaries designed to protect such Credit
Party or any of its Subsidiaries against fluctuations in the price of
commodities actually at that time used in the ordinary course of business of
such Credit Party or its Subsidiaries.
"Company Collateral" means (x) all of the real property of the Company and
(y) all of the personal property of the Company assigned to the Trustee, now
or in the future, under the Company Pledge and Security Agreement.
"Consolidated Adjusted Net Income" means, with respect to any Credit
Party, for any period, the consolidated net income (or loss) of such Credit
Party and all Restricted Subsidiaries of such Credit Party for such period as
determined in accordance with GAAP, adjusted by excluding, without
duplication, (a) any net after-tax extraordinary gains or losses (less all
fees and expenses relating thereto), (b) any net after-tax gains or losses
(less all fees and expenses relating thereto) attributable to asset
dispositions other than in the ordinary course of business, (c) the portion
of net income (or loss) of any Person (other than such Credit Party or a
Restricted Subsidiary of such Credit Party), including Unrestricted
Subsidiaries, in which such Credit Party or any Restricted Subsidiary of such
Credit Party has an ownership interest, except to the extent of the amount of
dividends or other distributions actually paid to such Credit Party or any
Restricted Subsidiary of such Credit Party in cash dividends or distributions
during such period, (d) the net income (or loss) of any Person combined with
such Credit Party or any Restricted Subsidiary of such Credit Party on a
"pooling of interests" basis attributable to any period prior to the date of
combination, (e) the net income of any Restricted Subsidiary of such Credit
Party and to the extent that the declaration or payment of dividends or
similar distributions by such Restricted Subsidiary is not at the date of
determination permitted, directly or indirectly, by operation of the terms of
its charter or any agreement, instrument, judgment, decree, order, statute,
rule or governmental regulation applicable to such Restricted Subsidiary or
its stockholders, and (f) for purposes of calculating Consolidated Adjusted
Net Income under the relevant "Limitation on Restricted Payments" covenant,
any net income (or loss) from any Restricted Subsidiary that was an
Unrestricted Subsidiary at any time during such period other than any amounts
actually received from such Restricted Subsidiary. The calculation of
Consolidated
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Adjusted Net Income for the Company or any other entity shall be adjusted by
imputing to the Company or such other entity as an expense all of the amounts
paid by the Company or such other entity to holders of direct or indirect
equity interests in the Company or such other entity in respect of their tax
liabilities and as income any amounts recontributed to the Company or such
other entity by direct or indirect holders of equity interests in the Company
or such other entity pursuant to clause (vi) of paragraph (b) under "Certain
Covenants of the Company--Limitation on Restricted Payments" and clause (vii)
of paragraph (b) under "Certain Covenants of the Security Parties--Limitation
on Restricted Payments by Timberlands."
"Consolidated Fixed Charge Coverage Ratio" means, with respect to any
Person, for any period, the ratio of (a) the sum of Consolidated Adjusted Net
Income, Consolidated Interest Expense, Consolidated Tax Expense and
Consolidated Non-cash Charges deducted in computing Consolidated Adjusted Net
Income, in each case, for such period to (b) the sum of (i) Consolidated
Interest Expense and (ii) cash and non-cash dividends for such Person due
(whether or not declared) on Preferred Stock by such Person and any
Restricted Subsidiary of such Person (to any Person other than the Person for
which such ratio is being determined and any wholly owned Restricted
Subsidiary of such Person), in each case for such period.
"Consolidated Income Tax Expense" means, with respect to any Person, for
any period, the provision for federal, state, local and foreign income taxes
of such Person and all Restricted Subsidiaries of such Person for such period
as determined on a consolidated basis in accordance with GAAP.
"Consolidated Interest Expense" means, with respect to any Person, for any
period, without duplication, the sum of (a) the interest expense of such
Person and the Restricted Subsidiaries of such Person for such period,
including, without limitation, (i) amortization of debt discount, (ii) the
net cost of Interest Rate Agreements (including amortization of discounts),
(iii) the interest portion of any deferred payment obligation and (iv)
amortization of debt issuance costs, plus (b) the interest component of
Capitalized Lease Obligations of such Person and its Restricted Subsidiaries
during such period, plus (c) cash and non-cash dividends due (whether or not
declared) on Redeemable Capital Stock by such Person and any Restricted
Subsidiary of such Person (to any Person other than the Person for which such
calculation is being determined and any wholly owned Restricted Subsidiary of
such Person), in each case as determined on a consolidated basis in
accordance with GAAP; provided that (x) the Consolidated Interest Expense
attributable to interest on any Indebtedness computed on a pro forma basis
and (A) bearing a floating interest rate shall be computed as if the rate in
effect on the date of computation had been the applicable rate for the entire
period and (B) which was not outstanding during the period for which the
computation is being made but which bears, at the option of the Person for
which such calculation is being determined, a fixed or floating rate of
interest, shall be computed by applying at the option of the Person for which
such calculation is being determined, either the fixed or floating rate, and
(y) in making such computation, the Consolidated Interest Expense
attributable to interest on any Indebtedness under a revolving credit
facility computed on a pro forma basis shall be computed based upon the
average daily balance of such Indebtedness during the applicable period;
provided further that, notwithstanding the foregoing, the interest rate with
respect to any Indebtedness covered by any Interest Rate Agreements shall be
deemed to be the effective interest rate with respect to such Indebtedness
after taking into account such Interest Rate Agreements.
"Consolidated Net Worth" means, with respect to any Person, at any date,
the stockholders' equity of such Person less the amount of such stockholders'
equity attributable to Redeemable Capital Stock or treasury stock of such
Person and any Restricted Subsidiary of such Person, as determined on a
consolidated basis in accordance with GAAP.
"Consolidated Tangible Net Worth" means, with respect to any Person, as of
any date, Consolidated Net Worth less the sum of the net book amount of all
assets, after deducting any reserves applicable thereto, which would be
treated as intangible under GAAP, as presented on the consolidated financial
statements of such Person as of such date.
"Consolidated Non-cash Charges" means, with respect to any Person, for any
period, the aggregate depreciation, amortization and other non-cash expenses
of such Person and any Restricted Subsidiary of such Person reducing
Consolidated Adjusted Net Income for such period, determined on a
consolidated basis in accordance with GAAP (excluding any such non-cash
charge that requires an accrual of or reserve for cash charges for any future
period).
"Credit Parties" means the Company and the Security Parties.
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"Currency Agreements" means, with respect to any Person, any spot or
forward foreign exchange agreements and currency swap, currency option or
other similar financial agreements or arrangements entered into by such
Person or any of its Restricted Subsidiaries in the ordinary course of
business and designed to protect against or manage exposure to fluctuations
in foreign currency exchange rates.
"Default" means any event that is, or after notice or passage of time or
both would be, an Event of Default.
"Disinterested Director" means, with respect to any transaction or series
of transactions in respect of which the Board of Directors of any of the
Credit Parties is required to deliver a resolution of the Board of Directors
under the Indenture, a member of the Board of Directors of such Credit Party
who does not have any material direct or indirect financial interest in or
with respect to such transaction or series of transactions.
"Elebash Agreement" means the agreement for certain marketing and
consulting services dated as of October 11, 1988 and effective as of July 12,
1988 between the Company and Timberlands, as successors in interest, and The
Elebash Company.
"Equity Value" means, with respect to any Person, an amount which is equal
to (x) the market value of the assets of such Person, less (y) the
liabilities of such Person (including, without limitation, contingent
Indebtedness of such Person).
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Fair Market Value" means, with respect to any asset or property, the sale
value that would be obtained in an arm's-length transaction between an
informed and willing seller under no compulsion to sell and an informed and
willing buyer under no compulsion to buy.
"FinCo" means Bear Island Finance Company II.
"Funded Debt" means, as to any Person, all Indebtedness of such Person
that matures more than one year from the date of its creation or matures
within one year from such date but is renewable or extendible, at the option
of such Person, to a date more than one year from such date or arises under a
revolving credit or similar agreement that obligates the lender or lenders to
extend credit during a period of more than one year from such date,
including, without limitation, all current maturities and current sinking
fund payments in respect of such Indebtedness whether or not required to be
paid within one year from the date of its creation and, in the case of the
Company, Indebtedness in respect of the Bank Credit Agreement.
"Generally Accepted Accounting Principles" or "GAAP" means generally
accepted accounting principles in the United States, consistently applied,
that are in effect on the date of the Indenture.
"guarantee" means, as applied to any obligation, (a) a guarantee (other
than by endorsement of negotiable instruments for collection in the ordinary
course of business), direct or indirect, in any manner, of any part or all of
such obligation and (b) an agreement, direct or indirect, contingent or
otherwise, the practical effect of which is to assure in any way the payment
or performance (or payment of damages in the event of non-performance) of all
or any part of such obligation, including, without limiting the foregoing,
the payment of amounts drawn down by letters of credit.
"Guarantee" means any guarantee of the obligations of the Issuers under
the Indenture and the Notes by any Restricted Subsidiary of the Company in
accordance with the provisions of the Indenture. When used as a verb,
"Guarantee" shall have a corresponding meaning.
"Guarantor" means any Restricted Subsidiary of the Company that incurs a
Guarantee.
"Hancock Loan" means the Timberlands Loan and Maintenance Agreement, dated
as of July 12, 1988, as amended on July 6, 1993, and as further amended as of
December 1, 1997, between Timberlands, as successor in interest, and John
Hancock Mutual Life Insurance Company.
"Indebtedness" means, with respect to any Person, without duplication, (a)
all liabilities of such Person for borrowed money (including overdrafts),
including, without limitation, all obligations, contingent or otherwise, of
such Person in connection with any letters of credit and acceptances issued
under letter of credit facilities, acceptance facilities or other similar
facilities, (b) all obligations of such Person evidenced by bonds, notes,
debentures or other similar instruments, (c) all indebtedness of such Person
created or arising under any conditional
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sale or other title retention agreement with respect to property acquired by
such Person (even if 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), but excluding trade payables arising in the ordinary course
of business, (d) all Capitalized Lease Obligations of such Person, (e) all
obligations of such Person under or in respect of Interest Rate Agreements,
Currency Agreements or Commodity Hedge Agreements, (f) all Indebtedness
referred to in (but not excluded from) the preceding clauses of other Persons
and all dividends of other Persons, the payment of which is secured by (or
for which the holder of such Indebtedness has an existing right, contingent
or otherwise, to be secured by) any Lien upon or with respect to 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 Indebtedness (the amount of such obligation being deemed to
be the lesser of the value of such property or asset or the amount of the
obligation so secured), (g) all guarantees by such Person of Indebtedness
referred to in this definition of any other Person and (h) all Redeemable
Capital Stock of such Person valued at the greater of its voluntary or
involuntary maximum fixed repurchase price plus accrued and unpaid dividends.
For purposes hereof, the "maximum fixed repurchase price" of any Redeemable
Capital Stock which does not have a fixed repurchase price shall be
calculated in accordance with the terms of such Redeemable Capital Stock as
if such Redeemable Capital Stock were purchased on any date on which
Indebtedness shall be required to be determined pursuant to the Indenture,
and if such price is based upon, or measured by, the fair market value of
such Redeemable Capital Stock, such fair market value shall be determined in
good faith by the board of directors of the issuer of such Redeemable Capital
Stock.
"Independent Valuation Agent" means any nationally recognized investment
banking firm, auditing or accounting firm and, with respect to valuation of
timberlands, any entity nationally recognized for providing appraisals or
valuations of timberlands.
"Interest Rate Agreements" means any interest rate protection agreements
and other types of interest rate hedging agreements (including, without
limitation, interest rate swaps, caps, floors, collars and similar
agreements) and other related agreements entered into in the ordinary course
of business and designed to protect against or manage exposure to
fluctuations in interest rates.
"Investment" means, with respect to any Person, any direct or indirect
advance, loan or other extension of credit or capital contribution to (by
means of any transfer of cash or other property to others or any payment for
property or services for the account or use of others), or any purchase,
acquisition or ownership by such Person of any Capital Stock, bonds, notes,
debentures or other securities or evidences of Indebtedness issued or owned
by, any other Person and all other items that would be classified as
investments on a balance sheet prepared in accordance with GAAP. In addition,
the fair market value of the net assets of any Restricted Subsidiary at the
time that such Restricted Subsidiary is designated an Unrestricted Subsidiary
shall be deemed to be an "Investment" made by such Person in such
Unrestricted Subsidiary at such time. "Investments" shall exclude of trade
credit on commercially reasonable terms in accordance with normal trade
practices.
"Investment Grade" means a rating of the Notes by either S&P or Moody's,
each such rating being in one of such agency's four highest generic rating
categories that signifies investment grade (i.e., BBB-(or the equivalent) or
higher by S&P and Baa3 (or the equivalent) or higher by Moody's); provided,
in each case, such ratings are publicly available; provided further that in
the event Moody's or S&P is no longer in existence, for purposes of
determining whether the Notes are rated "Investment Grade", such organization
may be replaced by a nationally recognized statistical rating organization
(as defined in Rule 436 under the Securities Act) designated by the Company,
notice of which designation shall be given to the Trustee.
"Issuers" means the Company and FinCo.
"Lien" means any mortgage, deed of trust, charge, pledge, lien (statutory
or otherwise), privilege, security interest, hypothecation, assignment for
security, claim, or preference or priority or other encumbrance upon or with
respect to any property of any kind, real or personal, movable or immovable,
now owned or hereafter acquired. A Person shall be deemed to own subject to a
Lien any property which such Person has acquired or holds subject to the
interest of a vendor or lessor under any conditional sale agreement, capital
lease or other title retention agreement.
"Maturity" means, with respect to any Note, the date on which any
principal of such Note becomes due and payable as therein or herein provided,
whether at the Stated Maturity with respect to such principal or by
declaration of acceleration, call for redemption or purchase or otherwise.
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"Moody's" means Moody's Investors Service, Inc. and its successors.
"Net Cash Proceeds" means, with respect to any Asset Sale made by any
Credit Party or any of its Restricted Subsidiaries, the proceeds thereof in
the form of cash or Cash Equivalents including payments in respect of
deferred payment obligations when received in the form of, or stock or other
assets when disposed for, cash or Cash Equivalents (except to the extent that
such obligations are financed or sold with recourse to such Credit Party or
any of its Restricted Subsidiaries), net of (i) brokerage commissions and
other fees and expenses (including fees and expenses of legal counsel and
investment banks) related to such Asset Sale, (ii) provisions for all taxes
payable by such Credit Party, any Subsidiary of such Credit Party, or any
direct or indirect owner of such Credit Party or such Subsidiary as a result
of such Asset Sale, (iii) payments made to retire Indebtedness where payment
of such Indebtedness is secured by the assets or properties the subject of
such Asset Sale, (iv) amounts required to be paid to any Person (other than
such Credit Party or any of its Restricted Subsidiaries) owning a beneficial
interest in the assets subject to the Asset Sale and (v) appropriate amounts
to be provided by such Credit Party or any of its Restricted Subsidiaries, as
the case may be, as a reserve required in accordance with GAAP against any
liabilities associated with such Asset Sale and retained by such Credit Party
or any of its Restricted Subsidiaries, as the case may be, after such Asset
Sale, including, without limitation, pension and other post-employment
benefit liabilities, liabilities related to environmental matters and
liabilities under any indemnification obligations associated with such Asset
Sale, all as reflected in an Officers' Certificate delivered to the Trustee.
"Permitted Designee" means (i) a spouse or a lineal descendant by blood or
adoption of a Permitted Holder, (ii) trusts for the benefit of a Permitted
Holder or of any of the persons referred to in clause (i), (iii) in the event
of the death or incompetence of a Permitted Holder, his estate, heirs,
executor, administrator, committee or other personal representative or (iv)
any Person so long as a Permitted Holder owns at least 50% of the voting
power of all classes of the Voting Stock of such Person.
"Permitted Holders" means Peter M. Brant, Joseph Allen and their Permitted
Designees.
"Permitted Indebtedness" means any of the following:
(a) Indebtedness of the Company under the Bank Credit Agreement in an
aggregate principal amount at any one time outstanding not to exceed
$120.0 million less (x) the amount of any permanent reductions made by the
Company in respect of any term loans under the Bank Credit Agreement and
(y) the amount by which the aggregate commitment under any revolving
credit facility under the Bank Credit Agreement at any time has been
permanently reduced.
(b) Indebtedness of the Issuers pursuant to the Notes or of any Guarantor
pursuant to a Guarantee of the Notes;
(c) Indebtedness of the Company or any Restricted Subsidiary of the
Company outstanding on the date of the Indenture and listed on a schedule
thereto;
(d) Indebtedness of the Company owing to any wholly owned Restricted
Subsidiary; provided that any disposition, pledge or transfer of any such
Indebtedness to a Person (other than a disposition, pledge or transfer to
the Company or another wholly owned Restricted Subsidiary) shall be deemed
to be an incurrence of such Indebtedness by the Company not permitted by
this clause (d);
(e) Indebtedness of a Restricted Subsidiary owing to the Company or to a
wholly owned Restricted Subsidiary; provided that (a) any disposition,
pledge or transfer of any such Indebtedness to a Person (other than a
disposition, pledge or transfer to (i) the Company or a wholly owned
Restricted Subsidiary, or (ii) the Banks as security for obligations under
the Bank Credit Agreement by the Company or a wholly owned Restricted
Subsidiary that is a Guarantor) shall be deemed to be an incurrence of
such Indebtedness by such Restricted Subsidiary not permitted by this
clause (e);
(f) guarantees of any Restricted Subsidiary of the Company of
Indebtedness of the Company entered into in accordance with the provisions
of (i) the Bank Credit Agreement or (ii) the "Guarantees by Restricted
Subsidiaries of the Company" covenant;
(g) Indebtedness of the Company under Currency Agreements, Interest Rate
Agreements and Commodity Hedge Agreements entered into in the ordinary
course of business;
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(h) Indebtedness of the Company and its Restricted Subsidiaries
consisting of guarantees, indemnities or obligations in respect of
purchase price adjustments and the balance deferred and unpaid of any
purchase price in connection with the acquisition or disposition of
assets, including, without limitation, shares of Capital Stock;
(i) any renewals, extensions, substitutions, refinancings or replacements
(each, for purposes of this clause, a "refinancing") of any Indebtedness
incurred pursuant to clauses (b) and (c) of this definition, including any
successive refinancings, so long as (i) any such new Indebtedness shall be
in a principal amount that does not exceed the principal amount (or, if
such Indebtedness being refinanced provides for an amount less than the
principal amount thereof to be due and payable upon a declaration of
acceleration thereof, such lesser amount as of the date of determination)
so refinanced, plus the lesser of the amount of any premium required to be
paid in connection with such refinancing pursuant to the terms of the
Indebtedness refinanced or the amount of any premium reasonably determined
as necessary to accomplish such refinancing, plus, in either case, the
amount of expenses incurred in connection with such refinancing, (ii) in
the case of any refinancing of Subordinated Indebtedness, such new
Indebtedness is made subordinate to the Notes at least to the same extent
as the Indebtedness being refinanced and (iii) such new Indebtedness (x)
has an Average Life either (A) longer than the Average Life of the Notes
or (B) equal to or greater than the Average Life of its Indebtedness being
refinanced and (y) a final Stated Maturity either (I) later than the final
Stated Maturity of the Notes or (II) no earlier than the final Stated
Maturity of its Indebtedness being refinanced;
(j) Indebtedness of the Company or its Restricted Subsidiaries (i)
incurred for the purpose of financing (A) all or any part of the purchase
price or cost of construction or improvement of property, plant, machines,
or equipment used in the business of the Company or such Restricted
Subsidiary or (B) construction of environmental-related capital projects
of the Company and its Restricted Subsidiaries, and (ii) representing
purchase money Indebtedness and Capitalized Lease Obligations; provided
that the aggregate amount of Indebtedness incurred or outstanding at any
given time pursuant to this clause (j) shall not exceed $7.0 million at
any one time outstanding;
(k) Indebtedness of the Company owed to Brant-Allen for cash borrowed
from Brant-Allen; provided that such Indebtedness shall (i) be
subordinated in right of payment to the Notes, (ii) bear no interest,
(iii) not require principal payments of any kind on such Indebtedness to
be repaid prior to the Stated Maturity of the Notes, and (iv) contain no
provisions for remedies (including, without limitation, any defaults or
any other provisions that would result in the acceleration of the maturity
of such Indebtedness); provided, however, that such Indebtedness may
contain provisions for an acceleration of the maturity of such
Indebtedness upon the acceleration of the Notes;
(l) Indebtedness of the Company owed to Brant-Allen in connection with
services provided by Brant-Allen to the Company under the Management
Services Agreement to the extent such Indebtedness represents fees in
excess of 1% of the revenues (net of transportation costs) of the Company;
provided that such Indebtedness shall (a) be subordinated in right of
payment to the Notes, (b) bear no interest, (c) not require principal
payments of any kind on such Indebtedness to be repaid prior to the Stated
Maturity of the Notes, and (d) shall contain no provisions for remedies
(including, without limitation, any defaults or any other provisions that
would result in the acceleration of the maturity of such Indebtedness);
(m) Indebtedness of the Company and any Restricted Subsidiary in respect
of (i) performance bonds of the Company or any Restricted Subsidiary or
surety bonds provided by the Company or any Restricted Subsidiary in the
ordinary course of business in connection with the operation of its
business (which Indebtedness shall be measured as the exposure of the
Company or such Restricted Subsidiary under such bonds) and (ii) letters
of credit; provided that the aggregate amount of Indebtedness pursuant to
this clause (m) shall not exceed $1.0 million at any one time outstanding;
and
(n) Indebtedness of the Company in an aggregate principal amount not in
excess of $7.0 million at any one time outstanding.
"Permitted Investments" means, with respect to any Credit Party, any of
the following:
(a) Investments in Cash Equivalents;
(b) Investments in such Credit Party or any wholly owned Restricted
Subsidiary of such Credit Party; provided that, in the case of Soucy Inc.,
Investments in Soucy Partners, Riviere du Loup Finance Ltd. and Arrimage
de Gros Cacouna Inc. shall also be Permitted Investments;
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(c) with respect to the Company, intercompany Indebtedness to the extent
permitted under clause (c) of the definition of "Permitted Indebtedness";
(d) Investments made by a Credit Party or a Restricted Subsidiary thereof
in the form of any stock, bonds, notes, debentures, partnership or joint
venture interests or other securities that are issued by a third party to
such Credit Party or Restricted Subsidiary solely as partial consideration
for the consummation of an Asset Sale that is otherwise permitted under
the covenant described under "Limitation on Sale of Assets";
(e) Investments consisting of loans and advances to officers and
employees of the Company for reasonable travel, relocation and business
expenses in the ordinary course of business;
(f) without duplication, Investments consisting of (i) with respect to
the Company, Indebtedness permitted pursuant to paragraphs (d), (e), (f),
(g), (k), (l) and (m) of the definition of Permitted Indebtedness and (ii)
with respect to the Security Parties, Indebtedness permitted pursuant to
paragraphs (a), (b)(v) and (c)(i), (ii) and (iii) of the definition of
"Permitted Security Party Indebtedness";
(g) Investments existing on the date of this Indenture;
(h) Investments by such Credit Party or any Restricted Subsidiary of such
Credit Party in another Person, if as a result of such Investment (i) such
other Person becomes a wholly owned Restricted Subsidiary of such Credit
Party; or (ii) such other Person is merged or consolidated with or into,
transfers or conveys all or substantially all of its assets to, or is
liquidated into, such Credit Party or a Restricted Subsidiary of such
Credit Party;
(i) Investments by Timberlands in (x) shares of Capital Stock of another
Person pursuant to clause (ii) of paragraph (b) under the "Limitation on
Sales of Collateral Stock and Certain Other Transactions" covenant and (y)
a joint venture pursuant to paragraph (d) under the "Limitation on Sale of
Assets" covenant;
(j) any Investment involved in, or resulting from, the receipt or
collection by Brant-Allen of payment for newsprint or other inventory for,
or on behalf of, any Credit Party for remittance to the beneficiary on the
Business Day following availability of funds for that payment; and
(k) Without duplication of any of the foregoing, Investments in an amount
not to exceed $1.0 million at any one time outstanding.
"Permitted Liens" means, with respect to any Credit Party, the following
types of Liens:
(a) Liens (other than Liens securing Indebtedness under the Bank Credit
Agreement) existing as of the date of the issuance of the Notes;
(b) Liens on property or assets of such Credit Party or any of its
Restricted Subsidiaries securing (i) Indebtedness and other obligations
under the Bank Credit Agreement in a principal amount not to exceed the
principal amount of the outstanding Indebtedness permitted by clause (i)
of the definition of "Permitted Indebtedness" and (ii) Indebtedness and
other obligations under the Timberlands Loan and the Hancock Loan;
(c) Liens on any property or assets of a Restricted Subsidiary of such
Credit Party granted in favor of such Credit Party or any wholly owned
Restricted Subsidiary of such Credit Party;
(d) Liens on any property or assets of such Credit Party or any
Restricted Subsidiary of such Credit Party securing the Notes;
(e) any interest or title of a lessor under any Capitalized Lease
Obligation or Sale and Leaseback Transaction that is permitted to be
incurred pursuant to the terms of the Indenture;
(f) statutory Liens of landlords and carriers, warehousemen, mechanics,
suppliers, materialmen, repairmen or other like Liens arising in the
ordinary course of business of such Credit Party or any Restricted
Subsidiary of such Credit Party and with respect to amounts not yet
delinquent for more than 30 days or being contested in good faith by
appropriate proceeding, if a reserve or other appropriate provision, if
any, as shall be required in conformity with GAAP, shall have been made
therefor;
(g) Liens for taxes, assessments, government charges or claims that are
being contested in good faith by appropriate proceedings promptly
instituted and diligently conducted and if a reserve or other appropriate
provision, if any, as shall be required in conformity with GAAP shall have
been made therefor;
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(h) Liens incurred or deposits made to secure the performance of tenders,
bids, leases, statutory obligations, surety and appeal bonds, government
contracts, performance bonds and other obligations of a like nature
incurred in the ordinary course of business (other than contracts for the
payment of money);
(i) easements, rights-of-way, restrictions and other similar charges or
encumbrances not interfering in any material respect with the business of
such Credit Party or any Restricted Subsidiary of such Credit Party
incurred in the ordinary course of business;
(j) Liens arising by reason of any judgment, decree or order of any court
so long as such Lien is adequately bonded and any appropriate legal
proceedings that may have been duly initiated for the review of such
judgment, decree or order shall not have been finally terminated or the
period within which such proceedings may be initiated shall not have
expired;
(k) Liens securing Acquired Indebtedness created prior to (and not in
connection with or in contemplation of) the incurrence of such
Indebtedness by such Credit Party or any Restricted Subsidiary of such
Credit Party); provided that such Lien does not extend to any property or
assets of such Credit Party or any Restricted Subsidiary of such Credit
Party other than the assets acquired in connection with the incurrence of
such Acquired Indebtedness;
(l) Liens securing obligations of such Credit Party under Interest Rate
Agreements, Commodity Hedge Agreements or Currency Agreements that are
permitted to be incurred pursuant to the terms of the Indenture, or any
collateral for the Indebtedness to which such Interest Rate Agreements,
Commodity Hedge Agreements or Currency Agreements relate;
(m) Liens incurred or deposits made in the ordinary course of business in
connection with workers' compensation, unemployment insurance and other
types of social security and government insurance;
(n) Liens securing reimbursement obligations of such Credit Party with
respect to letters of credit that encumber documents and other property
relating to such letters of credit and the products and proceeds thereof;
(o) Liens arising from purchase money mortgages and purchase money
security interests (including, where applicable, Liens securing
Indebtedness incurred in connection with purchases of timber deeds under
clause (b)(v) under "Permitted Security Party Indebtedness") incurred by
such Credit Party in the normal and ordinary course of the business of
such Credit Party; provided that (i) the related Indebtedness shall not be
secured by any property or assets of such Credit Party or any Restricted
Subsidiary of such Credit Party other than the property and assets so
acquired and (ii) the Lien securing such Indebtedness shall be created
within 60 days of such acquisition;
(p) Liens securing refinancing Indebtedness incurred under clause (i) of
the definition of "Permitted Indebtedness"; provided that such Liens only
extend to the property or assets securing the Indebtedness being
refinanced, such refinanced Indebtedness was previously secured by similar
Liens on such property or assets and the Indebtedness (or other
obligations) secured by such Liens is not increased;
(q) Liens securing Indebtedness incurred under paragraph (c) (v) of the
definition "Permitted Security Party Indebtedness"; and
(r) any extension, renewal or replacement, in whole or in part, of any
Lien described in the foregoing clauses (a) through (q); provided that any
such extension, renewal or replacement shall be no more restrictive in any
material respect than the Lien so extended, renewed or replaced and shall
not extend to any additional property or assets.
"Permitted Security Party Indebtedness" means, with respect to each of the
Security Parties, any of the following:
(a) Indebtedness of such Security Party; provided that the proceeds of
such Indebtedness are utilized by such Security Party, directly or
indirectly, to pay down Indebtedness of the Company;
(b) in addition, with respect to Timberlands, the incurrence of the
following:
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(i) Indebtedness or obligations of Timberlands under the Bank Credit
Agreement, the Hancock Loan, the Timberlands Loan, any agreements or
documents entered pursuant thereto or securing obligations thereunder
and other Indebtedness outstanding on the date of the Indenture and
listed on a schedule thereto;
(ii) Indebtedness of Timberlands and its Restricted Subsidiaries
under Currency Agreements or Commodity Agreements entered into in the
ordinary course of business;
(iii) Capitalized Lease Obligations of Timberlands and its Restricted
Subsidiaries and purchase money obligations of Timberlands and its
Restricted Subsidiaries; provided that the aggregate amount of such
Indebtedness does not exceed $750,000 at any one time outstanding;
(iv) any renewals, extensions, substitutions, refinancings or
replacements (each, for purposes of this clause, a "refinancing") of
any Indebtedness incurred pursuant to clause (i) of paragraph (b) of
this definition, including any successive refinancings, so long as (A)
any such new Indebtedness shall be in a principal amount that does not
exceed the principal amount (or, if such Indebtedness being refinanced
provides for an amount less than the principal amount thereof to be
due and payable upon a declaration of acceleration thereof, such
lesser amount as of the date of determination) so refinanced, plus the
lesser of the amount of any premium required to be paid in connection
with such refinancing pursuant to the terms of the Indebtedness
refinanced or the amount of any premium reasonably determined as
necessary to accomplish such refinancing, plus, in either case, the
amount of expenses of incurred in connection with such refinancing,
(B) in the case of any refinancing of Subordinated Indebtedness, such
new Indebtedness is made subordinate to the Notes at least to the same
extent as the Indebtedness being refinanced and (C) such new
Indebtedness (x) has an Average Life either (I) longer than the
Average Life of the Notes or (II) equal to or greater than the Average
Life of its Indebtedness being refinanced and (y) a final Stated
Maturity either (I) later than the final Stated Maturity of the Notes
or (II) no earlier than the final Stated Maturity of the Indebtedness
being refinanced;
(v) Indebtedness of Timberlands and its Restricted Subsidiaries (i)
for the purpose of financing all or any part of the purchase price of
timber deeds or (ii) in respect of performance bonds of Timberlands
and its Restricted Subsidiaries or surety bonds provided by
Timberlands and its Restricted Subsidiaries received in the ordinary
course of business in connection with the operation of its business
(which Indebtedness shall be measured as the exposure of Timberlands
and such Restricted Subsidiaries under such bonds); provided that the
aggregate amount of Indebtedness incurred pursuant to this sub-clause
(v) shall not exceed $1.5 million outstanding at any given time;
(vi) the incurrence of Indebtedness by Timberlands for the purchase
by it of timberlands acreage; provided that prior to each such
incurrence that individually, or together with other incurrences of
such Indebtedness since the Closing Date or the date of the most
recent valuation required by this clause (vi), as the case may be,
exceeds $3.0 million, Timberlands shall obtain a valuation of a
recognized Independent Valuation Agent certifying that, after the
consummation of such transaction, (x) Timberlands would have an Equity
Value equal to or greater than $28 million (less the aggregate amount
of all income taxes paid by Timberlands since the Closing Date in
connection with the sales of timberlands acreage) and (y) the total
amount of Timberlands' consolidated Indebtedness shall not exceed 70%
of an amount equal to the sum of its Equity Value and such total
Indebtedness; and provided further that all Indebtedness incurred
pursuant to this sub-clause (vi) shall not exceed $10.0 million
outstanding at any given time;
(vii) the incurrence of Indebtedness by a joint venture of
Timberlands created in accordance with paragraph (d) under the
"Limitation on Sales of Assets" covenant; provided that prior to each
such incurrence that, individually, or together with other incurrences
of such Indebtedness since the Closing Date or since the date of the
most recent valuation required by this clause (vii), as the case may
be, exceeds $3.0 million, Timberlands shall obtain a valuation of a
recognized Independent Valuation Agent certifying that, after the
consummation of such transaction, the total amount of such joint
venture's Indebtedness shall not exceed 50% of an amount equal to the
sum of its Equity Value and such total Indebtedness;
(viii) Indebtedness of Timberlands owing to any wholly owned
Restricted Subsidiary; provided that any disposition, pledge or
transfer of any such Indebtedness to a Person (other than a
disposition, pledge or transfer to Timberlands or another wholly owned
Restricted Subsidiary) shall be deemed to be an incurrence of such
Indebtedness by Timberlands not permitted by this clause (viii); and
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(ix) Indebtedness of a wholly owned Restricted Subsidiary owing to
Timberlands or to a wholly owned Restricted Subsidiary; provided that
any disposition, pledge or transfer of any such Indebtedness to a
Person (other than a disposition, pledge or transfer to Timberlands or
a wholly owned Restricted Subsidiary) shall be deemed to be an
incurrence of such Indebtedness by such Restricted Subsidiary not
permitted by this clause (ix).
(c) in addition, with respect to Soucy Inc., the incurrence of the
following:
(i) the incurrence of Indebtedness by Soucy Partners owed to Soucy
Inc. and to the other partners of Soucy Partners for cash borrowed
from such entities; provided that such Indebtedness (A) shall bear no
interest, (B) shall not require principal payments of any kind on such
Indebtedness to be repaid prior to the Stated Maturity of the Notes,
and (C) shall contain no provisions for remedies (including, without
limitation, any defaults or any other provisions that would result in
the acceleration of the maturity of such Indebtedness); provided, that
such Indebtedness may contain provisions for an acceleration of the
maturity of such Indebtedness upon the acceleration of the Notes;
(ii) Indebtedness of Soucy Inc. owing to any Restricted Subsidiary;
provided that any disposition, pledge or transfer of any such
Indebtedness to a Person (other than a disposition, pledge or transfer
to Soucy Inc. or another Restricted Subsidiary) shall be deemed to be
an incurrence of such Indebtedness by Soucy Inc. not permitted by this
clause (ii);
(iii) Indebtedness of a Restricted Subsidiary owing to Soucy Inc. or
to a wholly owned Restricted Subsidiary; provided that any
disposition, pledge or transfer of any such Indebtedness to a Person
(other than a disposition, pledge or transfer to Soucy Inc. or a
wholly owned Restricted Subsidiary) shall be deemed to be an
incurrence of such Indebtedness by such Restricted Subsidiary not
permitted by this clause (iii);
(iv) Indebtedness of Soucy Inc. and its Restricted Subsidiaries under
Currency Agreements, Interest Agreements and Commodity Hedge
Agreements entered into in the ordinary course of business; and
(v) other Indebtedness of Soucy Inc. and its Restricted Subsidiaries
in an aggregate principal amount not in excess of $72.0 million at any
one time outstanding (including Indebtedness outstanding on the
Closing Date); provided that Soucy Inc. will not, and will not permit
any of its Restricted Subsidiaries to, incur any Indebtedness under
this clause (c)(v) for the purposes of financing any dividend or
distribution to its equityholders or to make any Investment in any
Person (other than its Restricted Subsidiaries and in the other Credit
Parties and their Restricted Subsidiaries).
"Person" means any individual, corporation, limited liability company,
partnership, joint venture, association, joint-stock company, trust,
unincorporated organization or government or any agency or political
subdivision thereof.
"Preferred Stock" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated) of such
Person's preferred or preference stock whether now outstanding, or issued
after the Closing Date, and including, without limitation, all classes and
series of preferred or preference stock of such Person.
"Public Equity Offering" means an offer and sale of common stock (which is
Qualified Capital Stock) of the Company pursuant to a registration statement
that has been declared effective by the Commission pursuant to the Securities
Act (other than a registration statement on Form S-8 or otherwise relating to
equity securities issuable under any employee benefit plan of the Company).
"Qualified Capital Stock" of any person means any and all Capital Stock of
such person other than Redeemable Capital Stock.
"Redeemable Capital Stock" means any class or series of Capital Stock
that, either by its terms, by the terms of any security into which it is
convertible or exchangeable or by contract or otherwise, is, or upon the
happening of an event or passage of time would be, required to be redeemed
prior to the final Stated Maturity of the Notes or is redeemable at the
option of the holder thereof at any time prior to such final Stated Maturity,
or is convertible into or exchangeable for debt securities at any time prior
to such final Stated Maturity.
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"Restricted Payment" means, with respect to any Credit Party other than
Soucy Inc., any of the following:
(i) the declaration or payment of any dividend on, or the making of any
distribution to holders of, any shares of the Capital Stock of such Credit
Party (other than dividends or distributions payable solely in shares of
its Qualified Capital Stock or in options, warrants or other rights to
acquire such shares of Qualified Capital Stock);
(ii) the purchase, redemption or other acquisition or retirement for
value, directly or indirectly, of any shares of Capital Stock of such
Credit Party or any Capital Stock of any Affiliate of such Credit Party
(other than Capital Stock of any wholly owned Subsidiary) or any options,
warrants or other rights to acquire such shares of Capital Stock;
(iii) the making of any principal payment on, or the repurchase,
redemption, defeaseance or other acquisition or retirement for value of,
prior to any scheduled principal payment, sinking fund payment or
maturity, any Subordinated Indebtedness;
(iv) the making of any Investment (other than any Permitted Investment)
in any Person; or
(v) the making of any payments to any Affiliate of the Company (other
than the Company and its Subsidiaries) as compensation for management
services, except through the issuance of Qualified Capital Stock of the
Company.
"Restricted Subsidiary" means, with respect to any Credit Party, any
Subsidiary of such Credit Party other than an Unrestricted Subsidiary of such
Credit Party.
"Sale and Leaseback Transaction" means any transaction or series of
related transactions pursuant to which any Credit Party or a Subsidiary of
such Credit Party sells or transfers any property or asset in connection with
the leasing, or the resale against installment payments, of such property or
asset to the seller or transferor.
"S&P" means Standard and Poor's Ratings Group, a division of McGraw-Hill,
Inc. and its successors.
"Security Parties" means Timberlands and Soucy Inc.
"Soucy Inc." means F.F. Soucy, Inc.
"Soucy Collateral" means 65% of the issued and outstanding Capital Stock
of Soucy Inc.
"Soucy Partners" means F.F. Soucy, Inc. & Partners, Limited Partnership.
"Soucy Restricted Payment" means, with respect to Soucy Inc., any of the
following:
(i) the declaration or payment of any dividend on, or the making of any
distribution to holders of, any shares of the Capital Stock of Soucy Inc.
(other than dividends or distributions payable solely in shares of its
Qualified Capital Stock or in options, warrants or other rights to acquire
such shares of Qualified Capital Stock);
(ii) the purchase, redemption or other acquisition or retirement for
value, directly or indirectly, of any shares of Capital Stock of Soucy
Inc. or any Capital Stock of any Affiliate of Soucy Inc. (other than
Capital Stock of any wholly owned Subsidiary) or any options, warrants or
other rights to acquire such shares of Capital Stock; or
(iii) the making of any Investment in Brant-Allen, the Permitted Holders
or any of their Affiliates (other than the other Credit Parties and their
respective Subsidiaries); provided that any Investment involved in, or
resulting from, the receipt or collection by Brant-Allen of payment for
newsprint or other inventory for, or on behalf of, Soucy Inc. for
remittance to the beneficiary on the Business Day following availability
of funds for that payment shall not be an Investment prohibited by this
clause (iii).
"Stated Maturity" means, when used with respect to any Note or any
installment of interest thereon, the date specified in such Note as the fixed
date on which the principal of such Note or such installment of interest is
due and payable, and, when used with respect to any other Indebtedness, means
the date specified in the instrument governing such Indebtedness as the fixed
date on which the principal of such Indebtedness, or any installment of
interest thereon, is due and payable.
"Subordinated Indebtedness" means, with respect to Indebtedness of (i) the
Company, Indebtedness that is expressly subordinated in right of payment to
the Notes, (ii) Timberlands, Indebtedness that is expressly subordi-
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nated to the Hancock Loan (or other Indebtedness of Timberlands of the same
ranking) and (iii) Soucy Inc., Indebtedness that is expressly subordinated to
the Indebtedness of Soucy Inc. under a bank credit agreement with National
Bank of Canada, in effect as of the Closing Date (or other Indebtedness of
Soucy Inc. with the same ranking).
"Subsidiary" means, with respect to any Credit Party, any Person a
majority of the equity ownership or Voting Stock of which is at the time
owned, directly or indirectly, by such Credit Party or by one or more other
Subsidiaries of such Credit Party or by such Credit Party and one or more
other Subsidiaries of such Credit Party.
"Timberlands" means Bear Island Timberlands Company, L.L.C.
"Timberlands Collateral" means all of the issued and outstanding Capital
Stock of Timberlands owned by Brant-Allen.
"Timberlands Loan" means the $35 million senior secured two-year term loan
pursuant to the agreement dated as of the Closing Date among Brant-Allen, the
lenders from time to time parties thereto and Toronto Dominion (Texas), Inc.,
as administrative agent.
"Total Committed Debt" means, with respect to any Credit Party, at any
date, the total Funded Debt of such Credit Party (and its Restricted
Subsidiaries), including, with respect to the Company, without limitation,
the Notes and unused commitments under the Bank Credit Agreement.
"Total Market Value of Equity" of any Person means, as of any date of
determination, the sum of (1) the product of (i) the aggregate number of
outstanding primary shares of common stock of such Person (which shall not
include any options or warrants on, or securities convertible or exchangeable
into, shares of such common stock) and (ii) the average closing price of such
common stock over the 20 consecutive trading days immediately preceding such
date of determination, plus (2) the stated liquidation preference of any
outstanding shares of preferred stock of such Person outstanding as of such
date of determination.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as amended.
"Unrestricted Subsidiary" means, with respect to any Credit Party other
than Soucy Inc., (a) any Subsidiary of such Credit Party that at the time of
determination shall be an Unrestricted Subsidiary (as designated by the Board
of Directors of any such Credit Party, as provided below) and (b) any
Subsidiary of any such Unrestricted Subsidiary. The Board of Directors of any
Credit Party other than Soucy Inc. may designate any Subsidiary (including
any newly acquired or newly formed Subsidiary) to be an Unrestricted
Subsidiary so long as (i) neither such Credit Party nor any Restricted
Subsidiary is directly or indirectly liable for any Indebtedness of such
Subsidiary, (ii) no default with respect to any Indebtedness of such
Subsidiary would permit (upon notice, lapse of time or otherwise) any holder
of any other Indebtedness of such Credit Party or any Restricted Subsidiary
to declare a default on such other Indebtedness or cause the payment thereof
to be accelerated or payable prior to its stated maturity, (iii) any
Investment in such Subsidiary made as a result of designating such Subsidiary
an Unrestricted Subsidiary will not violate the provisions of the "Limitation
on Unrestricted Subsidiaries" covenant, (iv) neither such Credit Party nor
any Restricted Subsidiary has a contract, agreement or obligation of any
kind, whether written or oral, with such Subsidiary other than those that
might be obtained at the time from persons who are not Affiliates of such
Credit Party, and (v) neither such Credit Party nor any Restricted Subsidiary
has any obligation (1) to subscribe for additional shares of Capital Stock or
other equity interest in such Subsidiary, or (2) to maintain or preserve such
Subsidiary's financial condition or to cause such Subsidiary to achieve
certain levels of operating results. Soucy Inc. will not designate any of its
Subsidiaries to be an Unrestricted Subsidiary. Any such designation by the
Board of Directors of such Credit Party shall be evidenced to the Trustee by
filing a board resolution with the Trustee giving effect to such designation.
The Board of Directors of such Credit Party may designate any Unrestricted
Subsidiary as a Restricted Subsidiary if immediately after giving effect to
such designation, there would be no Default or Event of Default under the
Indenture and the Company could incur $1.00 of additional Indebtedness (other
than Permitted Indebtedness) pursuant to the "Limitation on Indebtedness"
covenant relevant to the Company.
"Voting Stock" means any class or classes of Capital Stock pursuant to
which the holders thereof have the general voting power under ordinary
circumstances to elect at least a majority of the board of directors,
managers or trustees of any Person (irrespective of whether or not, at the
time, stock of any other class or classes shall have, or might have, voting
power by reason of the happening of any contingency).
"Wood Supply Agreement" means the agreement for the supply of wood dated
as of the Closing Date between Timberlands and the Company.
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BOOK-ENTRY; DELIVERY AND FORM
The certificates representing the New Notes will be issued in fully
registered form. Except as described in the next paragraph, the New Notes
will initially be represented by a single, permanent global Note, in
definitive, fully registered form without interest coupons (the "Global
Note"). The Global Note will be registered in the name of a nominee of The
Depository Trust Company, New York, New York ("DTC") and deposited on behalf
of the purchasers of the Notes represented thereby with a custodian for DTC
for credit to the respective accounts of the purchasers (or to such other
accounts as they may direct).
Notes held by Holders who elect to take physical delivery of their
certificates instead of holding their interest through the Global Note (and
which are then unable to trade through DTC) (each, a "Non-Global Holder"),
will be in registered form without interest coupons ("Certificated Notes").
Upon the transfer of Certificated Notes initially issued to a Non-Global
Holder, such Certificated Notes will, unless the transferee requests
otherwise or the Global Notes have previously been exchanged in whole for
Certificated Notes, be exchanged for an interest in the Global Note.
DTC has advised the Issuers as follows: DTC is a limited purpose trust
company organized under the laws of the State of New York, a "banking
organization" within the meaning of the New York Banking law, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the
Uniform Commercial Code and a "Clearing Agency" registered pursuant to the
provision of Section 17A of the Exchange Act. DTC was created to hold
securities for its participants and facilitate the clearance and settlement
of securities transactions between participants through electronic book-entry
charges in accounts of its participants, thereby eliminating the need for
physical movement of certificates. Participants include securities brokers
and dealers, banks, trust companies and clearing corporations and certain
other organizations. Indirect access to the DTC system is available to others
such as banks, brokers, dealers and trust companies that clear through or
maintain a custodial relationship with a participant, either directly or
indirectly ("indirect participants").
Upon the issuance of the Global Note, DTC or its custodian will credit, on
its internal system, the respective principal amounts of the individual
beneficial interests in the New Notes represented by the Global Note to the
accounts of persons who have accounts with such depositary. Ownership of
beneficial interests in the Global Note will be limited to persons who have
accounts with DTC ("participants") or persons who hold interests through
participants. Ownership of beneficial interests in the Global Note will be
shown on, and the transfer of that ownership will be effected only through,
records maintained by DTC or its nominee (with respect to interests of
participants) and the records of participants (with respect to interests of
persons other than participants).
So long as DTC or its nominee is the registered owner or holder of the
Global Note, DTC or such nominee, as the case may be, will be considered the
sole record owner or holder of the Notes represented by such Global Note for
all purposes under the Indenture and the Notes. No beneficial owners of an
interest in the Global Note will be able to transfer that interest except in
accordance with the applicable procedures of DTC, in addition to those
provided for under the Indenture.
Payments of the principal of, premium, if any, and interest on the Global
Note will be made to DTC or its nominee, as the case may be, as the
registered owner thereof. Neither the Issuers, the Trustee, nor any paying
agent will have any responsibility or liability for any aspect of the records
relating to or payments made on account of beneficial ownership interests in
the Global Note or for maintaining, supervising or reviewing any records
relating to such beneficial ownership interests.
The Issuers expect that DTC or its nominee, upon receipt of any payment of
principal, premium, if any, or interest in respect of the Global Note, will
credit participants' accounts with payments in amounts proportionate to their
respective beneficial ownership interests in the principal amount of such
Global Notes, as shown on the records of DTC or its nominee. The Issuers also
expect that payments by participants to owners of beneficial interests in
such Global Note held through such participants will be governed by standing
instructions and customary practices, as is now the case with securities held
for the accounts of customers registered in the names of nominees for such
customers. Such payments will be the responsibility of such participants.
Transfers between participants in DTC will be effected in the ordinary way
in accordance with DTC rules and will be settled in immediately available
funds. If a holder requires physical delivery of Certificated Notes for any
reason, including to sell Notes to persons in states which require such
delivery of such Notes or to pledge such Notes, such holder must transfer its
interest in the Global Note in accordance with the normal procedures of DTC
and the procedures set forth in the applicable Indenture.
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Neither the Issuers nor the Trustee will have any responsibility for the
performance by DTC or its participants or indirect participants of their
respective obligations under the rules and procedures governing their
operations.
Subject to certain conditions, any person having a beneficial interest in
the Global Note may, upon request to the Trustee, exchange such beneficial
interest for Notes in the form of Certificated Notes. Upon any such issuance,
the Trustee is required to register such Certificated Notes in the name of,
and cause the same to be delivered to, such person or persons (or the nominee
of any thereof). In addition, if DTC is at any time unwilling or unable to
continue as a depositary for the Global Note and a successor depositary is
not appointed by the Company within 90 days, the Issuers will issue
Certificated Notes in exchange for the Global Note.
Although the Depository has agreed to the foregoing procedures in order to
facilitate transfers of interests in the Global Note among participants of
the Depository, it is under no obligation to perform or continue to perform
such procedures, and such procedures may be discontinued at any time. Neither
the Trustee nor the Issuers will have any responsibility for the performance
by the Depository or its participants or indirect participants of their
respective obligations under the rules and procedures governing their
operations.
EXCHANGE OFFER; REGISTRATION RIGHTS
The following summary of certain provisions of the Registration Rights
Agreement does not purport to be complete and is subject to, and is qualified
in its entirety by reference to, all the provisions of the Registration
Rights Agreement, a copy of which is filed as an exhibit to the Registration
Statement of which this Prospectus forms a part.
Pursuant to the Registration Rights Agreement, the Issuers agreed, for the
benefit of the holders of the Old Notes, at the Issuers' cost, (i) to use
their best efforts to file the Exchange Offer Registration Statement on or
prior to March 1, 1998 with the Commission with respect to the Exchange
Offer, (ii) to use their best efforts to cause the Exchange Offer
Registration Statement to be declared effective under the Securities Act on
or prior to May 30, 1998 and (iii) to use their best efforts to consummate
the Exchange Offer on or prior to June 29, 1998.
Under existing interpretations of the staff of the Commission contained in
several no-action letters to third parties, the New Notes would in general be
freely tradeable after the Exchange Offer without further registration under
the Securities Act. However, any purchaser of Old Notes who is an "affiliate"
of the Issuers or who intends to participate in the Exchange Offer for the
purpose of distributing the New Notes (i) will not be able to rely on the
interpretation of the staff of the Commission, (ii) will not be able to
tender its Old Notes in the Exchange Offer and (iii) must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any sale or transfer of the Old Notes unless such sale or
transfer is made pursuant to an exemption from such requirements.
If, after the date of this Prospectus, any changes in law or the
applicable interpretations of the staff of the Commission do not permit the
Issuers to effect the Exchange Offer, or if for any reason the Exchange Offer
is not consummated by June 29, 1998, or if any holder of the Old Notes (other
than the Initial Purchasers) notifies the Issuers by March 31, 1998 that it
is not eligible to participate in the Exchange Offer, or upon the request of
any Initial Purchaser under certain circumstances, then the Issuers will, at
their cost, (a) as promptly as practicable, file the Shelf Registration
Statement covering resales of the Old Notes, (b) use their best efforts to
cause the Shelf Registration Statement to be declared effective under the
Securities Act by June 29, 1998 and (c) use their best efforts to keep
effective the Shelf Registration Statement until two years after its
effective date (or until one year after such effective date if such Shelf
Registration Statement is filed at the request of any Initial Purchaser). The
Issuers will, if a Shelf Registration Statement is filed, use their
reasonable efforts to provide to each registered holder of the Old Notes
copies of the prospectus which is a part of the Shelf Registration Statement,
notify each such holder when the Shelf Registration Statement for the Notes
has become effective and take certain other actions as are required generally
to permit unrestricted resales of the Notes. A holder of Old Notes that sells
such Old Notes pursuant to the Shelf Registration Statement generally will be
required to be named as a selling securityholder in the related prospectus
and to deliver a prospectus to purchasers, will be subject to certain of the
civil liability provisions under the Securities Act in connection with such
sales and will be bound by the provisions of the Registration Rights
Agreement which are applicable to such a holder (including certain
indemnification obligations). In addition, each holder of the Old Notes will
be required to deliver information to be used in connection with the Shelf
Registration Statement and to provide comments on the Shelf Registration
Statement within the time periods set forth in the Registration Rights
Agreement in order to have its Old Notes included in the Shelf Registration
Statement and to benefit from the provisions regarding additional interest
set forth in the following paragraph.
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If either (i) the Exchange Offer is not consummated or, if required, a
Shelf Registration Statement with respect to the Notes is not declared
effective on or prior to June 29, 1998 or (ii) the Exchange Offer
Registration Statement is declared effective but thereafter ceases to be
effective or usable (each such event, a "Registration Default"), then the per
annum interest rate borne by the Old Notes shall be increased by 0.5% with
respect to the first 90-day period following such Registration Default. The
amount of such additional interest will increase by an additional 0.5% to a
maximum of 1.5% per annum for each subsequent 90-day period until such
Registration Default has been cured. Upon (x) the consummation of the
Exchange Offer or the effectiveness of a Shelf Registration Statement, as the
case may be, after June 29, 1998 or (y) the cure of any Registration Default
described in clause (ii) above, the interest rate borne by the Old Notes from
the date of such consummation or cure, as the case may be, will be reduced to
the original interest rate if the Issuers are otherwise in compliance with
such requirements; provided, however, that if, after any such reduction in
interest rate, a different event specified in clause (i) or (ii) above
occurs, the interest rate will again be increased pursuant to the foregoing
provisions.
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DESCRIPTION OF CERTAIN OTHER INDEBTEDNESS
The following summary does not purport to be complete and will be
qualified in its entirety by reference to the final form of the particular
agreement summarized, copies of which have either been filed as an exhibit to
the Registration Statement of which this Prospectus forms a part or, if not
so filed, will be available upon request from the Company. Capitalized terms
used in the following summary but not otherwise defined in the Prospectus,
will have the meanings given to them in the final form of the agreement.
COMPANY INDEBTEDNESS
THE BANK CREDIT FACILITIES
Concurrently with the issuance of the Old Notes, the Company entered into
a Bank Credit Agreement, which provides for maximum borrowings by the Company
of an aggregate original principal amount of up to $120 million under the
Bank Credit Facilities to be provided by a group of lenders thereunder. The
Bank Credit Facilities consist of: (i) the Revolving Credit Facility,
providing for borrowings by the Company of revolving loans of up to an
aggregate principal amount of $50 million (the "Revolving Loans") and (ii)
the Term Loan Facility, providing for one borrowing by the Company of a term
loan in an original aggregate principal amount of up to $70 million (the
"Term Loan"). The Revolving Loans and the Term Loan are hereinafter
collectively referred to as the "Bank Loans."
Commitment Fees. A commitment fee of up to 0.50% per annum is payable on
the committed but unused portions of the Revolving Credit Facility. This
percentage is expected to be subject to adjustment, based upon the ratio of
the Company's Consolidated Total Debt to Consolidated EBITDA.
Interest. The interest rate for the Bank Loans is based upon, at the
election of the Company, the Eurodollar Rate or the Base Rate, in each case
plus the Applicable Margin. The Applicable Margin is subject to adjustment,
based upon the ratio of the Company's Consolidated Total Debt to Consolidated
EBITDA. The Applicable Margin for that portion of the Term Loan which bears
interest at the Eurodollar Rate is equal to a percentage of up to 3.0% per
annum. The Applicable Margin for Revolving Loans which bear interest at the
Eurodollar Rate is equal to a percentage of up to 2.75% per annum. The
Applicable Margin for that portion of the Term Loan which bears interest (i)
at the Eurodollar Rate is initially set at 3.0% until December 31, 1998 and
(ii) at the Base Rate is initially set at 2.0% until December 31, 1998. The
Applicable Margin for Revolving Loans which bear interest at the Base Rate is
equal to a percentage of up to 1.75% per annum and the Applicable Margin for
that portion of the Term Loan which bears interest at the Base Rate is equal
to a percentage of up to 2.0% per annum.
Repayment. Beginning March 31, 1998, the Revolving Credit Facility is
required to be reduced in 20 equal quarterly installments of $1.25 million
per quarter until the Revolving Credit Facility reaches $25 million.
Beginning March 31, 1998, the Term Loan is required to be repaid in 31 equal
quarterly installments of $175,000 per quarter with the balance due on
December 31, 2005. The Revolving Credit Facility terminates on December 31,
2003.
Prepayments. The Company may permanently terminate the unused portion of
the Revolving Credit Facility in accordance with the terms of the Bank Credit
Facilities. The Company may prepay the Bank Loans in accordance with the
terms of the Bank Credit Facilities. Subject to the provisions of the Bank
Credit Facilities, the Company will be able to, from time to time, borrow,
repay and reborrow under the Revolving Credit Facility.
The Bank Credit Agreement requires all net proceeds from asset sales of
the Company (with certain exceptions) to be applied to repay the Bank Loans
and 75% of Excess Cash Flow (as defined in the Bank Credit Facilities) to be
applied to repay the Bank Loans; provided that, at the end of any fiscal year
commencing with the fiscal year ending December 31, 1998 if the Total
Committed Debt of the Company outstanding is less than $145,000,000, the
percentage of Excess Cash Flow to be applied to repay the Bank Loans will be
reduced to 50%. In addition, the Bank Credit Agreement requires that, subject
to certain exceptions, all net proceeds from (i) the sale or issuance of debt
and the sale or issuance of equity by the Company, and any dividends or
distributions from Timberlands to Brant-Allen (other than permitted tax
distributions and only to the extent there are no amounts outstanding under
the Timberlands Loan), (ii) the sale of equity interests in Timberlands or
the sale of certain assets of Timberlands (less, in each case, certain
amounts required to repay debt of Timberlands and only to the extent there
are no amounts outstanding under the Timberlands Loan) and (iii) the sale or
issuance of equity interests in Soucy, Inc. and the sale of certain of Soucy
Inc. or any of its subsidiaries assets (but only prior to the time the
lenders release their security interest in the shares of Soucy Inc. and
provided such proceeds must be shared pro rata with the lenders
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under the Timberlands Loan) to be applied to prepay the Bank Loans. Any such
mandatory prepayments of the Bank Credit Facilities must be applied, subject
to certain rights of the Term Loan lenders, pro rata to prepay installments
of the Term Loan and prepay installments of the Revolving Loans and
permanently reduce the Revolving Credit Facility until such time as the
Revolving Credit Facility has been reduced to $25 million in accordance with
the terms of the Bank Credit Facilities. At such time as the Revolving Credit
Facility has been reduced to $25 million, any such mandatory prepayment shall
be applied to prepay installments of the Term Loan. Such prepayments and
reductions are to be applied in the forward order of remaining maturities.
Security; Guarantee. The obligations under the Bank Credit Facilities are
guaranteed by: (i) Brant-Allen until Total Committed Debt of the Company is
reduced to $145 million and the Timberlands Loan has been repaid and (ii)
each domestic subsidiary of the Company (other than FinCo). The obligations
under the Bank Credit Facilities are secured by (i) a first priority security
interest in all of the assets, tangible and intangible, of the Company and
its domestic subsidiaries (other than FinCo) (to the extent such assets are
assignable and subject to permitted liens); (ii) a second priority security
interest in 100% of the membership interests in Timberlands; (iii) a first
priority security interest in 65% of the issued and outstanding capital stock
of Soucy Inc. (such lien to be shared pro rata with the lenders under the
Timberlands Financing and to be released when the Timberlands Loan has been
repaid and Total Committed Debt of the Company is reduced to $145 million);
and (iv) a first priority security interest in all of the membership
interests in the Company.
Covenants. The Bank Credit Agreement contains affirmative and negative
covenants typical in facilities of this type, including, among others, the
following: (i) delivery of financial statements and other reports,
projections and compliance certificates; (ii) maintenance of existence and
continuation of business; (iii) compliance with laws; (iv) maintenance of
insurance; (v) notices of default, material litigation, material ERISA events
and other material events; (vi) environmental management; (vii) limitations
on indebtedness; (viii) limitation on liens; (ix) limitation on dividends and
distributions from the Company and its subsidiaries; (x) limitations on
mergers, consolidations and sales of assets; (xi) limitations on investments;
(xii) limitations on payment of the Notes; (xiii) limitations on capital
expenditures and leases; (xiv) limitations on changes in line of business;
and (xv) limitations on amendments to the Company's management contracts.
In addition to the covenants described above, the Bank Credit Agreement
contains financial covenants with respect to (i) Consolidated Total Debt to
Consolidated Total Capitalization; (ii) Current Ratio; (iii) Interest
Coverage and (iv) Fixed Charge Coverage.
Events of Default. The Bank Credit Agreement provides for events of
default typical in facilities of its type, including, among others, the
following: (i) nonpayment of principal, interest, fees or other amounts; (ii)
violation of covenants; (iii) inaccuracy of representations and warranties;
(iv) cross-default of other indebtedness; (v) bankruptcy and other similar
events; (vi) material unsatisfied judgments; (vii) certain ERISA events;
(vii) invalidity of any loan documents or security interests; and (ix) change
in control.
TIMBERLANDS RELATED INDEBTEDNESS
THE TIMBERLANDS LOAN
Concurrent with the Timberlands Acquisition, Brant-Allen entered into a
credit agreement (the "Timberlands Credit Agreement"), which provides for
maximum borrowings by Brant-Allen from a group of lenders thereunder of an
aggregate principal amount of up to $35 million under two facilities: (i) a
term loan facility providing for one borrowing by Brant-Allen of up to $32
million and (ii) a revolving credit facility providing for revolving
borrowings by Brant-Allen of up to $3 million. The borrowings under these two
facilities are collectively referred to herein as the "Timberlands Loan."
Interest. The interest rate for the Timberlands Loan is based upon, at the
election of Brant-Allen, either the Eurodollar Rate or the Base Rate, in each
case, plus a margin. The margin for that portion of the Timberlands Loan
which bears interest at the Eurodollar Rate is 2.75% per annum. The margin
for that portion of the Timberlands Loan that bears interest at the Base Rate
is 1.75% per annum.
Repayment. The entire outstanding principal amount of the Timberlands Loan
will be due and payable on November 24, 1999.
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Prepayments. Brant-Allen may prepay the Timberlands Loan at any time in
accordance with the terms of the Timberlands Credit Agreement. All of the net
proceeds from the sale or issuance of debt by Timberlands or any of its
subsidiaries (subject to certain exceptions) will be required to be applied
to repay the term loan portion of the Timberlands Loan. In addition, all of
the net proceeds from (i) any dividends or distributions from Timberlands to
Brant-Allen (other than permitted tax distributions); (iii) the sale of
equity interests in Timberlands (subject to certain exceptions) and the sale
of certain assets of Timberlands (less certain amounts required to repay
other debt of Timberlands); and (iv) the sale of equity interests in Soucy
Inc. (subject to certain exceptions) and the sale (subject to certain
exceptions) of certain of the assets of Soucy Inc. and its subsidiaries (but
only prior to the date the lenders release their security interest in the
shares of Soucy Inc. and provided such proceeds in clause (iv) must be shared
pro rata with the lenders under the Bank Credit Facilities) must be applied
to repay the term loan portion of the Timberlands Loan. After the term loan
portion of the Timberlands Loan has been repaid in full, all required
prepayment amounts shall be applied towards the reduction of the revolving
portion of the Timberlands Loan.
Security; Guarantee. Brant-Allen's obligations under the Timberlands
Credit Agreement are guaranteed by Timberlands. The obligations under the
Timberlands Credit Agreement are secured by (i) a first priority security
interest in 100% of the issued and outstanding equity interests of
Timberlands; (ii) a first priority security interest in 65% of the issued and
outstanding capital stock of Soucy Inc. (such lien to be shared pro rata with
the lenders under the Bank Credit Facilities); and (iii) a security interest
in cash in an amount at all times equal to the amount of interest to be
payable on the Timberlands Loan for the next twelve months or through
maturity if less.
Covenants. The Timberlands Credit Agreement contains affirmative and
negative covenants typical in facilities of this type, including, among
others, the following: (i) delivery of financial statements and other
reports, projections and compliance certificates; (ii) maintenance of
existence and continuation of business; (iii) compliance with laws; (iv)
maintenance of insurance; (v) notices of default, material litigation,
material ERISA events and other material events; (vi) environmental
management; (vii) limitations or indebtedness; (viii) limitation on liens;
(ix) limitation on dividends and distributions from Timberlands, Brant-Allen
and Soucy Inc.; (x) limitations on mergers, consolidations and sales of
assets; (xi) limitations on investments; (xii) limitations on payment of
other indebtedness (other than certain permitted indebtedness); (xiii)
limitations on changes in line of business; and (xiv) limitations on
amendments to the Company's and Soucy Inc.'s management contracts. In
addition to the covenants described above, the Timberlands Credit Agreement
contains a financial covenant with respect to the ratio of the Administrative
Value (which is a calculation based upon value of land, pre-merchantable
timber and merchantable timber) to the sum of the outstanding principal
balance of the term loan and the outstanding principal balance of the Hancock
Loan.
Events of Default. The Timberlands Credit Agreement contains events of
default typical in facilities of its type, including, among others, the
following: (i) nonpayment of principal, interest, fees or other amounts; (ii)
violation of covenants; (iii) inaccuracy of representations and warranties;
(iv) cross-default of other indebtedness; (v) bankruptcy and other similar
events; (vi) material unsatisfied judgments; (vii) certain ERISA events;
(viii) invalidity of any loan documents or security interests; and (ix)
change in control.
THE HANCOCK LOAN
Concurrent with the closing of the Timberlands Acquisition, Timberlands
renegotiated the terms of its existing $27 million secured term loan with
John Hancock Mutual Life Insurance Company (and paid a related modification
fee) and in connection with the modification received a $3 million advance
from John Hancock Mutual Life Insurance Company bringing the total
outstanding balance to $30 million. The term of the Hancock Loan is now two
years.
Interest. The interest rate for the Hancock Loan is 90 day LIBOR plus
1.75% fixed every 90 days. Interest will be paid quarterly in arrears on the
balance of the unpaid principal amount of the Hancock Loan.
Repayment. The entire principal amount of the Hancock Loan will be due and
payable on December 31, 1999.
Prepayments. Timberlands may prepay the Hancock Loan at any time in
accordance with the terms of the Hancock Credit Agreement, but may be
required to pay a prepayment penalty.
Security. Timberlands' obligations under the Hancock Credit Agreement
continue to be secured by a first priority security interest in 124,662 acres
of Timberlands' land.
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Administrative Requirements. The Hancock Loan requires payment into escrow
for (i) any of the timberland property acquired with the proceeds of the loan
is sold or (ii) the volume of timber cut from the timberland property exceeds
the volume permitted by the lender. The principal balance of the escrow
account may be invested in only certain investments and may be used only to
make principal payments on long-term debt.
Covenants. The Hancock Agreement contains several affirmative and negative
covenants, including, among others, the following: (i) delivery of financial
statements and other reports, projections and compliance certificates; (ii)
maintenance of existence and continuation of business; (iii) compliance with
laws; (iv) maintenance of insurance; (v) notices of default, material
litigation and other material events; (vi) environmental management; (vii)
limitations on indebtedness and contingent obligations; (viii) limitation on
liens; (ix) limitation on dividends and distributions from Timberlands; (x)
limitations on mergers, consolidations and sales of assets; (xi) limitations
on investments; (xii) limitation on transactions with affiliates and
officers; (xiii) limitations on payment and prepayment of other indebtedness;
(xiv) limitations on sale and leaseback arrangements; (xv) limitations on
holding partnership or limited liability interests and entering into joint
ventures; (xvi) requirements to maintain the ratio of the administrative
value of the timberlands to the net principal balance of the Hancock Loan of
at least 1.33 to 1.00; and (xvii) limitations on the cutting or removal of
timber.
Events of Default. The Hancock Credit Agreement provides for events of
default typical in facilities of its type, including, among others, the
following: (i) nonpayment of principal, interest, fees or other amounts; (ii)
violation of covenants; (iii) inaccuracy of representations and warranties;
(iv) cross-default of other indebtedness; (v) bankruptcy and other similar
events; and (vi) material unsatisfied judgments.
TIMBERLANDS LAND FINANCING
BITCO is the maker of two purchase money notes, each secured by the
timberland acquired in connection with its issuance. One note is for
$178,400.00 due in three annual installments on January 31, 1998, 1999 and
2000, with interest at 7% per annum, and the other note will be fully paid by
an installment of $189,250.00, with 6% interest thereon, due on January 1,
1998.
SOUCY INDEBTEDNESS
THE SOUCY INC. BANK CREDIT FACILITIES
Soucy Inc. has entered into a bank credit agreement (the "Soucy Inc. Bank
Credit Agreement") with National Bank of Canada ("NBC"), to provide for
maximum borrowings by Soucy Inc. of revolving loans of up to an aggregate
principal amount of Cdn$3 million (the "Soucy Inc. Revolving Loans"). The
available operating commitment cannot exceed the lesser of Cdn$3 million and
an aggregate amount based on 75% of the net book value of Soucy Inc.'s
receivables plus 50% of the net book value of Soucy Inc.'s finished goods and
raw materials inventory.
Interest. The interest rate for the Soucy Inc. Revolving Loan is based on
(i) the lender's U.S. Prime Rate Basis or Canadian Prime Rate Basis plus 1/4%
or (ii) at LIBOR plus 1 1/4%, at the election of Soucy Inc., payable monthly
in arrears.
Conversion. Soucy Inc. may require that the Soucy Inc. Revolving Loan be
advanced, converted into or continued as banker's acceptances in whole or in
part. Such banker's acceptances will be liable for a stamping fee based on
the product of the face value of the banker's acceptance multiplied by a
fraction, the numerator of which is the product of the number of days of the
selected maturity period for the banker's acceptance times 0.0125 and the
denominator of which is 365.
Soucy Inc. may request the conversion of the whole or part of the Soucy
Inc. Revolving Loan into advances denominated in Canadian dollars or U.S.
dollars or that the applicable rate of interest be Canadian Prime Rate Basis
or U.S. Prime Rate Basis or LIBOR Basis.
Repayment. The Soucy Inc. Revolving Loan is repayable on demand. Where the
lender determines that the available operating commitment would be negative,
Soucy Inc. is required to repay the portion of the operating loan required to
bring such commitment to nil.
Prepayments. Soucy Inc. may prepay the Soucy Inc. Revolving Loan in
accordance with the terms of the Soucy Inc. Bank Credit Facilities without
penalty or premium, but on payment of losses, expenses and costs incurred by
the lender in connection with repayment of any advance by way of banker's
acceptances or any LIBOR based advance.
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Subject to the provisions of the Soucy Inc. Bank Credit Facilities, the
Company will be able to, from time to time, borrow, repay and reborrow under
the Soucy Inc. Bank Credit Facility.
Security; Guarantee. The obligations under the Soucy Inc. Bank Credit
Facilities are guaranteed by Brant-Allen and are intended to be secured by
(i) a first priority security interest in Soucy Inc.'s claims, book debts,
accounts receivable, inventory and insurance proceeds, and (ii) a first
priority security interest in Brant-Allen's claims, book debts, accounts
receivable, inventory, equipment and personal property.
Covenants. The Soucy Inc. Bank Credit Agreement contains affirmative and
negative covenants typical in facilities of this type, including, among
others, the following: (i) delivery of financial statements and other
reports, projections and compliance certificates; (ii) maintenance of
existence and continuation of business; (iii) compliance with laws; (iv)
maintenance of insurance; (v) notices of default, material litigation and
other material events; (vi) limitations on indebtedness; (vii) limitations on
mergers, consolidations and sales of assets; and (viii) limitations on
amendments to the Company's management contracts.
Events of Default. The Soucy Inc. Bank Credit Agreement provides for
events of default typical in facilities of its type, including, among others,
the following: (i) nonpayment of principal, interest, fees or other amounts;
(ii) violation of covenants; (iii) inaccuracy of representations and
warranties; (iv) cross-default of other indebtedness and material contracts;
(v) bankruptcy and other similar events; (vi) unsatisfied judgments; (vii)
cross-default under the security documents; and (viii) invalidity of any loan
documents or security interests.
THE SOUCY PARTNERS BANK CREDIT FACILITIES
Soucy Partners has entered into a bank credit agreement (the "Soucy
Partners Bank Credit Agreement") with NBC, to provide for maximum borrowings
by Soucy Partners of revolving loans of up to an aggregate principal amount
of Cdn$5 million (the "Soucy Partners Revolving Loans").
Stand-by Fees. A stand-by fee of 0.25% per annum is payable on the excess
of unused portions of the Soucy Partners Revolving Credit Facility over
Cdn$2,500,000.
Interest. The interest rate for the Soucy Partners Revolving Loan is, for
advances requested in Canadian Dollars, the greater of NBC's reference rate
for commercial loans made in Canada in Canadian Dollars plus 0.50% and the
average rate for 30 day banker's acceptances denominated in Canadian Dollars
which appears on Reuter's Screen's CDOR Page at 10:00 A.M. on the day that
the rate is determined, plus 0.50%. For advances in U.S. Dollars, at the
option of Soucy Partners, the rate is either NBC's reference rate for
commercial loans made in Canada in U.S. Dollars plus 0.50% or at LIBOR of NBC
plus 2.0%.
Repayment. The Soucy Partners Revolving Loans are repayable on demand. The
Soucy Partners Revolving Credit Facility is renewable annually upon payment
of a renewal fee of Cdn$15,625.
Prepayments. Soucy Partners may prepay the Soucy Partners Revolving Loan
without penalty. Subject to the provisions of the Soucy Partners Bank Credit
Facilities, Soucy Partners may from time to time, borrow, repay and reborrow
under the Soucy Partners Bank Credit Facility.
Soucy Partners must make a mandatory prepayment in the event the amount
advanced under the Soucy Partners Bank Credit Facilities, including the risk
associated with any Foreign Exchange Contracts entered into thereunder,
exceeds an amount calculated in accordance with the terms of the Soucy
Partners Bank Credit Facilities.
Security Guarantee. The obligations under the Soucy Partners Credit
Facilities are intended to be secured by a first priority security interest
in Soucy Partners' claims, book debts, accounts receivable, inventory and
insurance proceeds, as well as an assignment of the security interest in
favor of Soucy Partners granted by Brant-Allen as security for amounts owed
to Soucy Partners by Brant-Allen and a first ranking priority security
interest in the inventories of Soucy Partners sold by Brant-Allen and the
receivables from such sales.
Covenants. The Soucy Partners Bank Credit Agreement and the related
security documents contain affirmative and negative covenants typical in
facilities of this type, including, among others, the following: (i) delivery
of financial statements and other reports, projections and compliance
certificates with respect to Soucy Inc., Soucy Partners, Brant-Allen and
BIPCO; (ii) maintenance of existence and continuation of business; (iii)
maintenance of insurance; (iv) notices of default, material litigation and
other material events; (v) limitation on liens; and (vi) limitations on
mergers, consolidations and sales of assets.
108
<PAGE>
Events of Default. The Soucy Partners Bank Credit Agreement provides for
events of default typical in facilities of its type, including, among others,
the following: (i) nonpayment of principal, interest, fees or other amounts;
(ii) violation of covenants; (iii) inaccuracy of representations and
warranties; (iv) cross-default of other indebtedness and material contracts;
(v) bankruptcy and other similar events.
THE SOUCY BOND CREDIT FACILITIES
Soucy Partners has unconditionally guaranteed the obligations of Riviere
du Loup Finance Ltd ("RDL"), a wholly owned subsidiary of Soucy Partners,
under a Trust Indenture with Montreal Trust Company ("Montreal Trust")
bearing formal date of March 30, 1979, as amended (the "RDL Trust
Indenture"). Under the RDL Trust Indenture there were Series A bonds (the
"RDL Series A Bonds") issued in an original amount of $20,000,000, Series B
bonds (the "RDL Series B Bonds") issued in an original amount of
Cdn$5,000,000 and Series C bonds (the "RDL Series C Bonds") issued in an
original amount of $27,500,000 (the RDL Series A Bonds, the RDL Series B
Bonds and the RDL Series C Bonds are collectively referred to as the "RDL
Bonds").
Interest. The RDL Series A Bonds bear interest at the rate of 10 3/4% per
annum, the RDL Series B Bonds at the rate of 10 7/8% and the RDL Series C
Bonds at the rate of 9.65% per annum.
Repayment. The RDL Series A Bonds and the RDL Series B Bonds are due April
1, 1999. The RDL Series C Bonds are due on July 1, 2004. The RDL Trust
Indenture provides for sinking fund payments on each series of RDL Bonds. The
next sinking fund payment for the RDL Series A Bonds is in the amount of
$1,150,000 due on April 1, 1998 and for the RDL Series B Bonds is in the
amount of Cdn$287,000 due also on April 1, 1998. Sinking fund payments on the
RDL Series C Bonds have been due annually on July 1 since 1992 in the fixed
yearly amount of $2,115,385.
Redemption. The RDL Bonds are redeemable at the option of RDL on the terms
and conditions set forth in the RDL Trust Indenture.
Security; Guarantee. The obligations of RDL under the RDL Bonds and the
RDL Trust Indenture are guaranteed by Soucy Partners and such guarantee is
secured by (i) the pledge of the RDL shares held by Soucy Partners, (ii) a
first priority security interest (hypothec) in the immovable property of
Soucy Partners, and (iii) the assignment of the rights of Soucy Partners
under certain immovable leases and newsprint sales contracts and under the
Conflicts of Interests Agreement between Soucy Partners and Soucy Inc. dated
May 31, 1974, as amended, and the Wood Supply Contract with Rexfor. The
guarantee by Soucy Partners is also secured by the issuance of a debenture in
the amount of Cdn$100,000,000 issued by Soucy Partners in favor of Montreal
Trust which debenture is itself guaranteed by a second trust indenture with
The Canada Trust Company charging the immovable property of Soucy Partners.
Covenants. The RDL Trust Indenture contains affirmative and negative
covenants of RDL and Soucy Partners typical in facilities of this type,
including, among others, the following: (i) delivery of financial statements
and other reports, projections and compliance certificates; (ii) maintenance
of existence and continuation of business; (iii) compliance with laws; (iv)
maintenance of insurance; (v) notices of default, material litigation and
other material events; (vi) limitations on indebtedness; (vii) limitation on
liens; (viii) limitation on dividends and distributions from RDL and Soucy
Partners; (ix) limitations on mergers, consolidations and sales of assets;
(x) limitations on investments; (xi) limitations on payment of other
indebtedness; (xii) limitations on capital expenditures and leases; (xiii)
limitations on changes in line of business; and (xiv) limitations on
amendments to Soucy Partners' material contracts.
Events of Default. The RDL Trust Indenture provides for events of default
typical in facilities of its type, including, among others, the following:
(i) nonpayment of principal, interest, fees or other amounts; (ii) violation
of covenants; (iii) inaccuracy of representations and warranties; (iv)
cross-default of other indebtedness and material contracts; (v) bankruptcy
and other similar events; (vi) unsatisfied judgments; (vii) cross-defaults
with the security documents; and (viii) invalidity of any loan documents or
security interests.
109
<PAGE>
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following is a general discussion of the material United States
federal income tax consequences for original holders of the Old Notes who
exchange their Old Notes for New Notes in the Exchange Offer and who hold New
Notes subsequent to the Exchange Offer. This discussion is based on
provisions of the Internal Revenue Code of 1986, as amended (the "Code"),
Treasury regulations promulgated thereunder, and administrative and judicial
interpretations thereof, all as in effect on the date hereof and all of which
are subject to change, possibly with retroactive effect. This discussion does
not address the tax consequences to subsequent purchasers of New Notes and is
limited to investors who hold the New Notes as capital assets. Furthermore,
this discussion does not address all aspects of United States federal income
taxation that may be applicable to investors in light of their particular
circumstances, or to investors subject to special treatment under United
States federal income tax law (including, without limitation, certain
financial institutions, insurance companies, tax-exempt entities, dealers in
securities, certain U.S. expatriates, persons who have acquired Notes as part
of a straddle, hedge, conversion transaction or other integrated investment
or U.S. persons whose functional currency is not the United States dollar).
EACH PROSPECTIVE INVESTOR SHOULD CONSULT ITS TAX ADVISOR AS TO THE
PARTICULAR TAX CONSEQUENCES TO SUCH PURCHASER OF THE PURCHASE, OWNERSHIP AND
DISPOSITION OF THE NOTES, INCLUDING THE APPLICABILITY OF ANY FEDERAL ESTATE
OR GIFT TAX LAWS OR ANY STATE, LOCAL OR FOREIGN TAX LAWS, ANY CHANGES IN
APPLICABLE TAX LAWS AND ANY PENDING OR PROPOSED LEGISLATION OR REGULATIONS.
UNITED STATES FEDERAL INCOME TAXATION OF UNITED STATES HOLDERS
As used herein, (A) the term "United States Holder" means a beneficial
owner of a New Note that is, for United States federal income tax purposes,
(i) a citizen or individual resident of the United States, (ii) a
corporation, partnership or other entity created or organized in or under the
laws of the United States or of any political subdivision thereof, (iii) an
estate the income of which is subject to United States federal income
taxation regardless of its source, or (iv) a trust if a United States court
is able to exercise primary supervision over the administration of such trust
and one or more United States persons have the authority to control all
substantial decisions of such trust and (B) the term "Non-U.S. Holder" means
a beneficial owner of a New Note that is not a United States Holder.
Payments of Interest
Interest payable on the New Notes generally will be included in the gross
income of a United States Holder as ordinary interest income at the time
accrued or received, in accordance with such United States Holder's method of
tax accounting for United States federal income tax purposes.
Disposition of the Notes
Upon the sale, exchange, retirement at maturity, redemption or other
disposition of a Note (collectively, a "disposition"), a United States Holder
generally will recognize capital gain or loss equal to the difference between
the amount realized by such holder (except to the extent such amount is
attributable to accrued interest, which will be treated as ordinary interest
income) and such holder's adjusted tax basis in the Note. Such capital gain
or loss will be long-term capital gain or loss if the holding period for the
Note exceeds one year at the time of the disposition. In the case of
individuals, recently enacted United States tax legislation reduced the
maximum federal income tax rate applicable to long-term capital gains in
certain instances. Prospective investors should consult their tax advisors
regarding the possible effect on such investors of such legislation.
A United States Holder will not recognize any gain or loss on the exchange
of Old Notes for New Notes pursuant to the Exchange Offer. A United States
Holder's tax basis in the New Notes will equal its tax basis in the Old Notes
exchanged therefor, and a United States Holder's holding period in the New
Notes will include the holder's holding period for the Old Notes.
UNITED STATES TAXATION OF NON-U.S. HOLDERS
Payments of Interest
In general, payments of interest received by a Non-U.S. Holder will not be
subject to a United States federal income tax, provided that the interest
received on the Note is not effectively connected with a United States trade
or business conducted by the Non-U.S. Holder and:
110
<PAGE>
(i)(a) the Non-U.S. Holder does not actually or constructively own 10% or
more of the total combined voting power of all classes of stock of the
Company entitled to vote, (b) the Non-U.S. Holder is not a controlled
foreign corporation that is related to the Company actually or
constructively through stock ownership, and (c) the beneficial owner of
the Note, under penalties of perjury, either directly or through a
financial institution which holds the Note on behalf of the Non-U.S.
Holder and holds customers' securities in the ordinary course of its trade
or business, provides the Company or its agent with the beneficial owner's
name and address and certifies, under penalties of perjury, that it is not
a United States Holder; or
(ii) the Non-U.S. Holder is entitled to the benefits of an income tax
treaty under which the interest is exempt from United States withholding
tax and the Non-U.S. Holder complies with certain reporting requirements.
Payments of interest not exempt from United States federal income tax as
described above will (i) in the case of interest that is effectively
connected with the conduct of a United States trade or business, be subject
to United States federal income tax in the same manner as a United States
Holder and, in the case of a corporate holder, may be subject to a branch
profits tax, or (ii) in any other case, will be subject to U.S. withholding
tax at the rate of 30% (subject to reduction under an applicable income tax
treaty).
Disposition of the New Notes
A Non-U.S. Holder generally will not be subject to United States federal
income tax (and generally no such tax will be withheld) with respect to gain
realized on the disposition of a New Note, unless (i) the gain is effectively
connected with a United States trade or business conducted by the Non-U.S.
Holder or (ii) the Non-U.S. Holder is an individual who is present in the
United States for 183 or more days during the taxable year of the disposition
(and certain other conditions are satisfied). In addition, an exchange of an
Old Note for a New Note pursuant to the Exchange Offer will not constitute a
taxable exchange of the Old Note for Non-U.S. Holders. See "United States
Federal Income Taxation of United States Holders--Disposition of the Notes."
INFORMATION REPORTING AND BACKUP WITHHOLDING
Payments of principal of, and interest on, a New Note to United States
Holders will generally be subject to information reporting to the Internal
Revenue Service. In addition, certain non-corporate United States Holders may
be subject to backup withholding at a rate of 31% on payments of principal
of, premium and interest on, and the proceeds of the disposition of, the
Notes. In general, backup withholding will be imposed only if the United
States Holder (i) fails to furnish its taxpayer identification number
("TIN"), which, for an individual, would be his or her Social Security
number, (ii) furnishes an incorrect TIN, (iii) is notified by the IRS that it
has underreported payments of interest or dividends or (iv) under certain
circumstances, fails to certify, under penalty of perjury, that it has
furnished a correct TIN and has not been notified by the IRS that it is
subject to backup withholding. United States Holders should consult their tax
advisors regarding their qualification for exemption from backup withholding
and the procedure for obtaining such an exemption, if applicable.
Information reporting and backup withholding generally will not apply to
payments made to a Non-U.S. Holder of a Note who provides the certification
described under "United States Taxation of Non-U.S. Holders--Payments of
Interest" or otherwise establishes an exemption from information reporting
and backup withholding.
The amount of any backup withholding imposed on a payment to a holder of a
Note will be allowed as a credit against such holder's United States federal
income tax liability and may entitle such holder to a refund, provided that
certain required information is furnished to the IRS.
RECENTLY ISSUED TREASURY REGULATIONS
On October 7, 1997, the Department of Treasury issued new Treasury
regulations governing the certification procedures regarding withholding,
backup withholding and information reporting on certain amounts paid to
Non-U.S. Holders, which are effective for payments made after December 31,
1998. In general, the new Treasury regulations do not alter the treatment of
Non-U.S. Holders who satisfy current reporting requirements. The new Treasury
regulations alter the procedures for claiming the benefits of an income tax
treaty and may change certain procedures relating to intermediaries receiving
payments on behalf of a beneficial owner of a Note. Prospective investors
should consult their tax advisors concerning the effect, if any, of such new
Treasury regulations on an investment in the Notes.
111
<PAGE>
PLAN OF DISTRIBUTION
Each broker-dealer that receives New Notes for its own account pursuant to
the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. This Prospectus, as it may be
amended or supplemented from time to time, may be used by a broker-dealer in
connection with resales of New Notes received in exchange for Old Notes where
such Old Notes were acquired as a result of market-making activities or other
trading activities. The Issuers have agreed that, for a period of 90 days
after the Expiration Date, they will make this Prospectus, as amended or
supplemented, available to any broker-dealer for use in connection with any
such resale. In addition, until , 1998, all dealers effecting
transactions in the New Notes may be required to deliver a prospectus.
The Issuers will not receive any proceeds from any sale of New Notes by
broker-dealers. New Notes received by broker-dealers for their own account
pursuant to the Exchange Offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions,
through the writing of options on the New Notes or a combination of such
methods of resale, at market prices prevailing at the time of resale, at
prices related to such prevailing market prices or negotiated prices. Any
such resale may be made directly to purchasers or to or through brokers or
dealers who may receive compensation in the form of commissions or
concessions from any such broker-dealer or the purchasers of any such New
Notes. Any broker-dealer that resells New Notes that were received by it for
its own account pursuant to the Exchange Offer and any broker or dealer that
participates in a distribution of such New Notes may be deemed to be an
"underwriter" within the meaning of the Securities Act and any profit on any
such resale of New Notes and any commission or concessions received by any
such persons may be deemed to be underwriting compensation under the
Securities Act. The Letter of Transmittal states that, by acknowledging that
it will deliver and by delivering a prospectus, a broker-dealer will not be
deemed to admit that it is an "underwriter" within the meaning of the
Securities Act.
For a period of 90 days after the Expiration Date, the Issuers will
promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any broker-dealer that requests such
documents in the Letter of Transmittal. The Issuers have agreed to pay all
expenses in connection with the Exchange Offer and reimburse the Initial
Purchasers for the reasonable fees and expenses of up to $20,000 of one
counsel for the Holders of the Notes. Each holder will pay all expenses of
its counsel other than as described in the preceding sentence, transfer
taxes, if any, and any commissions or concessions of any brokers or dealers.
The Issuers have agreed in the Registration Statement to indemnify the
Holders of the Notes (including any broker-dealer) against certain
liabilities, including liabilities under the Securities Act.
In addition, to comply with the securities laws of certain jurisdictions
(including any jurisdiction in Canada), the New Notes may not be offered or
sold unless they have been registered or qualified for offer and sale in such
jurisdiction or an exemption from registration or qualification is available
and is complied with. The Issuers have agreed, pursuant to the Registration
Rights Agreement, subject to certain limitations specified therein, to
register or qualify the New Notes for offer or sale under the applicable
state securities laws of such United States jurisdictions as the Majority
Holders of the Old Notes reasonably request by the time the Registration
Statement (of which this Prospectus forms a part) is declared effective by
the Commission. The Issuers do not intend to register or qualify the offer
or sale of the New Notes in any United States jurisdiction (unless they
receive such a request) or any other jurisdiction.
EXPERTS
The financial statements of Bear Island Paper Company, L.P. as of December
31, 1996 and 1995 and for the three years in the period ended December 31,
1996, included in this Prospectus, have been included herein in reliance on
the report, which includes an explanatory paragraph regarding significant
related-party transactions, of Coopers & Lybrand L.L.P., independent
accountants, given on the authority of that firm as experts in accounting and
auditing.
The financial statements of Bear Island Timberlands Company, L.P. as of
December 31, 1996 and 1995 and for the three years in the period ended
December 31, 1996, included in this Prospectus, have been included herein in
reliance on the report, which includes an explanatory paragraph regarding
significant related-party transactions, of Coopers & Lybrand L.L.P.,
independent accountants, given on the authority of that firm as experts in
accounting and auditing.
The consolidated financial statements of Soucy Inc., expressed in Canadian
dollars, as of December 31, 1996 and 1995 and for the three years in the
period ended December 31, 1996, included in this Prospectus, have been
included herein in reliance on the report of Coopers & Lybrand, Chartered
Accountants, General Partnership, given on the authority of that firm as
experts in accounting and auditing.
LEGAL MATTERS
The validity of the New Notes being offered hereby will be passed upon for
the Issuers by Skadden, Arps, Slate, Meagher & Flom LLP, New York, New York.
112
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
<S> <C>
BEAR ISLAND PAPER COMPANY, L.P.
Report of Independent Accountants............................................................. F-2
Balance Sheets as of September 30, 1997 (unaudited) and December 31, 1996 and 1995 ........... F-3
Statements of Operations for the nine months ended September 30, 1997 (unaudited) and 1996
(unaudited) and for the years ended December 31, 1996, 1995 and 1994......................... F-4
Statements of Changes in Partners' Equity for the nine months ended September 30, 1997
(unaudited) and for the years ended December 31, 1996, 1995 and 1994......................... F-5
Statements of Cash Flows for the nine months ended September 30, 1997 (unaudited) and 1996
(unaudited) and for the years ended December 31, 1996, 1995, and 1994........................ F-6-F-7
Notes to Financial Statements................................................................. F-8-F-15
BEAR ISLAND TIMBERLANDS COMPANY, L.P.
Report of Independent Accountants............................................................. F-16
Balance Sheets as of September 30, 1997 (unaudited) and December 31, 1996 and 1995 ........... F-17
Statements of Income for the nine months ended September 30, 1997 (unaudited) and 1996
(unaudited) and for the years ended December 31, 1996, 1995 and 1994......................... F-18
Statements of Changes in Partners' Equity for the nine months ended September 30, 1997
(unaudited) and for the years ended December 31, 1996, 1995 and 1994......................... F-19
Statements of Cash Flows for the nine months ended September 30, 1997 (unaudited) and 1996
(unaudited) and for the years ended December 31, 1996, 1995, and 1994........................ F-20
Notes to Financial Statements................................................................. F-21-F-27
F.F. SOUCY INC.
Auditors' Report ............................................................................. F-28
Consolidated Balance Sheets as of September 30, 1997 (unaudited) and December 31, 1996
and 1995..................................................................................... F-29
Consolidated Statements of Retained Earnings for the nine months ended September 30, 1997
(unaudited) and 1996 (unaudited) and for the years ended December 31, 1996, 1995
and 1994..................................................................................... F-30
Consolidated Statements of Earnings for the nine months ended September 30, 1997 (unaudited)
and 1996 (unaudited) and for the years ended December 31, 1996, 1995
and 1994..................................................................................... F-31
Consolidated Statements of Changes in Financial Position for the nine months ended September
30, 1997 (unaudited) and 1996 (unaudited) and for the years ended December 31, 1996, 1995,
and 1994..................................................................................... F-32
Notes to Consolidated Financial Statements.................................................... F-33-F-43
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Partners of
Bear Island Paper Company, L.P.:
We have audited the accompanying balance sheets of Bear Island Paper
Company, L.P. (a Virginia limited partnership) (the "Company") as of December
31, 1996 and 1995, and the related statements of operations, changes in
partners' equity and cash flows for each of the three years in the period
ended December 31, 1996. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
As discussed in Note 3 to the financial statements, the Company had
numerous significant related-party transactions with an affiliate, Bear
Island Timberlands Company, L.P., for each of the three years in the period
ended December 31, 1996, which significantly impacted the financial position
at December 31, 1996 and 1995 and the results of operations and cash flows of
the Company for each of the three years in the period ended December 31,
1996.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Bear Island Paper
Company, L.P. as of December 31, 1996 and 1995, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1996, in conformity with generally accepted accounting
principles.
Coopers & Lybrand L.L.P.
Richmond, Virginia
January 17, 1997
F-2
<PAGE>
BEAR ISLAND PAPER COMPANY, L.P.
(A Virginia Limited Partnership)
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
SEPTEMBER 30, ---------------------------
1997 1996 1995
------------- ----------- -----------
UNAUDITED
<S> <C> <C> <C>
ASSETS
Cash and short-term investments ............................ $ 13,305,542 $ 13,625,322 $ 12,471,916
Accounts receivable:
Trade, less allowance for doubtful accounts of $73,100
(unaudited), $73,100 and $73,100, respectively .......... 8,045,540 7,881,685 10,035,702
Affiliates ................................................ 4,718,688 6,370,771 8,079,694
Other ..................................................... 436,936 943,260 347,243
Inventories ................................................ 13,853,125 13,936,443 12,815,584
Other current assets ....................................... 538,198 261,700 284,503
--------------- -------------- --------------
Total current assets ..................................... 40,898,029 43,019,181 44,034,642
--------------- -------------- --------------
Property, plant and equipment, at cost ..................... 241,415,773 235,616,026 224,602,558
Less accumulated depreciation ............................. 126,509,015 118,663,056 108,661,129
--------------- -------------- --------------
Net property, plant and equipment ........................ 114,906,758 116,952,970 115,941,429
--------------- -------------- --------------
Other assets:
Long-term notes receivable ................................ 13,548 13,548
Deferred financing costs, net of accumulated amortization
of $631,095 (unaudited), $586,662 and $527,418,
respectively ............................................. 429,804 474,237 533,481
--------------- -------------- --------------
429,804 487,785 547,029
--------------- -------------- --------------
$156,234,591 $160,459,936 $160,523,100
=============== ============== ==============
LIABILITIES
Current portion of long-term debt .......................... 6,591,936 6,449,498 6,344,358
Current portion of long-term purchase obligations ......... 720,064 2,032,548
Accounts payable and accrued expenses ...................... 7,072,165 10,074,275 11,463,114
Due to Bear Island Timberlands Company, L.P. ............... 1,672,705 1,388,085 1,159,056
Interest payable ........................................... 2,139,844 1,037,500 1,167,187
--------------- -------------- --------------
Total current liabilities ................................ 18,196,714 20,981,906 20,133,715
--------------- -------------- --------------
Long-term debt ............................................. 40,007,958 43,042,410 49,023,792
Long-term purchase obligations ............................. 437,381 646,805
--------------- -------------- --------------
40,445,339 43,689,215 49,023,792
--------------- -------------- --------------
PARTNERS' EQUITY
Contributed capital ........................................ 88,421,681 88,421,681 88,421,681
Retained earnings .......................................... 9,170,857 7,367,134 2,943,912
--------------- -------------- --------------
$156,234,591 $160,459,936 $160,523,100
=============== ============== ==============
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-3
<PAGE>
BEAR ISLAND PAPER COMPANY, L.P.
(A Virginia Limited Partnership)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
NINE-MONTHS
ENDED SEPTEMBER 30, FOR THE YEARS ENDED DECEMBER 31,
--------------------------- ------------------------------------------
1997 1996 1996 1995 1994
------------- ------------- ------------- ------------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net sales ................. $47,196,754 $ 59,353,279 $ 75,460,102 $ 70,960,222 $51,297,003
Net sales to affiliates .. 38,175,822 40,793,736 53,360,199 61,243,026 42,543,147
------------- ------------- ------------- ------------- -------------
Total net sales ......... 85,372,576 100,147,015 128,820,301 132,203,248 93,840,150
Cost of sales ............. 77,224,807 73,747,855 100,590,600 100,399,666 91,610,238
------------- ------------- ------------- ------------- -------------
Gross profit ............ 8,147,769 26,399,160 28,229,701 31,803,582 2,229,912
Selling, general and
administrative expenses:
Management fees paid to
affiliate ............... 2,561,177 3,004,410 3,865,000 3,961,000 2,820,000
Other direct ............. 668,182 568,594 153,370 223,644 207,565
------------- ------------- ------------- ------------- -------------
Income (loss) from
operations ............. 4,918,410 22,826,156 24,211,331 27,618,938 (797,653)
------------- ------------- ------------- ------------- -------------
Other income (deductions):
Interest income .......... 485,242 486,706 665,709 602,839 309,360
Interest expense ......... (3,592,344) (4,059,219) (5,397,959) (5,985,687) (6,193,838)
Other income (expense) .. (7,585) 93,969 (55,859) 32,642 2,114,881
------------- ------------- ------------- ------------- -------------
(3,114,687) (3,478,544) (4,788,109) (5,350,206) (3,769,597)
------------- ------------- ------------- ------------- -------------
Net income (loss) ....... $ 1,803,723 $ 19,347,612 $ 19,423,222 $ 22,268,732 $(4,567,250)
============= ============= ============= ============= =============
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-4
<PAGE>
BEAR ISLAND PAPER COMPANY, L.P.
(A Virginia Limited Partnership)
STATEMENTS OF CHANGES IN PARTNERS' EQUITY
<TABLE>
<CAPTION>
DOW JONES
BRANT-ALLEN VIRGINIA
INDUSTRIES, COMPANY, NEWSPRINT,
INC. INC. INC. TOTAL
------------- ------------- ------------- --------------
<S> <C> <C> <C> <C>
Contributed capital:
Balances, December 31, 1993 ............. $24,848,959 $21,557,500 $21,557,500 $ 67,963,959
Partner contributions ................... 1,350,000 10,325,000 10,325,000 22,000,000
------------- ------------- ------------- --------------
Balances, December 31, 1994 ............. 26,198,959 31,882,500 31,882,500 89,963,959
Partner distributions ................... (1,542,278) (1,542,278)
------------- ------------- ------------- --------------
Balances, December 31, 1995, 1996 and
September 30, 1997 (unaudited) ......... $24,656,681 $31,882,500 $31,882,500 $ 88,421,681
============= ============= ============= ==============
Retained earnings (accumulated deficit):
Balances, December 31, 1993 ............. (4,002,724) (1,398,562) (1,398,562) (6,799,848)
Net loss -1994 .......................... (1,370,174) (1,598,538) (1,598,538) (4,567,250)
------------- ------------- ------------- --------------
Balances, December 31, 1994 ............. (5,372,898) (2,997,100) (2,997,100) (11,367,098)
Net income -1995 ........................ 6,680,620 7,794,056 7,794,056 22,268,732
Partner distributions ................... (1,307,722) (3,325,000) (3,325,000) (7,957,722)
------------- ------------- ------------- --------------
Balances, December 31, 1995 ............. - 1,471,956 1,471,956 2,943,912
Net income -1996......................... 5,826,966 6,798,128 6,798,128 19,423,222
Partner distributions ................... (4,500,000) (5,250,000) (5,250,000) (15,000,000)
------------- ------------- ------------- --------------
Balances, December 31, 1996 ............. 1,326,966 3,020,084 3,020,084 7,367,134
Net income -nine months ended September
30, 1997 (unaudited) ................... 541,117 631,303 631,303 1,803,723
------------- ------------- ------------- --------------
Balances, September 30, 1997 (unaudited) $ 1,868,083 $ 3,651,387 $ 3,651,387 $ 9,170,857
============= ============= ============= ==============
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-5
<PAGE>
BEAR ISLAND PAPER COMPANY, L.P.
(A Virginia Limited Partnership)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE-MONTHS
ENDED SEPTEMBER 30, FOR THE YEARS ENDED DECEMBER 31,
--------------------------- -------------------------------------------
1997 1996 1996 1995 1994
------------- ------------- ------------- ------------- --------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Operating activities:
Net income (loss) .............. $ 1,803,723 $19,347,612 $19,423,222 $22,268,732 $(4,567,250)
Adjustments to reconcile net
income (loss) to net cash
provided by operating
activities:
Depreciation .................. 8,291,428 7,629,336 9,975,923 9,648,325 9,730,346
Depletion ..................... 12,501 29,696 58,494 89,831 38,621
Amortization of deferred
financing costs .............. 44,433 44,433 59,244 59,244 81,055
Noncurrent portion of notes
received on sales of land,
net .......................... (41,889)
(Gain) on sale of property,
plant and equipment .......... (134,300) (15,350) (28,391) (57,546) (2,430,129)
(Increase) decrease in:
Accounts receivable .......... 1,994,552 1,074,316 3,266,923 (4,989,370) (3,221,988)
Notes receivable ............. 13,548 35,566 55,646
Inventories .................. 83,318 (727,814) (1,120,859) (1,965,023) 3,246,851
Other current assets ......... (276,498) (488,200) 22,803 (16,758) (17,793)
Increase (decrease) in:
Accounts payable and accrued
expenses for operating
activities .................. (3,002,110) (2,625,251) (1,388,839) 2,276,089 624,929
Due to affiliate ............. 284,620 103,102 229,029 22,796 982,446
Interest payable ............. 1,102,344 1,257,969 (129,687) (129,688) (145,312)
Deferred profit on land
sales........................ (26,788) 26,788
------------- ------------- ------------- ------------- --------------
Net cash provided by
operating activities ....... 10,217,559 25,629,849 30,367,862 27,215,410 4,362,321
------------- ------------- ------------- ------------- --------------
Investing activities:
Purchases of property, plant
and equipment ................. (5,724,037) (5,226,890) (7,482,573) (6,644,939) (9,469,106)
Proceeds from disposition of
property, plant and equipment . 134,300 56,006 69,244 142,632 5,469,873
------------- ------------- ------------- ------------- --------------
Net cash used in investing
activities ................. (5,589,737) (5,170,884) (7,413,329) (6,502,307) (3,999,233)
------------- ------------- ------------- ------------- --------------
</TABLE>
F-6
<PAGE>
BEAR ISLAND PAPER COMPANY, L.P.
(A Virginia Limited Partnership)
STATEMENTS OF CASH FLOWS, CONTINUED
<TABLE>
<CAPTION>
NINE-MONTHS
ENDED SEPTEMBER 30, FOR THE YEARS ENDED DECEMBER 31,
------------------------------ ----------------------------------------------
1997 1996 1996 1995 1994
-------------- --------------- --------------- -------------- --------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Financing activities:
Distributions to partners ...... $(15,000,000) $(15,000,000) $ (9,500,000)
Contributions from partners .... $ 22,000,000
Principal payments on long-term
debt ........................... $(3,000,000) (3,000,000) (6,000,000) (6,170,256) (16,024,764)
Principal payments on promissory
notes .......................... (1,521,908) (243,558) (401,941) (24,764) (259,644)
Principal payments on long-term
purchase obligations ........... (425,694) (399,186)
Payments of construction payable (2,721,151)
-------------- --------------- --------------- -------------- --------------
Net cash provided (used) in
financing activities ......... (4,947,602) (18,243,558) (21,801,127) (15,695,020) 2,994,441
-------------- --------------- --------------- -------------- --------------
Net increase (decrease) in
cash and short-term
investments .................. (319,780) 2,215,407 1,153,406 5,018,083 3,357,529
Cash and short-term investments,
beginning of year ............... 13,625,322 12,471,916 12,471,916 7,453,833 4,096,304
-------------- --------------- --------------- -------------- --------------
Cash and short-term
investments, end of year .... $13,305,542 $ 14,687,323 $ 13,625,322 $ 12,471,916 $ 7,453,833
============== =============== =============== ============== ==============
Supplemental disclosures of cash
flow information:
Cash paid for interest .......... $ 2,490,000 $ 2,801,250 $ 5,527,646 $ 6,115,375 $ 6,339,150
============== =============== =============== ============== ==============
Noncash investing and financing
activities:
Increase in long-term purchase
obligations .................... $ 3,078,538
===============
Increase in promissory notes for
equipment acquisition .......... $ 533,680 $ 525,700 $ 525,700 $ 1,538,406
============== =============== =============== ==============
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-7
<PAGE>
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION:
Bear Island Paper Company, L.P. (the "Company" or "BIPCO") was constituted
as a limited partnership on May 18, 1978, under the Virginia Uniform Limited
Partnership Act, pursuant to a Limited Partnership Agreement, as amended (the
"Partnership Agreement"), among:
o Brant-Allen Industries, Inc. ("Brant-Allen"), a Delaware corporation;
o Dow Jones Virginia Company, Inc. ("D J Virginia"), a Delaware
corporation and a wholly owned subsidiary of Dow Jones & Company, Inc. ("Dow
Jones"); and
o Newsprint, Inc. ("Newsprint"), a Virginia corporation and a wholly
owned subsidiary of The Washington Post Company ("The Washington Post").
Brant-Allen is the general partner and D J Virginia and Newsprint are
limited partners. The Partnership Agreement, as amended, contains the
following provisions:
o The Company is established for an initial term of 50 years, renewable
for additional terms of 20 years, and is subject to dissolution with the
consent of the partners and in certain other circumstances.
o The purpose of the Company is to engage in the business of producing,
selling and distributing newsprint by constructing, owning and operating a
paper mill (the "Mill") in Hanover County, Virginia.
o Brant-Allen, as general partner, has full and exclusive control of the
business of the Company, has active control of its management and provides
marketing and certain administrative services for which it receives a monthly
management fee of three percent of BIPCO's newsprint sales less related
distribution costs. Brant-Allen is authorized to incur on behalf of the
Company, without the approval or consent of the partners, debt of up to
$97,900,000.
o The limited partners are not liable for any net losses or other debt or
liability of the Company to any extent, except for their respective
contributions to capital.
o Subject to the aforementioned provisions, the partners share the net
profits and losses, computed in accordance with generally accepted accounting
principles consistently applied, based on their interests, as defined by the
Partnership Agreement, as amended.
o No partner may sell, assign or otherwise dispose of its interest, or
any part thereof, in the Company, unless it first offers such interest to the
other partners as prescribed in the Partnership Agreement.
o Under the terms of the Partnership Agreement, D J Virginia's and
Newsprint's equity interests are 35% each and Brant-Allen's equity interest
is 30% for all periods shown.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
CASH AND SHORT-TERM INVESTMENTS: Cash and short-term investments include
all cash balances and highly liquid investments. Short-term investments of
$6,062,528 at December 31, 1995, consisted of U.S. government securities and
are included in cash and short-term investments. Short-term investments are
stated at cost plus accrued interest, which approximates market value. For
purposes of the statements of cash flows, the Company considers all highly
liquid short-term investments purchased with an original maturity of three
months or less to be cash equivalents.
INVENTORIES: Finished goods and raw materials inventories are valued at
the lower of cost or market, with cost determined on the first-in, first-out
("FIFO") basis. Stores inventories are valued at the lower of average cost or
market and are shown net of an allowance for obsolescence at September 30,
1997, December 31, 1996, and December 31, 1995 of approximately $245,827
(unaudited), $227,800 and $203,500, respectively.
PROPERTY, PLANT AND EQUIPMENT: The costs of major renewals and betterments
are capitalized while the costs of maintenance and repairs are charged to
income as incurred. When properties are sold or retired, their cost and the
related accumulated depreciation or depletion are eliminated from the
accounts and the gain or loss is reflected in income. The Company capitalizes
interest costs as part of the cost of constructing significant assets. There
were no capitalized interest costs in the years ended December 31, 1996 and
1995.
F-8
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (Continued)
The carrying value of property, plant and equipment is evaluated whenever
significant events or changes occur that might indicate an impairment through
comparison of the carrying value to fair market value or total undiscounted
cash flows.
DEPRECIATION AND DEPLETION: Depreciation of plant and equipment is
computed principally on the straight-line basis over the estimated useful
lives of the assets which range from 10 to 50 years for buildings and from
three to 50 years for machinery and equipment. The portion of the cost of
timberlands attributed to standing timber is charged against income as timber
is cut, at rates determined annually, based on the relationship of
unamortized timber costs to the estimated volume of recoverable timber.
DEFERRED FINANCING COSTS: Costs directly associated with the issuance of
certain debt have been deferred and are being amortized on a straight-line
basis over the life of the related debt which approximates the interest
method.
INCOME TAXES: No provision for income taxes is required in the financial
statements since each partner is individually liable for any income tax that
may be payable on its share of BIPCO's taxable income.
EARNINGS PER SHARE: No earnings per share calculations have been provided
in the financial statements since such calculations are not meaningful under
the partnership structure.
ESTIMATES: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the dates
of the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
FAIR VALUE OF FINANCIAL INSTRUMENTS: The fair value of the Company's
long-term debt is estimated using discounted cash flow analyses based on the
incremental borrowing rates currently available to the Company with loans of
similar terms and maturity. The fair value of trade receivables and payables
approximate the carrying amount because of the short maturity of these
instruments.
RISKS AND UNCERTAINTIES: Financial instruments which potentially subject
the Company to concentrations of credit risk consist principally of cash,
cash equivalents and receivables. The Company's cash balance is maintained at
a major financial institution. Cash equivalents, which consist of U.S.
government securities, are with a high-credit-quality financial institution.
Receivables consist principally of trade accounts receivable resulting
primarily from sales to newspaper publishers. Credit is extended to customers
after an evaluation of creditworthiness. Generally, the Company does not
require collateral or other security from customers for trade accounts
receivable. Substantially all of the Company's debtors' ability to honor
their obligations are dependent upon the printing and publishing sectors.
The Company operates solely to produce newsprint which is subject to
fluctuations in paper prices. The paper industry has experienced highly
volatile price changes over the past few years.
BIPCO derived 36% (unaudited), 41% (unaudited), 37%, 46% and 45% of net
sales from Dow Jones and The Washington Post in the nine-month periods ended
September 30, 1997 and 1996, and for the years ended December 31, 1996, 1995,
and 1994, respectively. Dow Jones and The Washington Post purchased newsprint
under prearranged pricing formula and volume contracts.
UNAUDITED INTERIM FINANCIAL STATEMENTS: The unaudited balance sheet as of
September 30, 1997 and the unaudited statements of income and cash flows for
the nine-month periods ended September 30, 1997 and 1996 have been prepared
in accordance with generally accepted accounting principles for interim
financial information. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management,
all adjustments (consisting of only normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results for
the nine months ended September 30, 1997 are not necessarily indicative of
the results that may be expected for the year ending December 31, 1997.
RECLASSIFICATIONS: Certain prior period amounts have been reclassified to
conform to the current presentation.
F-9
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
3. RELATED-PARTY TRANSACTIONS:
BIPCO has contracted to sell newsprint to Dow Jones and The Washington
Post (the "Sales Contracts"). The Sales Contracts will terminate on December
31, 2000; however, they will be extended for four years if prior to January
1, 2000 the parties agree to pricing provisions for the four-year period.
Both Dow Jones and The Washington Post are subject to minimum purchase
quantities under the Sales Contracts. The price payable under the Sales
Contracts is defined in the Sales Contracts, as amended, and during the
periods presented represented the average price paid by Dow Jones and The
Washington Post to third-party suppliers geographically located in the
eastern United States. Additionally, the parties to the Sales Contracts have
the option to purchase additional quantities of newsprint as available.
All sales and related collections are made through Newsprint Sales, a
division of Brant-Allen.
The Company received payments of approximately $174,433 (unaudited),
$149,608 (unaudited), $180,300, $266,000 and $272,000 from Brant-Allen as
reimbursement for expenses incurred on behalf of Brant-Allen during the
nine-month periods ended September 30, 1997 and 1996, and the years ended
December 31, 1996, 1995 and 1994, respectively.
The Company is a party to a wood supply contract with Bear Island
Timberlands Company, L.P. ("BITCO"), which is owned proportionately by the
same partners of BIPCO, whereby BITCO has guaranteed to supply all of the
Company's log and pulp chip requirements at a price to be negotiated
annually. Purchases under the wood supply contract approximated $10,982,000
(unaudited), $10,702,000 (unaudited), $14,744,000, $13,003,000 and
$11,896,000 during the nine-month periods ended September 30, 1997 and 1996,
and the years ended December 31, 1996, 1995 and 1994, respectively.
The Company has also contracted to pay BITCO a fee on a per ton basis for
procuring recycled paper. The Company recognized costs of $1,640,695
(unaudited), $1,554,854 (unaudited), $2,070,469, $147,340 and $122,307 for
such procurement fees during the nine-month periods ended September 30, 1997
and 1996, and the years ended December 31, 1996, 1995 and 1994, respectively,
which is included in cost of sales in the accompanying financial statements.
The Company charges BITCO for certain administrative and other expenses.
These charges approximated $1,068,000 (unaudited), $1,039,000 (unaudited),
$1,370,000, $1,276,000 and $1,128,000 during the nine-month periods ended
September 30, 1997 and 1996, and the years ended December 31, 1996, 1995 and
1994, respectively. The Company also paid BITCO approximately $44,500
(unaudited), $43,000 (unaudited), $57,750, $56,000 and $133,000 during the
nine-month periods ended September 30, 1997 and 1996, and the years ended
December 31, 1996, 1995 and 1994, respectively, for managing its timberlands.
F-10
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
3. RELATED-PARTY TRANSACTIONS: (Continued)
Company receivables, payables and sales to partners and their affiliates
were as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
SEPTEMBER 30, ------------------------------------
1997 1996 1995 1994
------------- ---------- ---------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Due from Brant-Allen .... $ 37,012 $ 54,529 $ 175,271 $ 36,932
Due from Newsprint sales 36,712 1,551,775 430,968 118,547
Due from Dow Jones ....... 2,235,493 2,477,581 3,324,282 2,265,530
Due from The Post ........ 2,409,471 2,286,886 4,149,173 2,860,298
Due to BITCO ............. 1,672,705 1,388,085 1,159,056 1,136,260
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
---------------------------- -------------------------------------------
1997 1996 1996 1995 1994
------------- ------------- ------------- ------------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net sales to Dow Jones $18,632,950 $22,686,548 $28,920,518 $31,580,720 $21,851,761
Net sales to The Post . 19,542,872 18,107,188 24,439,681 29,662,306 20,691,386
</TABLE>
Sales to Dow Jones represented approximately 22% (unaudited), 23%
(unaudited), 22%, 24% and 23% of total sales during the nine-month periods
ended September 30, 1997 and 1996, and the years ended December 31, 1996,
1995 and 1994, respectively. Sales to The Washington Post represented
approximately 23% (unaudited), 18% (unaudited), 19%, 22% and 22% of total
sales during the nine-month periods ended September 30, 1997 and 1996, and
the years ended December 31, 1996, 1995 and 1994, respectively. The remaining
sales were to other unaffiliated printing and publishing enterprises located
primarily in the eastern United States.
4. INVENTORIES:
Inventories consisted of:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
--------------- ---------------------------
1997 1996 1995
--------------- ------------- ------------
(UNAUDITED)
<S> <C> <C> <C>
Raw materials . $ 3,195,969 $ 3,076,391 $ 2,976,570
Stores ......... 8,889,490 8,908,263 8,440,210
Finished goods 1,767,666 1,951,789 1,398,804
--------------- ------------- ------------
$13,853,125 $13,936,443 $12,815,584
=============== ============= ============
</TABLE>
5. PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment is stated at cost and consists of the
following:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
--------------- -----------------------------
1997 1996 1995
--------------- -------------- -------------
(UNAUDITED)
<S> <C> <C> <C>
Land ........................................ $ 1,889,591 $ 447,045 $ 447,045
Timberlands ................................. 4,159,823 4,158,991 4,196,408
Building .................................... 17,572,268 17,360,771 16,943,645
Machinery and equipment ..................... 209,977,152 207,168,997 200,024,595
Construction in progress .................... 7,816,939 6,480,222 2,990,865
--------------- -------------- -------------
241,415,773 235,616,026 224,602,558
Less accumulated depreciation and depletion 126,509,015 118,663,056 108,661,129
--------------- -------------- -------------
Total ..................................... $114,906,758 $116,952,970 $115,941,429
=============== ============== =============
</TABLE>
F-11
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
6. LONG-TERM DEBT:
<TABLE>
<CAPTION>
Long-term debt consisted of:
SEPTEMBER 30, DECEMBER 31,
--------------- ----------------------------
1997 1996 1995
--------------- ------------- -------------
(UNAUDITED)
<S> <C> <C> <C>
Senior Secured Notes bearing interest at 10.375%
(interest payable semiannually); principal of
$3,000,000 due semiannually which commenced in
October 1992 and will continue until maturity in
2004 ............................................... $45,000,000 $48,000,000 $54,000,000
Promissory note bearing interest at LIBOR plus 2%,
(7.66% at September 30, 1997); principal of
approximately $21,056 and interest due in 60
monthly installments which commenced in June 1995
and will continue through May 2000; collateralized
by certain fixed assets with an approximate net
book value of $2,445,200 at September 30, 1997 .... 694,833 884,389 1,116,000
Promissory note bearing interest at LIBOR plus 2%
(7.66% at September 30, 1997); principal of
approximately $7,641 and interest due in 36 monthly
installments which commenced in October 1995 and
continuing through September 1998; collateralized
by certain fixed assets with an approximate net
book value of $227,000 at September 30, 1997 ...... 91,689 160,458 252,150
Promissory note bearing interest at LIBOR plus 2%
(7.66% at September 30, 1997); principal of
approximately $8,762 and interest due in 60 monthly
installments which commenced in April 1996 and
continuing through March 2001; collateralized by
certain fixed assets with an approximate net book
value of $606,500 at September 30, 1997 ............ 367,990 447,061
Promissory note bearing interest at LIBOR plus 2%
(7.66% at September 30, 1997); with 36 monthly
installments of principal of approximately $9,652
and interest followed by 24 monthly installments of
principal of approximately $2,217 and interest
which commenced in March 1997 and continuing
through February 2002; collateralized by certain
fixed assets with an approximate net book value of
$465,000 at September 30, 1997 ..................... 323,444
Promissory note bearing interest at LIBOR plus 2%
(7.66% at September 30, 1997); principal of
approximately $2,217 and interest due in 60 monthly
installments which commenced in June 1997 and
continuing through May 2002 collateralized by
certain fixed assets with an approximate net book
value of $187,000 at September 30, 1997 ............ 121,938
--------------- ------------- -------------
46,599,894 49,491,908 55,368,150
Less current portion ................................ 6,591,936 6,449,498 6,344,358
--------------- ------------- -------------
$40,007,958 $43,042,410 $49,023,792
=============== ============= =============
</TABLE>
F-12
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
6. LONG-TERM DEBT: (Continued)
In October 1987, the Company, through an intermediary, entered into an
Indenture of Mortgage and Deed of Trust with a consortium of institutional
investors which provided for the issuance of $75,000,000, 10.375% Senior
Secured Notes ("the 10.375% Notes"). The proceeds from the 10.375% Notes were
used to prepay previous debt and to repay partner capital loans. In
connection with the 10.375% Notes, the Company granted a first deed of trust
interest on the land and related facilities at the Mill and assigned its
interests in the Sales Contracts to a trustee. The Company is permitted to
prepay outstanding balances on the 10.375% Notes; however, in the event of
any prepayments, the Company may be required to pay a prepayment penalty, as
defined in the indenture agreement. The terms of the indenture agreement
provide that the Company may issue additional notes for permanent financing
for the cost of construction of certain major improvements to the Mill. In
the event such notes are issued, the noteholders have the option to redeem
their notes.
The indenture contains certain restrictive covenants. Two of the more
financially significant covenants limit the Company's ability to make
distributions to partners and incur additional debt.
During the periods presented, the Company entered into certain promissory
note agreements (the "Agreements") with a financial institution to finance
the purchase of certain equipment. These Agreements may be prepaid at the
option of the Company without incurring any prepayment penalties.
The fair value of the Company's senior secured notes was estimated by
discounting the future cash flows using a rate currently available for debt
with similar terms and maturities. The fair value of the Company's long-term
debt at December 31, 1996, and 1995 was estimated to be $51,060,285 and
$57,542,800, respectively.
Maturities on long-term debt for the four years after 1997 are
approximately as follows: 1998 - $6,427,000; 1999 - $6,358,000;
2000 - $6,210,420; and 2001 - $6,026,000.
7. LONG-TERM PURCHASE OBLIGATIONS:
Capitalized purchase obligations for purchases of machinery and equipment
at December 31, 1996, which approximate fair value, consisted of:
<TABLE>
<CAPTION>
<S> <C>
Long-term purchase obligations bearing interest at various rates ranging
from approximately 7% to 8%; with principal payments ending in 1998 ....... $2,679,353
Less current portion ........................................................ 2,032,548
------------
$ 646,805
============
</TABLE>
8. EMPLOYEE BENEFIT PLANS:
The Company provides a defined contribution retirement plan for
substantially all employees. The annual cost of the plan, which is currently
funded, is based on the compensation of participants. The Company increased
its contribution from 5% to 6% of employees' base compensation effective July
1, 1996.
The Company provides a thrift plan for substantially all employees which
incorporates the provisions of Internal Revenue Code Subsection 401(k),
whereby employees can make voluntary, tax-deductible contributions within
specified limits. The Company matched employee contributions at 60% during
the nine months ended September 30, 1997 and during 1996 and at 50% during
1995 and 1994, up to a maximum of 6% of an employee's base pay.
The Company's expense for both plans approximated $928,606 (unaudited),
$806,405 (unaudited), $1,103,000, $935,000 and $883,000 for the nine-month
periods ended September 30, 1997 and 1996, and the years ended December 31,
1996, 1995 and 1994, respectively.
The Company is self-insured for medical, dental and disability claims up
to $35,000 per claim per year. The Company has provided an accrual of
approximately $313,000 for claims incurred but not reported at September 30,
1997 and December 31, 1996 and 1995.
F-13
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
9. COMMITMENTS AND CONTINGENCIES:
Future minimum payments under noncancelable leases at December 31, 1996
were not material.
On September 30, 1994, the United States Environmental Protection Agency
("EPA") issued a Notice of Violation to the Company claiming violation of two
federally enforceable state air pollution requirements. Although the EPA has
not assessed any penalties for either alleged violation, the EPA may issue an
order requiring compliance with the requirements and administrative and civil
penalties. After consulting with counsel, the Company's management has
determined that it is not possible to estimate the amount of loss, if any,
that may ultimately be incurred related to the EPA matter.
On July 12, 1996, the Company entered into a Reasonably Available Control
Technology ("RACT") Agreement with the Virginia Department of Environmental
Quality (the "DEQ"). Under the RACT Agreement, the Company is not required to
incur any significant capital expenditures for the purchase and installation
of pollution control equipment.
No provision has been made in the financial statements with respect to
these contingencies and management believes that the probable resolution of
these matters will not materially affect the financial position and results
of operations of the Company.
10. SUBSEQUENT EVENT (UNAUDITED)
On December 1, 1997, Bear Island Paper Company, L.L.C., a newly
formed Viginia limited liability company ("Paper Company"), completed
the purchase of the 70% partnership interest in the Company previously
owned by subsidiaries of Dow Jones and The Washington Post for an
aggregate purchase price (subject to certain post-completion adjustments) of
approximately $149.8 million in cash. Immediately before the acquisition
and certain related financings facilitated to fund the acquisition, Paper
Company was merged into the Company, with Paper Company being the surviving
entity. Funding for the acquisition, including approximately $200,000 in
transaction costs, was provided from (i) borrowings under a $120 million
senior secured bank credit facility (the "Credit Facility"); (ii) the net
proceeds from an offering of $100 million aggregate principal amount 10%
senior secured notes due 2007 (the "Notes"); and (iii) $5.2 million of
existing cash on hand (of which $1.2 million was distributed to Brant-Allen
to reimburse certain deferred loan costs paid by Brant-Allen on behalf of
Paper Company in connection with the aforementioned borrowings.) The Credit
Facility consists of: (i) a $50 million 6-year senior secured reducing
revolving credit facility and (ii) a $70 million 8-year senior secured
term loan. The effects of the acquisition and related financings are not
reflected in the accompanying historical financial statements of the Company
as of and for the years ended December 31, 1996, 1995 and 1994 or in the
interim financial statements of the Company as of September 30, 1997 and
for the nine months ended September 30, 1997 and 1996.
Upon completion of the acquisition and related financings the Paper
Company is highly leveraged with total indebtedness at December 1, 1997 of
approximately $201.1 million, consisting of borrowings of $31 million under
the revolving portion of the Credit Facility, $70 million under the term loan
portion of the Credit Facility, $100 million under the Notes and
approximately $130,000 in long-term purchase obligations. In addition,
following the completion of the acquisition, $19 million was available in
unused borrowing capacity under the revolving portion of the Credit Facility.
The Notes are collateralized by (i) a second priority interest in all real
property of Paper Company and all personal property to the extent such
personal property is assignable and except for certain other assets that are
not assignable, (ii) a third priority security interest in 100% of the
membership interests in Bear Island Timberlands Company, L.L.C. (a newly
formed wholly owned subsidiary of Brant-Allen and the successor to BITCO),
and (iii) a second priority security interest in 65% of the issued and
outstanding capital stock of F.F. Soucy, Inc. (a wholly owned subsidiary of
Brant-Allen). The Credit Facility is collateralized by: (i) a first priority
security interest in substantially all of the assets of Paper Company; (ii) a
shared first priority security interest (shared pro rata with a security
interest held on a $35 million loan to Brant-Allen) in the 65% of the common
stock of F.F. Soucy, Inc.; and (iii) a second priority security interest in
100% of the membership interests in Bear Island Timberlands Company, L.L.C.
F-14
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
10. SUBSEQUENT EVENT (UNAUDITED) (Continued)
In connection with the acquisition, certain purchase accounting
adjustments (which are preliminary until post-completion adjustments are
finalized and the purchase price allocation process is completed) were
required to record the impacts to Paper Company's financial statements from
the acquisition. These adjustments: (i) capitalized approximately $8.2
million of deferred loan costs (including the aforementioned $1.2 million of
deferred loan costs paid by Brant-Allen), (ii) write-off approximately
$425,000 in deferred loan costs associated with the previous long-term debt
of the Company, for which the then outstanding balance of $42 million was
repaid at the closing of the acquisition (along with a prepayment penalty of
approximately $4 million), and (iii) record the allocation of approximately
$82 million of excess purchase price over the book value of the interests
acquired to inventory and property, plant and equipment.
F-15
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Partners of Bear Island Timberlands Company, L. P.:
We have audited the accompanying balance sheets of Bear Island Timberlands
Company, L. P. (a Virginia limited partnership) ("BITCO") as of December 31,
1996 and 1995, and the related statements of income, changes in partners'
equity and cash flows for each of the three years in the period ended
December 31, 1996. These financial statements are the responsibility of
BITCO's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
As discussed in Note 7 to the financial statements, BITCO had numerous
significant related-party transactions with an affiliate, Bear Island Paper
Company, L.P., for each of the three years in the period ended December 31,
1996 which significantly impacted the financial position at December 31, 1996
and 1995 and the results of operations and cash flows of BITCO for each of
the three years in the period ended December 31, 1996.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of BITCO as of December 31,
1996 and 1995, and the results of its operations and its cash flows for each
of the three years in the period ended December 31, 1996, in conformity with
generally accepted accounting principles.
Coopers & Lybrand L.L.P.
Richmond, Virginia
January 17, 1997
F-16
<PAGE>
BEAR ISLAND TIMBERLANDS COMPANY, L.P.
(A Virginia Limited Partnership)
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
SEPTEMBER 30, ---------------------------
1997 1996 1995
------------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Cash and short-term investments ............... $ 9,627,442 $ 7,535,254 $ 2,924,645
Restricted cash and investments ............... 341,856 3,165,442 4,797,791
Accounts and notes receivable ................. 410,165 592,163 541,101
Due from Bear Island Paper Company, L.P. ..... 1,672,705 1,388,085 1,159,056
Inventory ..................................... 1,039,910 1,560,991 1,536,823
Other current assets .......................... 63,388 16,434 18,729
--------------- ------------- -------------
Total current assets ........................ 13,155,466 14,258,369 10,978,145
--------------- ------------- -------------
Property and equipment ........................ 1,353,657 1,183,083 1,040,594
Less accumulated depreciation ................. (727,215) (734,661) (691,292)
--------------- ------------- -------------
Net property and equipment .................. 626,442 448,422 349,302
Timberlands, net .............................. 44,056,338 44,017,608 44,336,737
--------------- ------------- -------------
44,682,780 44,466,030 44,686,039
--------------- ------------- -------------
Other assets:
Restricted cash and investments .............. 2,571,922
Long-term notes receivable ................... 175,315 229,197 556,497
Deferred financing costs, net of accumulated
amortization of $313,607 (unaudited),
$288,180 and $254,275, respectively ........ 194,945 220,373 254,277
--------------- ------------- -------------
370,260 449,570 3,382,696
--------------- ------------- -------------
$58,208,506 $59,173,969 $59,046,880
=============== ============= =============
LIABILITIES
Current portion of long-term debt ............. 4,835,241 4,689,250 4,689,250
Accounts payable and accrued expenses ........ 403,042 65,214 137,626
Interest payable .............................. 700,864 1,632,360 1,841,373
--------------- ------------- -------------
Total current liabilities ................... 5,939,147 6,386,824 6,668,249
--------------- ------------- -------------
Deferred profit on land sales ................. 15,472 49,960 173,275
--------------- ------------- -------------
Long-term debt ................................ 22,667,276 27,189,250 31,878,500
--------------- ------------- -------------
PARTNERS' EQUITY
Contributed capital ........................... 18,860,496 18,860,496 18,860,496
Retained earnings ............................. 10,726,115 6,687,439 1,466,360
--------------- ------------- -------------
Total partners' equity ...................... 29,586,611 25,547,935 20,326,856
--------------- ------------- -------------
$58,208,506 $59,173,969 $59,046,880
=============== ============= =============
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-17
<PAGE>
BEAR ISLAND TIMBERLANDS COMPANY, L.P.
(A Virginia Limited Partnership)
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
NINE-MONTHS
ENDED SEPTEMBER 30, FOR THE YEARS ENDED DECEMBER 31,
---------------------------- -------------------------------------------
1997 1996 1996 1995 1994
------------- ------------- ------------- ------------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Sales:
Timber -affiliated ................ $10,982,178 $10,702,189 $14,744,000 $13,003,000 $11,896,000
Timber -unaffiliated 2,713,919 1,451,043 2,407,122 1,120,558 1,357,595
Land .............................. 811,257 1,235,103 1,708,144 3,301,155 11,218,763
------------- ------------- ------------- ------------- -------------
Total sales ...................... 14,507,354 13,388,335 18,859,266 17,424,713 24,472,358
------------- ------------- ------------- ------------- -------------
Cost of sales: .....................
Timber 8,269,368 7,305,842 10,220,154 9,496,291 9,916,054
Land .............................. 102,830 231,764 308,007 1,217,975 5,719,044
------------- ------------- ------------- ------------- -------------
Total cost of sales .............. 8,372,198 7,537,606 10,528,161 10,714,266 15,635,098
------------- ------------- ------------- ------------- -------------
Gross profit ..................... 6,135,156 5,850,729 8,331,105 6,710,447 8,837,260
Fees for recycled fiber ............ 1,640,695 1,554,854 2,070,469 147,340
Selling, general and administrative
expenses .......................... (2,086,800) (2,010,398) (2,695,956) (2,596,236) (2,482,010)
------------- ------------- ------------- ------------- -------------
Income from operations ........... 5,689,051 5,395,185 7,705,618 4,261,551 6,355,250
------------- ------------- ------------- ------------- -------------
Other income (deductions):
Interest income ................... 380,333 393,526 533,286 633,809 502,145
Interest expense .................. (2,203,106) (2,546,483) (3,356,985) (3,795,948) (4,254,075)
Other income ...................... 172,398 215,000 339,160 366,948 532,904
------------- ------------- ------------- ------------- -------------
(1,650,375) (1,937,957) (2,484,539) (2,795,191) (3,219,026)
------------- ------------- ------------- ------------- -------------
Net income ....................... $ 4,038,676 $ 3,457,228 $ 5,221,079 $ 1,466,360 $ 3,136,224
============= ============= ============= ============= =============
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-18
<PAGE>
BEAR ISLAND TIMBERLANDS COMPANY, L.P.
(A Virginia Limited Partnership)
STATEMENTS OF CHANGES IN PARTNERS' EQUITY
<TABLE>
<CAPTION>
DOW JONES
BRANT-ALLEN VIRGINIA
INDUSTRIES COMPANY,
INC. INC. NEWSPRINT, INC. TOTAL
------------- ------------- --------------- -------------
<S> <C> <C> <C> <C>
Contributed capital:
Balances, December 31, 1993, 1994, 1995,
1996 and September 30, 1997
(unaudited)............................. $6,332,292 $ 6,264,102 $ 6,264,102 $18,860,496
============= ============= =============== =============
Retained earnings: .......................
Balances, December 31, 1993 ............. - - - -
Net income -1994 ........................ 940,868 1,097,678 1,097,678 3,136,224
------------- ------------- --------------- -------------
Distributions to partners ............... (940,868) (1,097,678) (1,097,678) (3,136,224)
Balances, December 31, 1994 ............. - - - -
Net income -1995 ........................ 439,908 513,226 513,226 1,466,360
------------- ------------- --------------- -------------
Balances, December 31, 1995 ............. 439,908 513,226 513,226 1,466,360
Net income -1996 ........................ 1,566,323 1,827,378 1,827,378 5,221,079
------------- ------------- --------------- -------------
Balances, December 31, 1996 ............. 2,006,231 2,340,604 2,340,604 6,687,439
Net income -nine-months ended September
30, 1997 (unaudited) ................... 1,211,604 1,413,536 1,413,536 4,038,676
------------- ------------- --------------- -------------
Balances, September 30, 1997 (unaudited) $3,217,835 $ 3,754,140 $ 3,754,140 $10,726,115
============= ============= =============== =============
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-19
<PAGE>
BEAR ISLAND TIMBERLANDS COMPANY, L.P.
(A Virginia Limited Partnership)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS
ENDED SEPTEMBER 30, FOR THE YEARS ENDED DECEMBER 31,
--------------------------- ------------------------------------------
1997 1996 1996 1995 1994
------------- ------------- ------------- ------------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Operating activities:
Net income ....................................... $ 4,038,676 $ 3,457,228 $ 5,221,079 $ 1,466,360 $ 3,136,224
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation .................................... 87,435 72,749 98,587 82,581 88,864
Depletion ....................................... 588,701 507,415 1,099,762 689,733 770,324
Amortization of deferred financing costs ....... 25,428 25,428 33,904 33,903 33,903
Net book value of land sold ..................... 133,873 302,728 308,007 1,340,027 5,775,067
Gain on disposal of machinery and equipment .... (32,537) (9,393) (10,995) (5,183)
(Increase) decrease in:
Accounts and notes receivable ................... 235,880 364,462 276,238 (235,830) 456,953
Due from Bear Island Paper Company, L.P. ....... (284,620) (103,102) (229,029) (22,796) (982,446)
Inventory ....................................... 521,081 263,845 (24,168) (177,408) (77,132)
Other current assets ............................ (46,954) (1,899) 2,295 (2,191) 1,082
Increase (decrease) in:
Accounts payable and accrued expenses .......... 337,828 162,814 (72,412) (7,036) (36,773)
Interest payable ................................ (931,496) (1,030,870) (209,013) (228,177) (229,950)
Deferred profit on land sales ................... (34,488) (97,925) (123,315) 8,617 (195,516)
------------- ------------- ------------- ------------- -------------
Net cash provided by operating activities ..... 4,638,807 3,913,480 6,370,940 2,942,600 8,740,600
------------- ------------- ------------- ------------- -------------
Investing activities:
Purchases of machinery and equipment ............. (120,198) (301,870) (204,114) (144,066) (23,919)
Purchases of timberlands ......................... (582,904) (804,765) (1,088,640) (1,883,133) (558,952)
Proceeds from disposal of machinery and equipment 37,711 17,402 17,402 14,757
Decrease (increase) in restricted cash and
investments ..................................... 2,823,586 4,434,572 4,204,271 3,473,614 (1,313,594)
------------- ------------- ------------- ------------- -------------
Net cash provided by (used in) investing
activities .................................... 2,158,195 3,345,339 2,928,919 1,461,172 (1,896,465)
------------- ------------- ------------- ------------- -------------
Financing activities:
Distributions to partners......................... (4,500,000)
Principal payments on long-term debt ............. (4,704,814) (4,689,250) (4,689,250) (4,500,000) (4,500,000)
------------- ------------- ------------- ------------- -------------
Net cash used in financing activities ......... (4,704,814) (4,689,250) (4,689,250) (4,500,000) (9,000,000)
------------- ------------- ------------- ------------- -------------
Net increase (decrease) in cash and short-term
investments ................................... 2,092,188 2,569,569 4,610,609 (96,228) (2,155,865)
Cash and short-term investments, beginning
of year .......................................... 7,535,254 2,924,645 2,924,645 3,020,873 5,176,738
------------- ------------- ------------- ------------- -------------
Cash and short-term investments, end of period $ 9,627,442 $ 5,494,214 $ 7,535,254 $ 2,924,645 $ 3,020,873
============= ============= ============= ============= =============
Supplemental disclosures of cash flow information:
Cash paid for interest ............................ $ 3,134,604 $ 3,565,998 $ 3,565,998 $ 4,025,898 $ 4,484,025
============= ============= ============= ============= =============
Noncash investing and financing activity:
Increase in long-term debt for purchase of
timberlands ..................................... $ 178,400 $ 567,750
============= =============
Increase in promissory notes for equipment
acquisition ..................................... $ 150,431
=============
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-20
<PAGE>
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION:
Bear Island Timberlands Company, L.P. ("BITCO") was constituted as a
limited partnership on August 14, 1985, under the Virginia Uniform Limited
Partnership Act, pursuant to a Limited Partnership Agreement, as amended (the
"Partnership Agreement"), among:
o Brant-Allen Timberlands Company, Inc., which was merged into
Brant-Allen Industries, Inc. ("Brant-Allen"), a Delaware corporation, on
October 31, 1988;
o Dow Jones Virginia Company, Inc. ("D J Virginia"), a Delaware
corporation and a wholly owned subsidiary of Dow Jones & Company, Inc. ("Dow
Jones"); and
o Newsprint, Inc. ("Newsprint"), a Virginia corporation and a wholly
owned subsidiary of The Washington Post Company ("The Washington Post").
Brant-Allen is both the general partner and a limited partner and D J
Virginia and Newsprint are limited partners. The Partnership Agreement was
most recently amended on September 1, 1992. The Partnership Agreement
includes the following provisions:
o BITCO is established for an initial term of 43 years and is renewable
for additional terms of 20 years. BITCO may be dissolved with the consent of
the partners and in certain other circumstances.
o The purpose of BITCO is to engage in the business of acquiring, or
otherwise investing in, holding, managing, maintaining, operating, harvesting
and disposing of (i) real property containing timberlands or to be planted
for production of timber, (ii) timber rights, (iii) logs, and (iv) pulp
chips, and to engage in other activities desirable or incidental to timber
management, production and sales.
o Brant-Allen, as general partner, has full and exclusive control of the
business of BITCO and has active control of its management. Brant-Allen
receives no fees or other compensation for managing BITCO.
o The limited partners are not liable for any net losses or other debt or
liability of BITCO to any extent, except for (i) their respective
contributions to capital and (ii) their guarantee of BITCO's long-term debt
(see Note 6) up to $7,933,333 each.
o Subject to the aforementioned provisions, the partners share the net
profits and losses based on their interests, as defined by the Partnership
Agreement, computed in accordance with generally accepted accounting
principles consistently applied.
o No partner may sell, assign or otherwise dispose of its interest, or
any part thereof, in BITCO, unless it first offers such interest to the other
partners as prescribed in the Partnership Agreement.
o No partner may mortgage, pledge, hypothecate or otherwise encumber its
interest in BITCO without the prior written consent of the other partners.
o BITCO may not borrow in excess of $5,000,000 for short-term working
capital needs without the prior consent of the partners.
Under the terms of the Partnership Agreement, D J Virginia's and
Newsprint's equity interests in BITCO are 35% each and Brant-Allen's equity
interest is 30% for all periods shown.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
CASH AND SHORT-TERM INVESTMENTS: Short-term investments with a bank
balance of $6,056,045 (unaudited), $7,559,715 and $2,816,815 included in cash
and short-term investments at September 30, 1997, December 31, 1996 and 1995,
consist of repurchase agreements and are stated at cost plus accrued interest
which approximates market value. For purposes of the statements of cash
flows, BITCO considers all highly liquid short-term investments purchased
with an original maturity of three months or less to be cash equivalents.
ACCOUNTS AND NOTES RECEIVABLE: As certain timberlands are sold, BITCO may
accept a note as part of the sales transaction. The current portion of notes
receivable approximated $105,222 (unaudited), $154,000 and
F-21
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
$100,000 at September 30, 1997, December 31, 1996 and 1995, respectively.
There is no allowance for doubtful accounts receivable at September 30, 1997,
December 31, 1996 and 1995.
INVENTORY: Inventory consists primarily of wood stored at the mill site of
Bear Island Paper Company, L.P. ("BIPCO") and off-site wood yards and is
valued at the lower of actual cost or market, with cost determined on the
first-in, first-out ("FIFO") basis.
PROPERTY, EQUIPMENT AND TIMBERLANDS: Land, machinery and equipment are
stated at cost. Timberlands are stated at cost net of accumulated depletion.
The cost of reforestation is capitalized. The costs of major renewals and
betterments to equipment are capitalized while the costs of maintenance and
repairs are charged to income as incurred. When properties are sold or
retired, their cost and the related accumulated depreciation or depletion are
eliminated from the accounts and the gain or loss is reflected in income.
Carrying value of property, plant and equipment is evaluated whenever
significant events or changes occur that might indicate an impairment through
comparison of the carrying value to fair market value or total undiscounted
cash flows.
DEPRECIATION: Depreciation of machinery and equipment is computed
principally on the straight-line basis over the estimated useful lives of the
assets which range from three to five years.
DEPLETION: The portion of the cost of timberlands attributed to standing
timber is charged against income as timber is cut, at rates determined
annually, based on the relationship of unamortized timber costs to the
estimated volume of recoverable timber.
DEFERRED FINANCING COSTS: Costs directly associated with the issuance of
certain long-term debt have been deferred and are being amortized on a
straight-line basis over 15 years, the life of the related debt, which
approximates the interest method.
DEFERRED PROFIT ON LAND SALES: Profit on land sales for which the buyer
has not invested a sufficient amount of equity is recognized on the
installment method when cash is received from the buyer.
REVENUE RECOGNITION: Sales to BIPCO are recognized when wood is placed
into production by BIPCO rather than when wood is delivered to the BIPCO
plant site. All other sales are recorded based on delivery of product.
INCOME TAXES: No provision for income taxes is required in the
accompanying financial statements since each partner is individually liable
for any income tax that may be payable on its share of BITCO's taxable
income.
EARNINGS PER SHARE: No earnings per share calculations have been provided
in the financial statements since such calculations are not meaningful under
the partnership structure.
ESTIMATES: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the dates
of the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
FAIR VALUE OF FINANCIAL INSTRUMENTS: The fair value of the long-term debt
is estimated using discounted cash flow analysis based on the incremental
borrowing rates currently available to BITCO for loans with similar terms and
maturity. The fair value of trade receivables and payables approximates the
carrying amounts because of the short maturity of these instruments.
RISK AND UNCERTAINTIES: Financial instruments which potentially subject
BITCO to concentrations of credit risk consist principally of cash, short
term investments, U.S. Government securities and receivables. BITCO's cash
and restricted cash balances are maintained at a major financial institution.
Cash equivalents at December 31, 1996, 1995 and 1994 consisted of repurchase
agreements with a high-credit-quality financial institution. The repurchase
agreements were collateralized by United States Government agency
obligations. The credit rating of the issuing institution for the repurchase
agreements indicates the issuing entity has a strong capacity to repay
short-term obligations.
Receivables consist principally of trade accounts receivable resulting
primarily from sales to BIPCO and notes receivable resulting from land sales.
Notes receivable credit is extended after an evaluation of creditworthiness
and are collateralized by a first deed of trust on the land sold.
F-22
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The Company's sales of timber are made almost entirely to BIPCO. Sales to
BIPCO represented approximately 76% (unaudited), 80% (unaudited), 78%, 75%
and 49% of total sales during the nine-month periods ended September 30, 1997
and 1996 and for the years ended December 31, 1996, 1995 and 1994,
respectively.
UNAUDITED INTERIM FINANCIAL STATEMENTS: The unaudited balance sheet as of
September 30, 1997 and the unaudited statements of income and cash flows for
the nine-months ended September 30, 1997 and 1996 have been prepared in
accordance with generally accepted accounting principles for interim
financial information. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management,
all adjustments (consisting of only normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results for
the nine months ended September 30, 1997 are not necessarily indicative of
the results that may be expected for the year ending December 31, 1997.
RECLASSIFICATIONS: Certain prior period amounts have been reclassified to
conform to the 1996 presentation.
3. RESTRICTED CASH AND INVESTMENTS:
Investments of $101,250 and $4,602,745 are included in restricted cash and
investments at December 31, 1996 and 1995, and consist of U.S. Government
securities which are stated at amortized cost which approximates market
value. Cash and investments are restricted for the payment of principal under
the terms of an escrow agreement entered into in connection with BITCO's
long-term debt agreement as described in Note 6.
During the nine months ended September 30, 1997 and years ended December
31, 1996 and 1995, BITCO sold certain timberlands whereby proceeds of
$332,109 (unaudited), $274,682 and $297,791, respectively, were placed into
an escrow account as part of tax deferred land exchanges. Of the amounts
placed in escrow, approximately $32,600 and $21,500, for the years ended
December 31, 1996 and 1995, are subject to taxation since these amounts were
not used to purchase additional timberlands within the prescribed periods.
There were no amounts (unaudited) placed in escrow for the nine months ended
September 30, 1997 that were subject to taxation, as previously described.
This escrow account is not part of the escrow agreement entered into in
connection with BITCO's long-term debt agreement as described in Note 6. The
amount escrowed is included in current restricted cash and investments in the
accompanying balance sheets.
4. TIMBERLANDS:
At September 30, 1997, December 31, 1996 and 1995, BITCO's timberlands
consisted of the cost of land and standing timber owned by BITCO ("Fee
Lands") and the cost of the right to cut timber from land owned by third
parties within a specified period of time ("Timber Deeds").
F-23
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Timberlands consisted of:
<TABLE>
<CAPTION>
DECEMBER 31,
SEPTEMBER 30, ---------------------------
1997 1996 1995
------------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Fee Lands .................. $57,200,634 $56,604,247 $55,891,945
Timber Deeds ............... 107,933 76,889 83,583
--------------- ------------- -------------
57,308,567 56,681,136 55,975,528
Less accumulated depletion 13,252,229 12,663,528 11,638,791
--------------- ------------- -------------
Timberlands, net ........ $44,056,338 $44,017,608 $44,336,737
=============== ============= =============
</TABLE>
5. PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment is stated at cost and consists of the
following:
<TABLE>
<CAPTION>
DECEMBER 31,
SEPTEMBER 30, ---------------------------
1997 1996 1995
------------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Land .......................... $ 33,492 $ 33,492 $ 33,492
Machinery and equipment ...... 1,320,165 1,149,591 1,007,102
--------------- ----------- -----------
1,353,657 1,183,083 1,040,594
Less accumulated depreciation 727,215 734,661 691,292
--------------- ----------- -----------
Total ....................... $ 626,442 $ 448,422 $ 349,302
=============== =========== ===========
</TABLE>
F-24
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
6. LONG-TERM DEBT:
Long-term debt consisted of:
<TABLE>
<CAPTION>
DECEMBER 31,
SEPTEMBER 30, --------------------------
1997 1996 1995
------------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Senior notes bearing interest at 10.22% (interest
payable semi-annually); principal of $2,250,000
due semiannually which commenced in July 1993 and
will continue until maturity in July 2003 ....... $27,000,000 $31,500,000 $36,000,000
Promissory note bearing interest at 6%; principal
and interest due in three annual installments of
$189,250, which commenced on January 1, 1996 and
will continue through January 1, 1998;
collateralized by a deed of trust on certain
timberland with a book value of approximately
$765,000 ......................................... 189,250 378,500 567,750
Promissory note bearing interest at 7%; principal
and interest due in three annual installments;
first and second installments of $67,980 are due
on January 31, 1998 and 1999, with the balance
due in the third installment on January 31, 2000;
collateralized by a deed of trust on certain
timberland with a book value of approximately
$229,500 ......................................... 178,400
Promissory note bearing interest at LIBOR plus 2%
(7.66% at September 30, 1997); principal of
approximately $2,594 and interest due in 60
monthly installments which commenced March 1,
1997 and will continue through February 2002;
collateralized by certain fixed assets with an
approximate net book value of $148,000 at
September 30, 1997 ............................... 134,867
--------------- ------------- -------------
27,502,517 31,878,500 36,567,750
Less current portion .............................. 4,835,241 4,689,250 4,689,250
--------------- ------------- -------------
$22,667,276 $27,189,250 $31,878,500
=============== ============= =============
</TABLE>
The senior notes were issued under a Timberlands Loan and Maintenance
Agreement (the "Agreement") with an insurance company which was used to
finance the purchase of approximately 157,000 acres of timberland at an
aggregate price of $46,877,000.
BITCO is permitted to prepay outstanding principal balances on the senior
notes; however, in the event of any prepayments, BITCO may be required to pay
a prepayment penalty, as defined in the Agreement. Borrowings under the
Agreement are collateralized by substantially all of BITCO's assets.
Under the more financially significant covenants of the Agreement, BITCO
has agreed to (i) limit distributions, (ii) restrict investments, (iii) limit
the incurrence of additional indebtedness, (iv) not pay remuneration of any
nature to the partners, (v) limit timberland sales, (vi) restrict the cutting
of timber, and (vii) maintain a ratio of Administrative Value of timberland
to Net Principal Balance (as defined in the Agreement) of at least 1.33 to 1.
F-25
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The Agreement also requires that BITCO make certain payments to an escrow
account (see Note 3) in the event (i) any of the timberland property acquired
with the proceeds of the loan is sold or (ii) the volume of timber cut from
the timberland property exceeds the volume permitted by the lender. The
principal balance of the escrow account may be invested in only certain
investments and may be used only to make principal payments on long-term
debt. The balance in the escrow account was approximately $2,891,000 and
$7,072,000 at December 31, 1996 and 1995, and is classified as restricted
cash and investments in the accompanying balance sheets.
The Agreement allows BITCO to withdraw funds from the escrow account if
additional timberlands are added as collateral for the loan or D J Virginia
and Newsprint provide guarantees for the amount of funds withdrawn.
The promissory note bearing interest at 6% was issued in December 1995 in
connection with the purchase of timberland at an aggregate price of
approximately $757,000. BITCO is permitted to prepay outstanding principal
and interest balances with lender approval. The promissory note is
collateralized by a deed of trust on timberland which is not part of the
collateralized assets under the Agreement.
The fair value of BITCO's long-term debt was calculated by discounting the
future cash flows using an estimated rate currently available for debt with
similar terms and maturities. The fair values of BITCO's long-term debt at
December 31, 1996 and 1995 were estimated to be $34,457,350 and $38,021,400.
Maturities on long-term debt for the four years after 1997 are
approximately as follows: 1998 - $4,775,858; 1999 - $4,590,492;
2000 - $4,594,648; and 2001 - $4,531,116.
7. RELATED-PARTY TRANSACTIONS:
BITCO has entered into a wood supply contract with BIPCO whereby BITCO has
guaranteed to supply BIPCO's wood requirements at a price to be negotiated
annually (see Note 2).
Wood sales to BIPCO approximated $10,982,178 (unaudited), $10,702,189
(unaudited), $14,744,000, $13,003,000 and $11,896,000 during the nine-month
periods ended September 30, 1997 and 1996 and the years ended December 31,
1996, 1995 and 1994, respectively. At September 30, 1997, December 31, 1996,
and 1995, BIPCO owed BITCO approximately $1,672,705 (unaudited), $1,388,000,
and $1,159,000, respectively. All other sales of wood were made to
unaffiliated companies primarily located in Virginia.
BITCO has agreed to procure recycled paper for BIPCO on a fee per tonnes
basis. BITCO recognized revenue of $1,640,695 (unaudited), $1,554,854
(unaudited), $2,070,469, $147,340 and $122,307 for the nine-month periods
ended September 30, 1997 and 1996, and the years ended December 31, 1996,
1995 and 1994, respectively.
BITCO shares employees, facilities and recordkeeping systems with BIPCO
and reimburses BIPCO monthly for its share of these costs. Accordingly, these
shared employees receive benefits under BIPCO's defined contribution
retirement plan and are eligible to participate in BIPCO's thrift plan. Costs
associated with these plans are reimbursed monthly by the Partnership.
Amounts paid to BIPCO for shared costs, which are included in general and
administrative expenses, approximated $1,068,138 (unaudited), $1,039,076
(unaudited), $1,370,000, $1,276,000 and $1,128,000 for the nine-month periods
ended September 30, 1997 and 1996, and the years ended December 31, 1996,
1995 and 1994, respectively. BITCO received approximately $44,448
(unaudited), $42,919 (unaudited), $57,750, $56,000 and $133,000 from BIPCO
for the nine-month periods ended September 30, 1997 and 1996, and the years
ended December 31, 1996, 1995 and 1994, respectively, for managing certain of
its timberlands. Such amounts are included in other income in the
accompanying statements of income.
8. COMMITMENTS
BITCO and BIPCO have entered into an agreement for certain marketing and
consulting services with The Elebash Company ("Elebash") whereby BITCO, in
the case of sales of its land, or BIPCO, in the case of BIPCO-owned land, has
agreed to pay Elebash two percent of the gross sales price of any land
purchased or sold pursuant to the terms of the agreement. In this connection,
BITCO paid Elebash approximately $34,000, $71,000 and $229,000 for the years
ended December 31, 1996, 1995 and 1994. Amounts paid to Elebash are included
in selling, general and administrative expenses in the accompanying
statements of income. This agreement is cancelable by any party by providing
60 days written notice.
F-26
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
9. SUBSEQUENT EVENT--(UNAUDITED)
On December 1, 1997, Brant-Allen completed the purchase of the 70%
partnership interest in BITCO previously owned by subsidiaries of Dow Jones
and The Washington Post for an aggregate purchase price (subject to certain
post-completion adjustments) of approximately $36 million in cash. Immediately
prior to the acquisition, BITCO was converted into Bear Island Timberlands
Company, L.L.C., a Virginia limited liability company ("Timberlands").
Funding for the acquisition, including approximately $30,000 in transactions
costs, was provided from (i) borrowings by Brant-Allen of $35 million under a
senior secured two-year loan facility consisting of a $32 million term
facility and a $3 million revolving facility borrowed by Brant-Allen
(collectively the "Timberlands Loan") and guaranteed by Timberlands; and (ii)
$1 million of Brant-Allen's cash on hand. The Timberlands Loan is secured by
(i) a first priority interest in 100% of the membership interests in
Timberlands; and (ii) a shared first priority security interest in 65% of the
common stock of F. F. Soucy, Inc. (a wholly owned subsidiary of Brant-Allen).
This security interest is shared pro rata with a security interest held on
the $120 million credit facility of Bear Island Paper Company, L.L.C. (a
wholly owned subsidiary of Brant-Allen and the successor to BIPCO). The
effects of the acquisition and related financings are not reflected in the
accompanying historical financial statements as of and for the years ended
December 31, 1996, 1995 and 1994 or in the interim financial statements as of
September 30, 1997 and for the nine months ended September 30, 1997 and 1996.
Concurrent with the closing of the acquisition on December 1, 1997,
Timberlands substantially modified the terms of the existing $27 million loan
from John Hancock Mutual Life Insurance Company (and paid a related
modification fee of approximately $2.3 million). In connection with the
modification, an additional $3 million was drawn down from John Hancock
Mutual Life Insurance Company, bringing the total outstanding balance under
the loan to $30 million. As modified, this loan matures on December 31, 1999,
and is collateralized by approximately 125,000 acres of Timberlands' land.
In addition, in connection with the acquisition, Timberlands made an
approximate $5.3 million distribution to Brant-Allen to fund: (i) a one year
interest escrow requirement of the Timberlands Loan; (ii) the income tax
liability for Brant-Allen's proportionate share of BITCO's earnings for 1997
prior to closing; and (iii) certain other costs.
In connection with the acquisition, purchase accounting adjustments (which
are preliminary until post-completion adjustments are finalized and the
purchase price allocation process is completed) were required to record the
impact in the Timberlands financial statements of the acquisition. These
adjustments: (i) write-off approximately $195,000 of existing deferred loan
costs, (ii) push down the amount of the $35 million Timberlands Loan, (iii)
push down approximately $800,000 resulting from the payment by Brant-Allen of
associated deferred loan costs, and (iv) push down the excess of the
estimated purchase price of approximately $36 million over the $35 million
Timberland Loan. Under generally accepted accounting principles these amounts
were required to be pushed down into the financial statements of Timberlands
following the acquisition because the Timberlands Loan is collateralized by a
first priority security interest in 100% of the membership interests in
Timberlands and because of the guarantee by Timberlands of the Timberlands
Loan.
F-27
<PAGE>
AUDITORS' REPORT
To the Board of Directors of
F.F. Soucy, Inc.
We have audited the consolidated balance sheets of F.F. Soucy, Inc. as at
December 31, 1996 and 1995 and the consolidated statements of earnings,
retained earnings and changes in financial position for each of the three
years in the period ended December 31, 1996. These financial statements are
the responsibility of F.F. Soucy, Inc.'s management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with Canadian generally accepted
auditing standards. Those standards require that we plan and perform an audit
to obtain reasonable assurance whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation.
In our opinion, these consolidated financial statements present fairly, in
all material respects, the financial position of F.F. Soucy, Inc. as at
December 31, 1996 and 1995, and the consolidated results of its operations
and the changes in its financial position for each of the three years in the
period ended December 31, 1996, in accordance with generally accepted
accounting principles in Canada.
Coopers & Lybrand
Chartered Accountants
General Partnership
Montreal, Canada
January 14, 1997
F-28
<PAGE>
F.F. SOUCY, INC.
CONSOLIDATED BALANCE SHEETS
(expressed in Canadian dollars)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
1997 1996 1995
$ $ $
--------------- -------------- --------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash.................................................... 5,388,855 18,318,068 21,560,317
Accounts receivable -
Affiliate.............................................. 361,916 268,407 1,543,979
Other.................................................. 22,072,763 16,350,278 25,267,657
Advances to an affiliate................................ 2,523,008 2,041,272 1,953,591
Inventories............................................. 14,234,964 17,303,111 13,465,784
Prepaid expenses........................................ 443,236 552,276 562,774
--------------- -------------- --------------
45,024,742 54,833,412 64,354,102
PROPERTY, PLANT AND EQUIPMENT .......................... 93,395,198 94,333,876 85,537,961
DEFERRED PENSION COSTS.................................. 1,245,451 1,245,451 1,344,614
UNAMORTIZED FOREIGN EXCHANGE LOSS ON LONG-TERM DEBT ... 1,160,775 1,275,003 1,628,136
--------------- -------------- --------------
140,826,166 151,687,742 152,864,813
=============== ============== ==============
LIABILITIES
CURRENT LIABILITIES
Bank indebtedness....................................... 1,800,000 2,200,000 --
Accounts payable and accrued liabilities................ 13,010,073 15,592,690 14,603,886
Income taxes............................................ 1,472,825 2,597,638 15,202,719
Current portion of long-term debt....................... 4,819,739 5,020,611 5,400,310
--------------- -------------- --------------
21,102,637 25,410,939 35,206,915
LONG-TERM DEBT.......................................... 20,686,224 25,318,865 30,212,085
DEFERRED INCOME TAXES................................... 13,450,826 10,965,826 9,665,826
NON-CONTROLLING INTEREST IN F.F. SOUCY, INC. &
PARTNERS, LIMITED PARTNERSHIP ......................... 47,175,143 43,777,808 44,004,988
--------------- -------------- --------------
102,414,830 105,473,438 119,089,814
--------------- -------------- --------------
SHAREHOLDERS' EQUITY
CAPITAL STOCK .......................................... 1,621,851 1,941,592 1,941,592
CONTRIBUTED SURPLUS..................................... 1,133,850 1,133,850 1,133,850
RETAINED EARNINGS....................................... 35,655,635 43,138,862 30,699,557
--------------- -------------- --------------
38,411,336 46,214,304 33,774,999
--------------- -------------- --------------
140,826,166 151,687,742 152,864,813
=============== ============== ==============
</TABLE>
The accompanying notes are an integral part of the consolidated
financial Statements.
F-29
<PAGE>
F.F. SOUCY, INC.
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
(expressed in Canadian dollars)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
-------------------------- ------------------------------------------
1997 1996 1996 1995 1994
$ $ $ $ $
------------ ------------ ------------ ------------- -------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
RETAINED EARNINGS (DEFICIT)
-BEGINNING OF PERIOD ............... 43,138,862 30,699,557 30,699,557 (2,971,370) (7,188,100)
Net earnings for the period.......... 1,597,032 13,089,062 12,439,305 38,661,572 4,216,730
------------ ------------ ------------ ------------- -------------
44,735,894 43,788,619 43,138,862 35,690,202 (2,971,370)
Dividends............................ -- -- -- 4,990,645 --
Premium on redemption of common
shares ............................. 9,080,259 -- -- -- --
------------ ------------ ------------ ------------- -------------
RETAINED EARNINGS (DEFICIT) -END OF
PERIOD ............................. 35,655,635 43,788,619 43,138,862 30,699,557 (2,971,370)
============ ============ ============ ============= =============
Dividends per share.................. -- -- -- 9.98 --
============ ============ ============ ============= =============
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
F-30
<PAGE>
F.F. SOUCY INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(expressed in Canadian dollars)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
----------------------------- ---------------------------------------------
1997 1996 1996 1995 1994
$ $ $ $ $
------------- -------------- -------------- -------------- -------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
SALES................................. 106,407,146 136,468,881 168,676,664 216,987,549 122,379,524
FREIGHT............................... 11,287,740 12,644,097 15,017,213 11,475,943 13,339,149
------------- -------------- -------------- -------------- -------------
NET SALES............................. 95,119,406 123,824,784 153,659,451 205,511,606 109,040,375
COST OF SALES......................... 77,895,080 76,097,180 102,188,319 95,690,600 83,065,828
------------- -------------- -------------- -------------- -------------
17,224,326 47,727,604 51,471,132 109,821,006 25,974,547
------------- -------------- -------------- -------------- -------------
EXPENSES
Selling, general and administrative -
To an affiliate ..................... 9,255,202 12,048,152 14,951,065 19,934,626 10,576,916
To other............................. 850,939 752,311 905,185 877,556 829,162
Interest on long-term debt............ 2,090,975 2,481,595 3,219,064 4,435,895 4,687,498
Interest on demand loans.............. -- -- -- -- 671,075
Other interest........................ 43,962 31,095 153,655 26,601 124,737
------------- -------------- -------------- -------------- -------------
12,241,078 15,313,153 19,228,969 25,274,678 16,889,388
------------- -------------- -------------- -------------- -------------
4,983,248 32,414,451 32,242,163 84,546,328 9,085,159
------------- -------------- -------------- -------------- -------------
OTHER INCOME
Compensation for power interruption .. 1,837,028 1,909,880 2,420,875 2,501,212 2,443,534
Interest income....................... 180,488 495,210 609,272 382,261 8,940
Loss on foreign exchange and
translation -net .................... (1,101,397) (567,247) (348,534) (622,727) (654,758)
------------- -------------- -------------- -------------- -------------
916,119 1,837,843 2,681,613 2,260,746 1,797,716
------------- -------------- -------------- -------------- -------------
NON-CONTROLLING INTEREST IN EARNINGS
OF F.F. SOUCY, INC. & PARTNERS,
LIMITED PARTNERSHIP ................. (3,397,335) (13,763,232) (14,784,471) (30,567,502) (4,542,745)
------------- -------------- -------------- -------------- -------------
EARNINGS BEFORE INCOME TAXES.......... 2,502,032 20,489,062 20,139,305 56,239,572 6,340,130
PROVISION FOR INCOME TAXES............ 905,000 7,400,000 7,700,000 17,578,000 2,123,400
------------- -------------- -------------- -------------- -------------
NET EARNINGS FOR THE PERIOD........... 1,597,032 13,089,062 12,439,305 38,661,572 4,216,730
============= ============== ============== ============== =============
Net earning per share................. 3.80 26.18 24.88 77.32 8.43
============= ============== ============== ============== =============
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
F-31
<PAGE>
F.F. SOUCY, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN FINANCIAL POSITION
(expressed in Canadian dollars)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
------------------------------ ---------------------------------------------
1997 1996 1996 1995 1994
$ $ $ $ $
-------------- -------------- -------------- -------------- -------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH PROVIDED BY (USED FOR)
OPERATIONS
Net earnings for the period...................... 1,597,032 13,089,062 12,439,305 38,661,572 4,216,730
Items not affecting cash -
Depreciation of property, plant and equipment . 6,524,844 6,393,583 9,301,317 8,162,565 7,840,341
Non-controlling interest of a limited
partnership................................... 3,397,335 13,763,232 14,784,471 30,567,502 4,542,745
Deferred income taxes.......................... 2,485,000 1,200,000 1,300,000 (1,050,000) (483,000)
Foreign exchange loss on long-term debt ....... 319,778 356,235 497,374 339,003 892,351
Loss on disposal of capital assets............. -- -- -- 180,793 (19,097)
-------------- -------------- -------------- -------------- -------------
Provided by operations........................... 14,323,989 34,802,112 38,322,467 76,861,435 16,990,070
Cash provided by (used for) non-cash working
capital......................................... (6,346,237) (11,000,092) (5,250,155) (5,372,127) 3,094,160
-------------- -------------- -------------- -------------- -------------
7,977,752 23,802,020 33,072,312 71,489,308 20,084,230
-------------- -------------- -------------- -------------- -------------
FINANCING
Increase in long-term debt....................... -- -- -- -- 8,975,000
Decrease in long-term debt....................... (5,039,063) (5,339,476) (5,417,160) (14,668,961) (5,572,946)
Repayment of demand loans........................ -- -- -- -- (9,800,000)
Redemption of common shares...................... (9,400,000) -- -- -- --
Dividends paid................................... -- -- -- (4,990,645) --
Distribution to minority interest in F.F. Soucy,
Inc. & Partners, Limited Partnership............ -- (10,939,289) (15,011,651) (13,893,126) --
-------------- -------------- -------------- -------------- -------------
(14,439,063) (16,278,765) (20,428,811) (33,552,732) (6,397,946)
-------------- -------------- -------------- -------------- -------------
INVESTMENT
Additions to property, plant and equipment ...... (6,374,025) (10,249,173) (18,690,559) (17,895,673) (8,930,271)
Investment tax credits resulting from the
purchase of capital assets...................... 787,859 588,000 593,327 1,217,361 655,714
Proceeds from disposal of capital assets ........ -- -- -- 117,500 22,000
Decrease in deferred pension costs............... -- -- 99,163 102,447 95,907
Advances to an affiliate......................... (481,736) (8,118,931) (87,681) (1,953,591) --
-------------- -------------- -------------- -------------- -------------
(6,067,902) (17,780,104) (18,085,750) (18,411,956) (8,156,650)
-------------- -------------- -------------- -------------- -------------
INCREASE (DECREASE) IN NET CASH DURING THE
PERIOD.......................................... (12,529,213) (10,256,849) (5,442,249) 19,524,620 5,529,634
NET CASH -BEGINNING OF PERIOD ................... 16,118,068 21,560,317 21,560,317 2,035,697 (3,493,937)
-------------- -------------- -------------- -------------- -------------
NET CASH -END OF PERIOD ......................... 3,588,855 11,303,468 16,118,068 21,560,317 2,035,697
============== ============== ============== ============== =============
Net cash includes cash less bank indebtedness.
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
F-32
<PAGE>
F.F. SOUCY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the three-year period ended December 31, 1996
(expressed in Canadian dollars)
(All information as at, and for the nine months ended, September 30, 1997 and
1996 is unaudited)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF CONSOLIDATION
These consolidated financial statements have been prepared in conformity
with accounting principles generally accepted in Canada and include the
accounts of the wholly-owned subsidiary, Arrimage de Gros Cacouna Inc., and
F.F. Soucy, Inc. & Partners, Limited Partnership ("Soucy Partners"), a Quebec
limited partnership in which F.F. Soucy, Inc. ("Soucy Inc." and, together
with Soucy Partners, "Soucy") is general partner and shares in 50.1% of the
profits and losses.
USE OF ESTIMATES
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the dates
of the financial statements and the reported amounts of revenue and expenses
during the reporting periods. Actual results could differ from those
estimates.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair market values of the financial instruments included in the
consolidated financial statements approximate the carrying values of those
instruments except for long-term debt as disclosed in note 7.
CASH
Cash includes all cash balances, and all highly liquid short-term
investments, exclusive of bank indebtedness, where applicable. As of December
31, 1996 and 1995, and September 30, 1997, Soucy held no short-term
investments. For purposes of the statement of changes in financial position,
Soucy considers all highly liquid short-term investments with an original
maturity of three months or less to be cash equivalents.
CREDIT RISK
Financial instruments which potentially subject Soucy to concentrations of
credit risk consist principally of cash and accounts receivable. Soucy's cash
balance is maintained at a major financial institution. Receivables consist
principally of trade accounts receivable resulting primarily from sales to
newspaper publishers. Credit is extended to customers after an evaluation of
creditworthiness. Generally, Soucy does not require collateral or other
security from customers for trade accounts receivable. Substantially all of
Soucy's debtors' ability to honor their obligations are dependent upon the
printing and publishing sectors.
Soucy operates solely to produce newsprint which is subject to
fluctuations in paper prices. The paper industry has experienced highly
volatile price changes over the past few years.
INVENTORIES
Inventories are valued at the lower of cost (first in, first out) or
market. Cost as applied to finished goods includes cost of materials, direct
labour and overhead.
PROPERTY, PLANT AND EQUIPMENT
Cost of property, plant and equipment is recorded net of applicable
government grants on capital expenditures. Depreciation of property, plant
and equipment is computed using the declining balance method by Soucy Inc.
and the straight-line method by Soucy Partners as follows:
F-33
<PAGE>
F.F. SOUCY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(All information as at, and for the nine months ended, September 30, 1997 and
1996 is unaudited)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
<TABLE>
<CAPTION>
<S> <C>
Buildings................... 2% -10%
Machinery and equipment .... 2% -50%
Furniture and fixtures ..... 20%
</TABLE>
Soucy Inc. and Soucy Partners commence depreciating property, plant and
equipment at the time the assets are put into use. As at December 31, 1996,
there were capitalized costs of $9,025,751 (1995 -$1,656,000) with respect to
property, plant and equipment not yet in use.
For income tax purposes, depreciation is computed principally on an
accelerated basis.
Soucy Partners capitalizes interest costs, where material, as part of the
cost of constructing major facilities and equipment. No such interest costs
have been capitalized in years 1996, 1995 and 1994.
REVENUE RECOGNITION
Sales and related costs of goods sold are included in earnings when goods
are delivered to the customer in accordance with the delivery terms.
PENSION COSTS
The pension costs include the cost of pension benefits related to
employees' services in the current year and the amortization of the
difference between pension fund assets and the actuarial present value of
accrued pension benefits for services rendered to date. This difference is
being amortized over the expected average remaining service life of the
employee groups which extends for periods of up to 18 years. Soucy Inc. makes
appropriate provision against deferred pension costs where there is
uncertainty regarding its ability to benefit from the underlying pension
surplus.
COMPENSATION FOR POWER INTERRUPTION
The compensation for power interruption (note 10) is comprised of a fixed
portion, which is recognized as earned by Soucy in equal amounts over a
period of four months from December to March, and a variable portion which is
recognized as earned when the power interruptions occur. Any remaining
balance of the fixed portion is recognized as income at such time as the
maximum variable portion is recognized.
INCOME TAXES
Soucy Inc. provides deferred income taxes for timing differences which
relate principally to differences between financial and tax reporting in the
recognition of depreciation charges. For income tax reporting purposes, Soucy
Inc. includes its proportionate share of earnings and losses of Soucy
Partners. In accordance with the Partnership Agreement, maximum capital cost
allowances are being claimed by Soucy Partners including accelerated
depreciation of production machinery and equipment.
FOREIGN CURRENCY TRANSLATION
Monetary assets and liabilities in foreign currencies are translated at
year-end rates, and non-monetary assets and liabilities at rates prevailing
at the transaction dates. Revenue and expenses (other than amortization which
is translated at the rate applicable to the related assets) are translated at
the average rate for the year. Gains or losses arising on translation are
included in earnings for the current year except those relating to long-term
debt (note 7) which are deferred and amortized over the remaining life of the
debt.
F-34
<PAGE>
F.F. SOUCY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(All information as at, and for the nine months ended, September 30, 1997 and
1996 is unaudited)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
FORWARD EXCHANGE CONTRACTS
Forward exchange contracts are entered into to hedge contracted revenue
streams from foreign currency exchange rate fluctuations. As such, these
non-speculative forward exchange contracts are not recorded on Soucy's
balance sheets. Also, unrealized gains and losses on these forward exchange
contracts are deferred and recognized upon settlement of the related
transactions. Accordingly, cash flows resulting from forward exchange
contract settlements are classified as cash provided by operations as are the
corresponding cash flows from the revenue streams being hedged (note 13).
DIVIDENDS
Dividends on common shares, when declared, are paid to shareholders in
United States dollars.
UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENT PRESENTATION
The unaudited interim consolidated balance sheet as of September 30, 1997
and the unaudited interim consolidated statements of income and changes in
financial position for the nine-month periods ended September 30, 1997 and
1996 have been prepared in accordance with generally accepted accounting
principles for interim financial information. Accordingly, they do not
include all of the information and notes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments (consisting of only normal recurring adjustments)
considered necessary for a fair presentation have been included. The
consolidated results for the nine months ended September 30, 1997 are not
necessarily indicative of the results that may be expected for the year
ending December 31, 1997.
2. F.F. SOUCY, INC. & PARTNERS, LIMITED PARTNERSHIP
Soucy Partners was constituted as a limited partnership on May 31, 1974
under the Civil Code of the Province of Quebec, Canada, pursuant to a limited
partnership agreement (the "Partnership Agreement") between Soucy Inc., Dow
Jones Newsprint Company, Inc. ("DJ Newsprint"), a Delaware corporation and a
wholly-owned subsidiary of Dow Jones and Company, Inc. ("Dow Jones"), and
Rexfor, a Crown corporation of the Quebec Provincial Government. The
Partnership Agreement, as amended, includes the following provisions:
o The partnership is for an initial term expiring December 31, 2004,
renewable for further terms of ten years and is subject to dissolution
with the consent of two or more partners and in certain other
circumstances.
o The purpose of the partnership is to engage in the business of
producing, selling and distributing newsprint by constructing, owning
and operating a paper mill (the "Partnership Mill") at Rivi|f4re du Loup,
Quebec.
o Soucy Inc., as general partner, has full and exclusive control of the
business of Soucy Partners and has active control of its management. DJ
Newsprint and Rexfor, as limited partners, are not liable for any net
losses or other debt or liability of Soucy Partners to any extent,
except for their respective contributions to capital.
o Subject to the above, the partners shall share the net profits or
losses of Soucy Partners in the following proportions:
<TABLE>
<CAPTION>
<S> <C>
Soucy, Inc. .......... 50.1%
DJ Newsprint ......... 39.9%
Rexfor ............... 10.0%
-----
100.0%
=====
</TABLE>
o No partner may sell, assign or otherwise dispose of its interest, or
any part thereof, in Soucy Partners, unless it first offers such
interest to the other partners as prescribed in the Partnership
Agreement.
F-35
<PAGE>
F.F. SOUCY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(All information as at, and for the nine months ended, September 30, 1997 and
1996 is unaudited)
3. ACCOUNTS RECEIVABLE AND RELATED PARTY TRANSACTIONS
(a) All sales are made through Newsprint Sales, a division of
Brant-Allen Industries, Inc. ("Brant-Allen"), an affiliated
company. At December 31, 1996, accounts receivable include an
amount of $268,407 (September 30, 1997 -$361,916; December 31, 1995
-$1,543,979) receivable from Newsprint Sales representing amounts
received by Newsprint Sales on collection of receivable balances
yet to be transferred to Soucy.
(b) During the years ended December 31, 1996, 1995 and 1994 and the
nine months ended September 30, 1997 and 1996, Brant-Allen charged
Soucy Inc. approximately $14,951,000, $19,935,000, $10,577,000,
$9,255,000 and $12,048,000, respectively, for management and
selling services. At December 31, 1996, the balance owing to Soucy
Inc. by Brant-Allen amounted to $2,041,272 (September 30, 1997
-$2,523,008; December 31, 1995 -$1,953,591).
4. INVENTORIES
Inventories comprise:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
--------------- -------------------------
1997 1996 1995
$ $ $
--------------- ------------ -----------
(UNAUDITED)
<S> <C> <C> <C>
Raw materials . 6,572,733 9,565,714 7,098,936
Finished
goods......... 2,955,686 3,329,981 2,020,857
Stores......... 4,706,545 4,407,416 4,345,991
--------------- ------------ -----------
14,234,964 17,303,111 13,465,784
=============== ============ ===========
</TABLE>
5. PROPERTY, PLANT AND EQUIPMENT
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
--------------- ----------------------------
1997 1996 1995
$ $ $
--------------- ------------- -------------
(UNAUDITED)
<S> <C> <C> <C>
Land and buildings....... 18,854,816 18,854,816 18,854,816
Machinery and equipment . 233,583,555 227,997,389 208,461,859
Furniture and fixtures .. 343,351 343,351 343,351
--------------- ------------- -------------
252,781,722 247,195,556 227,660,026
Less:
Accumulated depreciation 159,386,524 152,861,680 142,122,065
--------------- ------------- -------------
93,395,198 94,333,876 85,537,961
=============== ============= =============
</TABLE>
Machinery and equipment include assets under capital leases with a cost of
$4,299,000 and accumulated depreciation of $1,927,000 as at December 31, 1996
(1995 -$4,299,000 and $1,520,000 respectively).
F-36
<PAGE>
F.F. SOUCY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(All information as at, and for the nine months ended, September 30, 1997 and
1996 is unaudited)
6. BANK INDEBTEDNESS
Soucy Inc. and Soucy Partners have available lines of credit from a bank
amounting to Cdn. $3,000,000 and Cdn. $5,000,000 respectively. As at December
31, 1996, an advance of $2,200,000 was drawn down under Soucy Inc.'s line of
credit (December 31, 1995 -nil) and, as at December 31, 1996 and 1995, there
were no advances drawn down under Soucy Partners' line of credit. Outstanding
balances under the lines of credit are payable on demand and interest is
payable at 1/4% and 1/2% above the bank's prime rate respectively which was
at 4.75% as at December 31, 1996. Soucy Inc. and Soucy Partners have assigned
their accounts receivable and pledged their inventories to the bank as
security for any advances under the lines of credit. Also, Newsprint Sales
has assigned its accounts receivable and provided an unlimited guarantee and
postponement of claim against Soucy Inc. and Soucy Partners.
7. LONG-TERM DEBT
Long-term debt comprises:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
--------------- --------------------------
1997 1996 1995
$ $ $
--------------- ------------ ------------
(UNAUDITED)
<S> <C> <C> <C>
Sinking fund bonds maturing 2004 (note
7(a))....................................... 20,449,786 23,191,825 25,976,886
Sinking fund bonds maturing 1999 (note
7(a))....................................... 5,056,177 6,887,312 8,717,990
Obligation under capital leases (note 7(e)) . -- 260,339 917,519
--------------- ------------ ------------
25,505,963 30,339,476 35,612,395
Less: Current portion........................ 4,819,739 5,020,611 5,400,310
--------------- ------------ ------------
20,686,224 25,318,865 30,212,085
=============== ============ ============
</TABLE>
(a) In 1979, Soucy Partners, through Rivi|f4re du Loup Finance Ltd., its
wholly-owned subsidiary, issued U.S. $20,000,000, 10 3/4% and Cdn.
$5,000,000, 10 7/8% bonds to several insurance companies maturing
on April 1, 1999. In 1987, Soucy Partners, through Rivi|f4re du Loup
Finance Ltd., issued U.S. $27,500,000, 9.65% bonds to an insurance
company maturing on July 1, 2004.
The trust indenture contains certain restrictive covenants
including equity and working capital requirements. Soucy Partners
has assigned the sale agreement (note 11(a)) and collateralized
substantially all of its property, plant and equipment having a net
book value of $79,123,000 as at December 31, 1996 for the bonds.
(b) The aggregate fair market value of Soucy's long-term debt,
including the obligation under capital leases, was $33,463,000 as
at December 31, 1996 (1995 -$39,352,000) based on discounted future
cash flows using interest rates available to Soucy for issues with
similar terms and average conditions.
(c) Interest incurred on long-term debt in 1996 amounted to $3,214,000
(1995 -$4,415,000; 1994 -$5,115,000).
(d) Long-term debt maturities are as follows as at December 31, 1996
excluding the obligation under capital leases detailed in note
7(e):
<TABLE>
<CAPTION>
U.S. $ CDN. $
----------- ---------
<S> <C> <C>
Year ending December
31, 1997............... 3,265,385 288,000
1998 .................. 3,265,385 287,000
1999 .................. 4,065,385 488,000
2000 .................. 2,115,385 --
2001 .................. 2,115,385 --
</TABLE>
F-37
<PAGE>
F.F. SOUCY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(All information as at, and for the nine months ended, September 30, 1997 and
1996 is unaudited)
7. LONG-TERM DEBT (Continued)
(e) Future minimum lease payments under capital leases are as follows
as at December 31, 1996:
<TABLE>
<CAPTION>
<S> <C>
Year ending December 31,
1997 ................... 271,871
Less: Interest (9.6%).. 11,532
---------
$260,339
=========
</TABLE>
8. CAPITAL STOCK
The authorized capital stock of Soucy Inc. is comprised of 500,000 common
shares without par value. As at December 31, 1996 and 1995, the number of
issued and paid shares was 500,000. On January 10, 1997, Soucy Inc. redeemed
82,340 of its common shares, with a book value of $319,741, for a cash
consideration of $9,400,000. The excess of $9,080,259 of the redemption price
over book value has been charged to retained earnings. As at September 30,
1997, the number of issued and paid shares was 417,660.
9. WOOD CHIPS AND ROUND WOOD SUPPLY AGREEMENTS
Soucy has entered into a number of agreements for the supply of its wood
chips and round wood requirements. The duration of these agreements varies
between one and five years. The estimated future purchase commitments, based
on current prices which are renewable annually, for the next five years are
as follows:
<TABLE>
<CAPTION>
<S> <C>
1997 ... $14,341,500
1998 ... 10,969,800
1999 ... 9,289,000
2000 ... 4,512,100
2001 ... 3,310,600
</TABLE>
10. POWER INTERRUPTION AGREEMENT
Under an agreement with Hydro-Quebec, expiring on September 30, 2000,
Soucy will be compensated by a fixed annual amount, plus a variable annual
amount based on the actual power usage and power interruptions requested by
Hydro-Quebec. The agreement establishes a maximum amount of power consumption
which may be interrupted at the request of Hydro-Quebec.
11. SALES
(a) Soucy Partners has contracted to sell Dow Jones the basis weight
equivalent of a minimum of 45,000 short tons of 32 lb. basis weight
newsprint per annum, through December 31, 2004. Dow Jones has the
option to purchase additional quantities of newsprint, as
available. The price payable has been agreed to annually based upon
market conditions. This sale agreement has been assigned as partial
collateral for the sinking fund bonds (note 7(a)).
(b) Soucy Inc. and Soucy Partners sold newsprint to Dow Jones and its
subsidiaries during the years ended December 31, 1996, 1995 and
1994 and the nine months ended September 30, 1997 and 1996
amounting to $35,004,000, $35,646,000, $26,825,000, $20,804,000 and
$28,668,000, net of discounts, respectively. At December 31, 1996,
the balances owing to Soucy Inc. and Soucy Partners by Dow Jones
and its subsidiaries amounted to $3,080,974 (September 30, 1997
-$2,780,651; December 31, 1995 -$5,132,583).
(c) With the exclusion of Dow Jones and its subsidiaries, which is
disclosed above, two unrelated corporations represented
approximately 12% each of Soucy's sales in 1996 (1995 -16% and 12%;
1994 -less than 10%).
F-38
<PAGE>
F.F. SOUCY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(All information as at, and for the nine months ended, September 30, 1997 and
1996 is unaudited)
11. SALES (Continued)
(d) Soucy operates two newsprint paper mills in Quebec, Canada, and
sells most of its production to the following regions as a
percentage of sales:
<TABLE>
<CAPTION>
1996 1995 1994
% % %
-------- -------- --------
<S> <C> <C> <C>
United States..... 49 46 77
South America .... 4 5 13
Europe ........... 13 5 8
Asia ............. 26 41 --
</TABLE>
12. PENSION COSTS AND OBLIGATIONS
Soucy Inc. has defined benefit plans for its employees and charges Soucy
Partners its share of the related pension costs. Soucy Inc. maintains
separate defined benefit plans for its unionized plant employees, its
unionized office employees and its non-unionized employees. The benefits are
based on career average earnings of the employee. Soucy Inc.'s funding policy
is to contribute amounts not exceeding those that may be deducted for income
tax purposes. Contributions are intended to provide not only for benefits
attributed to service to date but also for those expected to be earned in the
future.
Soucy's net pension cost comprises:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------
1996 1995 1994
$ $ $
------------- ------------- -------------
<S> <C> <C> <C>
Current service costs......................... 461,000 437,000 346,000
Interest cost on projected benefit
obligation................................... 1,922,000 1,736,000 1,500,000
Return on plans' assets....................... (2,171,000) (1,923,000) (1,783,000)
Amortization of unrecorded pension asset ..... (80,000) (80,000) (80,000)
Amortization of experience gains.............. (171,000) (139,000) (157,000)
Amortization of cost of amendments............ 169,000 169,000 100,000
Amortization of change in assumptions ........ (33,000) (33,000) (33,000)
Provision against deferred pension costs ..... 812,000 212,000 273,000
------------- ------------- -------------
Net pension cost.............................. 909,000 379,000 166,000
============= ============= =============
</TABLE>
In order to measure the projected benefit obligation, the weighted-average
discount rate used was 7.5% (1995 and 1994 -8%); the rate of increase in
future compensation levels used for the non-unionized plan was 5% (1995 and
1994 -5.5%) and the rate used for the unionized office plan and the unionized
plant plan was 5.5% (1995 and 1994 -5.5%). The expected long-term rate of
return on assets of the plans was 8%.
F-39
<PAGE>
F.F. SOUCY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(All information as at, and for the nine months ended, September 30, 1997 and
1996 is unaudited)
12. PENSION COSTS AND OBLIGATIONS (Continued)
The funded status of the plans as at December 31, 1996 was:
<TABLE>
<CAPTION>
<S> <C>
Actuarial present value of accumulated benefit obligations including vested benefits
of $21,901,000 ....................................................................... $23,735,999
-------------
Projected benefit obligation for services rendered to date............................. 27,734,940
Plans' assets at fair value, primarily listed Canadian stocks and Canadian bonds ..... 34,816,547
-------------
Plans' assets in excess of projected benefit obligation................................ 7,081,607
Unrecognized gains..................................................................... 5,001,196
Provision against pension assets....................................................... 834,960
-------------
Pension asset recognized as deferred pension costs..................................... $ 1,245,451
=============
</TABLE>
The excess of the plans' assets is being amortized over the expected
average remaining service life of the employees which extends for periods of
up to 18 years. Soucy Inc. makes appropriate provision against deferred
pension costs where there is uncertainty regarding its ability to benefit
from the underlying pension surplus. Soucy Inc.'s contributions for the year
ended December 31, 1996 were $807,000 (1995 -$277,000; 1994 -$70,000).
13. FORWARD EXCHANGE CONTRACTS
Soucy Partners entered into contracts which mature in less than twelve
months to sell forward U.S. dollars in exchange for Canadian dollars. As at
December 31, 1996, Soucy Partners held forward exchange contracts of U.S.
$13,000,000 (1995 -U.S. $11,000,000) with a contracted value of $17,403,100
(1995 -$15,214,200) against a fair value of $17,804,800 (1995 -$15,008,500),
representing a deferred loss of $401,700 (1995 -deferred gain $205,700). As
at September 30, 1997 Soucy Partners held no such contracts.
14. UNITED STATES ACCOUNTING PRINCIPLES
The consolidated financial statements have been prepared in accordance
with accounting principles generally accepted in Canada ("Canadian GAAP"). In
certain respects, Canadian GAAP differs from accounting principles generally
accepted in the United States ("U.S. GAAP").
NET EARNINGS AND SHAREHOLDERS' EQUITY
(a) The following summary sets out the material adjustments to Soucy
Inc.'s reported net earnings and shareholders' equity which would
be made in order to conform to U.S. GAAP:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
------------------------- -----------------------------------------
1997 1996 1996 1995 1994
$ $ $ $ $
----------- ------------ ------------ ------------ -------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net earnings for the
period under Canadian
GAAP ................ 1,597,032 13,489,062 12,439,305 38,661,572 4,216,730
U.S. GAAP adjustments -
Translation gains and
losses (note 14(b)) 114,228 407,359 353,133 1,498,799 (1,243,305)
Income taxes (note
14(c))............... (233,000) 8,000 8,000 (100,000) 44,000
----------- ------------ ------------ ------------ -------------
Net earnings for the
period under U.S.
GAAP ................ 1,478,260 13,904,421 12,800,438 40,060,371 3,017,425
=========== ============ ============ ============ =============
</TABLE>
F-40
<PAGE>
F.F. SOUCY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(All information as at, and for the nine months ended, September 30, 1997 and
1996 is unaudited)
14. UNITED STATES ACCOUNTING PRINCIPLES (Continued)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
--------------- -------------------------------------------
1997 1996 1995 1994
$ $ $ $
--------------- ------------- ------------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Shareholders' equity under Canadian
GAAP................................ 38,411,336 46,214,304 33,774,999 104,072
U.S. GAAP adjustments -
Translation gains and losses (note
14(b)).............................. (1,160,775) (1,275,003) (1,628,136) (3,126,935)
Income taxes (note 14(c))............ 788,000 1,021,000 1,013,000 1,113,000
--------------- ------------- ------------- -------------
Shareholders' equity (deficiency)
under U.S. GAAP..................... 38,038,561 45,960,301 33,159,863 (1,909,863)
=============== ============= ============= =============
</TABLE>
(b) Under Canadian GAAP, translation gains and losses arising on the
translation, at exchange rates prevailing at the balance sheet
date, of long-term debt denominated in foreign currency are
deferred and amortized over the remaining life of the related debt.
Under U.S. GAAP, such gains and losses are included in the
statement of earnings in the period in which the exchange rate
changes.
(c) Under Canadian GAAP, Soucy Inc. follows the tax allocation method
in providing for income taxes while under U.S. GAAP, the liability
method would be used. Under this method, deferred income taxes are
calculated on the difference between accounting and tax values of
the assets and liabilities. The current tax rate is used to
calculate deferred income taxes at the balance sheet date. Deferred
tax assets arising from losses and temporary differences are
subject to a valuation allowance whenever it is more likely that
the assets will not be realized.
(d) Under Canadian GAAP, costs of providing life insurance and health
care benefits to employees after retirement are recognized as
incurred while under U.S. GAAP, these costs are accrued during the
employees' years of active service. This difference in GAAP would
not result in a material change to Soucy Inc.'s consolidated
financial statements.
CASH FLOWS
(e) Under U.S. GAAP, the following amounts would be reported:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
------------------------------ ---------------------------------------------
1997 1996 1996 1995 1994
$ $ $ $ $
-------------- -------------- -------------- -------------- -------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net cash provided by (used
in):
Operating activities......... 7,977,752 23,802,020 33,072,312 71,489,308 20,084,230
Financing activities......... (14,839,063) (16,278,765) (18,228,811) (35,052,732) (8,391,883)
Investment activities........ (6,067,902) (17,780,104) (18,085,750) (18,411,956) (8,156,650)
-------------- -------------- -------------- -------------- -------------
Net increase (decrease) in
cash ....................... (12,929,213) (10,256,849) (3,242,249) 18,024,620 3,535,697
============== ============== ============== ============== =============
Cash -End of period.......... 5,388,855 11,303,468 18,318,068 21,560,317 3,535,697
============== ============== ============== ============== =============
</TABLE>
(f) Under U.S. GAAP, the definition of cash in the statement of cash
flows would exclude bank indebtedness which amounted to $2,200,000
as at December 31, 1996 (September 30, 1997 -$1,800,000; September
30, 1996 -nil; December 31, 1995 -nil; December 31, 1994
-$1,500,000). Under U.S. GAAP, changes in bank indebtedness would
be disclosed as a financing activity.
(g) Canadian GAAP allows the disclosure of a subtotal of the amount of
cash provided by operating activities before cash provided by
non-cash operating working capital items. U.S. GAAP requires a
statement of cash flows without subtotal.
F-41
<PAGE>
F.F. SOUCY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(All information as at, and for the nine months ended, September 30, 1997 and
1996 is unaudited)
14. UNITED STATES ACCOUNTING PRINCIPLES (Continued)
(h) Net change in non-cash operating working capital balances details
as follows:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
----------------------------- -------------------------------------------
1997 1996 1996 1995 1994
$ $ $ $ $
------------- -------------- -------------- -------------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Decrease (increase) in:
Accounts receivable ..... (5,815,994) 8,304,557 10,192,951 (10,865,391) 3,541,335
Inventories.............. 3,068,147 (2,104,522) (3,837,327) (6,113,293) 676,978
Prepaid expenses......... 109,040 (225,562) 10,498 62,401 104,919
Increase (decrease) in:
Accounts payable and
accrued liabilities .... (2,582,617) (5,027,793) 988,804 (1,842,133) (267,174)
Income taxes............. (1,124,813) (11,946,772) (12,605,081) 13,386,289 (961,898)
------------- -------------- -------------- -------------- -----------
(6,346,237) (11,000,092) (5,250,155) (5,372,127) 3,094,160
============= ============== ============== ============== ===========
</TABLE>
OTHER DISCLOSURE
(i) The disclosure of the following amounts is required under U.S.
GAAP:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
------------------------- --------------------------------------
1997 1996 1996 1995 1994
$ $ $ $ $
----------- ------------ ------------ ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Payments under capital
leases................... 272,000 517,000 689,000 1,253,000 1,248,000
Interest paid............. 2,674,000 2,709,000 3,509,000 4,763,000 5,476,000
Income taxes paid......... (909,000) 18,020,000 19,203,000 4,279,000 3,505,000
Foreign exchange loss
(gain):
Realized.................. 781,000 211,000 (149,000) 284,000 (238,000)
Unrealized................ 320,000 356,000 497,000 339,000 892,000
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
--------------- --------------------------
1997 1996 1995
$ $ $
--------------- ------------ ------------
(UNAUDITED)
<S> <C> <C> <C>
Trade accounts receivable .. 20,503,000 13,666,000 21,101,000
Other accounts receivable .. 1,570,000 2,684,000 4,166,000
Allowance for doubtful
accounts................... 216,000 216,000 216,000
Trade accounts payable ..... 9,419,000 11,269,000 9,906,000
Accrued employees costs .... 2,819,000 2,583,000 2,219,000
Interest payable............ 772,000 1,311,000 1,507,000
</TABLE>
F-42
<PAGE>
F.F. SOUCY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(All information as at, and for the nine months ended, September 30, 1997 and
1996 is unaudited)
14. UNITED STATES ACCOUNTING PRINCIPLES (Continued)
(j) The provision for income taxes and effective tax rates are detailed
as follows:
<TABLE>
<CAPTION>
1997 1996 1996 1995 1994
$ $ $ $ $
----------- ------------- ------------- ------------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Provision for income taxes based on
combined basic Canadian and Quebec
income tax rate of 44.25%.............. 1,107,000 9,066,000 8,912,000 24,886,000 2,805,500
----------- ------------- ------------- ------------- -----------
Increase (decrease) in income taxes
arising from the following:
Active business income deduction ....... (184,000) (1,506,000) (1,480,000) (4,134,000) (466,000)
----------- ------------- ------------- ------------- -----------
Deduction for manufacturing and
processing............................. (169,000) (1,399,000) (1,375,000) (3,841,000) (433,000)
Surtax ................................. 28,000 172,000 169,000 472,000 53,000
Non-deductible expenses................. 33,000 101,000 135,000 144,000 171,000
----------- ------------- ------------- ------------- -----------
Other................................... 90,000 966,000 1,339,000 51,000 (7100)
----------- ------------- ------------- ------------- -----------
905,000 7,400,000 7,700,000 17,578,000 2,123,400
=========== ============= ============= ============= ===========
</TABLE>
(k) Deferred tax assets and liabilities of Soucy Inc. were as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
--------------- ----------------------------
1997 1996 1995
$ $ $
--------------- ------------- -------------
(UNAUDITED)
<S> <C> <C> <C>
Deferred tax assets:
Net capital loss carryforwards........... 131,000 131,000 93,000
Unrealized foreign exchange gain ........ -- -- 13,343
--------------- ------------- -------------
131,000 131,000 106,343
Valuation allowance....................... (131,000) (131,000) (93,000)
--------------- ------------- -------------
-- -- 13,343
Deferred tax liabilities:
Depreciation............................. (12,296,164) (9,585,931) (8,220,237)
Pension costs............................ (250,857) (239,963) (258,543)
Other.................................... (115,805) (118,932) (187,389)
--------------- ------------- -------------
(12,662,826) (9,944,826) (8,666,169)
--------------- ------------- -------------
Net deferred income taxes under U.S.
GAAP..................................... (12,662,826) (9,944,826) (8,652,826)
=============== ============= =============
</TABLE>
F-43
<PAGE>
===============================================================================
NO DEALER, SALESPERSON, OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE ISSUERS OR ANY AGENT OR
THE INITIAL PURCHASERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OF ANY
SECURITIES OTHER THAN THOSE TO WHICH IT RELATES OR AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO BUY, TO ANY PERSON IN ANY JURISDICTION WHERE AN
OFFER OR SOLICITATION WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE HEREOF.
---------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Available Information......................... ii
Certain References ........................... ii
Prospectus Summary ........................... 1
Risk Factors ................................. 15
The Acquisition .............................. 23
The Timberlands Acquisition .................. 24
Use of Proceeds .............................. 24
Capitalization ............................... 24
Selected Historical Financial Data ........... 25
Unaudited Pro Forma Condensed Consolidated
Financial Statements ........................ 26
Management's Discussion and Analysis of
Financial Condition and Results of
Operations .................................. 38
The Exchange Offer ........................... 43
Business of the Company....................... 49
Business of Soucy ............................ 61
Business of Timberlands ...................... 61
Management ................................... 62
Security Ownership ........................... 64
Certain Related Party Transactions ........... 64
Limited Liability Company Operating Agreement 66
Description of the Notes ..................... 67
Description of Certain Other Indebtedness .... 104
Certain Federal Income Tax Considerations .... 110
Plan of Distribution ......................... 112
Experts ...................................... 112
Legal Matters ................................ 112
Index to Financial Statements ................ F-1
</TABLE>
UNTIL , 1998, (90 DAYS FOLLOWING THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE NEW NOTES WHETHER OR NOT PARTICIPATING
IN THE EXCHANGE OFFER MAY BE REQUIRED TO DELIVER A PROSPECTUS.
===============================================================================
<PAGE>
===============================================================================
$100,000,000
BEAR ISLAND
PAPER COMPANY, L.L.C.
BEAR ISLAND FINANCE COMPANY II
10% SERIES B SENIOR SECURED NOTES
DUE 2007
#############################################################################
[LOGO]
#############################################################################
--------------
PROSPECTUS
--------------
, 1998
===============================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
20.1 THE BEAR ISLAND PAPER COMPANY, L.L.C.
The Company is a limited liabilitiy company organized under the Limited
Liability Company Act of the Commonwealth of Virginia (the "Virginia L.L.C.
Law"). Section 13.1-1009 of the Virginia L.L.C. Law empowers a Virginia
limited liability company to indemnify any persons who are, or are threatened
to be made, parties to any threatened, pending or completed legal action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of such corporation), by reason of
the fact that such person is or was an officer, director, member, employee or
agent of such company, or is or was serving at the request of such company as
a director, officer, member, employee or agent of another company,
corporation, partnership, joint venture, trust or other enterprise. The
indemnity may include expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred by such
person in connection with such action, suit or proceeding, provided that such
officer or director acted in good faith and in a manner he reasonably
believed to be in or not opposed to the company's best interests, and, for
criminal proceedings, had no reasonable cause to believe his conduct was
unlawful. A Virginia limited liability company may indemnify officers and
directors against expenses (including attorneys' fees) in an action by or in
the right of the company under the same conditions, except that no
indemnification is permitted without judicial approval if the officer or
director is adjudged to be liable to the company. Where an officer or
director is successful on the merits or otherwise in the defense of any
action referred to above, the company must indemnify him against the expenses
which such officer or director actually and reasonably incurred.
Article VI of the Operating Agreement of the Company, a copy of which is
filed as Exhibit 3.2 to this Registration Statement, allows the Company to
maintain director and officer liability insurance on behalf of any person who
is or was a director or officer of the Company or such person who serves or
served as director, officer, member, employee or agent, of another company,
corporation, partnership or other enterprise at the request of the
Registrant. Article VI of the Company's Operating Agreement provides for
indemnification of the officers and directors of the Company to the fullest
extend permitted by applicable law.
Pursuant to Section 13.1-1025 of the Virginia L.L.C. Law, Article VI of
the Operating Agreement of the Company, a copy of which is filed as Exhibit
3.2 to this Registration Statement, provides that no director of the Company
shall be personally liable to the Company or its members for monetary damages
for any act, occurrence or course of conduct; provided, however, that such
clause shall not apply to any liability of a director based upon any willful
misconduct, intentional breach or disregard of the terms of the Operating
Agreement or knowing violation of criminal law.
20.2 BEAR ISLAND FINANCE COMPANY II
FinCo is a Delaware corporation. Section 145 of the General Corporation
Law of the State of Delaware (the "Delaware Corporation Law") empowers a
Delaware corporation to indemnify any persons who are, or are threatened to
be made, parties to any threatened, pending or completed legal action, suit
or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of such corporation), by reason of
the fact that such person is or was an officer, director, employee or agent
of such corporation, or is or was serving at the request of such corporation
as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise. The indemnity may
include expenses (including attorneys' fees), judgments, fines and amounts
paid in settlement actually and reasonably incurred by such person in
connection with such action, suit or proceeding, provided that such officer
or director acted in good faith and in a manner he reasonably believed to be
in or not opposed to the corporation's best interests, and, for criminal
proceedings, had no reasonable cause to believe his conduct was unlawful. A
Delaware corporation may indemnify officers and directors against expenses
(including attorneys' fees) in an action by or in the right of the
corporation under the same conditions, except that no indemnification is
permitted without judicial approval if the officer or director is adjudged to
be liable to the corporation. Where an officer or director is successful on
the merits or otherwise in the defense of any action referred to above, the
corporation must indemnify him against the expenses which such officer or
director actually and reasonably incurred.
II-1
<PAGE>
Article VII of the By-laws of FinCo, a copy of which is filed as Exhibit
3.4 to this Registration Statement, allows the Registrant to maintain
director and officer liability insurance on behalf of any person who is or
was a director or officer of FinCo or such person who serves or served as
director, officer, employee or agent, of another corporation, partnership or
other enterprise at the request of FinCo. Article VIII of FinCo's By-laws
provides for indemnification of the officers and directors of the Registrant
to the fullest extend permitted by applicable law.
Pursuant to Section 102(b)(7) of the Delaware Corporation Law, Article
Sixth of the Certificate of Incorporation of FinCo, a copy of which is filed
as Exhibit 3.3 to this Registration Statement, provides that no director of
FinCo shall be personally liable to FinCo or its shareholders for monetary
damages for any breach of his fiduciary duty as a director; provided,
however, that such clause shall not apply to any liability of a director (1)
for any breach of the Director's duty of loyalty to the Registrant or its
stockholders, (2) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of the law, (3) pursuant to
Section 174 of the Delaware Corporation Law, or (4) for any transaction from
which the director derived an improper personal benefit.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits: The following exhibits are filed as part of this
Registration Statement
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
---------- ---------------
<S> <C>
2. PLAN OF ACQUISITION, REORGANIZATION, ARRANGEMENT, LIQUIDATION OR SUCCESSION.
2.1 The Partnership Interest Sale Agreement, dated as of December 1, 1997, by and among Dow Jones Virginia
Company Inc., Newsprint, Inc. and Brant-Allen
2.2 Articles of Organization and Articles of Merger of Bear Island Mergerco, LLC, dated as of December 1,
1997, by and between the Company and Bear Island Mergerco, LLC.
3. CERTIFICATE OF INCORPORATION AND BY-LAWS.
3.1 Articles of Organization of the Company.
3.2 Operating Agreement of the Company.
3.3 Certificate of Incorporation of Bear Island Finance Company II.
3.4 By-Laws of Bear Island Finance Company II.
4. INSTRUMENTS DEFINING THE RIGHT OF SECURITY HOLDERS, INCLUDING INDENTURES.
4.1 Indenture, dated as of December 1, 1997, among the Registrants, Timberlands, Soucy Inc. and Crestar Bank,
as Trustee, relating to the Notes.
4.2 Form of New Note (included as an exhibit to exhibit 4.1).
4.3 Registration Rights Agreement, dated December 1, 1997, among the Registrants and TD Securities (USA),
Inc. and Salomon Brothers Inc, as Initial Purchasers.
4.4 Intercreditor Agreement, dated as of December 1, 1997, by and among the Registrants, Brant-Allen, Toronto
Dominion (Texas), Inc. and Crestar Bank.
4.5 Deed of Trust, dated as of December 1, 1997, by and between the Company and Crestar Bank, as Trustee.
*4.6 Company Pledge and Security Agreement, dated as of December 1, 1997, by and between the Company and
Crestar Bank, as Trustee.
4.7 Timberlands Pledge Agreement, dated as of December 1, 1997, by and between Brant-Allen and Crestar Bank,
as Trustee.
*4.8 Soucy Pledge Agreement, dated as of December 1, 1997, by and between Brant-Allen and Crestar Bank, as
Trustee.
II-2
<PAGE>
EXHIBIT NO. DESCRIPTION
- - ----------- ---------------
4.9 Hypotech Agreement, dated as of December 1, 1997, by and between Brant-Allen and Crestar Bank, as
Trustee.
5. OPINIONS.
*5.1 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP, special counsel to the Company.
10. MATERIAL CONTRACTS.
10.1 Purchase Agreement, dated as of November 21, 1997, by and among the Registrants and TD Securities
(USA)Inc. and Salomon Brothers Inc with respect to the Notes.
10.2 Bank Credit Agreement, dated as of December 1, 1997, by and among the Company, TD Securities (USA), Inc.,
Toronto Dominion (Texas), Inc., Christiania Bank OG Kreditkass ASA, Keyport Life Insurance Company, Prime
Income Trust, Deeprock & Company, Merrill Lynch Senior Floating Rate Fund, Inc. and Van Kampen American
Capital Prime Rate Trust.
10.3 Timberlands Credit Agreement, dated as of December 1, 1997, by and among Brant-Allen, TD Securities
(USA), Inc. and Toronto Dominion (Texas), Inc.
*10.4 The Timberlands Loan and Maintenance Agreement, dated as of December 1, 1997, by and between Brant-Allen
and John Hancock Mutual Life Insurance Company.
10.5 Timberlands Interest Sale Agreement, dated as of December 1, 1997, by and among Dow Jones Virginia
Company, Inc., Newsprint Inc., Inc. and Brant-Allen
10.6 The Management Services Agreement, dated as of December 1, 1997, by and among the Company and
Brant-Allen.
10.7 The Wood Supply Agreement, dated as of December 1, 1997, by and among the Company and Timberlands.
10.8 The Newsprint Purchase Agreement, dated as of May 19, 1978, by and between the Company and the Dow Jones
& Co., Inc.
10.9 The Newsprint Purchase Agreement, dated as of May 19, 1978, by and between the Company and The Washington
Post.
12. RATIO OF EARNINGS TO FIXED CHARGES.
12.1 Statement regarding the computation of ratio of earnings to fixed charges for the Company and FinCo.
21. SUBSIDIARIES.
21.1 Subsidiaries of the Company.
23. CONSENTS.
23.1 Consent of Coopers & Lybrand L.L.P. (Bear Island Paper Company, L.P.).
23.2 Consent of Coopers & Lybrand L.L.P. (Bear Island Timberlands Company, L.P.)
23.3 Consent of Coopers & Lybrand (F.F. Soucy Inc.).
23.4 Consent of Skadden, Arps, Slate, Meagher & Flom LLP, special counsel to the Company (included in Exhibit
5.1).
24. POWERS OF ATTORNEY.
24.1 Power of Attorney (included in signature page).
25. FORM T-1.
II-3
<PAGE>
EXHIBIT NO. DESCRIPTION
- - ----------- ---------------
25.1 Statement of Eligibility and Qualification on Form T-1 of Crestar Bank, as Trustee under the Indenture
relating to the Company's 10% Series B Senior Secured Notes due 2007.
27. FINANCIAL DATA SCHEDULE.
27.1 Financial Data Schedule.
99. MISCELLANEOUS.
*99.1 Form of Letter of Transmittal.
*99.2 Form of Notice of Guaranteed Delivery.
*99.3 Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees.
*99.4 Form of Letter to Clients.
</TABLE>
- - ------------
* To be filed by amendment.
(b) Financial Statement Schedules:
Schedule II--Valuation and Qualifying Accounts and Reserves.
ITEM 22. UNDERTAKINGS
(a) The undersigned Registrants hereby undertake:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high and of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price represent no more than
20 percent change in the maximum aggregate offering price set forth in
the "Calculation of Registration Fee" table in the effective
registration statement.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of the Registrants pursuant to the foregoing provisions, or
otherwise, the Registrants have been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the Registrants of expenses incurred or paid by a
director, officer or controlling person of the Registrants in the successful
defense of any action, suit or proceeding) is
II-4
<PAGE>
asserted by such director, officer or controlling person in connection with
the securities being registered, the Registrants will, unless in the opinion
of its counsel the matter has been settled by controlling precedent, submit
to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
(c) The undersigned registrants hereby undertake to respond to requests
for information that is incorporated by reference into the prospectus
pursuant to Item 4, 10(b), 11, or 13 of this form, within one business day of
receipt of such request, and to send the incorporated documents by first
class mail or other equally prompt means. This includes information contained
in documents filed subsequent to the effective date of the registration
statement through the date of responding to the request.
(d) The undersigned registrants hereby undertake to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant has duly caused this Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized in Greenwich, State
of Connecticut, on the 12th day of December, 1997.
BEAR ISLAND PAPER COMPANY, L.L.C
By: /s/ PETER M. BRANT
-------------------------------
Peter M. Brant
President, Chairman of the
Board and
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints each of Peter Brant, Joseph Allen, Edward D.
Sherrick and Thomas Armstrong his true and lawful attorney-in-fact, each with
full power of substitution and revocation, for him and in his name, place and
stead, in any and all capacities (including his capacity as a director and/or
officer of Bear Island Paper Company, L.L.C.) to sign any and all amendments
(including post-effective amendments) to this Registration Statement, and any
registration statement relating to the same offering as this Registration
Statement that is to be effective upon filing pursuant to Rule 462(b) under
the Securities Act of 1933, and to file the same with all exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto each such attorney-in-fact and agent, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done, as fully to all intents and purposes as such person
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
THIS REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
----------- ------- ------
<S> <C> <C>
/s/ Peter M. Brant President, Chairman of the Board December 12, 1997
-------------------------- and Chief Executive Officer
Peter M. Brant (Principal Executive Officer)
/s/ Joseph Allen Executive Vice President, Co-Chairman December 12, 1997
-------------------------- of the Board and Chief Operating Officer
Joseph Allen
/s/ Edward D. Sherrick Vice President of Finance and December 12, 1997
--------------------------- Director (Principal Financial Officer)
Edward D. Sherrick (Principal Accounting Officer)
/s/ Thomas E. Armstrong Vice President of Sales December 12, 1997
-------------------------- and Marketing and Director
Thomas E. Armstrong
/s/ Michael Conroy Director December 12, 1997
---------------------------
Michael Conroy
/s/ Robert Flug Director December 12, 1997
---------------------------
Robert Flug
</TABLE>
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant has duly caused this Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized in Greenwich, State
of Connecticut, on the 12th day of December, 1997.
BEAR ISLAND FINANCE COMPANY II
By: /s/ PETER M. BRANT
-------------------------------
Peter M. Brant
President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Peter Brant, Joseph Allen, Edward D. Sherrick
and Thomas Armstrong his true and lawful attorney-in-fact, each with full
power of substitution and revocation, for him and in his name, place and
stead, in any and all capacities (including his capacity as a director and/or
officer of Bear Island Finance Company II) to sign any and all amendments
(including post-effective amendments) to this Registration Statement, and any
registration statement relating to the same offering as this Registration
Statement that is to be effective upon filing pursuant to Rule 462(b) under
the Securities Act of 1933, and to file the same with all exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto each such attorney-in-fact and agent, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done, as fully to all intents and purposes as such person
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
THIS REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
----------- ------- ------
<S> <C> <C>
/s/ Peter M. Brant Director and President December 12, 1997
---------------------------
Peter M. Brant
/s/ Joseph Allen Director, Executive Vice President, December 12, 1997
--------------------------- Treasurer and Secretary
Joseph Allen (Principal Financial Officer)
/s/ Edward D. Sherrick Director and Vice President December 12, 1997
---------------------------
Edward D. Sherrick
/s/ Thomas E. Armstrong Director and Vice President December 12, 1997
---------------------------
Thomas E. Armstrong
</TABLE>
II-7
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION PAGE NO.
--------- ------------- ----------
<S> <C> <C>
2. PLAN OF ACQUISITION, REORGANIZATION, ARRANGEMENT, LIQUIDATION OR SUCCESSION.
2.1 The Partnership Interest Sale Agreement, dated as of December 1, 1997, by and among Dow Jones Virginia
Company Inc., Newsprint, Inc. and Brant-Allen
2.2 Articles of Organization and Articles of Merger of Bear Island Mergerco, LLC, dated as of December
1, 1997, by and between the Company and Bear Island Mergerco, LLC.
3. CERTIFICATE OF INCORPORATION AND BY-LAWS.
3.1 Articles of Organization of the Company.
3.2 Operating Agreement of the Company.
3.3 Certificate of Incorporation of Bear Island Finance Company II.
3.4 By-Laws of Bear Island Finance Company II.
4. INSTRUMENTS DEFINING THE RIGHT OF SECURITY HOLDERS, INCLUDING INDENTURES.
4.1 Indenture, dated as of December 1, 1997, among the Registrants, Timberlands, Soucy Inc. and Crestar
Bank, as Trustee, relating to the Notes.
4.2 Form of New Note (included as an exhibit to exhibit 4.1).
4.3 Registration Rights Agreement, dated December 1, 1997, among the Registrants and TD Securities (USA),
Inc. and Salomon Brothers Inc, as Initial Purchasers.
4.4 Intercreditor Agreement, dated as of December 1, 1997, by and among the Registrants, Brant-Allen,
Toronto Dominion (Texas), Inc. and Crestar Bank.
4.5 Deed of Trust, dated as of December 1, 1997, by and between the Company and Crestar Bank, as Trustee.
*4.6 Company Pledge and Security Agreement, dated as of December 1, 1997, by and between the Company and
Crestar Bank, as Trustee.
4.7 Timberlands Pledge Agreement, dated as of December 1, 1997, by and between Brant-Allen and Crestar
Bank, as Trustee.
*4.8 Soucy Pledge Agreement, dated as of December 1, 1997, by and between Brant-Allen and Crestar Bank,
as Trustee.
4.9 Hypotech Agreement, dated as of December 1, 1997, by and between Brant-Allen and Crestar Bank, as
Trustee.
5. OPINIONS.
*5.1 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP, special counsel to the Company.
10. MATERIAL CONTRACTS.
10.1 Purchase Agreement, dated as of November 21, 1997, by and among the Registrants and TD Securities
(USA)Inc. and Salomon Brothers Inc with respect to the Notes.
10.2 Bank Credit Agreement, dated as of December 1, 1997, by and among the Company, TD Securities (USA),
Inc., Toronto Dominion (Texas), Inc., Christiania Bank OG Kreditkass ASA, Keyport Life Insurance
Company, Prime Income Trust, Deeprock & Company, Merrill Lynch Senior Floating Rate Fund, Inc. and
Van Kampen American Capital Prime Rate Trust.
10.3 Timberlands Credit Agreement, dated as of December 1, 1997, by and among Brant-Allen, TD Securities
(USA), Inc. and Toronto Dominion (Texas), Inc.
*10.4 The Timberlands Loan and Maintenance Agreement, dated as of December 1, 1997, by and between Brant-Allen
and John Hancock Mutual Life Insurance Company.
<PAGE>
EXHIBIT DESCRIPTION PAGE NO.
--------- ------------- ----------
10.5 Timberlands Interest Sale Agreement, dated as of December 1, 1997, by and among Dow Jones Virginia
Company, Inc., Newsprint Inc., Inc. and Brant-Allen.
10.6 The Management Services Agreement, dated as of December 1, 1997, by and among the Company and Brant-Allen.
10.7 The Wood Supply Agreement, dated as of December 1, 1997, by and among the Company and Timberlands.
10.8 The Newsprint Purchase Agreement, dated as of May 19, 1978, by and between the Company and the Dow
Jones & Co., Inc.
10.9 The Newsprint Purchase Agreement, dated as of May 19, 1978, by and between the Company and The Washington
Post.
12. RATIO OF EARNINGS TO FIXED CHARGES.
12.1 Statement regarding the computation of ratio of earnings to fixed charges for the Company and Finco.
21. SUBSIDIARIES.
21.1 Subsidiaries of the Company.
23. CONSENTS.
23.1 Consent of Coopers & Lybrand L.L.P. (Bear Island Paper Company, L.P.).
23.2 Consent of Coopers & Lybrand L.L.P. (Bear Island Timberlands Company, L.P.)
23.3 Consent of Coopers & Lybrand (F.F. Soucy, Inc.).
*23.4 Consent of Skadden, Arps, Slate, Meagher & Flom LLP, special counsel to the Company (included in
Exhibit 5.1).
24. POWERS OF ATTORNEY.
24.1 Power of Attorney (included in signature page).
25. FORM T-1.
25.1 Statement of Eligibility and Qualification on Form T-1 of Crestar Bank, as Trustee under the Indenture
relating to the Company's 10% Series B Senior Secured Notes due 2007.
27. FINANCIAL DATA SCHEDULE.
27.1 Financial Data Schedule.
99. MISCELLANEOUS.
*99.1 Form of Letter of Transmittal.
*99.2 Form of Notice of Guaranteed Delivery.
*99.3 Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees.
*99.4 Form of Letter to Clients.
</TABLE>
- - ------------
* To be filed by amendment.
<PAGE>
EXHIBIT 2.1
PARTNERSHIP INTEREST SALE AGREEMENT
AGREEMENT dated as of October 15, 1997 by and among Dow Jones
Virginia Company, Inc., a Delaware corporation ("DJ"), Newsprint, Inc.,
a Virginia corporation ("Newsprint") (each of DJ and Newsprint
sometimes being referred to herein as a "Selling Partner" and sometimes
being collectively referred to as the "Selling Partners"), and
Brant-Allen Industries, Inc., a Delaware corporation ("Brant-Allen").
WHEREAS, the Selling Partners are the sole limited partners in
Bear Island Paper Company, L.P., a Virginia limited partnership (the
"Partnership"), and parties to the Limited Partnership Agreement (the
"Limited Partnership Agreement") dated as of May 18, 1978, as amended,
among the Selling Partners and Brant-Allen; and
WHEREAS, each of the Selling Partners desires to sell its entire
partnership interest (the "Partnership Interest") in the Partnership to
Brant-Allen, and Brant-Allen desires to purchase such Partnership
Interests on the terms provided for herein.
NOW, THEREFORE, in consideration of the mutual agreements
contained herein, intending to be legally bound hereby, the parties
agree as follows:
I. SALE OF PARTNERSHIP INTERESTS
1.1 Partnership Interests. Subject to the terms and
conditions of this Agreement, at the Closing provided for herein each
of the Selling Partners agrees to sell, transfer and convey its entire
Partnership Interest to Brant-Allen, and Brant-Allen agrees to purchase
from each of the Selling Partners such Partnership Interest.
1.2 Consideration. (a) Subject to the terms and
conditions of this Agreement, and in reliance upon the representations,
warranties and agreements of the parties contained herein, and in
consideration of the sale and transfer of the Partnership Interest by
each of the Selling Partners to Brant-Allen, Brant-Allen shall pay at
Closing to each Selling Partner the sum of (i) the amount that each
Selling Partner would receive if the Partnership's Enterprise Value (as
defined below) were distributed as follows: (A) of the first
$48,765,000 of Enterprise Value, each of the Selling Partners would
receive $16,841,000; (B) of the next $39,658,000 of Enterprise Value,
each of the Selling Partners would receive $16,725,000; and (C) of the
remaining portion of Enterprise Value, each of the Selling Partners
would receive 35% (the "Partnership Percentage") of such remaining
portion; and (ii) the Additional Amount, defined in (c) below.
(b) The Partnership's Enterprise Value shall be equal to
(A) $255 million less (B) the sum of $47,776,594 and the amount of any
prepayment penalties paid by the Partnership pursuant to Sections 6.03
and 6.04 of the Indenture of Mortgage and Deed of Trust between the
Partnership and Sovran Bank, N.A. dated October 15, 1987 as a result of
the prepayment of the amount outstanding under such credit agreement
(the "Long-Term Debt") on the Closing Date. For purposes of
determining the amounts to be paid on the Closing Date, the amount of
such prepayment penalties shall be estimated in good faith by the Chief
Financial Officer of the Partnership.
(c) The Additional Amount for each Selling Partner shall
be an amount equal to 35% of the net income (but not net loss, if any)
of the Partnership for the period from June 1, 1997 through the Closing
Date and for purposes of determining the amounts to be paid on the
Closing Date shall be as estimated in good faith by the Chief Financial
Officer of the Partnership. The net income of the Partnership for such
period shall be determined in accordance with generally accepted
accounting principles, as applied consistent with the past practices of
the Partnership as applied to interim periods.
(d) The aggregate of the amounts referred to in Section
1.2(a) shall be paid to the Selling Partners at the Closing in
immediately available funds.
1.3 Closing Statement. (a) Not later than thirty (30)
days following the Closing Date, Brant-Allen shall deliver to each of
the Selling Partners a statement (the "Closing Statement"), which
Closing Statement shall include (i) the amount of net income of the
Partnership for the period from June 1, 1997 through the Closing Date,
(ii) a calculation of the Additional Amount, and (iii) the amount of
any prepayment penalty paid by the Partnership as a result of the
prepayment of the Long-Term Debt. The Closing Statement shall be
certified by the Chief Financial Officer of the Partnership and shall
be accompanied by such work papers and other relevant documents
relating to its preparation as the Selling Partners may reasonably
request.
(b) If the Selling Partners are both in agreement with
the amounts shown in the Closing Statement, any difference between the
amounts paid on the Closing Date and the amounts which would have been
paid on the Closing Date had the amounts shown in the Closing Statement
been used to compute the amounts paid on the Closing Date shall be paid
in immediately available funds by the party or parties from whom such
payment is owing to the other party or parties within two (2) business
days of the delivery of the Closing Statement. However, in the event
that one or both of the Selling Partners does not agree with the
amounts shown in the Closing Statement, such Selling Partner or
Partners, on the one hand, and Brant-Allen, on the other hand, shall
jointly appoint an independent accounting firm to arbitrate the
dispute. Brant-Allen, on the one hand, and the disputing Selling
Partner or Selling Partners, on the other hand, shall bear equally the
cost of retaining such accounting firm. The parties shall use their
best commercially reasonable efforts to resolve any such dispute within
thirty (30) days following the delivery of the Closing Statement. The
determination of the accounting firm shall be final and binding on all
parties. Any adjustment required as a consequence of the arbitration
shall be paid in immediately available funds within one (1) business
day of the termination of the arbitration.
1.4 Fair Value. The Selling Partners agree that the
consideration referred to in Section 1.2 above represents the fair
value of the Partnership Interests. Each of the Selling Partners
hereby expressly agrees and acknowledges that it shall not receive and
is not entitled to receive any further payments of any kind from the
Partnership or its partners.
II. CLOSING
2.1 Closing. Subject to the terms and conditions of this
Agreement, the closing of the transactions contemplated hereby (the
"Closing") shall occur at the offices of Skadden, Arps, Slate, Meagher
& Flom LLP, 919 Third Avenue, New York, New York, on the day that is
two (2) business days following the satisfaction of the conditions to
Closing set forth in Article VI of this Agreement, or at such other
time and place as the parties may agree (the "Closing Date"), but in no
event shall the Closing occur after 5:00 p.m. (Eastern Standard Time)
on January 31, 1998.
2.2 Restructuring. Prior to the purchase of the
Partnership Interests pursuant to this Agreement, Brant-Allen may elect
to (i) transfer its interest in the Partnership to a limited liability
company wholly-owned by Brant-Allen, and/or (ii) convert the
Partnership from a limited partnership to a limited liability company
(collectively, the "Restructuring"). The Selling Partners will
reasonably cooperate with Brant-Allen and take any actions that
Brant-Allen may reasonably request in order to implement the
Restructuring, provided, that the Selling Partners will not be required
to take any actions that might adversely affect them or their
Partnership Interests, provided further that if any actions required to
be taken by the Selling Partners might be adverse, but not materially
adverse, the Selling Partners will take such actions if, prior to
taking such actions, they are fully indemnified by Brant-Allen to the
Selling Partners' satisfaction for any adverse consequences of such
actions. If Brant-Allen elects to proceed with the Restructuring, the
Restructuring will occur and become effective concurrently with, or
immediately prior to, the Closing.
2.3 Tax Certificate. Each of the Selling Partners shall
deliver to Brant-Allen at the Closing a certificate of such Selling
Partner's non-foreign status which complies with the requirements of
Section 1445 of the Internal Revenue Code of 1986, as amended, and the
Treasury Regulations promulgated thereunder.
III. REPRESENTATIONS OF THE SELLING PARTNERS
Each of the Selling Partners hereby severally, but not
jointly, represents and warrants to Brant-Allen as follows:
3.1 Ownership of the Partnership Interest. Such Selling
Partner has the complete and unrestricted power, and the unqualified
right to sell, assign, transfer and deliver to Brant-Allen, good and
valid title to its Partnership Interest, free and clear of all liens,
claims, options, charges and encumbrances whatsoever (individually, an
"Encumbrance"), except any Encumbrance that may have resulted from any
liability of the Partnership. Evidence of the authority of each
Selling Partner to enter into this Agreement has been, or will be,
separately delivered to Brant-Allen, such evidence being certified
resolutions properly adopted by the Board of Directors and
shareholders, respectively, of such Selling Partner.
3.2 Valid and Binding Agreement. This Agreement
constitutes the valid and binding agreement of such Selling Partner,
enforceable in accordance with its terms. The officer signing on
behalf of such Selling Partner has the necessary corporate authority to
do so. No consent or approval of any court, governmental agency
(foreign, federal or state), or any other person or entity is required
in connection with the execution or consummation of the transactions
contemplated herein to permit such Selling Partner to carry out its
obligations hereunder.
3.3 No Violation. The execution, delivery and
performance of this Agreement by such Selling Partner will not (i)
result in a breach of any of the terms or provisions of, or constitute
a default under, the certificate of incorporation or by-laws of such
Selling Partner or any indenture or other agreement or instrument to
which such Selling Partner is a party, (ii) constitute a default under
any mortgage, deed of trust, or other encumbrance to which such Selling
Partner or its property is subject, or (iii) conflict with, or result
in a breach of, any law, order, judgment, decree or regulation binding
on such Selling Partner.
3.4 Selling Partner's Knowledge. As of the date hereof,
such Selling Partner has no actual knowledge of any material breach of
any representation or warranty of Brant-Allen set forth in this
Agreement.
IV. REPRESENTATIONS OF BRANT-ALLEN
Brant-Allen hereby represents and warrants to each of the
Selling Partners as follows:
4.1 Valid and Binding Agreement. This Agreement
constitutes the valid and binding agreement of Brant-Allen, enforceable
in accordance with its terms. The officer signing on behalf of
Brant-Allen has the necessary corporate authority to do so. No consent
or approval of any court, governmental agency (foreign, federal or
state), or any other person or entity is required in connection with
the execution or consummation of the transactions contemplated herein
to permit Brant-Allen to carry out its obligations hereunder.
4.2 No Violation. The execution, delivery and
performance of this Agreement by Brant-Allen will not (i) result in a
breach of any of the terms or provisions of, or constitute a default
under, the certificate of incorporation or by-laws of Brant-Allen or
any indenture or other agreement or instrument to which Brant-Allen is
a party, (ii) constitute a default under any mortgage, deed of trust,
or other encumbrance to which Brant-Allen or its property is subject,
or (iii) conflict with, or result in a breach of, any law, order,
judgment, decree or regulation binding on Brant-Allen.
4.3 Financial Statements. To the knowledge of
Brant-Allen, the unaudited balance sheet of the Partnership as of May
31, 1997, the related statements of income, changes in partners' equity
and cash flow and internal management accounts or reports for the
period (collectively, the "Interim Financial Statements"), and the
audited balance sheets of the Partnership as of December 31, 1996 and
1995, and the related statements of income, changes in partners' equity
and cash flows for the years then ended, including any footnotes
thereto (collectively, the "Financial Statements"), fairly present in
all material respects the financial position of the Partnership as of
the dates indicated and the results of its operations and cash flows
for the periods indicated, and, in the case of the Interim Financial
Statements, subject to normal year-end adjustments which, to the
knowledge of Brant-Allen, are not expected to be material. To the
knowledge of Brant-Allen, the Interim Financial Statements and the
Financial Statements have been prepared in accordance with generally
accepted accounting principles consistently applied throughout the
periods covered thereby and in accordance with the books and records of
the Partnership maintained in accordance with historical practice
(except that the Interim Financial Statements do not contain footnote
disclosure that otherwise would be required by generally accepted
accounting principles).
4.4 Disclosure. To Brant-Allen's knowledge, none of the
documents or materials set forth on Schedule 4.4 to this Agreement,
which have been furnished to the Selling Partners in connection with
the consummation of the transactions contemplated by this Agreement
contains any untrue statement of a material fact by the Partnership or
omits to state a material fact necessary in order to make statements
contained herein or therein, in light of the circumstances in which
they were made, not misleading. As of the date of this Agreement,
there is no fact which Brant-Allen has not disclosed to either of the
Selling Partners and of which Brant-Allen has knowledge which
materially positively affects, or could reasonably be expected to
materially positively affect, the business or assets of the Partnership
or the operations, financial condition or prospects of the Partnership;
it being understood that for purposes of such representation,
Brant-Allen shall be deemed to have disclosed, and the Selling Partners
shall be deemed to have possession and otherwise be aware of, all
information relating to the paper and newsprint industries generally,
and to general economic conditions, which would reasonably be expected
to be known by participants in such industries or is otherwise
generally publicly available. Brant-Allen has furnished to the Selling
Partners all material information relating to offers made by third
parties to acquire the Partnership Interests or all or a material
portion of the assets of the Partnership.
4.5 Conduct of Business. Since May 31, 1997, the
Partnership has not taken, and Brant-Allen has not caused the
Partnership to take, any actions outside the ordinary course of
business or inconsistent with past practices, except as contemplated by
this Agreement, including but not limited to the following:
(a) the creation, incurring or assumption of any debt,
liability or obligation, direct, indirect, whether accrued, absolute,
contingent or otherwise, relating to the business of the Partnership,
and which is material to the business of the Partnership;
(b) with respect to any executive officer of the
Partnership, other than in the ordinary course of business (i) any
increase in the rate or terms of compensation payable or to become
payable, (ii) the payment or agreement to pay any pension, retirement
or other employee benefit nor required by any existing plan, agreement
or arrangement, or (iii) the commitment to any additional pension,
bonus, incentive, deferred compensation or other employee benefit plan,
agreement or arrangement, or the increase in the rate or terms of any
such plan, agreement or arrangement which currently exists;
(c) the waiver or release of any material right of value
relating to the business of the Partnership;
(d) the alteration of, or increase in services provided
under, any maintenance or service agreement of the Partnership, other
than in the ordinary course of business, consistent with the past
practices of the Partnership;
(e) the acceleration of any expense of the Partnership;
(f) any expenditure of capital relating to the business
of the Partnership, other than in the ordinary course of business,
consistent with the past practices of the Partnership;
(g) any material alteration in the manner of keeping the
books, accounts or records of the Partnership, or in the accounting
practices therein reflected, except as required by law or generally
accepted accounting principles; or
(h) any agreement to take any of the foregoing actions.
V. RELATED MATTERS; COVENANTS
5.1 Funding. Brant-Allen shall use its best commercially
reasonable efforts to obtain the funds necessary to consummate the
transactions contemplated by this Agreement. Brant-Allen shall provide
the Selling Partners with written or oral weekly progress reports as to
the status of the potential financing and shall appropriately respond
to any questions that the Selling Partners may have with respect to
such financing. In addition, Brant-Allen shall cooperate and use
reasonable efforts in making available to the Selling Partners
representatives of the Toronto Dominion Bank, TD Securities (U.S.A.),
Inc., Salomon Brothers, Inc and John Hancock Life Insurance Company
(the "Prospective Lenders"), subject to the availability of such
representatives, to discuss the status of the financings and to
appropriately respond to any questions that the Selling Partners may
have with respect to such financings at such times as either of the
Selling Partners may reasonably request. Brant-Allen also shall
promptly provide the Selling Partners with copies of any documents
relating to the financing, or current drafts thereof, provided to or by
any of the Prospective Lenders as the Selling Partners may reasonably
request.
5.2 Transfer Taxes. Brant-Allen shall be responsible for
the payment, if any, of 50 percent (50%) of all sales, use, transfer,
recording, ad valorem and other similar taxes and fees attributable to
the sale of the Selling Partners' Partnership Interests hereunder, and
the remaining 50 percent (50%) of any such taxes or fees shall be paid
by the Selling Partners.
5.3 Conduct of Business. The parties agree that the
business of the Partnership shall be conducted in the ordinary course
and consistent with past practices in all material respects between the
date hereof and the Closing Date and that during such period
Brant-Allen shall not cause or permit the Partnership to take any of
the actions set forth in Section 4.5. The Selling Partners shall not
take any action that may have the effect of causing a dissolution of
the Partnership.
5.4 Distributions. Brant-Allen shall not permit the
Partnership to make any distributions, in cash or kind, to either
Selling Partner or to Brant-Allen, or to any of their respective
affiliates, between the date hereof and the Closing Date.
5.5 No Dispositions. The Selling Partners shall not, nor
shall they enter into any agreement (other than this Agreement) to,
directly or indirectly, sell, convey, pledge, encumber, assign or
otherwise transfer in any manner all or any portion of the Partnership
Interests prior to the Closing or termination of this Agreement.
5.6 Section 754 Election. Each of the Selling Partners
acknowledges that the Partnership or its successor intends to make an
election pursuant to Section 754 of the Internal Revenue Code of 1986,
as amended (the "Election"), to step up the basis of Partnership assets
as a result of the sale of the Selling Partners' Partnership Interests
and agrees to cooperate with the Partnership in making such election
by, among other things, providing to the Partnership such information
as is necessary to enable the Partnership to determine the basis of its
assets following the Election.
5.7 Fees and Expenses. The parties hereto shall bear
their own respective fees and expenses incurred in connection with the
preparation for and consummation of the transactions contemplated by
this Agreement. None of the fees or expenses that may be incurred by
the parties hereto in connection with this Agreement or obtaining the
financing for the purchase of the Selling Partners' Partnership
Interests (such as any third party costs of environmental due diligence
and costs of accountants and counsel, including those of the
Partnership) shall be borne by the Partnership.
5.8 Long-Term Debt Repayment. Brant-Allen shall take all
actions necessary to prepay the Long-Term Debt contemporaneously with
the Closing.
5.9 Hart-Scott-Rodino. Each of the parties will file any
Notification and Report Forms and related material that it may be
required to file with the Federal Trade Commission and the Antitrust
Division of the United States Department of Justice under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
"HSR Act"), and will use all commercially reasonable efforts to obtain
an early termination of the applicable waiting period, and will make
any further filings pursuant thereto that may be necessary or advisable
in connection therewith.
VI. CONDITIONS TO CLOSING
6.1 Conditions to Obligations of the Selling Partners.
The obligations of the Selling Partners to consummate the transactions
contemplated by this Agreement shall be subject to the satisfaction on
or prior to the Closing Date of the following conditions:
(a) the representations and warranties of Brant-Allen
contained herein shall be true and accurate in all material respects on
the date of this Agreement and on the Closing Date;
(b) Brant-Allen shall have performed in all material
respects all the covenants and agreements required to be performed by
it prior to the Closing Date;
(c) no order or injunction of any court or governmental
authority shall be in effect which shall restrain, enjoin or otherwise
prevent the consummation of any of the transactions contemplated
hereby, and all applicable waiting periods (and any extensions thereof)
under the HSR Act shall have expired or otherwise been terminated;
(d) the transactions contemplated by the Timberlands
Partnership Interest Sale Agreement of even date herewith by and among
the Selling Partners and Brant-Allen shall be closed contemporaneously;
(e) each of the Selling Partners shall have received
evidence in a form and substance reasonably satisfactory to it that it
has been released of any and all guaranties made by it in connection
with the Partnership; and
(f) Brant-Allen shall have caused the Long-Term Debt to
have been contemporaneously repaid.
6.2 Conditions to Obligations of Brant-Allen. The
obligation of Brant-Allen to consummate the transactions contemplated
by this Agreement shall be subject to the satisfaction on or prior to
the Closing Date of the following conditions:
(a) the representations and warranties of the Selling
Partners contained herein shall be true and accurate in all material
respects on the date of this Agreement and on the Closing Date;
(b) the Selling Partners shall have performed in all
material respects all the covenants and agreements required to be
performed by them prior to the Closing Date;
(c) no order or injunction of any court or governmental
authority shall be in effect which shall restrain, enjoin or otherwise
prevent the consummation of any of the transactions contemplated
hereby, and all applicable waiting periods (and any extensions thereof)
under the HSR Act shall have expired or otherwise been terminated; and
(d) Brant-Allen shall have closed on the funds necessary
to consummate the transactions contemplated by this Agreement;
provided, however, that Brant-Allen's failure to satisfy this condition
6.2(d) will not eliminate the assessment of the Dilution Percentage (as
hereinafter defined) if any of the conditions required to assess the
Dilution Percentage are met under the provisions of Article VIII of
this Agreement.
VII. MISCELLANEOUS
7.1 Survival. All representations, warranties and
agreements made in this Agreement or pursuant hereto (including
Sections 7.7 and 8.2) shall survive indefinitely following the Closing,
except that the representations and warranties made by Brant-Allen in
Sections 4.3, 4.4 and 4.5 shall expire and have no further force or
effect after the first anniversary of the Closing Date and,
accordingly, the Selling Partners shall not be indemnified for breaches
of such representations and warranties discovered after such first
anniversary. None of the representations, warranties and agreements
made in this Agreement or pursuant hereto shall survive the termination
of this Agreement, except this Section 7.1 shall not limit any covenant
or agreement which by its terms contemplates performance after the
termination of this Agreement.
7.2 Further Assurance and Cooperation. From time to time
at the request of any party to this Agreement and without further
consideration, each party will execute and deliver such documents and
take such action as may reasonably be requested in order to consummate
more effectively the transactions contemplated by this Agreement.
7.3 Assignment; Parties in Interest; Execution in
Counterparts. This Agreement and the rights, interests and obligations
hereunder may not be assigned by any party hereto without the prior
written consent of the other parties hereto, except that Brant-Allen
may assign the right to purchase the Selling Partners' Partnership
Interests to a wholly-owned subsidiary (including, without limitation,
a limited liability company formed in connection with the
Restructuring), provided that Brant-Allen shall remain responsible for
all obligations hereunder. This Agreement will be binding upon, inure
to the benefit of and be enforceable by the parties and their
respective successors and assigns. This Agreement may be executed in
one or more counterparts, but all such counterparts shall constitute
one and the same instrument.
7.4 Entire Agreement. This Agreement and the documents
referred to herein or delivered pursuant hereto which form a part
hereof, contain the entire understanding of the parties with respect to
its subject matter. There are no restrictions, agreements, promises,
warranties, covenants or undertaking other than those expressly set
forth herein or therein. This Agreement supersedes all prior
agreements and understandings between the parties with respect to its
subject matter.
7.5 Law Governing. This Agreement will be governed by
and construed in accordance with the laws of the Commonwealth of
Virginia
7.6 Specific Performance. Each of the parties hereto
acknowledges and agrees that the other parties hereto would be
irreparably damaged in the event any of the provisions of this
Agreement were not performed in accordance with their specific terms or
were otherwise breached. Accordingly, each of the parties hereto
agrees that it shall be entitled to an injunction or injunctions to
prevent breaches of the provisions of this Agreement and to enforce
specifically this Agreement and the terms and provisions hereof in any
action instituted in any court of the United States or any state
thereof having subject matter jurisdiction, in addition to any other
remedy to which a party may be entitled, at law or in equity.
7.7 Indemnification. (a) Brant-Allen (the "Buyer
Indemnifying Party") shall indemnify and hold each of the Selling
Partners (each a "Seller Indemnified Party") harmless from and against
all claims, demands, losses, obligations, liabilities, damages and
reasonable costs and expenses, including attorneys' fees and expenses
(individually, a "Loss," and collectively, "Losses"), that either of
the Seller Indemnified Parties shall incur or suffer which result from
or relate to (i) any breach of any representation or warranty of the
Buyer Indemnifying Party contained in this Agreement; (ii) any breach
of or failure to perform, any covenant or agreement of the Buyer
Indemnifying Party contained in this Agreement; (iii) the business or
assets of the Partnership; or (iv) any alleged liability under Section
50-73.43 of the Virginia Revised Uniform Limited Partnership Act or any
successor provision as a result of the sale to Brant-Allen of the
Selling Partners' Partnership Interests pursuant to this Agreement.
(b) Each Selling Partner (each a "Seller Indemnifying
Party") shall indemnify and hold Brant-Allen (the "Buyer Indemnified
Party") harmless from and against all Losses that the Buyer Indemnified
Party shall incur or suffer which result from or relate to (i) any
breach of any representation or warranty of such Selling Partner
contained in this Agreement; and (ii) any breach of, or failure to
perform, any covenant or agreement of such Selling Partner contained in
this Agreement.
(c) The Seller Indemnifying Party and the Buyer
Indemnifying Party are each referred to herein as an "Indemnifying
Party," and the Buyer Indemnified Party and the Seller Indemnified
Party are each referred to herein as an "Indemnified Party." The
Indemnified Party shall promptly notify the Indemnifying Party of any
Loss for which indemnification is sought under this Agreement. If such
Loss is initiated by a third party, the Indemnifying Party shall have
the right, but not the obligation, at its own expense, to assume the
defense thereof with counsel reasonably acceptable to the Indemnified
Party. In connection with any such third party Loss which the
Indemnifying Party has elected to defend, (i) the Indemnified Party
shall have the right to participate, at its own expense, and (ii) the
parties hereto shall cooperate with each other and provide each other
with access to relevant books and records in their possession. No
third party Loss shall be settled without the prior written consent of
the Indemnified Party.
(d) Notwithstanding the foregoing, no Indemnifying Party
shall have any liability to any Indemnified Party pursuant to this
Section 7.7 unless and until the total amount of Losses suffered by the
Indemnified Party shall exceed $100,000, in which case the amount of
Losses for which indemnity may be sought shall be limited to the amount
in excess of $100,000.
7.8 Knowledge of Brant-Allen. Whenever a representation
and warranty contained in this Agreement is made to the "knowledge of
Brant-Allen," it shall mean all facts and conditions which are actually
known by Joseph Allen, Peter Brant, Edward Sherrick or Tom Armstrong
(individually, an "Insider") or which should have been known by a
prudent manager holding the position of an Insider with access to the
books and records of the Partnership or Brant-Allen.
7.9 Knowledge of a Selling Partner. The "actual
knowledge" of Newsprint for purposes of Section 3.4 shall mean all
facts and conditions which are actually known by Boisfeuillet Jones,
Jr., Gerald Rosberg and Martin Cohen, and the "actual knowledge" of DJ
for purposes of Section 3.4 shall mean all facts and conditions which
are actually known by Kevin J. Roche and Leonard E. Doherty.
7.10 Notice. All notices, requests and other
communications hereunder shall be sufficient if given in writing and
either personally delivered, sent by a nationally recognized overnight
courier or sent by telecopy, addressed as follows, and shall be
effective only when actually received:
If to Newsprint: with a copy to:
Newsprint, Inc. Shaw, Pittman, Potts & Trowbridge
c/o The Washington Post 2300 N Street, N.W.
1150 15th Street, N.W. Washington, D.C. 20037
Washington,D.C. 20071 Tel: (202) 663-8000
Tel: (202) 334-6696 Fax: (202) 663-8007
Fax: (202) 334-4536 Attn: Thomas H. McCormick, Esq.
Attn: John Hockenberry, Esq.
if to DJ: with a copy to:
Dow Jones Virginia Company, Inc. Shaw, Pittman, Potts & Trowbridge
c/o Dow Jones & Company, Inc. 2300 N Street, N.W.
World Financial Center Washington, D.C. 20037
200 Liberty Street, 14th Floor Tel: (202) 663-8000
New York, NY 10281 Fax: (202) 663-8007
Tel: (212) 416-3023 Attn: Thomas H. McCormick, Esq.
Fax: (212) 416-2637
Attn: Mr. Kevin J. Roche
if to Brant-Allen: with a copy to:
Brant-Allen Industries, Inc. Skadden, Arps, Slate, Meagher & Flom LLP
80 Field Point Road 919 Third Avenue
Greenwich, CT 06830 New York, NY 10022
Tel: (203) 661-3344 Tel: (212) 735-3000
Fax: (203) 661-3349 Fax: (212) 735-2000
Attn: Mr. Peter Brant Attn: Jeffrey W. Tindell, Esq.
VIII. TERMINATION
8.1 Termination Rights. This Agreement may be terminated in
any of the following circumstances:
(a) Upon the mutual agreement of the parties.
(b) By a nonbreaching party concurrently with the
termination of the Partnership Interest Sale Agreement, dated as of
October 15, 1997, among the parties with respect to the Bear Island
Timberlands Company, L.P. in accordance with the terms thereof.
(c) By a Selling Partner at any time after a Selling Partner
has been advised by Brant-Allen that commercial banking, investment
banking or lending services of entities other than one or more of the
Prospective Lenders will be required to obtain funds sufficient to
consummate the transactions contemplated by this Agreement; provided
that it is agreed and understood that the Prospective Lenders may at
their election include other banks, underwriters, agents and syndicates
as part of their customary selling efforts.
(d) By a Selling Partner at any time after a Selling Partner
has notified Brant-Allen in writing that Brant-Allen is in material
breach of any provision of this Agreement, unless Brant-Allen has cured
such breach within three (3) business days of receiving such notice.
(e) By Brant-Allen at any time after Brant-Allen has
notified a Selling Partner in writing that the Selling Partner is in
material breach of any provision of this Agreement, unless the Selling
Partner has cured such breach within three (3) business days of
receiving such notice.
(f) By a Selling Partner on or after November 30, 1997,
unless prior to November 30, 1997 a Selling Partner has received a
certificate, which shall be reasonably based, from Brant-Allen, dated
after November 20, 1997, certifying that, as of the date of such
certificate, Brant-Allen has no current knowledge of any issue that
would reasonably be expected to prevent the financing necessary for the
transactions contemplated by this Agreement from being received on or
prior to December 31, 1997; provided, however, that the certificate may
list an issue which could be expected to not be resolved until after
December 31, 1997 if (i) the issue involves an action of the type
described in clause (iv) of paragraph (g) below, and (ii) Brant-Allen
certifies that it will use all commercially reasonable efforts to
resolve such issue prior to December 31, 1997.
(g) By a Selling Partner on or after December 31, 1997,
unless prior to December 31, 1997 a Selling Partner has received a
certificate, which shall be reasonably based, from Brant-Allen
certifying that (i) all necessary loan agreements relating to the
financing have been executed by all parties; (ii) the underwriting or
purchase agreements relating to the issuance of any securities relating
to the financing has been fully negotiated and is, except for
execution, completed; (iii) prospective investors have "circled" or
otherwise indicated their commitment to purchase the requisite dollar
amount of securities to be issued in connection with the financing; and
(iv) the only outstanding actions necessary to be taken before the
Closing can occur, which shall be listed and described in the
certificate, shall be actions which do not involve the exercise of any
material discretion on the part of any person and are capable of being,
and reasonably expected to be, completed on or before January 31, 1998.
At the time Brant-Allen provides the Selling Partner such certificate,
Brant-Allen shall also provide the Selling Partner a copy of the loan
agreement and/or underwriting or purchase agreement referred to in such
certificate.
(h) By any party after January 31, 1998.
8.2 Effect of Termination. (a) Subject to paragraph (b)
below, upon a rightful termination of this Agreement by a Selling
Partner pursuant to Section 8.1(b), (c), (d), (f) or (g) or by any
party pursuant to Section 8.1(h), including as a result of the waiting
period under the HSR Act not having expired by January 31, 1998,
Brant-Allen shall be assessed a dilution of 2.5% of its interest in the
Partnership (the "Dilution Percentage") to be distributed equally to
the Selling Partners. In the event that the dilution is assessed in
accordance with this Section 8.2, the parties hereto agree that they
will take the necessary actions to amend the Limited Partnership
Agreement to reduce Brant-Allen's interest in the Partnership (i.e.,
Brant-Allen's share of the Partnership's profits, losses and
distributions as set forth in Section 3.2 of the Limited Partnership
Agreement) by the Dilution Percentage and to increase the partnership
interest of each of the Selling Partners by one half (1/2) of the
Dilution Percentage or 1.25% (the " Amendment"). Brant-Allen hereby
grants to each of the Selling Partners and their successors and assigns
a limited power of attorney (which the parties acknowledge shall be
deemed to be coupled with an interest) for the purpose of executing any
and all documents, instruments and certificates that are necessary to
effect the Amendment; provided, however, that Brant-Allen shall be
notified at least five (5) business days prior to a Selling Partner's
use of this proposed power of attorney.
(b) Brant-Allen shall not be assessed the Dilution
Percentage if the termination of this Agreement results from one or
more Prospective Lenders being unable or unwilling to provide funds
necessary to consummate the transactions contemplated by this Agreement
primarily due to one or more of the following reasons that arose after
the date of this Agreement: (i) a fire or earthquake, hurricane or
comparable physical event beyond the control of Brant-Allen causing
material damage to the Partnership's properties; provided that
Brant-Allen's negligence or misconduct did not materially contribute to
the extent of the damage caused by such event; or (ii) a proceeding is
begun under a governmental authority's power of eminent domain with
respect to a material portion of the Partnership's properties.
(c) The parties acknowledge and agree that time is of the
essence with respect to the expected dates for Closing as set forth in
this Article VIII and that the assessment of the Dilution Percentage as
set forth in Section 8.2 hereof are reasonable and justifiable
liquidated damages for the failure of the Closing to occur in a timely
manner.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first written.
DOW JONES VIRGINIA COMPANY, INC.
By: /s/ Kevin J. Roche
__________________________
Name: ____________________
Title: ___________________
NEWSPRINT, INC.
By: /s/ Martin Cohen
__________________________
Name: Martin Cohen
Title: President
BRANT-ALLEN INDUSTRIES, INC.
By: /s/ Joseph Allen
__________________________
Name: Joseph Allen
Title: Executive Vice President
<PAGE>
Partnership Interest Sale Agreement
Schedule 4.4
Financial Statements (as defined in the Partnership Interest Sale
Agreement)
Interim Financial Statements (as defined in the Partnership Interest
Sale Agreement)
Bowater's Letter of Intent, dated July 25, 1997, to purchase the
business and assets of Bear Island Paper Company, L.P. and Bear Island
Timberlands Company, L.P. (the "Partnerships")
Bowater's Proposed Asset Purchase Agreement, dated August 12, 1997, for
the Partnerships
T.D. Securities Engagement Letter, dated August 29, 1997
T.D. Securities Commitment Letters, dated August 29, 1997, relating to
$120 million in bank debt and sale of $100 million in high yield bonds
Salomon Brothers Letter, relating to sale of $ 195 million in high
yield bonds
<PAGE>
COMMONWEALTH OF VIRGINIA
STATE CORPORATION COMMISSION
BEAR ISLAND MERGERCO, LLC
ARTICLES OF ORGANIZATION
=================================================================
THESE ARTICLES OF ORGANIZATION are filed for and on behalf
of BEAR ISLAND MERGERCO, LLC (the "COMPANY") pursuant to Section 13.1-1010.1
of the Virginia Limited Liability Company Act, Virginia Code Sections
13.1-1000, et seq. (the "ACT").
WHEREAS, the Company was formed under the name "BEAR ISLAND
PAPER COMPANY", in accordance with the provisions of the Virginia Uniform
Limited Partnership Act, pursuant to a Certificate of Limited Partnership
filed with the Clerk of the Circuit Court of Hanover County, Virginia on May
18, 1978, and a Limited Partnership Agreement, dated as of May 18, 1978, which
Agreement has been amended from time to time, including an amendment made
pursuant to an Amendment to Limited Partnership Agreement dated as of April
20, 1987 in order to change the name of "BEAR ISLAND PAPER COMPANY" to "BEAR
ISLAND PAPER COMPANY, L.P."; and
WHEREAS, in accordance with the requirements of the Virginia
Revised Uniform Limited Partnership Act, Bear Island Paper Company, L.P. filed
its initial Certificate of Limited Partnership under such act with the Clerk
of the Virginia State Corporation Commission (the "CLERK") on April 23, 1987
and filed Amended and Restated Certificates of Limited Partnership with the
Clerk on October 19, 1987 and October 8, 1992; and
WHEREAS, by unanimous agreement of the partners of Bear
Island Paper Company, L.P, the partners have agreed to convert Bear Island
Paper Company, L.P. from a Virginia limited partnership to a Virginia limited
liability company in accordance with the provisions of Section 13.1-1010.1 of
the Act;
NOW, THEREFORE, pursuant to Chapter 12 of Title 13.1 of the Code of
Virginia, the undersigned states as follows:
1. The name of the limited liability company is:
Bear Island Mergerco, LLC
2. The address of the initial registered office in Virginia is:
NationsBank Center, 23rd Floor
1111 East Main Street
Richmond, Virginia 23219,
located in the City of Richmond, Virginia.
<PAGE>
3. The registered agent's name is:
Collins Denny, III,
whose business address is identical with the registered office, and who is a
resident of Virginia and a member of the Virginia State Bar.
4. The post office address of the principal office where the records
will be maintained pursuant to Virginia Code Section 13.1-1028 is:
Post Office Box 2119
10026 Old Ridge Road
Ashland, Virginia 23005
The office is located in the County of Hanover, Virginia.
5. The period of duration of the limited liability company shall continue
through December 31, 2028.
ORGANIZER: BRANT-ALLEN INDUSTRIES, INC.,
Date: December 1, 1997 By: /s/ Edward D. Sherrick
Name Edward D. Sherrick
----------------------
Title: VP/Finance
--------------------
2
<PAGE>
ARTICLES OF MERGER
OF
BEAR ISLAND MERGERCO, LLC
WITH AND INTO
BEAR ISLAND PAPER COMPANY, L.L.C.
1. Plan of Merger. Attached hereto and incorporated herein by
this reference is a copy of the plan of merger ("PLAN OF
MERGER") by which Bear Island Mergerco, LLC, a Virginia
limited liability company, shall be merged with and into
Bear Island Paper Company, L.L.C., a Virginia limited
liability company.
2. Outstanding Membership Interests. The outstanding
membership interests of Bear Island Mergerco, LLC consist of
one membership interest, which is owned by Bear Island Paper
Company, L.L.C. The outstanding membership interests of
Bear Island Paper Company, L.L.C. consist of one membership
interest, which is held by a single member.
3. Adoption by Directors. On December 1, 1997, the Plan of
Merger was adopted by unanimous written consent of the
directors of Bear Island Paper Company, L.L.C. and by
unanimous written consent of the directors of Bear Island
Mergerco, LLC.
4. Adoption by Members. On December 1, 1997, the Plan of
Merger was adopted by written consent of the sole member of
Bear Island Paper Company, L.L.C. and by written consent of
the sole member of Bear Island Mergerco, LLC.
5. Effective Date. The effective date of the certificate of
merger issued by the Virginia State Corporation Commission,
and the date on which the merger of Bear Island Mergerco.,
LLC with and into Bear Island Paper Company, L.L.C. shall be
effected, shall be December 1, 1997.
Date: December 1, 1997 BEAR ISLAND MERGERCO, LLC
By: /s/ Peter M. Brant
________________________
Name: Peter M. Brant
Title: President
BEAR ISLAND PAPER COMPANY, L.L.C.
By: /s/ Peter M. Brant
_______________________
Name: Peter M. Brant
Title: President
PLAN OF MERGER
OF
BEAR ISLAND MERGERCO, LLC
AND
BEAR ISLAND PAPER COMPANY, L.L.C.
1. Limited Liability Companies Planning to Merge. The names of
the limited liability companies planning to merge are:
Bear Island Mergerco, LLC, a Virginia limited liability
company ("MERGERCO"); and
Bear Island Paper Company, L.L.C., a Virginia limited
liability company ("BIPC").
On the "Effective Date", as defined herein, Mergerco will
merge with and into BIPC.
2. Surviving Limited Liability Company. The name of the
surviving limited liability company is Bear Island Paper
Company, L.L.C. The Board of Directors and the officers of
BIPC, as each exists immediately prior to the Effective
Date, shall be the Board of Directors and officers of the
surviving limited liability company. The Articles of
Organization and Operating Agreement of BIPC, as each exists
immediately prior to the Effective Date, shall be the
Articles of Organization and Operating Agreement of the
surviving limited liability company.
3. State of Incorporation and Organization. Virginia is the
name of the state under whose law each of Mergerco and BIPC
are organized.
4. Terms and Conditions. On the "Effective Date", as defined
herein, all assets and properties of Mergerco shall be
vested in BIPC without reversion or impairment, and BIPC
shall be liable for all liabilities of Mergerco; provided,
however, that no member of BIPC which is a party to the
merger shall, as a result of the merger, become personally
liable for the liabilities or obligations of any other
person or entity unless that member approves the plan of
merger or otherwise consents to becoming personally liable.
<PAGE>
5. Cancellation of Outstanding Membership Interest in Bear
Island Mergerco, LLC. On the Effective Date, the
outstanding membership interest in Mergerco shall be
canceled and cease to exist.
6. Adoption by Directors. This plan of merger shall be adopted
by written consents of all of the directors of Mergerco and
all of the directors of BIPC.
7. Approval by Shareholders and Members. This plan of merger
shall be approved by written consents of the sole member of
a Mergerco and the sole member of BIPC.
8. Articles of Merger. After the approval of this plan of
merger by the sole member of Mergerco and the sole member of
BIPC, an authorized officer of Mergerco, for and on behalf
of Mergerco, and an authorized officer of BIPC, for and on
behalf of BIPC as the surviving company, shall execute and
file with the Virginia State Corporation Commission
("COMMISSION") articles of merger and shall execute and
deliver such other documents and instruments and to take
such action as they may deem necessary or advisable to
effect and evidence the merger of Mergerco with and into
BIPC in accordance with the provisions of this plan of
merger.
9. Effective Date. The time and date at and on which the
merger of Mergerco with and into BIPC shall be effected (the
"EFFECTIVE DATE") shall be the time and date, if any,
specified in the articles of merger filed with the
Commission as the effective date of the certificate of
merger issued by the Commission, if no such time and date
are specified, the time and date at and on which the
certificate of merger shall be issued by the Commission.
<PAGE>
EXHIBIT 3.1
COMMONWEALTH OF VIRGINIA
STATE CORPORATION COMMISSION
BEAR ISLAND PAPER COMPANY, L.L.C
ARTICLES OF ORGANIZATION
=================================================================
THESE ARTICLES OF ORGANIZATION are filed for and on behalf
of BEAR ISLAND PAPER COMPANY, L.L.C. pursuant to Section 13.1-
1011 of the Virginia Uniform Limited Liability Company Act,
Virginia Code Sections 13.1-1000, et seq.
1. The name of the limited liability company is: Bear Island
Paper Company, L.L.C.
2. The address of the initial registered office in Virginia is:
NationsBank Center, 23rd Floor
1111 East Main Street
Richmond, Virginia 23219,
located in the City of Richmond, Virginia.
3. The registered agent's name is: Collins Denny, III, whose
business address is identical with the registered office, and who
is a resident of Virginia and a member of the Virginia State Bar.
4. The post office address of the principal office where the
records will be maintained pursuant to Virginia Code Section
13.1-1028 is:
Post Office Box 2119
10026 Old Ridge Road
Ashland, Virginia 23005
The office is located in the County of Hanover, Virginia.
5. The period of duration of the limited liability company
shall continue through December 31, 2028.
ORGANIZER: BRANT-ALLEN INDUSTRIES, INC.,
Date: November 1, 1997 By: /s/ Edward D. Sherrick
_________________________________
Name: Edward D. Sherrick
Title: Vice President of Finance
<PAGE>
EXHIBIT 3.2
BEAR ISLAND PAPER COMPANY, L.L.C.
OPERATING AGREEMENT
THIS OPERATING AGREEMENT is made as of November 3, 1997 by
and between BEAR ISLAND PAPER COMPANY, L.L.C. (the "COMPANY") and
BRANT-ALLEN INDUSTRIES, INC. as the sole Member of the Company.
ARTICLE I
FORMATION
1.1. Formation. The Member acknowledges the formation of
the Company as a Virginia limited liability company upon the
filing of Articles of Organization with the Virginia State
Corporation Commission and its issuance of a Certificate of
Organization on November 3, 1997.
1.2. Name. The name of the Company is "Bear Island Paper
Company, L.L.C."
1.3. Purpose. The purpose of the Company is to engage,
directly or indirectly through acquisition of interests in other
Persons, in the business of producing, selling and distributing
newsprint by (i) constructing, owning and operating a paper mill
(the "MILL") for the production of newsprint in Hanover County,
Virginia on the land (the "REAL PROPERTY") described in the deed
dated March 30, 1978 from Richmond Land Corporation to The Bato
Company, Inc., a New York corporation, recorded on March 30, 1978
in the Clerk's Office, Circuit Court, Hanover County, Virginia in
Deed Book 435 at page 667, as amended, and construction and
operation of a deinking facility at the Mill to permit the Mill
to produce recycled newsprint; (ii) selling and distributing the
newsprint produced by the Mill; (iii) acquiring, through
purchase, lease or otherwise, and trading in, timberlands and
timber rights for the purpose of meeting supply requirements of
the Mill; and (iv) doing all things which may be necessary or
desirable in connection therewith without materially changing the
essential nature of the Company s business (all of the foregoing
being hereinafter referred to as the "business "). The Company
may also pursue any other lawful activity approved by the Member.
1.4. Term. The term of the Company shall continue until
December 31, 2028, unless sooner dissolved and terminated in
accordance with the Act and this Agreement.
ARTICLE II
DEFINITIONS
Terms defined elsewhere in the text of this Agreement shall
have the meanings ascribed to them in text. Otherwise, as used
in this Agreement:
"ACT" means the Virginia Limited Liability Company Act,
Virginia Code Sections 13.1-1000, et seq.
"AFFILIATE" (or "CONTROLLING PERSON") means any Person that
directly, or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with,
another Person.
"AGREEMENT" means this Operating Agreement, as initially
executed, or as amended from time to time, as the context may
require.
"BANKRUPTCY" , with respect to any Person, means (i) making
an assignment for the benefit of creditors; (ii) filing a
voluntary petition in bankruptcy, (iii) becoming the subject of
an order for relief or being declared insolvent in any federal or
state bankruptcy or insolvency proceeding (unless such order is
dismissed within 90 days following entry); (iv) filing a petition
or answer seeking for himself any reorganization, arrangement,
composition, readjustment, liquidation, dissolution or similar
relief under any statute, law, or regulation; (v) filing an
answer or other pleading admitting or failing to contest the
material allegation of a petition filed against him in any
proceeding similar in nature to those described in the preceding
clause, or otherwise failing to obtain dismissal of such petition
within 120 days following its filing; or (vi) seeking, consenting
to, or acquiescing in, the appointment of a trustee, receiver, or
liquidator of all or any substantial part of his properties.
"BOARD" means the Board of Directors described in Section
5.1.
"CAPITAL CONTRIBUTION" means, with respect to any Member,
the cash and the initial fair market value of any other property
that a Member has contributed to the Company pursuant to the
terms of this Agreement.
"CAPITAL PROCEEDS" means the net cash proceeds realized by
the Company from (1) refinancing of any Mortgage, (2) a Capital
Transaction, or (3) elimination of any unnecessary funded reserve
previously established and maintained in connection with any
Mortgage or other Company financing.
"CAPITAL TRANSACTION" means the sale, exchange, liquidation
or other disposition of, or any condemnation award or casualty
loss recovery with respect to, all or any part of the Property.
"CODE" means the Internal Revenue Code of 1986, as amended,
and any successor statute.
"COMPANY" means Bear Island Paper Company, L.L.C.
"INTEREST" means the entire ownership interest of a Member
in the Company at any particular time, including, without
limitation, allocations of profit or loss (or items thereof),
distributions, any and all rights to vote and otherwise
participate in the Company's affairs, and any benefits to which a
Member may be entitled under this Agreement or the Act, together
with the obligations of such Member to comply with the provisions
of this Agreement and the Act.
"LIQUIDATOR" means the Board or such Person as may be
designated by the Board, or in the absence thereof, such other
Person who is appointed in accordance with applicable law to take
all actions related to winding up of the Company's business and
distribution of the Company's assets.
"MEMBER" means Brant-Allen Industries, Inc.
"MORTGAGE" means any Company liability secured by real or
personal property, or any interest therein, owned by the Company.
"NET CASH FLOW" means, with respect to any fiscal year of
the Company, all cash receipts of the Company (other than any
Capital Proceeds) that are in excess of the amount that the Board
determines is required to satisfy the Company obligations
(including any obligations owed to any Member or Affiliate), the
Company's operating expenses and working capital requirements,
and the restoration, increase, or creation of reserves.
"NOTICE" means a writing containing all information
necessary to satisfy the purposes for which Notice is being
given, which is personally delivered, sent by postal or reputable
commercial overnight delivery service, or mailed, first-class
postage prepaid, addressed, as applicable, to a Member at its
address as appears from the Company's records and to any other
Person at his last known address.
"OFFICER" means the President and any other Person
designated by the Board as an officer of the Company.
"PERSON" means an individual, corporation (stock or
nonstock), unincorporated association (profit or nonprofit),
business trust, estate, partnership, limited liability company,
trust, or two or more persons having a joint or common economic
interest.
"PROPERTY" means and any interest in any real or personal
property owned or acquired from time to time by the Company.
ARTICLE III
MEMBER AND CAPITAL CONTRIBUTIONS
3.1. Member and Capital Contributions. The sole Member and
its business address are as follows:
Brant-Allen Industries, Inc.
80 Field Point Road
Greenwich, Connecticut 06830
The Member has made a Capital Contribution to the Company in the
amount of $5,000. The Member shall not be required to make any
additional Capital Contributions to the Company without its
written consent.
3.2. Interest on Capital Contribution. The Member shall not
be entitled to interest on its Capital Contribution.
3.3. Member Loans. If the Company requires additional funds
for any Company purpose then, subject to the provisions of
Section 5.3(b) of this Agreement, it may borrow needed funds from
the Member or other Person for such period of time and on such
terms as the Board and the lender may agree.
3.4. Loans not to be Treated as Capital Contributions.
Loans or advances by the Member to the Company shall not be
considered Capital Contributions and shall not increase the
Capital Account balance of the lending or advancing Member. No
Member shall be required to contribute or lend any money or
property to the Company.
ARTICLE IV
ALLOCATIONS AND DISTRIBUTIONS
4.1. Allocation of Profits and Losses from Operations and
Capital Transactions. All profits, losses and tax credits
(including any gain or loss arising from a Capital Transaction),
shall be allocated to the Member.
4.2. Distributions of Net Cash Flow. Net Cash Flow of the
Company shall be distributed to the Member annually (or at such
other times as the Board may determine).
4.3. Distribution of Capital Proceeds. Any Capital Proceeds
shall be distributed to the Member after payment of debts of the
Company to the extent required (including the payment of any
debts or obligations to the Member) and the setting aside of any
reserves which the Board deems reasonably necessary for
contingent, unforeseen or unmatured Company obligations.
ARTICLE V
MANAGEMENT OF COMPANY
5.1. Board of Directors.
(a) The operation of the Company shall be managed by a
Board which shall consist of not less than one (1) nor more than
eight (8) Directors selected by the Member as provided in Section
5.2. The initial Directors, who shall serve until their
successors are selected, shall be Edward D. Sherrick, Thomas E.
Armstrong, Peter M. Brant, Joseph Allen, Michael Conroy and
Robert Flug.
(b) Subject to the approval rights reserved to the
Member as provided in this Agreement, the Board shall have
exclusive authority and full discretion with respect to
management of the Company.
(c) The Board shall act by resolution duly adopted at
a meeting of the Board or by written consent of all Directors.
Directors may vote or give their consent in person or by proxy.
(d) No action may be taken by the Board without the
affirmative vote of a majority of the Directors present at a
meeting of Directors at which a quorum is present. A quorum for
a meeting of Directors shall consist of a majority of the
Directors.
5.2 Selection and Removal of Directors.
(a) The Member shall designate the Directors by Notice
to such Directors and the Company.
(b) The Member may, at any time, by Notice to the
Directors and the Company, remove any or all of the Directors and
substitute new Directors to serve in their stead.
(c) If any Director is unwilling or unable to serve or
is removed from office by the Member, the Member shall designate
the successor to such Director.
5.3. Exercise of Authority Granted to the Board.
(a) Subject to the limitations of Section 5.3(b), the
Board may delegate such general or specific authority to the
Officers of the Company as it from time to time considers
desirable, and the Officers may, subject to any restraints or
limitations imposed by the Board, exercise the authority granted
to them.
(b) Notwithstanding anything contained herein to the
contrary, the authority to determine the following matters with
respect to the Company shall be retained by the Board and any
action with respect thereto may be taken by the Officers of the
Company (with such general or specific limitations as may be
determined by the Board) only after the Board has approved the
action in question in accordance with this Section:
(i) appointing or removing any Officer;
(ii) determining the compensation to be paid to
any Officer or entering into any agreement with respect to the
employment of any Officer;
(iii) borrowing or incurring indebtedness on
behalf of the Company;
(iv) assigning, transferring, pledging, or
compromising any debts due to the Company, except on full
payment;
(v) acquiring or starting up any business
activity or venture or interest therein;
(vi) pledging, assigning or otherwise encumbering
any property or assets of the Company;
(vii) selling or otherwise disposing of, or
contracting to sell or otherwise dispose of, any of the Company s
assets in any one transaction or in any series of transactions
out of the ordinary course of business of the Company;
(viii) entering into any contract or commitment
obligating the Company to make aggregate capital or other
expenditures of more than $100,000 other than in the ordinary
course of business of the Company;
(ix) reorganizing or restructuring the Company;
(x) voluntarily taking any action that would
cause Bankruptcy of the Company; and
(xi) acquiring any equity or debt securities of
any Member or any of its Affiliates, or otherwise make loans to
any Member or any of its Affiliates.
5.4. Meetings of the Board.
(a) The Board shall hold not less than four (4)
regular meetings each year on such dates and at such times as may
be designated by the Board or the President.
(b) Special meetings of the Board may be held at any
time, upon call of the President or any Director.
(c) Unless waived in writing by all of the Directors
(either before or after a meeting) at least five (5) business
days prior Notice of any meeting shall be given to each Director
and the Member. Such Notice shall, in the case of a special
meeting, state the purpose for which such meeting has been
called. No business may be conducted or action taken at such
meeting that is not provided for in such Notice.
(d) Members of the Board may participate in a meeting
of such Board by means of conference telephone or similar
communications equipment by means of which all persons
participating in the meeting can hear each other, and such
participation shall constitute presence in person at such
meeting.
5.5. Officers of the Company.
(a) The Company shall have such Officers as may be
designated by the Board pursuant to Section 5.3(b) from time to
time, who shall act as agents of the Company, shall have such
powers as are usually exercised by comparably designated officers
of a Virginia corporation and shall have the power to bind the
Company through exercise of such powers, to the extent consistent
with the terms of this Agreement. The Officers designated as
provided in Section 5.3(b) shall, unless and until removed from
office, and subject to Section 5.5(d), act as agents of the
Company.
(b) Peter M. Brant is hereby appointed as Chairman of
the Board and President of the Company and shall, unless and
until removed from office, act as an agent of the Company. The
President shall also serve as Chief Executive Officer of the
Company.
(c) The following are hereby appointed to the offices
set forth opposite their respective names to serve until removed
from office:
Joseph Allen - Executive Vice President and Chief
Operating Officer
Edward D. Sherrick - Vice President of Finance
Thomas E. Armstrong - Vice President of Sales and
Manufacturing
5.6. Execution of Documents.
(a) Any deed, deed of trust, lease, bill of sale,
security agreement, financing statement, contract of purchase or
sale or other contract or instrument purporting to bind the
Company or convey or encumber any of the assets of the Company,
may be signed by any Officer, or such other person or persons as
the Board may designate, after obtaining the approval required by
this Agreement, and no other signature shall be required.
(b) Any Person dealing with the Company shall be
entitled to rely on a certificate of any Officer as conclusive
evidence of the incumbency of any Officer and his authority to
take action on behalf of the Company, and shall be entitled to
rely on a copy of any resolution or other action taken by the
Board and certified by any Officer as conclusive evidence of such
action and of the authority of the Officer referred to in such
resolution to bind the Company to the extent set forth therein.
5.7. Approval Rights of Member. Notwithstanding anything in
this Agreement to the contrary, the following actions by the
Company shall require the written consent of the Member:
(a) The adoption of a plan of merger or consolidation
involving the Company;
(b) The sale, lease, exchange or other disposition of
all, or substantially all, of the property of the Company,
otherwise than in the usual and ordinary course of business of
the Company;
(c) Dissolution of the Company; or
(d) Amendment of this Agreement.
5.8. Expenses. The Directors and the Officers shall be
entitled to have the Company pay, or to be reimbursed by the
Company for, all expenses reasonably incurred by them in
furtherance of the business of the Company.
ARTICLE VI
INDEMNIFICATION
6.1. Indemnification of Members, Directors and Officers.
Except as provided in Section 6.3, every Person who was or is a
party, or who is threatened to be made a party, to any pending,
completed or impending action, suit or proceeding of any kind,
whether civil, criminal, administrative, arbitrative or
investigative (whether or not by or in the right of the Company)
by reason of (i) being or having been a Director, Officer or
Member of the Company, (ii) being or having been a member,
manager, partner, officer or director of any other entity at the
request of the Company, or (iii) serving or having served in a
representative capacity for the Company in connection with any
partnership, joint venture, committee, trust, employee benefit
plan or other enterprise, shall be indemnified by the Company
against all expenses (including attorneys' fees), judgments,
fines, penalties, awards, costs, amounts paid in settlement and
liabilities of all kinds, actually incurred by him incidental to
or resulting from such action, suit or proceeding to the fullest
extent permitted under the Act, without limiting any other
indemnification rights to which he otherwise may be entitled.
The Company may, but shall not be required to, purchase insurance
on behalf of such Person against liability asserted against or
incurred by him in his capacity as a Director, Officer or Member
whether or not the Company would have authority to indemnify him
against the same liability under the provisions of this Section
6.1 or the Act.
6.2. Liability Limitation. Except as otherwise expressly
provided in this Agreement, no Director, Officer or Member shall
have liability to the Company or other Members for monetary
damages resulting from a single transaction, occurrence or
isolated course of conduct which does not constitute willful
wrongdoing or intentional disregard of the terms of this
Agreement, it being the intent and purpose of this Section 6.2
that no Director, Officer or Member have such liability for
errors made in the exercise of good faith judgment and as a
result of actions which such Director, Officer or Member
reasonably believed to be in, or not opposed to, the best
interest of the Company.
6.3. Qualification of Indemnification and Liability
Limitation. The indemnification rights and limitations on
liabilities set forth in Sections 6.1 and 6.2 shall not apply to
claims based upon any willful misconduct, intentional breach or
disregard of the terms of this Agreement or knowing violation of
criminal law, nor shall such indemnification rights and
limitations on liabilities preclude the Company or any Member
from recovery for any loss or damage otherwise covered under any
insurance policy or fidelity bonding. Nothing herein shall be
deemed to prohibit or limit the Company's right to pay, or obtain
insurance covering, the costs (including attorneys' fees) to
defend an indemnitee, Director, Officer or Member against any
such claims, subject to a full reservation of rights to
reimbursement in the event of a final adjudication adverse to
such indemnitee, Director, Officer or Member.
6.4. Advances for Expenses. Expenses (including attorneys'
fees) incurred by or in respect of any such person in connection
with any such action, suit or proceeding, whether civil,
criminal, administrative, arbitrative or investigative, may be
paid by the Company in advance of the final disposition thereof
upon receipt of an undertaking by, or on behalf of, such person
to repay such amount, unless it shall ultimately be determined
that he is entitled to be indemnified by the Company, in which
case reimbursement shall not be required.
6.5. Elimination of Liability. The Member acknowledges,
agrees and desires that the liability of any Director, Officer or
Member to the Company or to any Member shall be eliminated, to
the maximum extent possible, pursuant to Virginia Code
Section 13.1-1025, as amended. The provisions of this Article
are in addition to, and not in substitution for, any other right
to indemnity to which any person who is or may be indemnified by
or pursuant to this Article may otherwise be entitled, and to the
powers otherwise accorded by law to the Company to indemnify any
such person and to purchase and maintain insurance on behalf of
any such person against any liability asserted against or
incurred by him in any capacity referred to in this Article or
arising from his status as serving or having served in any such
capacity (whether or not the Company would have the power to
indemnify against such liability).
6.6. No Retroactive Effect of Amendment. No amendment or
repeal of this Article shall limit or eliminate the right to
indemnification provided hereunder with respect to acts or
omissions occurring prior to such amendment or repeal.
6.7. No Personal Liability of Members. Notwithstanding any
other provisions of this Article VI, the indemnification provided
in this Article shall not cause the Member to incur any liability
beyond its total agreed Capital Contributions plus its share of
any undistributed profits of the Company, nor shall it result in
any liability of a Member to any third party.
ARTICLE VII
TRANSFER OF MEMBERSHIP INTEREST
7.1. Transfer of Interest. The Member may transfer, sell,
give, encumber, assign, pledge or otherwise dispose of all or any
part of its Interest upon Notice to the Board and execution of
such amendments to this Agreement and such other documents or
instruments as the Board may reasonably require.
7.2. Rights of Assignee or Transferee. Any transfer or
assignment of a Membership Interest as set forth in this Article
VII shall be effective only to give the transferee or assignee
the right to receive the share of tax allocations and
distributions to which the transferring Member would otherwise be
entitled unless the transferring Member expressly provides in
writing that the transferee or assignee shall have the right to
become a Substitute Member and the assignee or transferee agrees
to be bound by all the terms and conditions of this Agreement.
Unless and until a transferee or assignee is admitted as a
Substitute Member, the transferee or assignee shall have no right
to exercise any of the powers, rights and privileges of a Member
hereunder.
ARTICLE VIII
DISSOLUTION
8.1. Events Resulting in Dissolution. The Company will be
dissolved upon the earlier of the expiration of its term or the
occurrence of any of the following:
(a) The election of the Member;
(b) The expiration of 30 days following the sale or
transfer of all of the assets of the Company; or
(c) As otherwise required by the Act or the provisions
of this Agreement.
8.2. Winding Up and Distribution.
(a) Upon the dissolution of the Company pursuant to
Section 8.1, the Company's business shall be wound up and its
assets liquidated by the Liquidator as provided in this
Section 8.2, and the net proceeds of such liquidation shall be
distributed to the Member.
(b) The Liquidator shall file all certificates and
notices of the Company's dissolution required by law. The
Liquidator shall sell and otherwise liquidate the Company's
assets without unnecessary delay; provided however, that to the
extent undue loss to the Members would result from immediate sale
of any Company assets, the Liquidator may defer liquidation of
such assets for a reasonable time, unless prohibited by the Act,
or unless proceeds of liquidation are required to satisfy the
Company's debts and liabilities to Persons other than the Member
and Affiliates of the Member. Upon the complete liquidation of
the Company's assets and distribution to the Member, it shall
cease to be a Member of the Company, and the Liquidator shall
execute, acknowledge and cause to be filed all certificates and
notices required by law to terminate the existence of the
Company.
(c) Promptly following the Company's dissolution
pursuant to Section 8.1, the Company's accountants shall prepare,
and the Liquidator shall furnish to the Member, a statement
setting forth the assets and liabilities of the Company.
Promptly following the complete liquidation and distribution of
the Company's assets, the Company's accountants shall prepare,
and the Liquidator shall furnish to each Member, a statement of
account for the liquidation and distribution of the Company's
assets.
ARTICLE IX
MISCELLANEOUS
9.1. Books and Records. At all times during the term of the
Company, the Company shall keep, or cause to be kept, full and
faithful books of account, records and supporting documents,
which shall reflect, completely, accurately and in reasonable
detail, each transaction of the Company. The books of account,
records and all documents and other writings of the Company shall
be kept and maintained at the principal office of the Company.
The Member or its designated representative shall have access to
such financial books, records and documents during reasonable
business hours and may inspect and make copies of any of them at
its own expense. The Company shall keep at its principal office
the following:
(a) A current list of the full name and last known
business address of each Member;
(b) A copy of the Articles of Organization and
Certificate of Organization and all Articles of Amendment and
Certificates of Amendment;
(c) Copies of the Company's federal, state and local
income tax returns and reports, if any, for the three most recent
years; and
(d) Copies of the Agreement, as amended, and of any
financial statements of the Company for the three most recent
years.
9.2. Custody of Company Funds; Bank Accounts.
(a) The Board, or such Officer as the Board shall
appoint, shall have fiduciary responsibility for the safekeeping
and use of all funds and assets of the Company, whether or not in
his immediate possession or control. The Company's funds shall
not be commingled with the funds of any other Person and no
Director or Officer shall use, or permit use of, the Company's
funds in any manner except for the benefit of the Company.
(b) All funds of the Company not otherwise invested
shall be deposited in one or more accounts maintained in such
federally-insured financial institutions as the Board may deem
appropriate, and withdrawals shall be made only in the regular
course of Company business on such signature or signatures as the
Board may specify.
9.3. Tax Matters Partner. The Member shall be the "Tax
Matters Partner" (as defined in Code Section 6231(a)(7)) for
federal income tax purposes, and as such, shall represent the
Company in dealing with the Internal Revenue Service or other
state or federal tax authorities, and shall be the Member to whom
all official government tax notices shall be sent.
9.4. Accountants; Tax Filings and Financial Statements. The
Company shall engage a certified public accountant or accounting
firm to perform accounting services for the Company, which shall
be selected by the Board. The accountant shall prepare all
Company tax returns, and at least annually shall prepare
financial statements for the Company effective as of the end of
each fiscal year, to include a balance sheet, profit and loss
statement, and cash flow statement.
9.5. Tax Elections. In the event that a Member transfers
all or any part of its Interest, the Company may elect to adjust
the basis of Company assets in accordance with Code Sections 743
and 754, if the Board consents to such election. Except to the
extent otherwise required as a consequence of an election made
pursuant to Code Section 754 with respect to any Member's
Interest, the determination of profits, losses and cash
distributions shall be made in accordance with this Agreement.
Appropriate adjustments shall be made in the determination of
profits, losses and cash distributions to be allocated or made to
any Member whose Interest has been affected by an election made
pursuant to Code Section 754. Each Member shall furnish the
Company with all information necessary to give effect to such
election. The Board may, based upon the advice of the Company's
accountants, cause the Company to may make any other election
permitted under any provision of the Code.
9.6. Fiscal Year. The fiscal year of the Company shall be
the fiscal year of the Member.
9.7. Amendment. This Agreement may be modified or amended
only by a written instrument executed by the Member.
9.8. Enforceability and Severability. The waiver by any
party to this Agreement of a breach of any provision of this
Agreement will not operate or be construed as a waiver of any
subsequent breach by any party. If any term or provision of this
Agreement or the application thereof to any Person or
circumstance shall, to any extent, be invalid or unenforceable,
the remainder of this Agreement and the application of such term
or provision to Persons or circumstances other than those as to
which it is held invalid or unenforceable, shall not be affected
thereby, and each term and provision of this Agreement shall be
valid and be enforceable to the fullest extent permitted by law.
9.9. Binding Effect. This Agreement will inure to the
benefit of and be binding upon the parties to this Agreement,
their successors, heirs, personal representatives and assigns.
9.10. Counterparts. This Agreement may be executed in
any number of counterparts, each of which shall be an original
but all of which together will constitute one instrument, binding
upon all parties hereto, notwithstanding that all of such parties
may not have executed the same counterpart.
9.11. Governing Law. This Agreement shall be construed
and enforced in accordance with the laws of the Commonwealth of
Virginia, without reference to its conflicts of laws rules.
9.12. Pronouns and Plurals. All pronouns used herein
shall be deemed to refer to the masculine, feminine, neuter,
singular or plural as the identity of the Person or Persons may
require in the context, and the singular form of nouns, pronouns
and verbs shall include the plural, and vice versa, whichever the
context may require.
9.13. Entire Agreement. This Agreement contains the
entire understanding of the Member. There are no representations,
agreements, arrangements or understandings, oral or written, of
the Member relating to the subject matter of this Agreement, which
are not fully expressed in this Agreement.
MEMBER: BRANT-ALLEN INDUSTRIES, INC.
By: /s/ Joseph Allen
_______________________
Name: Joseph Allen
Title: Chief Operating Officer
COMPANY: BEAR ISLAND PAPER COMPANY, L.L.C.
By: /s/ Peter M. Brant
________________________
Name: Peter M. Brant
Title: President
SEEN AND AGREED:
INITIAL DIRECTORS:
/s/ PETER M. BRANT
_________________________
PETER M. BRANT
/s/ JOSEPH ALLEN
_________________________
JOSEPH ALLEN
/s/ EDWARD D. SHERRICK
_________________________
EDWARD D. SHERRICK
/s/ THOMAS E. ARMSTRONG
_________________________
THOMAS E. ARMSTRONG
/s/ MICHAEL CONROY
_________________________
MICHAEL CONROY
/s/ ROBERT FLUG
_________________________
ROBERT FLUG
<PAGE>
EXHIBIT 3.3
CERTIFICATE OF INCORPORATION
OF
Bear Island Finance Company II
FIRST: The name of the Corporation is Bear
Island Finance Company II (hereinafter the "Corporation").
SECOND: The address of the registered office
of the Corporation in the State of Delaware is 1209
Orange Street, in the City of Wilmington, County of New
Castle. The name of its registered agent at that address
is The Corporation Trust Company.
THIRD: The purpose of the Corporation is to
engage in any lawful act or activity for which a
corporation may be organized under the General
Corporation Law of the State of Delaware as set forth in
Title 8 of the Delaware Code (the "GCL").
FOURTH: The total number of shares of stock
which the Corporation shall have authority to issue is
1,000 shares of Common Stock, each having a par value of
one penny ($ .01).
FIFTH: The name and mailing address of the
Sole Incorporator is as follows:
Name Address
Lynn Buckley P.O. Box 636
Wilmington, DE 19899
SIXTH: The following provisions are inserted
for the management of the business and the conduct of the
affairs of the Corporation, and for further definition,
limitation and regulation of the powers of the
Corporation and of its directors and stockholders:
(1) The business and affairs of the
Corporation shall be managed by or under the
direction of the Board of Directors.
(2) The directors shall have concurrent
power with the stockholders to make, alter,
amend, change, add to or repeal the By-Laws of
the Corporation.
(3) The number of directors of the
Corporation shall be as from time to time fixed
by, or in the manner provided in, the By-Laws
of the Corporation. Election of directors need
not be by written ballot unless the By-Laws so
provide.
(4) No director shall be personally
liable to the Corporation or any of its
stockholders for monetary damages for breach of
fiduciary duty as a director, except for
liability (i) for any breach of the director's
duty of loyalty to the Corporation or its
stockholders, (ii) for acts or omissions not in
good faith or which involve intentional
misconduct or a knowing violation of law, (iii)
pursuant to Section 174 of the GCL or (iv) for
any transaction from which the director derived
an improper personal benefit. Any repeal or
modification of this Article SIXTH by the
stockholders of the Corporation shall not
adversely affect any right or protection of a
director of the Corporation existing at the
time of such repeal or modification with
respect to acts or omissions occurring prior to
such repeal or modification.
(5) In addition to the powers and
authority hereinbefore or by statute expressly
conferred upon them, the directors are hereby
empowered to exercise all such powers and do
all such acts and things as may be exercised or
done by the Corporation, subject, nevertheless,
to the provisions of the GCL, this Certificate
of Incorporation, and any By-Laws adopted by
the stockholders; provided, however, that no
By-Laws hereafter adopted by the stockholders
shall invalidate any prior act of the directors
which would have been valid if such By-Laws had
not been adopted.
SEVENTH: Meetings of stockholders may be held
within or without the State of Delaware, as the By-Laws
may provide. The books of the Corporation may be kept
(subject to any provision contained in the GCL) outside
the State of Delaware at such place or places as may be
designated from time to time by the Board of Directors or
in the By-Laws of the Corporation.
EIGHTH: The Corporation reserves the right to
amend, alter, change or repeal any provision contained in
this Certificate of Incorporation, in the manner now or
hereafter prescribed by statute, and all rights conferred
upon stockholders herein are granted subject to this
reservation.
I, THE UNDERSIGNED, being the Sole Incorporator
hereinbefore named, for the purpose of forming a
corporation pursuant to the GCL, do make this
Certificate, hereby declaring and certifying that this is
my act and deed and the facts herein stated are true, and
accordingly have hereunto set my hand this 20th day of
October, 1997.
/s/ Lynn Buckley
----------------
Lynn Buckley
Sole Incorporator
<PAGE>
BY-LAWS
OF
Bear Island Finance Company II
(hereinafter called the "Corporation")
ARTICLE I
OFFICES
Section 1. Registered Office. The registered
office of the Corporation shall be in the City of
Wilmington, County of New Castle, State of Delaware.
Section 2. Other Offices. The Corporation may also have
offices at such other places both within and without the State of Delaware
as the Board of Directors may from time to time determine.
ARTICLE II
MEETINGS OF STOCKHOLDERS*
Section 1. Place of Meetings. Meetings of the stockholders
for the election of directors or for any other purpose shall be held at
such time and place, either within or without the State of Delaware as
shall be designated from time to time by the Board of Directors.
Section 2. Annual Meetings. The Annual Meetings of
Stockholders for the election of directors shall be held on such date and
at such time as shall be designated from time to time by the Board of
Directors. Any other proper business may be transacted at the Annual
Meeting of Stockholders.
Section 3. Special Meetings. Unless otherwise required by
law or by the certificate of incorporation of the Corporation, as amended
and restated from time to time (the "Certificate of Incorporation"),
Special Meetings of Stockholders, for any purpose or purposes, may be
called by either (i) the Chairman, if there be one, or (ii) the President,
(iii) any Vice President, if there be one, (iv) the Secretary or (v) any
Assistant Secretary, if there be one, and shall be called by any such
officer at the request in writing of (i) the Board of Directors, (ii) a
committee of the Board of Directors that has been duly designated by the
Board of Directors and whose powers and authority include the power to call
such meetings or (iii) stockholders owning a majority of the capital stock
of the Corporation issued and outstanding and entitled to vote.* Such
request shall state the purpose or purposes of the proposed meeting. At a
Special Meeting of Stockholders, only such business shall be conducted as
shall be specified in the notice of meeting (or any supplement thereto).
Section 4. Notice. Whenever stockholders are required or
permitted to take any action at a meeting, a written notice of the meeting
shall be given which shall state the place, date and hour of the meeting,
and, in the case of a special meeting, the purpose or purposes for which
the meeting is called. Unless otherwise required by law, the written
notice of any meeting shall be given not less than ten nor more than sixty
days before the date of the meeting to each stockholder entitled to vote at
such meeting.
Section 5. Adjournments. Any meeting of the stockholders may
be adjourned from time to time to reconvene at the same or some other
place, and notice need not be given of any such adjourned meeting if the
time and place thereof are announced at the meeting at which the
adjournment is taken. At the adjourned meeting, the Corporation may
transact any business which might have been transacted at the original
meeting. If the adjournment is for more than thirty days, or if after the
adjournment a new record date is fixed for the adjourned meeting, notice
of the adjourned meeting shall be given to each stockholder of record
entitled to vote at the meeting.
Section 6. Quorum. Unless otherwise required by law or the
Certificate of Incorporation, the holders of a majority* of the capital
stock issued and outstanding and entitled to vote thereat, present in
person or represented by proxy, shall constitute a quorum at all meetings
of the stockholders for the transaction of business. A quorum, once
established, shall not be broken by the withdrawal of enough votes to leave
less than a quorum. If, however, such quorum shall not be present or
represented at any meeting of the stockholders, the stockholders entitled
to vote thereat, present in person or represented by proxy, shall have
power to adjourn the meeting from time to time, in the manner provided in
Section 5, until a quorum shall be present or represented.
Section 7. Voting. Unless otherwise required by
law, the Certificate of Incorporation or these By-laws, any
question brought before any meeting of stockholders, other
than the election of directors, shall be decided by the
vote of the holders of a majority* of the total number of
votes of the capital stock represented and entitled to vote
thereat, voting as a single class. Unless otherwise
provided in the Certificate of Incorporation, and subject to
Section 5 of Article V hereof, each stockholder represented
at a meeting of stockholders shall be entitled to cast one
vote for each share of the capital stock entitled to vote
thereat held by such stockholder. Such votes may be cast
in person or by proxy but no proxy shall be voted on or
after three years from its date, unless such proxy provides
for a longer period. The Board of Directors, in its
discretion, or the officer of the Corporation presiding at a
meeting of stockholders, in such officer's discretion, may
require that any votes cast at such meeting shall be cast by written
ballot.
- - -------------
* If the Corporation is to become a public company, consideration should
be given to adding an advance notice provision requiring stockholders
to give notice to the Corporation at least sixty but not more than
ninety days prior to the anniversary date of the immediately preceding
annual meeting when they intend to nominate directors or propose
actions to be taken at a meeting. (SEE RIDERS 2-A AND 2-B)
* If the Corporation is to become a public company, the Corporation
should consider eliminating the ability of stockholders to call a
special meeting. The Corporation could accomplish this through a
charter provision (SEE RIDER 3-A) denying stockholders the right to
call a special meeting (which would provide the greatest protection
since stockholders can not unilaterally amend the charter), or by
simply not granting stockholders the right to call a special meeting in
the By-Laws.
* Section 216 of the Delaware General Corporation Law ("DGCL") permits a
corporation to specify any number of shares as the minimum amount to
constitute a quorum at a meeting, provided that such number is not less
than one-third of the shares entitled to vote at the meeting. Absent
special circumstances, however, a majority is customary.
* Section 216 of the DGCL permits a corporation to specify in its charter
or by-laws the minimum number of votes necessary for the transaction of
any business at a meeting of stockholders, subject to the
requirements elsewhere in the DGCL as to the vote required for a
specific action. Section 102 of the DGCL permits a corporation's
charter to include a provision requiring for any corporate action the
vote of a larger portion of the stock than is required elsewhere in
the DGCL. Absent special circumstances, however, a majority is
customary.
Section 8. Consent of Stockholders in Lieu of Meeting.*
Unless otherwise provided in the Certificate of Incorporation, any action
required or permitted to be taken at any Annual or Special Meeting of
Stockholders of the Corporation, may be taken without a meeting, without
prior notice and without a vote, if a consent or consents in writing,
setting forth the action so taken, shall be signed by the holders of
outstanding stock having not less than the minimum number of votes that
would be necessary to authorize or take such action at a meeting at which
all shares entitled to vote thereon were present and voted and shall be
delivered to the Corporation by delivery to its registered office in the
State of Delaware, its principal place of business, or an officer or
agent of the corporation having custody of the book in which proceedings of
meetings of stockholders are recorded. Delivery made to the Corporation's
registered office shall be by hand or by certified or registered mail,
return receipt requested. Every written consent shall bear the date of
signature of each stockholder who signs the consent and no written consent
shall be effective to take the corporate action referred to therein unless,
within sixty days of the earliest dated consent delivered in the manner
required by this Section 8 to the Corporation, written consents signed by
a sufficient number of holders to take action are delivered to the
Corporation by delivery to its registered office in the state of Delaware,
its principal place of business, or an officer or agent of the Corporation
having custody of the book in which proceedings of meetings of stockholders
are recorded. Prompt notice of the taking of the corporate action without
a meeting by less than unanimous written consent shall be given to those
stockholders who have not consented in writing and who, if the action had
been taken at a meeting, would have been entitled to notice of the meeting
if the record date for such meeting had been the date that written consents
signed by a sufficient number of holders to take the action were delivered
to the Corporation as provided above in this section.
Section 9. List of Stockholders Entitled to Vote. The
officer of the Corporation who has charge of the stock ledger of the
Corporation shall prepare and make, at least ten days before every meeting
of stockholders, a complete list of the stockholders entitled to vote at
the meeting, arranged in alphabetical order, and showing the address of
each stockholder and the number of shares registered in the name of each
stockholder. Such list shall be open to the examination of any stockholder,
for any purpose germane to the meeting, during ordinary business hours, for
a period of at least ten days prior to the meeting either at a place within
the city where the meeting is to be held, which place shall be specified in
the notice of the meeting, or, if not so specified, at the place where the
meeting is to be held. The list shall also be produced and kept at the time
and place of the meeting during the whole time thereof, and may be in-
spected by any stockholder of the Corporation who is present.
Section 10. Stock Ledger. The stock ledger of the
Corporation shall be the only evidence as to who are the stockholders
entitled to examine the stock ledger, the list required by Section 9 of
this Article II or the books of the Corporation, or to vote in person or by
proxy at any meeting of stockholders.
Section 11. Conduct of Meetings. The Board of Directors of
the Corporation may adopt by resolution such rules and regulations for the
conduct of the meeting of the stockholders as it shall deem appropriate.
Except to the extent inconsistent with such rules and regulations as
adopted by the Board of Directors, the chairman of any meeting of the
stockholders shall have the right and authority to prescribe such rules,
regulations and procedures and to do all such acts as, in the judgment of
such chairman, are appropriate for the proper conduct of the meeting. Such
rules, regulations or procedures, whether adopted by the Board of Directors
or prescribed by the chairman of the meeting, may include, without
limitation, the following: (i) the establishment of an agenda or order of
business for the meeting; (ii) the determination of when the polls shall
open and close for any given matter to be voted on at the meeting; (iii)
rules and procedures for maintaining order at the meeting and the safety of
those present; (iv) limitations on attendance at or participation in the
meeting to stockholders of record of the corporation, their duly authorized
and constituted proxies or such other persons as the chairman of the
meeting shall determine; (v) restrictions on entry to the meeting after the
time fixed for the commencement thereof; and (vi) limitations on the time
allotted to questions or comments by participants.
- - -----------
* If the Corporation is to become a public company, consideration should
be given to eliminating stockholders' authority to act by written
consent in lieu of meeting. Under Delaware law, however, any such
limitation is required to be in the charter. (SEE RIDER 7-A).
Alternatively, certain limitations on stockholders' ability to wage a
consent solicitation could be adopted. (SEE RIDER 7-B).
ARTICLE III
DIRECTORS
Section 1. Number and Election of Directors.
The Board of Directors shall consist of not less than one
nor more than fifteen members, the exact number of which
shall initially be fixed by the Incorporator and thereaf-
ter from time to time by the Board of Directors.* Except
as provided in Section 2 of this Article III, directors
shall be elected by a plurality of the votes cast at the
Annual Meetings of Stockholders and each director so
elected shall hold office until the next Annual Meeting of
Stockholders and until such director's successor is duly elected
and qualified, or until such director's earlier death,
resignation or removal. Any director may resign at any time
upon written notice to the Corporation. Directors need
not be stockholders.
- - -----------
* If the Corporation is to become a public company,
consideration should be given to (i) fixing the number
of directors, or range in the number of directors, in
the charter (SEE RIDER 11-A), (ii) establishing a
classified board through the charter (SEE RIDER 11-B)
and/or (iii) providing for removal of directors only
upon a supermajority vote of the shareholders. (SEE
RIDER 11-C).
Section 2. Vacancies.* Unless otherwise required by law or
the Certificate of Incorporation, vacancies arising through death,
resignation, removal, an increase in the number of directors or otherwise
may be filled only by a majority of the directors then in office, though
less than a quorum, or by a sole remaining director, and the directors so
chosen shall hold office until the next annual election and until their
successors are duly elected and qualified, or until their earlier death,
resignation or removal.
Section 3. Duties and Powers. The business and affairs of
the Corporation shall be managed by or under the direction of the Board of
Directors which may exercise all such powers of the Corporation and do all
such lawful acts and things as are not by statute or by the Certificate of
Incorporation or by these By-Laws required to be exercised or done by the
stockholders.
Section 4. Meetings. The Board of Directors may hold
meetings, both regular and special, either within or without the State of
Delaware. Regular meetings of the Board of Directors may be held without
notice at such time and at such place as may from time to time be
determined by the Board of Directors. Special meetings of the Board of
Directors may be called by the Chairman, if there be one, the President, or
by any director.* Notice thereof stating the place, date and hour of the
meeting shall be given to each director either by mail not less than
forty-eight (48) hours before the date of the meeting, by telephone or
telegram on twenty-four (24) hours' notice, or on such shorter notice as
the person or persons calling such meeting may deem necessary or
appropriate in the circumstances.
Section 5. Quorum. Except as otherwise required by law or
the Certificate of Incorporation, at all meetings of the Board of
Directors, a majority of the entire Board of Directors shall constitute a
quorum** for the transaction of business and the act of a majority of the
directors present at any meeting at which there is a quorum shall be the
act of the Board of Directors. If a quorum shall not be present at any
meeting of the Board of Directors, the directors present thereat may
adjourn the meeting from time to time, without notice other than
announcement at the meeting of the time and place of the adjourned meeting,
until a quorum shall be present.
Section 6. Actions by Written Consent. Unless otherwise
provided in the Certificate of Incorporation, or these By-Laws, any action
required or permitted to be taken at any meeting of the Board of Directors
or of any committee thereof may be taken without a meeting, if all the
members of the Board of Directors or committee, as the case may be, consent
thereto in writing, and the writing or writings are filed with the minutes
of proceedings of the Board of Directors or committee.
Section 7. Meetings by Means of Conference Telephone. Unless
otherwise provided in the Certificate of Incorporation, members of the
Board of Directors of the Corporation, or any committee thereof, may
participate in a meeting of the Board of Directors or such committee by
means of a conference telephone or similar communications equipment by
means of which all persons participating in the meeting can hear each
other, and participation in a meeting pursuant to this Section 7 shall
constitute presence in person at such meeting.
Section 8. Committees.* The Board of Directors may
designate one or more committees, each committee to consist of one or more
of the directors of the Corporation. The Board of Directors may designate
one or more directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of any such
committee. In the absence or disqualification of a member of a committee,
and in the absence of a designation by the Board of Directors of an
alternate member to replace the absent or disqualified member, the member
or members thereof present at any meeting and not disqualified from voting,
whether or not such member or members constitute a quorum, may unanimously
appoint another member of the Board of Directors to act at the meeting in
the place of any absent or disqualified member. Any committee, to the
extent permitted by law and provided in the resolution establishing such
committee, shall have and may exercise all the powers and authority of the
Board of Directors in the management of the business and affairs of the
Corporation, and may authorize the seal of the Corporation to be affixed to
all papers which may require it. Each committee shall keep regular minutes
and report to the Board of Directors when required.
Section 9. Compensation. The directors may be paid their
expenses, if any, of attendance at each meeting of the Board of Directors
and may be paid a fixed sum for attendance at each meeting of the Board of
Directors or a stated salary as director, payable in cash or securities.
No such payment shall preclude any director from serving the Corporation in
any other capacity and receiving compensation therefor. Members of
special or standing committees may be allowed like compensation for
attending committee meetings.
Section 10. Interested Directors. No contract or transaction
between the Corporation and one or more of its directors or officers, or
between the Corporation and any other corporation, partnership,
association, or other organization in which one or more of its directors or
officers are directors or officers or have a financial interest, shall be
void or voidable solely for this reason, or solely because the director or
officer is present at or participates in the meeting of the Board of
Directors or committee thereof which authorizes the contract or
transaction, or solely because the director or officer's vote is counted
for such purpose if (i) the material facts as to the director or officer's
relationship or interest and as to the contract or transaction are
disclosed or are known to the Board of Directors or the committee, and the
Board of Directors or committee in good faith authorizes the contract or
transaction by the affirmative votes of a majority of the disinterested
directors, even though the disinterested directors be less than a quorum;
or (ii) the material facts as to the director or officer's relationship or
interest and as to the contract or transaction are disclosed or are known
to the stockholders entitled to vote thereon, and the contract or
transaction is specifically approved in good faith by vote of the
stockholders; or (iii) the contract or transaction is fair as to the
Corporation as of the time it is authorized, approved or ratified by the
Board of Directors, a committee thereof or the stockholders. Common or
interested directors may be counted in determining the presence of a
quorum at a meeting of the Board of Directors or of a committee which
authorizes the contract or transaction.
ARTICLE IV
OFFICERS*
Section 1. General. The officers of the Corporation shall be
chosen by the Board of Directors and shall be a President, a Secretary and
a Treasurer. The Board of Directors, in its discretion, also may choose a
Chairman of the Board of Directors (who must be a director) and one or more
Vice Presidents, Assistant Secretaries, Assistant Treasurers and other
officers. Any number of offices may be held by the same person, unless
otherwise prohibited by law or the Certificate of Incorporation. The
officers of the Corporation need not be stockholders of the Corporation
nor, except in the case of the Chairman of the Board of Directors, need
such officers be directors of the Corporation.
Section 2. Election. The Board of Directors, at its first
meeting held after each Annual Meeting of Stockholders (or action by
written consent of stockholders in lieu of the Annual Meeting of
Stockholders), shall elect the officers of the Corporation who shall hold
their offices for such terms and shall exercise such powers and perform
such duties as shall be determined from time to time by the Board of
Directors; and all officers of the Corporation shall hold office until
their successors are chosen and qualified, or until their earlier death,
resignation or removal. Any officer elected by the Board of Directors may
be removed at any time by the affirmative vote of the Board of Directors.
Any vacancy occurring in any office of the Corporation shall be filled by
the Board of Directors. The salaries of all officers of the Corporation
shall be fixed by the Board of Directors.
Section 3. Voting Securities Owned by the Corporation.
Powers of attorney, proxies, waivers of notice of meeting, consents and
other instruments relating to securities owned by the Corporation may be
executed in the name of and on behalf of the Corporation by the President
or any Vice President or any other officer authorized to do so by the Board
of Directors and any such officer may, in the name of and on behalf of the
Corporation, take all such action as any such officer may deem advisable to
vote in person or by proxy at any meeting of security holders of any
corporation in which the Corporation may own securities and at any such
meeting shall possess and may exercise any and all rights and power
incident to the ownership of such securities and which, as the owner
thereof, the Corporation might have exercised and possessed if present. The
Board of Directors may, by resolution, from time to time confer like
powers upon any other person or persons.
Section 4. Chairman of the Board of Directors. The Chairman
of the Board of Directors, if there be one, shall preside at all meetings
of the stockholders and of the Board of Directors. The Chairman of the
Board of Directors shall be the Chief Executive Officer of the Corporation,
unless the Board of Directors designates the President as the Chief
Executive Officer, and, except where by law the signature of the President
is required, the Chairman of the Board of Directors shall possess the same
power as the President to sign all contracts, certificates and other
instruments of the Corporation which may be authorized by the Board of
Directors. During the absence or disability of the President, the Chairman
of the Board of Directors shall exercise all the powers and discharge all
the duties of the President. The Chairman of the Board of Directors shall
also perform such other duties and may exercise such other powers as may
from time to time be assigned by these By-Laws or by the Board of
Directors.
Section 5. President. The President shall, subject to the
control of the Board of Directors and, if there be one, the Chairman of the
Board of Directors, have general supervision of the business of the
Corporation and shall see that all orders and resolutions of the Board of
Directors are carried into effect. The President shall execute all bonds,
mortgages, contracts and other instruments of the Corporation requiring a
seal, under the seal of the Corporation, except where required or permitted
by law to be otherwise signed and executed and except that the other
officers of the Corporation may sign and execute documents when so
authorized by these By-Laws, the Board of Directors or the President. In
the absence or disability of the Chairman of the Board of Directors, or if
there be none, the President shall preside at all meetings of the
stockholders and the Board of Directors. If there be no Chairman of the
Board of Directors, or if the Board of Directors shall otherwise designate,
the President shall be the Chief Executive Officer of the Corporation. The
President shall also perform such other duties and may exercise such other
powers as may from time to time be assigned to such officer by these
By-Laws or by the Board of Directors.
Section 6. Vice Presidents. At the request of the President
or in the President's absence or in the event of the President's inability
or refusal to act (and if there be no Chairman of the Board of Directors),
the Vice President, or the Vice Presidents if there is more than one (in
the order designated by the Board of Directors), shall perform the duties
of the President, and when so acting, shall have all the powers of and be
subject to all the restrictions upon the President. Each Vice President
shall perform such other duties and have such other powers as the Board of
Directors from time to time may prescribe. If there be no Chairman of the
Board of Directors and no Vice President, the Board of Directors shall
designate the officer of the Corporation who, in the absence of the
President or in the event of the inability or refusal of the President to
act, shall perform the duties of the President, and when so acting, shall
have all the powers of and be subject to all the restrictions upon the
President.
Section 7. Secretary. The Secretary shall attend all
meetings of the Board of Directors and all meetings of stockholders and
record all the proceedings thereat in a book or books to be kept for that
purpose; the Secretary shall also perform like duties for committees of
the Board of Directors when required. The Secretary shall give, or cause
to be given, notice of all meetings of the stockholders and special
meetings of the Board of Directors, and shall perform such other duties as
may be prescribed by the Board of Directors, the Chairman of the Board of
Directors or the President, under whose supervision the Secretary shall be.
If the Secretary shall be unable or shall refuse to cause to be given
notice of all meetings of the stockholders and special meetings of the
Board of Directors, and if there be no Assistant Secretary, then either the
Board of Directors or the President may choose another officer to cause
such notice to be given. The Secretary shall have custody of the seal of
the Corporation and the Secretary or any Assistant Secretary, if there be
one, shall have authority to affix the same to any instrument requiring it
and when so affixed, it may be attested by the signature of the Secretary
or by the signature of any such Assistant Secretary. The Board of Directors
may give general authority to any other officer to affix the seal of the
Corporation and to attest to the affixing by such officer's signature. The
Secretary shall see that all books, reports, statements, certificates and
other documents and records required by law to be kept or filed are
properly kept or filed, as the case may be.
Section 8. Treasurer. The Treasurer shall have the custody
of the corporate funds and securities and shall keep full and accurate
accounts of receipts and disbursements in books belonging to the
Corporation and shall deposit all moneys and other valuable effects in the
name and to the credit of the Corporation in such depositories as may be
designated by the Board of Directors. The Treasurer shall disburse the
funds of the Corporation as may be ordered by the Board of Directors,
taking proper vouchers for such disbursements, and shall render to the
President and the Board of Directors, at its regular meetings, or when the
Board of Directors so requires, an account of all transactions as Treasurer
and of the financial condition of the Corporation. If required by the Board
of Directors, the Treasurer shall give the Corporation a bond in such sum
and with such surety or sureties as shall be satisfactory to the Board of
Directors for the faithful performance of the duties of the office of the
Treasurer and for the restoration to the Corporation, in case of the
Treasurer's death, resignation, retirement or removal from office, of all
books, papers, vouchers, money and other property of whatever kind in the
Treasurer's possession or under the Treasurer's control belonging to the
Corporation.
Section 9. Assistant Secretaries. Assistant Secretaries, if
there be any, shall perform such duties and have such powers as from time
to time may be assigned to them by the Board of Directors, the President,
any Vice President, if there be one, or the Secretary, and in the absence
of the Secretary or in the event of the Secretary's disability or refusal
to act, shall perform the duties of the Secretary, and when so acting,
shall have all the powers of and be subject to all the restrictions upon
the Secretary.
Section 10. Assistant Treasurers. Assistant Treasurers, if
there be any, shall perform such duties and have such powers as from time
to time may be assigned to them by the Board of Directors, the President,
any Vice President, if there be one, or the Treasurer, and in the absence
of the Treasurer or in the event of the Treasurer's disability or refusal
to act, shall perform the duties of the Treasurer, and when so acting,
shall have all the powers of and be subject to all the restrictions upon
the Treasurer. If required by the Board of Directors, an Assistant
Treasurer shall give the Corporation a bond in such sum and with such
surety or sureties as shall be satisfactory to the Board of Directors for
the faithful performance of the duties of the office of Assistant Treasurer
and for the restoration to the Corporation, in case of the Assistant
Treasurer's death, resignation, retirement or removal from office, of all
books, papers, vouchers, money and other property of whatever kind in the
Assistant Treasurer's possession or under the Assistant Treasurer's control
belonging to the Corporation.
Section 11. Other Officers. Such other officers as the Board
of Directors may choose shall perform such duties and have such powers as
from time to time may be assigned to them by the Board of Directors. The
Board of Directors may delegate to any other officer of the Corporation the
power to choose such other officers and to prescribe their respective
duties and powers.
ARTICLE V
STOCK
Section 1. Form of Certificates. Every holder of stock in
the Corporation shall be entitled to have a certificate signed, in the name
of the Corporation (i) by the Chairman of the Board of Directors, the
President or a Vice President and (ii) by the Treasurer or an Assistant
Treasurer, or the Secretary or an Assistant Secretary of the Corporation,
certifying the number of shares owned by such stockholder in the
Corporation.
Section 2. Signatures. Any or all of the signatures on a
certificate may be a facsimile. In case any officer, transfer agent or
registrar who has signed or whose facsimile signature has been placed upon
a certificate shall have ceased to be such officer, transfer agent or
registrar before such certificate is issued, it may be issued by the
Corporation with the same effect as if such person were such officer,
transfer agent or registrar at the date of issue.
Section 3. Lost Certificates. The Board of Directors may
direct a new certificate to be issued in place of any certificate
theretofore issued by the Corporation alleged to have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost, stolen or destroyed. When
authorizing such issue of a new certificate, the Board of Directors may, in
its discretion and as a condition precedent to the issuance thereof,
require the owner of such lost, stolen or destroyed certificate, or the
owner's legal representative, to advertise the same in such manner as the
Board of Directors shall require and/or to give the Corporation a bond in
such sum as it may direct as indemnity against any claim that may be made
against the Corporation with respect to the certificate alleged to have
been lost, stolen or destroyed or the issuance of such new certificate.
Section 4. Transfers. Stock of the Corporation shall be
transferable in the manner prescribed by law and in these By-Laws.
Transfers of stock shall be made on the books of the Corporation only by
the person named in the certificate or by such person's attorney lawfully
constituted in writing and upon the surrender of the certificate therefor,
which shall be cancelled before a new certificate shall be issued. No
transfer of stock shall be valid as against the Corporation for any purpose
until it shall have been entered in the stock records of the Corporation by
an entry showing from and to whom transferred.
Section 5. Record Date.
(a) In order that the Corporation may determine the
stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, the board of directors may fix a
record date, which record date shall not precede the date upon which the
resolution fixing the record date is adopted by the Board of Directors, and
which record date shall not be more than sixty nor less than ten days
before the date of such meeting. If no record date is fixed by the Board of
Directors, the record date for determining stockholders entitled to notice
of or to vote at a meeting of stockholders shall be at the close of
business on the day next preceding the day on which notice is given, or, if
notice is waived, at the close of business on the day next preceding the
day on which the meeting is held. A determination of stockholders of
record entitled to notice of or to vote at a meeting of stockholders shall
apply to any adjournment of the meeting; providing, however, that the Board
of Directors may fix a new record date for the adjourned meeting.
(b) In order that the Corporation may determine the
stockholders entitled to consent to corporate action in writing without a
meeting, the Board of Directors may fix a record date, which record date
shall not precede the date upon which the resolution fixing the record date
is adopted by the Board of Directors, and which record date shall not be
more than ten days after the date upon which the resolution fixing the
record date is adopted by the Board of Directors. If no record date has
been fixed by the Board of Directors, the record date for determining
stockholders entitled to consent to corporate action in writing without a
meeting, when no prior action by the Board of Directors is required by law,
shall be the first date on which a signed written consent setting forth the
action taken or proposed to be taken is delivered to the Corporation by
delivery to its registered office in this State, its principal place of
business, or an officer or agent of the Corporation having custody of the
book in which proceedings of meetings of stockholders are recorded.
Delivery made to a corporation's registered office shall be by hand or by
certified or registered mail, return receipt requested. If no record date
has been fixed by the Board of Directors and prior action by the Board of
Directors is required by law, the record date for determining stockhold-
ers entitled to consent to corporate action in writing without a meeting
shall be at the close of business on the day on which the Board of
Directors adopts the resolutions taking such prior action.
(c) In order that the Corporation may determine the
stockholders entitled to receive payment of any dividend or other
distribution or allotment of any rights or the stockholders entitled to
exercise any rights in respect of any change, conversion or exchange of
stock, or for the purpose of any other lawful action, the Board of
Directors may fix a record date, which record date shall not precede the
date upon which the resolution fixing the record date is adopted, and which
record date shall be not more than sixty days prior to such action. If no
record date is fixed, the record date for determining stockholders for
any such purpose shall be at the close of business on the day on which the
Board of Directors adopts the resolution relating thereto.
Section 6. Record Owners. The Corporation shall be entitled
to recognize the exclusive right of a person registered on its books as the
owner of shares to receive dividends, and to vote as such owner, and to
hold liable for calls and assessments a person registered on its books as
the owner of shares, and shall not be bound to recognize any equitable or
other claim to or interest in such share or shares on the part of any other
person, whether or not it shall have express or other notice thereof,
except as otherwise required by law.
- - ------------
* If the Corporation is to become a public company, consideration
should be given to including these provisions in the charter.
* If the Corporation is to become a public company, consideration
should be given to eliminating the ability of a single director to
call a special meeting.
** Section 141(b) of the DGCL permits a corporation to provide in its
charter or by-laws that a number less than a majority constitutes a
quorum, provided that such number is not less than one-third of the
total number of directors. Absent special circumstances, however, a
majority is customary.
* Section 141(c) of the DGCL was amended in 1996 to permit the board
of directors to establish committees without the requirement that
such action be approved by a majority of the whole board. This
provision only applies to (i) corporations formed after July 1,
1996 or (ii) corporations formed prior to July 1, 1996 if a
majority of the whole board has adopted a resolution electing to be
governed by Section 141(c)(2). (SEE RIDER 15-A).
* This section of the by-laws may need to be customized to the
client's management structure for the Corporation.
ARTICLE VI
NOTICES
Section 1. Notices. Whenever written notice is required by
law, the Certificate of Incorporation or these By-Laws, to be given to any
director, member of a committee or stockholder, such notice may be given by
mail, addressed to such director, member of a committee or stockholder, at
such person's address as it appears on the records of the Corporation, with
postage thereon prepaid, and such notice shall be deemed to be given at the
time when the same shall be deposited in the United States mail. Written
notice may also be given personally or by telegram, telex or cable.
Section 2. Waivers of Notice. Whenever any notice is
required by law, the Certificate of Incorporation or these By-Laws, to be
given to any director, member of a committee or stockholder, a waiver
thereof in writing, signed, by the person or persons entitled to said
notice, whether before or after the time stated therein, shall be deemed
equivalent thereto. Attendance of a person at a meeting, present in person
or represented by proxy, shall constitute a waiver of notice of such
meeting, except where the person attends the meeting for the express
purpose of objecting at the beginning of the meeting to the transaction of
any business because the meeting is not lawfully called or convened.
ARTICLE VII
GENERAL PROVISIONS
Section 1. Dividends. Dividends upon the
capital stock of the Corporation, subject to the requirements of the DGCL
and the provisions of the Certificate of Incorporation, if any, may be
declared by the Board of Directors at any regular or special meeting of the
Board of Directors (or any action by written consent in lieu thereof in
accordance with Section 6 of Article III hereof), and may be paid in cash,
in property, or in shares of the Corporation's capital stock. Before pay-
ment of any dividend, there may be set aside out of any funds of the
Corporation available for dividends such sum or sums as the Board of
Directors from time to time, in its absolute discretion, deems proper as a
reserve or reserves to meet contingencies, or for equalizing dividends,
or for repairing or maintaining any property of the Corporation, or for any
proper purpose, and the Board of Directors may modify or abolish any such
reserve.
Section 2. Disbursements. All checks or demands for money
and notes of the Corporation shall be signed by such officer or officers or
such other person or persons as the Board of Directors may from time to
time designate.
Section 3. Fiscal Year. The fiscal year of the
Corporation shall be fixed by resolution of the Board of Directors.
Section 4. Corporate Seal. The corporate seal shall have
inscribed thereon the name of the Corporation, the year of its organization
and the words "Corporate Seal, Delaware". The seal may be used by causing
it or a facsimile thereof to be impressed or affixed or reproduced or
otherwise.
ARTICLE VIII
INDEMNIFICATION*
Section 1. Power to Indemnify in Actions, Suits
or Proceedings other than Those by or in the Right of the Corporation.
Subject to Section 3 of this Article VIII, the Corporation shall indemnify
any person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in
the right of the Corporation) by reason of the fact that such person is or
was a director or officer of the Corporation, or is or was a director or
officer of the Corporation serving at the request of the Corporation as a
director or officer, employee or agent of another corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise, against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by such person in connection
with such action, suit or proceeding if such person acted in good faith and
in a manner such person reasonably believed to be in or not opposed to
the best interests of the Corporation, and, with respect to any criminal
action or proceeding, had no reasonable cause to believe such person's
conduct was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo
contendere or its equivalent, shall not, of itself, create a presumption
that the person did not act in good faith and in a manner which such person
reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that such person's conduct was unlawful.
Section 2. Power to Indemnify in Actions, Suits or
Proceedings by or in the Right of the Corporation. Subject to Section 3
of this Article VIII, the Corporation shall indemnify any person who was or
is a party or is threatened to be made a party to any threatened, pending
or completed action or suit by or in the right of the Corporation to
procure a judgment in its favor by reason of the fact that such person is
or was a director or officer of the Corporation, or is or was a director or
officer of the Corporation serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise against
expenses (including attorneys' fees) actually and reasonably incurred by
such person in connection with the defense or settlement of such action
or suit if such person acted in good faith and in a manner such person
reasonably believed to be in or not opposed to the best interests of the
Corporation; except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to
be liable to the Corporation unless and only to the extent that the Court
of Chancery or the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability
but in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which the Court of
Chancery or such other court shall deem proper.
Section 3. Authorization of Indemnification. Any
indemnification under this Article VIII (unless ordered by a court) shall
be made by the Corporation only as authorized in the specific case upon a
determination that indemnification of the director or officer is proper in
the circumstances because such person has met the applicable standard of
conduct set forth in Section 1 or Section 2 of this Article VIII, as the
case may be. Such determination shall be made (i) by a majority vote of the
directors who are not parties to such action, suit or proceeding, even
though less than a quorum, or (ii) if there are no such directors, or if
such directors so direct, by independent legal counsel in a written opinion
or (iii) by the stockholders. To the extent, however, that a director or
officer of the Corporation has been successful on the merits or otherwise
in defense of any action, suit or proceeding described above, or in defense
of any claim, issue or matter therein, such person shall be indemnified
against expenses (including attorneys' fees) actually and reasonably
incurred by such person in connection therewith, without the necessity of
authorization in the specific case.
Section 4. Good Faith Defined. For purposes of any
determination under Section 3 of this Article VIII, a person shall be
deemed to have acted in good faith and in a manner such person reasonably
believed to be in or not opposed to the best interests of the Corpo-
ration, or, with respect to any criminal action or proceeding, to have
had no reasonable cause to believe such person's conduct was unlawful, if
such person's action is based on the records or books of account of the
Corporation or another enterprise, or on information supplied to such
person by the officers of the Corporation or another enterprise in the
course of their duties, or on the advice of legal counsel for the
Corporation or another enterprise or on information or records given or
reports made to the Corporation or another enterprise by an independent
certified public accountant or by an appraiser or other expert selected
with reasonable care by the Corporation or another enterprise. The term
"another enterprise" as used in this Section 4 shall mean any other
corporation or any partnership, joint venture, trust, employee benefit plan
or other enterprise of which such person is or was serving at the request
of the Corporation as a director, officer, employee or agent. The
provisions of this Section 4 shall not be deemed to be exclusive or to
limit in any way the circumstances in which a person may be deemed to have
met the applicable standard of conduct set forth in Section 1 or 2 of this
Article VIII, as the case may be.
Section 5. Indemnification by a Court. Notwithstanding any
contrary determination in the specific case under Section 3 of this Article
VIII, and notwithstanding the absence of any determination thereunder, any
director or officer may apply to the Court of Chancery in the State of
Delaware for indemnification to the extent otherwise permissible under
Sections 1 and 2 of this Article VIII. The basis of such indemnification by
a court shall be a determination by such court that indemnification of the
director or officer is proper in the circumstances because such person has
met the applicable standards of conduct set forth in Section 1 or 2 of this
Article VIII, as the case may be. Neither a contrary determination in the
specific case under Section 3 of this Article VIII nor the absence of any
determination thereunder shall be a defense to such application or create a
presumption that the director or officer seeking indemnification has not
met any applicable standard of conduct. Notice of any application for
indemnification pursuant to this Section 5 shall be given to the
Corporation promptly upon the filing of such application. If successful, in
whole or in part, the director or officer seeking indemnification shall
also be entitled to be paid the expense of prosecuting such application.
Section 6. Expenses Payable in Advance. Expenses incurred by
a director or officer in defending any civil, criminal, administrative or
investigative action, suit or proceeding shall be paid by the Corporation
in advance of the final disposition of such action, suit or proceeding upon
receipt of an undertaking by or on behalf of such director or officer to
repay such amount if it shall ultimately be determined that such person is
not entitled to be indemnified by the Corporation as authorized in
this Article VIII.
Section 7. Nonexclusivity of Indemnification and Advancement
of Expenses. The indemnification and advancement of expenses provided by or
granted pursuant to this Article VIII shall not be deemed exclusive of any
other rights to which those seeking indemnification or advancement of
expenses may be entitled under the Certificate of Incorporation, any
By-Law, agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in such person's official capacity and as to
action in another capacity while holding such office, it being the policy
of the Corporation that indemnification of the persons specified in
Sections 1 and 2 of this Article VIII shall be made to the fullest extent
permitted by law. The provisions of this Article VIII shall not be deemed
to preclude the indemnification of any person who is not specified in
Section 1 or 2 of this Article VIII but whom the Corporation has the power
or obligation to indemnify under the provisions of the General Corporation
Law of the State of Delaware, or otherwise.
Section 8. Insurance. The Corporation may purchase and
maintain insurance on behalf of any person who is or was a director or
officer of the Corporation, or is or was a director or officer of the
Corporation serving at the request of the Corporation as a director,
officer, employee or agent of another corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise against any
liability asserted against such person and incurred by such person in any
such capacity, or arising out of such person's status as such, whether or
not the Corporation would have the power or the obligation to indemnify
such person against such liability under the provisions of this Article
VIII.
Section 9. Certain Definitions. For purposes of this Article
VIII, references to "the Corporation" shall include, in addition to the
resulting corporation, any constituent corporation (including any
constituent of a constituent) absorbed in a consolidation or merger which,
if its separate existence had continued, would have had power and authority
to indemnify its directors or officers, so that any person who is or was a
director or officer of such constituent corporation, or is or was a
director or officer of such constituent corporation serving at the request
of such constituent corporation as a director, officer, employee or agent
of another corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise, shall stand in the same position under
the provisions of this Article VIII with respect to the resulting or
surviving corporation as such person would have with respect to such
constituent corporation if its separate existence had continued. For pur-
poses of this Article VIII, references to "fines" shall include any excise
taxes assessed on a person with respect to an employee benefit plan; and
references to "serving at the request of the Corporation" shall include any
service as a director, officer, employee or agent of the Corporation which
imposes duties on, or involves services by, such director or officer with
respect to an employee benefit plan, its participants or beneficiaries; and
a person who acted in good faith and in a manner such person reasonably
believed to be in the interest of the participants and beneficiaries of an
employee benefit plan shall be deemed to have acted in a manner "not
opposed to the best interests of the Corporation" as referred to in this
Article VIII.
Section 10. Survival of Indemnification and Advancement of
Expenses. The indemnification and advancement of expenses provided by, or
granted pursuant to, this Article VIII shall, unless otherwise provided
when authorized or ratified, continue as to a person who has ceased to be a
director or officer and shall inure to the benefit of the heirs, executors
and administrators of such a person.
Section 11. Limitation on Indemnification. Notwithstanding
anything contained in this Article VIII to the contrary, except for
proceedings to enforce rights to indemnification (which shall be governed
by Section 5 hereof), the Corporation shall not be obligated to indemnify
any director or officer in connection with a proceeding (or part thereof)
initiated by such person unless such proceeding (or part thereof) was
authorized or consented to by the Board of Directors of the Corporation.
Section 12. Indemnification of Employees and Agents. The
Corporation may, to the extent authorized from time to time by the Board of
Directors, provide rights to indemnification and to the advancement of
expenses to employees and agents of the Corporation similar to those
conferred in this Article VIII to directors and officers of the
Corporation.
ARTICLE IX
AMENDMENTS*
Section 1. Amendments. These By-Laws may be altered, amended
or repealed, in whole or in part, or new By-Laws may be adopted by the
stockholders or by the Board of Directors, provided, however, that notice
of such alteration, amendment, repeal or adoption of new By-Laws be
contained in the notice of such meeting of stockholders or Board of
Directors as the case may be. All such amendments must be approved by
either the holders of a majority of the outstanding capital stock entitled
to vote thereon or by a majority of the entire Board of Directors then in
office.
Section 2. Entire Board of Directors. As used in this
Article IX and in these By-Laws generally, the term "entire Board of
Directors" means the total number of directors which the Corporation would
have if there were no vacancies.
* * *
Adopted as of: October 20, 1997
Last Amended as of: ________________
- - --------------
* If the Corporation is to become a public company, consideration
should be given to having a short form indemnification provision in
the charter in lieu of or in addition to these provisions. (SEE
RIDER 34-A)
* If the Corporation is to become a public company, consideration
should be given to requiring in the charter a supermajority vote
for stockholders to amend some or all of the By-Laws. (SEE RIDER
45-A)
RIDER 2-A
ADVANCE NOTICE PROVISION FOR PROPOSING
BUSINESS AT A STOCKHOLDERS' MEETING
Section . Nature of Business at Meetings of Stockholders. No
business may be transacted at an annual meeting of stockholders, other than
business that is either (a) specified in the notice of meeting (or any
supplement thereto) given by or at the direction of the Board of Directors
(or any duly authorized committee thereof), (b) otherwise properly brought
before the annual meeting by or at the direction of the Board of Directors
(or any duly authorized committee thereof) or (c) otherwise properly
brought before the annual meeting by any stockholder of the Company (i) who
is a stockholder of record on the date of the giving of the notice
provided for in this Section __ and on the record date for the
determination of stockholders entitled to vote at such annual meeting and
(ii) who complies with the notice procedures set forth in this Section __.
In addition to any other applicable requirements, for
business to be properly brought before an annual meeting by a stockholder,
such stockholder must have given timely notice thereof in proper written
form to the Secretary of the Company.
To be timely, a stockholder's notice to the Secretary must
be delivered to or mailed and received at the principal executive offices
of the Company not less than sixty (60) days nor more than ninety (90) days
prior to the anniversary date of the immediately preceding annual meeting
of stockholders; provided, however, that in the event that the annual
meeting is called for a date that is not within thirty (30) days before or
after such anniversary date, notice by the stockholder in order to be
timely must be so received not later than the close of business on the
tenth (10th) day following the day on which such notice of the date of the
annual meeting was mailed or such public disclosure of the date of the
annual meeting was made, whichever first occurs.
To be in proper written form, a stockholder's notice to the
Secretary must set forth as to each matter such stockholder proposes to
bring before the annual meeting (i) a brief description of the business
desired to be brought before the annual meeting and the reasons for
conducting such business at the annual meeting, (ii) the name and record
address of such stockholder, (iii) the class or series and number of shares
of capital stock of the Company which are owned beneficially or of record
by such stockholder, (iv) a description of all arrangements or
understandings between such stockholder and any other person or persons
(including their names) in connection with the proposal of such business
by such stockholder and any material interest of such stockholder in such
business and (v) a representation that such stockholder intends to appear
in person or by proxy at the annual meeting to bring such business before
the meeting.
No business shall be conducted at the annual meeting of
stockholders except business brought before the annual meeting in
accordance with the procedures set forth in this Section __; provided,
however, that, once business has been properly brought before the annual
meeting in accordance with such procedures, nothing in this Section __
shall be deemed to preclude discussion by any stockholder of any such
business. If the Chairman of an annual meeting determines that business was
not properly brought before the annual meeting in accordance with the
foregoing procedures, the Chairman shall declare to the meeting that the
business was not properly brought before the meeting and such business
shall not be transacted.
RIDER 2-B
ADVANCE NOTICE PROVISION FOR
NOMINATION OF DIRECTORS
Section . Nomination of Directors. Only persons who are
nominated in accordance with the following procedures shall be eligible
for election as directors of the Company, except as may be otherwise
provided in the Certificate of Incorporation with respect to the right of
holders of preferred stock of the Corporation to nominate and elect a
specified number of directors in certain circumstances. Nominations of
persons for election to the Board of Directors may be made at any annual
meeting of stockholders, or at any special meeting of stockholders called
for the purpose of electing directors, (a) by or at the direction of the
Board of Directors (or any duly authorized committee thereof) or (b) by
any stockholder of the Company (i) who is a stockholder of record on the
date of the giving of the notice provided for in this Section __ and on
the record date for the determination of stockholders entitled to vote at
such meeting and (ii) who complies with the notice procedures set forth in
this Section __.
In addition to any other applicable requirements, for a
nomination to be made by a stockholder, such stockholder must have given
timely notice thereof in proper written form to the Secretary of the
Company.
To be timely, a stockholder's notice to the Secretary must
be delivered to or mailed and received at the principal executive offices
of the Company (a) in the case of an annual meeting, not less than sixty
(60) days nor more than ninety (90) days prior to the anniversary date of
the immediately preceding annual meeting of stockholders; provided,
however, that in the event that the annual meeting is called for a date
that is not within thirty (30) days before or after such anniversary date,
notice by the stockholder in order to be timely must be so received not
later than the close of business on the tenth (10th) day following the day
on which such notice of the date of the annual meeting was mailed or such
public disclosure of the date of the annual meeting was made, whichever
first occurs; and (b) in the case of a special meeting of stockholders
called for the purpose of electing directors, not later than the close of
business on the tenth (10th) day following the day on which notice of the
date of the special meeting was mailed or public disclosure of the date of
the special meeting was made, whichever first occurs.
To be in proper written form, a stockholder's notice to the
Secretary must set forth (a) as to each person whom the stockholder
proposes to nominate for election as a director (i) the name, age, business
address and residence address of the person, (ii) the principal
occupation or employment of the person, (iii) the class or series and
number of shares of capital stock of the Company which are owned
beneficially or of record by the person and (iv) any other information
relating to the person that would be required to be disclosed in a proxy
statement or other filings required to be made in connection with
solicitations of proxies for election of directors pursuant to Section 14
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
and the rules and regulations promulgated thereunder; and (b) as to the
stockholder giving the notice (i) the name and record address of such
stockholder, (ii) the class or series and number of shares of capital stock
of the Company which are owned beneficially or of record by such
stockholder, (iii) a description of all arrangements or understandings
between such stockholder and each proposed nominee and any other person or
persons (including their names) pursuant to which the nomination(s) are to
be made by such stockholder, (iv) a representation that such stockholder
intends to appear in person or by proxy at the meeting to nominate the
persons named in its notice and (v) any other information relating to such
stockholder that would be required to be disclosed in a proxy statement
or other filings required to be made in connection with solicitations of
proxies for election of directors pursuant to Section 14 of the Exchange
Act and the rules and regulations promulgated thereunder. Such notice must
be accompanied by a written consent of each proposed nominee to being named
as a nominee and to serve as a director if elected.
No person shall be eligible for election as a director of
the Company unless nominated in accordance with the procedures set forth in
this Section __. If the Chairman of the meeting determines that a
nomination was not made in accordance with the foregoing procedures, the
Chairman shall declare to the meeting that the nomination was defective and
such defective nomination shall be disregarded.
RIDER 3-A
CHARTER PROVISION DENYING STOCKHOLDERS THE
RIGHT TO CALL A SPECIAL MEETING
______________: Unless otherwise required by law, special meetings
of stockholders, for any purpose or purposes, may be called by either (i)
the Chairman of the Board of Directors, if there be one, (ii) the President
or (iii) the Board of Directors. The ability of the stockholders to call a
special meeting of stockholders is hereby specifically denied.
RIDER 7-A
CHARTER PROVISION ELIMINATING STOCKHOLDERS'
ABILITY TO ACT BY WRITTEN CONSENT
__________: Any action required or permitted to be taken by the
stockholders of the Corporation must be effected at a duly called annual or
special meeting of stockholders of the Corporation, and the ability of
the stockholders to consent in writing to the taking of any action is
hereby specifically denied.
RIDER 7-B
FORM OF BY-LAW ESTABLISHING
A PROCEDURE FOR THE BOARD OF
DIRECTORS TO FIX THE RECORD DATE FOR
STOCKHOLDER ACTION BY WRITTEN CONSENT
Section [ ]. In order that the corporation may determine the
stockholders entitled to consent to corporate action in writing without a
meeting, the Board of Directors may fix a record date, which record date
shall not precede the date upon which the resolution fixing the record date
is adopted by the Board of Directors, and which date shall not be more
than ten (10) days after the date upon which the resolution fixing the
record date is adopted by the Board of Directors. Any stockholder of record
seeking to have the stockholders authorize or take corporate action by
written consent shall, by written notice to the secretary, request the
Board of Directors to fix a record date. The Board of Directors shall
promptly, but in all events within ten (10) days after the date on which
such a request is received, adopt a resolution fixing the record date. If
no record date has been fixed by the Board of Directors within ten (10)
days of the date on which such a request is received, the record date for
determining stockholders entitled to consent to corporate action in writing
without a meeting, when no prior action by the Board of Directors is
required by applicable law, shall be the first date on which a signed
written consent setting forth the action taken or proposed to be taken is
delivered to the corporation by delivery to its registered office in the
State of Delaware, its principal place of business, or an officer or agent
of the corporation having custody of the book in which proceedings of
stockholders meetings are recorded, to the attention of the Secretary of
the corporation. Delivery shall be by hand or by certified or registered
mail, return receipt requested. If no record date has been fixed by the
Board of Directors and prior action by the Board of Directors is required
by applicable law, the record date for determining stockholders entitled
to consent to corporate action in writing without a meeting shall be at the
close of business on the date on which the Board of Directors adopts the
resolution taking such prior action.
RIDER 11-A
CHARTER PROVISION FIXING THE NUMBER OF DIRECTORS,
OR A RANGE IN THE NUMBER OF DIRECTORS
__________: The Board of Directors shall consist of [_________ members]
[not less than __________ nor more than _________ members, the exact number
of which shall initially be fixed by the Incorporator and thereafter from
time to time by the Board of Directors].
RIDER 11-B
CHARTER PROVISION ESTABLISHING
A CLASSIFIED BOARD
__________: The directors shall be divided into three
classes, designated Class I, Class II and Class III. Each class shall
consist, as nearly as may be possible, of one-third of the total number of
directors constituting the entire Board of Directors. The initial division
of the Board of Directors into classes shall be made by the decision of the
affirmative vote of a majority of the entire Board of Directors. The term
of the initial Class I directors shall terminate on the date of the [1998]
annual meeting; the term of the initial Class II directors shall terminate
on the date of the [1999] annual meeting; and the term of the initial Class
III directors shall terminate on the date of the [2000] annual meeting. At
each succeeding annual meeting of stockholders beginning in [1998],
successors to the class of directors whose term expires at that annual
meeting shall be elected for a three-year term. If the number of directors
is changed, any increase or decrease shall be apportioned among the classes
so as to maintain the number of directors in each class as nearly equal as
possible, and any additional director of any class elected to fill a
vacancy resulting from an increase in such class shall hold office for a
term that shall coincide with the remaining term of that class, but in no
case will a decrease in the number of directors shorten the term of any
incumbent director.
RIDER 11-C
CHARTER PROVISION REGARDING REMOVAL OF DIRECTORS
[NOTE: UNDER DGCL ss. 141(k), IF THERE IS A CLASSIFIED BOARD, DIRECTORS MAY
BE REMOVED ONLY FOR CAUSE BY THE HOLDERS OF A MAJORITY OF SHARES ENTITLED
TO VOTE, UNLESS THE CHARTER PROVIDES OTHERWISE. IF THERE IS NO CLASSIFIED
BOARD, DIRECTORS MAY BE REMOVED WITH OR WITHOUT CAUSE BY THE HOLDERS OF A
MAJORITY OF SHARES ENTITLED TO VOTE. IN EITHER CASE, SECTION 102 OF THE
DGCL PERMITS THE CHARTER TO INCREASE THE SHAREHOLDER VOTE REQUIRED FOR
REMOVAL TO A SUPERMAJORITY VOTE]:
__________: Any director or the entire Board of Directors may be removed
from office at any time, [but only for cause,] [with or without cause,] and
only by the affirmative vote of the holders of at least [eighty percent
(80%)] of the voting power of the issued and outstanding capital stock of
the Corporation entitled to vote in the election of directors.
RIDER 15-A
BOARD RESOLUTION FOR CORPORATIONS FORMED PRIOR
TO JULY 1, 1996, ELECTING TO BE GOVERNED BY
SECTION 141(c)(2)
"WHEREAS, a majority of the whole Board of Directors has determined that it
is advisable and in the best interest of the Corporation that the Board's
authority to designate committees of the Board be governed by Section
141(c)(2) of the Delaware General Corporation Law (the "DGCL");
NOW, THEREFORE, BE IT RESOLVED, that the Corporation shall
henceforth be governed by Section 141(c)(2) of the DGCL."
RIDER 34-A
SHORT FORM CHARTER INDEMNIFICATION PROVISION
__________: The Corporation shall indemnify its directors
and officers to the fullest extent authorized or permitted by law, as now
or hereafter in effect, and such right to indemnification shall continue as
to a person who has ceased to be a director or officer of the Corporation
and shall inure to the benefit of his or her heirs, executors and personal
and legal representatives; provided, however, that, except for proceedings
to enforce rights to indemnification, the Corporation shall not be
obligated to indemnify any director or officer (or his or her heirs,
executors or personal or legal representatives) in connection with a
proceeding (or part thereof) initiated by such person unless such
proceeding (or part thereof) was authorized or consented to by the Board of
Directors. The right to indemnification conferred by this Article ______
shall include the right to be paid by the Corporation the expenses incurred
in defending or otherwise participating in any proceeding in advance of its
final disposition.
The Corporation may, to the extent authorized from time to
time by the Board of Directors, provide rights to indemnification and to
the advancement of expenses to employees and agents of the Corporation
similar to those conferred in this Article _______ to directors and
officers of the Corporation.
The rights to indemnification and to the advance of
expenses conferred in this Article _______ shall not be exclusive of any
other right which any person may have or hereafter acquire under this
Amended and Restated Certificate of Incorporation, the By-Laws of the
Corporation, any statute, agreement, vote of stockholders or disinterested
directors or otherwise.
Any repeal or modification of this Article _______ by the
stockholders of the Corporation shall not adversely affect any rights to
indemnification and to the advancement of expenses of a director or officer
of the Corporation existing at the time of such repeal or modification with
respect to any acts or omissions occurring prior to such repeal or
modification.
RIDER 45-A
CHARTER PROVISION REQUIRING SUPERMAJORITY
VOTE OF THE STOCKHOLDERS TO AMEND BY-LAWS
_______: In furtherance and not in limitation of the powers conferred upon
it by the laws of the State of Delaware, the Board of Directors shall have
the power to adopt, amend, alter or repeal the Corporation's By-Laws. The
affirmative vote of at least a majority of the entire Board of Directors
shall be required to adopt, amend, alter or repeal the Corporation's
By-Laws. The Corporation's By-Laws also may be adopted, amended, altered
or repealed by the affirmative vote of the holders of at least [eighty
percent (80%)] of the voting power of the shares entitled to vote at an
election of directors.
<PAGE>
EXHIBIT 4.1
BEAR ISLAND PAPER COMPANY, L.L.C.
BEAR ISLAND FINANCE COMPANY II
Issuers
BEAR ISLAND TIMBERLANDS COMPANY, L.L.C.
F.F. SOUCY, INC.
AND
CRESTAR BANK
Trustee
Indenture
Dated as of December 1, 1997
10% Senior Secured Notes due 2007 10% Series B
Senior Secured Notes due 2007
BEAR ISLAND PAPER COMPANY, L.L.C.
BEAR ISLAND FINANCE COMPANY II
Reconciliation and tie between Trust Indenture Act
of 1939 and Indenture, dated as of December 1, 1997
Trust Indenture Indenture
Act Section Section
ss. 310(a)(1).................................. 607
(a)(2).................................. 607
(b)..................................... 608
ss. 312(c)..................................... 701
ss. 314(a)(4).................................. 1004
(c)(1).................................. 102
(c)(2).................................. 102
(e)..................................... 102
ss. 315(b)..................................... 601
ss. 316(a)(last sentence)...................... 101 ("Outstanding")
(a)(1)(A)............................... 502, 512
(a)(1)(B)............................... 513
(b)..................................... 508
(c)..................................... 104(d)
ss. 317(a)(1).................................. 503
(a)(2).................................. 504
(b)..................................... 1003
ss. 318(a)..................................... 111
Note: This reconciliation and tie shall not, for any purpose, be deemed to
be a part of the Indenture.
TABLE OF CONTENTS
Page
PARTIES......................................................................1
RECITALS OF THE COMPANY......................................................1
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
SECTION 101. Definitions............................................ 2
Acquired Indebtedness.......................................... 2
Act............................................................ 3
Affiliate...................................................... 3
Agent Bank..................................................... 3
Agent Members.................................................. 3
Asset Sale..................................................... 3
Attributable Value............................................. 3
Authenticating Agent........................................... 4
Average Life................................................... 4
Bank Credit Agreement.......................................... 4
Bankruptcy Law................................................. 4
Banks.......................................................... 4
Board of Directors............................................. 4
Board Resolution............................................... 4
Brant-Allen.................................................... 5
Business Day................................................... 5
Capital Stock.................................................. 5
Capitalized Lease Obligation................................... 5
Cash Equivalents............................................... 5
Cdn$........................................................... 5
Change of Control.............................................. 5
Change of Control Offer........................................ 6
Change of Control Purchase Date................................ 6
Change of Control Purchase Price............................... 6
Closing Date................................................... 6
Collateral..................................................... 6
Collateral Documents........................................... 6
Commission..................................................... 7
Commodity Hedge Agreements..................................... 7
Company........................................................ 7
Company Collateral............................................. 7
Consolidated Adjusted Net Income............................... 7
Consolidated Fixed Charge Coverage Ratio....................... 8
Consolidated Income Tax Expense................................ 8
Consolidated Interest Expense.................................. 8
Consolidated Net Worth......................................... 9
Consolidated Tangible Net Worth................................ 9
Consolidated Non-Cash Charges.................................. 9
Corporate Trust Office......................................... 9
corporation.................................................... 9
Credit Parties................................................. 9
Currency Agreements............................................ 10
Default........................................................ 10
Defaulted Interest............................................. 10
Depositary..................................................... 10
Disinterested Director......................................... 10
Dollar or $.................................................... 10
Elebash Agreement.............................................. 10
Equity Value................................................... 10
Event of Default............................................... 10
Excess Proceeds................................................ 10
Exchange Act................................................... 10
Exchange Notes................................................. 10
Exchange Offer................................................. 11
Exchange Offer Registration Statement.......................... 11
Fair Market Value.............................................. 11
FinCo.......................................................... 11
Funded Debt.................................................... 11
Generally Accepted Accounting Principles or GAAP............... 11
Global Notes................................................... 11
guarantee...................................................... 11
Guarantee...................................................... 12
Guarantor...................................................... 12
Hancock Loan................................................... 12
Holder......................................................... 12
Indebtedness................................................... 12
Indenture...................................................... 13
Indenture Obligations.......................................... 13
Independent Valuation Agent.................................... 13
Initial Notes.................................................. 13
Intercreditor Agreement........................................ 13
Interest Payment Date.......................................... 13
Interest Rate Agreements....................................... 13
Investment..................................................... 13
Investment Grade............................................... 14
Issuers........................................................ 14
Issuer Request or Issuer Order................................. 14
Lien........................................................... 14
Maturity....................................................... 14
Moody's........................................................ 14
Net Cash Proceeds.............................................. 15
Non-Registration Opinion and Supporting Evidence............... 15
Non-U.S. Person................................................ 15
Note Register and Note Registrar............................... 15
Notes.......................................................... 15
Offer Date..................................................... 15
Offer Price.................................................... 15
Officers' Certificate.......................................... 15
Offshore Global Note........................................... 16
Offshore Note Exchange Date.................................... 16
Offshore Definitive Note....................................... 16
Opinion of Counsel............................................. 16
Outstanding.................................................... 16
Paying Agent................................................... 17
Permitted Designee............................................. 17
Permitted Holders.............................................. 17
Permitted Indebtedness......................................... 17
Permitted Investments.......................................... 20
Permitted Liens................................................ 21
Permitted Security Party Indebtedness.......................... 23
Person......................................................... 26
Definitive Notes............................................... 26
Place of Payment............................................... 26
Predecessor Note............................................... 27
Preferred Stock................................................ 27
Private Placement Legend....................................... 27
Public Equity Offering......................................... 27
Qualified Capital Stock........................................ 27
Qualified Institutional Buyer.................................. 27
Redeemable Capital Stock....................................... 27
Redemption Date................................................ 27
Redemption Price............................................... 27
Registration Rights Agreement.................................. 28
Registration Statement......................................... 28
Regular Record Date............................................ 28
Regulation S Certificate....................................... 28
Responsible Officer............................................ 28
Restricted Payment............................................. 28
Restricted Subsidiary.......................................... 29
Rule 144A Certificate.......................................... 29
Sale and Leaseback Transaction................................. 29
S&P............................................................ 29
Securities Act................................................. 29
Security Parties............................................... 29
Shelf Registration Statement................................... 29
Soucy Inc...................................................... 29
Soucy Collateral............................................... 29
Soucy Partners................................................. 29
Soucy Restricted Payment....................................... 29
Special Record Date............................................ 30
Stated Maturity................................................ 30
Subordinated Indebtedness...................................... 30
Subsidiary..................................................... 30
Surviving Entity............................................... 30
Timberlands.................................................... 30
Timberlands Collateral......................................... 30
Timberlands Loan............................................... 31
Total Committed Debt........................................... 31
Total Market Value of Equity................................... 31
Trust Indenture Act or TIA..................................... 31
Trustee........................................................ 31
United States.................................................. 31
Unrestricted Subsidiary........................................ 31
U.S. Government Obligations.................................... 32
U.S. Global Note............................................... 32
U.S. Definitive Note........................................... 32
Vice President................................................. 32
Voting Stock................................................... 33
Wood Supply Agreement.......................................... 33
SECTION 102. Compliance Certificates and Opinions................... 33
SECTION 103. Form of Documents Delivered to Trustee................. 34
SECTION 104. Acts of Holders........................................ 34
SECTION 105. Notices, etc., to Trustee, Issuers and Agent Bank...... 35
SECTION 106. Notice to Holders; Waiver.............................. 36
SECTION 107. Effect of Headings and Table of Contents............... 37
SECTION 108. Successors and Assigns................................. 37
SECTION 109. Separability Clause.................................... 37
SECTION 110. Benefits of Indenture.................................. 37
SECTION 111. Governing Law.......................................... 37
SECTION 112. Legal Holidays......................................... 37
SECTION 113. Trust Indenture Act Controls........................... 38
SECTION 114. No Recourse Against Others............................. 38
ARTICLE TWO
NOTE FORMS
SECTION 201. Forms Generally........................................ 38
SECTION 202. Form of Trustee's Certificate of Authentication........ 40
SECTION 203. Restrictive Legends.................................... 40
SECTION 204. Form of Certificate to Be Delivered upon Termination
of Restricted Period................................... 42
ARTICLE THREE
THE NOTES
SECTION 301. Amount................................................. 43
SECTION 302. Denominations.......................................... 44
SECTION 303. Execution, Authentication, Delivery and Dating......... 44
SECTION 304. Temporary Notes........................................ 45
SECTION 305. Registration, Registration of Transfer and Exchange.... 46
SECTION 306. Mutilated, Destroyed, Lost and Stolen Notes............ 47
SECTION 307. Payment of Interest; Interest Rights Preserved......... 48
SECTION 308. Persons Deemed Owners.................................. 49
SECTION 309. Cancellation........................................... 49
SECTION 310. Computation of Interest................................ 50
SECTION 311. Book-Entry Provisions for Global Notes................. 50
SECTION 312. Transfer Provisions.................................... 51
SECTION 313. Form of Regulation S Certificate....................... 59
SECTION 314. Form of Rule 144A Certificate.......................... 61
SECTION 315. CUSIP Numbers.......................................... 62
ARTICLE FOUR
SATISFACTION AND DISCHARGE
SECTION 401. Satisfaction and Discharge of Indenture................ 62
SECTION 402. Application of Trust Money............................. 64
ARTICLE FIVE
REMEDIES
SECTION 501. Events of Default...................................... 64
SECTION 502. Acceleration of Maturity; Rescission and Annulment..... 66
SECTION 503. Collection of Indebtedness and Suits for
Enforcement by Trustee................................. 68
SECTION 504. Trustee May File Proofs of Claim....................... 69
SECTION 505. Trustee May Enforce Claims Without Possession of Notes. 70
SECTION 506. Application of Money Collected......................... 70
SECTION 507. Limitation on Suits.................................... 70
SECTION 508. Unconditional Right of Holders to Receive
Principal, Premium and Interest........................ 71
SECTION 509. Restoration of Rights and Remedies..................... 71
SECTION 510. Rights and Remedies Cumulative......................... 72
SECTION 511. Delay or Omission Not Waiver........................... 72
SECTION 512. Control by Holders..................................... 72
SECTION 513. Waiver of Past Defaults................................ 72
SECTION 514. Waiver of Stay or Extension Laws....................... 73
ARTICLE SIX
THE TRUSTEE
SECTION 601. Notice of Defaults..................................... 73
SECTION 602. Certain Rights of Trustee.............................. 74
SECTION 603. Trustee Not Responsible for Recitals or
Issuance of Notes...................................... 75
SECTION 604. May Hold Notes......................................... 76
SECTION 605. Money Held in Trust.................................... 76
SECTION 606. Compensation and Reimbursement......................... 76
SECTION 607. Corporate Trustee Required; Eligibility................ 77
SECTION 608. Resignation and Removal; Appointment of Successor...... 77
SECTION 609. Acceptance of Appointment by Successor................. 79
SECTION 610. Merger, Conversion, Consolidation or
Succession to Business................................. 79
SECTION 611. Appointment of Authenticating Agent.................... 80
SECTION 612. Appointment of Trustee as Fonde de Pouvoir............. 82
ARTICLE SEVEN
HOLDERS' LISTS AND REPORTS BY TRUSTEE
SECTION 701. Disclosure of Names and Addresses of Holders........... 82
SECTION 702. Reports by Trustee..................................... 82
ARTICLE EIGHT
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
SECTION 801. Issuers May Consolidate, etc., Only on Certain Terms... 83
SECTION 802. Successor Substituted.................................. 85
ARTICLE NINE
SUPPLEMENTAL INDENTURES
SECTION 901. Supplemental Indentures Without Consent of Holders..... 85
SECTION 902. Supplemental Indentures with Consent of Holders........ 86
SECTION 903. Execution of Supplemental Indentures................... 87
SECTION 904. Effect of Supplemental Indentures...................... 88
SECTION 905. Conformity with Trust Indenture Act.................... 88
SECTION 906. Reference in Notes to Supplemental Indentures.......... 88
SECTION 907. Notice of Supplemental Indentures...................... 88
ARTICLE TEN
COVENANTS
SECTION 1001. Payment of Principal, Premium, If Any, and Interest... 88
SECTION 1002. Maintenance of Office or Agency....................... 89
SECTION 1003. Money for Notes Payments to Be Held in Trust.......... 89
SECTION 1004. Corporate Existence................................... 91
SECTION 1005. Payment of Taxes and Other Claims..................... 91
SECTION 1006. Maintenance of Properties............................. 91
SECTION 1007. Statement by Officers as to Default................... 92
SECTION 1008. Limitation on Indebtedness of the Company............. 92
SECTION 1009. Limitation on Restricted Payments by the Company...... 93
SECTION 1010. Limitation on Liens of the Company.................... 97
SECTION 1011. Guarantees by Restricted Subsidiaries of the Company.. 97
SECTION 1012. Purchase of Notes upon a Change of Control............ 97
SECTION 1013. Limitation on Indebtedness of the Security Parties.... 99
SECTION 1014. Limitation on Restricted Payments by Timberlands...... 99
SECTION 1015. Limitation on Certain Restricted Payments by
Soucy Inc.............................................102
SECTION 1016. Limitation on Liens of the Security Parties...........103
SECTION 1017. Limitation on Guarantees of Company Indebtedness
by the Security Parties and Their Restricted
Subsidiaries..........................................103
SECTION 1018. Limitation on Sales of Collateral Stock by
Brant-Allen and Certain Other Transactions
by Brant-Allen........................................104
SECTION 1019. Limitation on Proceeds of Asset Sales
by Subsidiaries.......................................105
SECTION 1020. Limitation on Issuances and Sales of Capital
Stock of Subsidiaries.................................105
SECTION 1021. Limitation on Transactions with Affiliates............105
SECTION 1022. Limitation on Sale of Assets..........................107
SECTION 1023. Limitation on Sale and Leaseback Transactions.........110
SECTION 1024. Limitation on Dividends and Other Payment
Restrictions Affecting Restricted Subsidiaries........111
SECTION 1025. Limitation on Conduct of Business.....................112
SECTION 1026. Limitation on Unrestricted Subsidiaries...............112
SECTION 1027. Reports...............................................112
SECTION 1028. Waiver of Certain Covenants...........................113
ARTICLE ELEVEN
REDEMPTION OF SECURITIES
SECTION 1101. Right of Redemption...................................113
SECTION 1102. Applicability of Article..............................113
SECTION 1103. Election to Redeem; Notice to Trustee.................114
SECTION 1104. Selection by Trustee of Notes to Be Redeemed..........114
SECTION 1105. Notice of Redemption..................................114
SECTION 1106. Deposit of Redemption Price...........................115
SECTION 1107. Notes Payable on Redemption Date......................116
SECTION 1108. Notes Redeemed in Part................................116
ARTICLE TWELVE
DEFEASANCE AND COVENANT DEFEASANCE
SECTION 1201. Issuers' Option to Effect Defeasance or
Covenant Defeasance...................................116
SECTION 1202. Defeasance and Discharge..............................117
SECTION 1203. Covenant Defeasance...................................117
SECTION 1204. Conditions to Defeasance or Covenant Defeasance.......118
SECTION 1205. Deposited Money and Government Obligations to Be
Held in Trust; Other Miscellaneous Provisions.........119
SECTION 1206. Reinstatement.........................................120
ARTICLE THIRTEEN
RELEASE OF COLLATERAL AND TERMINATION OF COVENANTS
SECTION 1301. Release of Soucy Collateral...........................120
SECTION 1302. Termination of Covenants of Soucy Inc.................120
ARTICLE FOURTEEN
SECURITY
SECTION 1401. Collateral Documents..................................121
SECTION 1402. Recording, etc........................................122
SECTION 1403. Release of Collateral.................................122
SECTION 1404. Suits to Protect the Collateral.......................123
SECTION 1405. Authorization of Intercreditor Agreement..............123
SECTION 1406. Authorization of Receipt of Funds by the
Trustee Under the Collateral Documents................123
TESTIMONIUM................................................................122
SIGNATURES AND SEALS.......................................................122
EXHIBIT A - Form of Note
SCHEDULES 101(a), 101(b) and 1024(a)
INDENTURE, dated as of December 1, 1997, among BEAR ISLAND
PAPER COMPANY, L.L.C., a limited liability company duly formed and
existing under the laws of the Commonwealth of Virginia (herein called
the "Company"), BEAR ISLAND FINANCE COMPANY II, a corporation duly
organized and existing under the laws of the State of Delaware (herein
called "FinCo" and, together with the Company, the "Issuers"), having
their principal offices at 10026 Old Ridge Road, Ashland, Virginia 23005,
BEAR ISLAND TIMBERLANDS COMPANY, L.L.C., a limited liability company duly
formed and existing under the laws of the Commonwealth of Virginia
(herein called "Timberlands"), F.F. SOUCY, INC., a corporation duly
formed and existing under the laws of the Province of Quebec, Canada
(herein called "Soucy Inc.," and, together with Timberlands, the
"Security Parties"), and CRESTAR BANK, a Virginia banking corporation,
Trustee (herein called the "Trustee"). In addition, BRANT-ALLEN
INDUSTRIES, INC., a corporation duly formed and existing under the laws
of the State of Delaware (herein called "Brant-Allen"), is subject to
Sections 1018 and 1019 and such other provisions of this Indenture that
specifically apply to Brant-Allen.
RECITALS OF THE ISSUERS
The Issuers have duly authorized the creation of and issuance
of their 10% Senior Secured Notes due 2007 (the "Initial Notes"), and
their 10% Series B Senior Secured Notes due 2007 (the "Exchange Notes"
and, together with the Initial Notes, the "Notes"), of substantially the
tenor and amount hereinafter set forth, and to provide therefor the
Issuers have duly authorized the execution and delivery of this
Indenture.
The obligations of the Issuers under this Indenture and the
Notes are secured by (i) a pledge by the Company of the Company
Collateral pursuant to the Deed of Trust and the Company Security and
Pledge Agreement (as such terms are defined herein), (ii) a pledge by
Brant-Allen of the Timberlands Collateral pursuant to the Timberlands
Pledge Agreement (as such terms are defined herein), (iii) a pledge by
Brant-Allen of the Soucy Collateral pursuant to the Soucy Pledge
Agreement and (iv) a hypothec without delivery by Brant-Allen of the
Soucy Collateral pursuant to the Hypothec Agreement (as such terms are
defined herein).
Upon the issuance of the Exchange Notes, if any, or the
effectiveness of the Shelf Registration Statement (as defined herein),
this Indenture will be subject to, and shall be governed by the
provisions of the Trust Indenture Act of 1939, as amended, that are
required to be part of or deemed to be part of and to govern the
indentures qualified thereunder.
All things necessary have been done to make the Notes, when
duly executed and duly issued by the Issuers and authenticated and
delivered hereunder by the Trustee or the Authenticating Agent, the valid
obligations of the Issuers and to make this Indenture a valid agreement
of the Issuers, in accordance with their and its terms.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of
the Notes by the Holders thereof, it is mutually covenanted and agreed,
for the equal and proportionate benefit of all Holders of the Notes, as
follows:
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
SECTION 101. Definitions.
For all purposes of this Indenture, except as otherwise
expressly provided or unless the context otherwise requires:
(1) the terms defined in this Article have the meanings
assigned to them in this Article and include the plural as well as
the singular;
(2) all other terms used herein which are defined in the
Trust Indenture Act (as defined herein), either directly or by
reference therein, have the meanings assigned to them therein, and
the terms "cash transaction" and "self-liquidating paper," as used
in TIA Section 311, shall have the meanings assigned to them in the
rules of the Commission adopted under the Trust Indenture Act;
(3) all accounting terms not otherwise defined herein have
the meanings assigned to them in accordance with generally accepted
accounting principles (as defined herein); and
(4) the words "herein," "hereof" and "hereunder" and other
words of similar import refer to this Indenture as a whole and not
to any particular Article, Section or other subdivision.
"Acquired Indebtedness" means Indebtedness of a Person (a)
existing at the time such Person becomes a Subsidiary or (b) assumed in
connection with the acquisition of assets from such Person. Acquired
Indebtedness shall be deemed to be incurred on the date of the related
acquisition of assets from any Person or the date the acquired Person
becomes a Restricted Subsidiary.
"Act," when used with respect to any Holder, has the meaning
specified in Section 104.
"Affiliate" means, with respect to any specified Person, (a)
any other Person directly or indirectly controlling or controlled by or
under direct or indirect common control with such specified Person or (b)
any other Person that owns, directly or indirectly, 5% or more of such
specified Person's Capital Stock or any executive officer or director of
any such specified Person or other Person or, with respect to any natural
Person, any Person having a relationship with such Person by blood,
marriage or adoption not more remote than first cousin. For the purposes
of this definition, "control," when used with respect to any specified
Person, means the power to direct the management and policies of such
Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Agent Bank" means Toronto-Dominion (Texas), Inc. as agent
under the Bank Credit Agreement and any future or successor or replacement
agent under the Bank Credit Agreement.
"Agent Members" has the meaning specified in Section 311.
"Asset Sale" means, with respect to any Credit Party, any
sale, issuance, conveyance, transfer, lease or other disposition
(including, without limitation, by way of merger or consolidation)
(collectively, a "transfer"), directly or indirectly, in one or a series
of related transactions, of (a) any Capital Stock of any Restricted
Subsidiary of such Credit Party; (b) all or substantially all of the
properties and assets of such Credit Party or its Restricted
Subsidiaries; or (c) any other properties or assets of any division or
line of business of such Credit Party or any Restricted Subsidiary of
such Credit Party, other than in the ordinary course of business
(including, without limitation, transfers of newsprint or other inventory
in the ordinary course of business). For the purposes of this definition,
the term "Asset Sale" shall not include any transfer of properties or
assets or Capital Stock of Restricted Subsidiaries (i) that is governed
by the provisions of this Indenture described under Article Eight and
under Section 1018, (ii) between or among any Credit Party and any of its
Restricted Subsidiaries in accordance with the terms of this Indenture or
(iii) to an Unrestricted Subsidiary, if permitted under Section 1009,
1014 or 1015, as the case may be.
"Attributable Value" means, with respect to any lease of any
Person, at the time of determination, the present value (discounted at the
interest rate implicit in the lease or, if not known, at the incremental
borrowing rate of such Person) of the obligations of the lessee of the
property subject to such lease for rental payments during the remaining
term of the lease included in such transaction, including any period for
which such lease has been extended or may, at the option of the lessor, be
extended, or until the earliest date on which the lessee may terminate such
lease without penalty or upon payment of penalty (in which case the rental
payments shall include such penalty), after excluding from such rental
payments all amounts required to be paid on account of maintenance and
repairs, insurance, taxes, assessments, water, utilities and similar
charges.
"Authenticating Agent" means any Person authorized by the
Trustee to act on behalf of the Trustee to authenticate Notes.
"Average Life" means, as of the date of determination with
respect to any Indebtedness, the quotient obtained by dividing (a) the
sum of the products of (i) the number of years from the date of
determination to the date or dates of each successive scheduled principal
payment (including, without limitation, any sinking fund requirements) of
such Indebtedness multiplied by (ii) the amount of each such principal
payment by (b) the sum of all such principal payments.
"Bank Credit Agreement" means the credit agreement dated as
of the Closing Date among the Company, the Banks and the Agent Bank, as
such agreement may be amended, renewed, extended, substituted, restated,
refinanced, restructured, supplemented or otherwise modified from time to
time (including, without limitation, any successive amendments, renewals,
extensions, substitutions, restatements, refinancings, restructurings,
supplements or other modifications of the foregoing); provided that with
respect to any agreement providing for the refinancing of Indebtedness
under the Bank Credit Agreement, such agreement shall be the Bank Credit
Agreement for the purposes of this definition only if a notice to that
effect is delivered by the Company to the Trustee and there shall be at
any time only one instrument that is the Bank Credit Agreement under this
Indenture.
"Bankruptcy Law" means Title 11, United States Bankruptcy
Code of 1978, as amended, or any similar United States federal or state
law relating to bankruptcy, insolvency, receivership, winding-up,
liquidation, reorganization or relief of debtors or any amendment to,
succession to or change in any such law.
"Banks" means the banks and other financial institutions from
time to time that are lenders under the Bank Credit Agreement.
"Board of Directors" means the board of directors of the
Company, FinCo, Timberlands, Soucy Inc. or Brant-Allen, as the case may be,
or any duly authorized committee of that board.
"Board Resolution" means a copy of resolutions by each of the
Issuers certified by the Secretary or an Assistant Secretary of the Issuer
to have been duly adopted by the Board of Directors of such Issuer and to
be in full force and effect on the date of such certification, and
delivered to the Trustee.
"Brant-Allen" means Brant-Allen Industries, Inc.
"Business Day," when used with respect to any Place of
Payment or any other particular location referred to in this Indenture or
in the Notes, means each Monday, Tuesday, Wednesday, Thursday and Friday
which is not a day on which banking institutions in that Place of Payment
or other location are authorized or obligated by law, regulation or
executive order to close.
"Capital Stock" means, with respect to any Person, any and
all shares, partnership interests, membership interests, participations,
rights in or other equivalents (however designated) of such Person's
capital stock and any rights (other than debt securities convertible into
capital stock), warrants or options exchangeable for or convertible into
such capital stock, whether now outstanding or issued after the date of
this Indenture.
"Capitalized Lease Obligation" means, with respect to any
Person, any obligation of such Person or a Subsidiary of such Person,
under a lease of (or other agreement conveying the right to use) any
property (whether real, personal or mixed) that is required to be
classified and accounted for as a capital lease obligation under GAAP,
and, for the purpose of this Indenture, the amount of such obligation at
any date shall be the capitalized amount thereof at such date, determined
in accordance with GAAP.
"Cash Equivalents" means (a) any evidence of Indebtedness
with a maturity of 180 days or less issued or directly and fully
guaranteed or insured by the United States of America or any agency or
instrumentality thereof (provided that the full faith and credit of the
United States of America is pledged in support thereof); (b) certificates
of deposit or acceptances or Eurodollar time deposits with a maturity of
180 days or less of, and overnight bank deposits with, any financial
institution that is a member of the Federal Reserve System having
combined capital and surplus and undivided profits of not less than $500
million; (c) commercial paper with a maturity of 180 days or less issued
by a corporation that is not an Affiliate of the Company and is organized
under the laws of any state of the United States or the District of
Columbia and rated at least A-1 by S&P or at least P-l by Moody's; and
(d) funds which invest in any of the foregoing.
"Cdn$" means a dollar or other equivalent unit in such
Canadian coin or currency of as at the time shall be legal tender in
Canada for the payment of public and private debts.
"Change of Control" means the occurrence of any of the
following events: (a) prior to the initial Public Equity Offering of the
Company the gross proceeds of which shall exceed $100 million, the
Permitted Holders are or become the "beneficial owners" (as defined in
Rules 13d-3 and l3d-5 under the Exchange Act, except that a Person shall
be deemed to have "beneficial ownership" of all securities that such
Person has the right to acquire, whether such right is exercisable
immediately or only after the passage of time), directly or indirectly,
of less than 51% of the total outstanding Voting Stock of the Company; or
(b) after the initial Public Equity Offering of the Company referred to
in clause (a) above, (i) a "person" or a "group" (as such terms are
defined in Sections 13(d) and 14(c) of the Exchange Act) other than the
Permitted Holders are or become the "beneficial owners" (as defined in
Rules 13d-3 and 13d-5 under the Exchange Act, except that a Person shall
be deemed to have "beneficial ownership" of all securities that such
Person has the right to acquire, whether such right is exercisable
immediately or only after the passage of time), directly or indirectly,
of 35% or more of the total outstanding Voting Stock of the Company; or
(ii) during any consecutive two year period, individuals who at the
beginning of such period constituted the Board of Directors of the
Company (together with any new directors whose election to such Board of
Directors, or whose nomination for election by the stockholders of the
Company, was approved by a vote of more than 50% 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 Company then in office; or (c) the Company is liquidated or
dissolved or adopts a plan of liquidation or dissolution other than in a
transaction which complies with the provisions described under Article
Eight.
"Change of Control Offer" has the meaning specified in Section
1012.
"Change of Control Purchase Date" has the meaning specified in
Section 1012.
"Change of Control Purchase Price" has the meaning specified in
Section 1012.
"Closing Date" means the date of the initial issuance of the
Notes under this Indenture.
"Collateral" means the Company Collateral, the Timberlands
Collateral and the Soucy Collateral.
"Collateral Documents" means (i) the deed of trust dated as of
the Closing Date among the Company, the Trustee and the collateral trustee
thereunder (the "Deed of Trust"), (ii) the pledge and security agreement
dated as of the Closing Date between the Company and the Trustee (the
"Company Pledge and Security Agreement"), (iii) the pledge agreement
concerning the Capital Stock of Soucy Inc. dated as of the Closing Date
between Brant-Allen and the Trustee governed by the law of the State of New
York (the "Soucy Pledge Agreement"), (iv) the hypothec agreement concerning
the Capital Stock of Soucy Inc. dated as of the Closing Date between
Brant-Allen and the Trustee governed by Quebec law (the "Hypothec
Agreement") and (v) the pledge agreement concerning the Capital Stock of
Timberlands dated as of the Closing Date between Brant-Allen and the
Trustee (the "Timberlands Pledge Agreement").
"Commission" means the Securities and Exchange Commission, as
from time to time constituted, created under the Exchange Act, or, if at
any time after the execution of this Indenture such Commission is not
existing and performing the duties now assigned to it under the Trust
Indenture Act, then the body performing such duties at such time.
"Commodity Hedge Agreements" means any commodity futures
contract, commodity option or other similar agreement or arrangement
entered into by any Credit Party or any of its Subsidiaries designed to
protect such Credit Party or any of its Subsidiaries against fluctuations
in the price of commodities actually at that time used in the ordinary
course of business of such Credit Party or its Subsidiaries.
"Company" means the Person named as the "Company" in the
first paragraph of this Indenture until a successor Person shall have
become such pursuant to the applicable provisions of this Indenture, and
thereafter "Company" shall mean such successor Person.
"Company Collateral" means (x) all of the real property of
the Company and (y) all of the personal property of the Company assigned
to the Trustee, now or in the future, under the Company Pledge and
Security Agreement.
"Consolidated Adjusted Net Income" means, with respect to any
Credit Party, for any period, the consolidated net income (or loss) of such
Credit Party and all Restricted Subsidiaries of such Credit Party for such
period as determined in accordance with GAAP, adjusted by excluding,
without duplication, (a) any net after-tax extraordinary gains or losses
(less all fees and expenses relating thereto), (b) any net after-tax gains
or losses (less all fees and expenses relating thereto) attributable to
asset dispositions other than in the ordinary course of business, (c) the
portion of net income (or loss) of any Person (other than such Credit Party
or a Restricted Subsidiary of such Credit Party), including Unrestricted
Subsidiaries, in which such Credit Party or any Restricted Subsidiary of
such Credit Party has an ownership interest, except to the extent of the
amount of dividends or other distributions actually paid to such Credit
Party or any Restricted Subsidiary of such Credit Party in cash dividends
or distributions during such period, (d) the net income (or loss) of any
Person combined with such Credit Party or any Restricted Subsidiary of such
Credit Party on a "pooling of interests" basis attributable to any period
prior to the date of combination, (e) the net income of any Restricted
Subsidiary of such Credit Party and to the extent that the declaration or
payment of dividends or similar distributions by such Restricted Subsidiary
is not at the date of determination permitted, directly or indirectly, by
operation of the terms of its charter or any agreement, instrument,
judgment, decree, order, statute, rule or governmental regulation
applicable to such Restricted Subsidiary or its stockholders, and (f) for
purposes of calculating Consolidated Adjusted Net Income under Section
1009, 1014 or 1015, as the case may be, any net income (or loss) from any
Restricted Subsidiary that was an Unrestricted Subsidiary at any time
during such period other than any amounts actually received from such
Restricted Subsidiary. The calculation of Consolidated Adjusted Net Income
for the Company or any other entity shall be adjusted by imputing to the
Company or such other entity as an expense all of the amounts paid by the
Company or such other entity to holders of direct or indirect equity
interests in the Company or such other entity in respect of their tax
liabilities and as income any amounts recontributed to the Company or such
other entity by direct or indirect holders of equity interests in the
Company or such other entity pursuant to clause (vi) of paragraph (b) under
Section 1009 and clause (vii) of paragraph (b) under Section 1014.
"Consolidated Fixed Charge Coverage Ratio" means, with
respect to any Person, for any period, the ratio of (a) the sum of
Consolidated Adjusted Net Income, Consolidated Interest Expense,
Consolidated Tax Expense and Consolidated Non-Cash Charges deducted in
computing Consolidated Adjusted Net Income, in each case, for such period
to (b) the sum of (i) Consolidated Interest Expense and (ii) cash and
non-cash dividends for such Person due (whether or not declared) on
Preferred Stock by such Person and any Restricted Subsidiary of such
Person (to any Person other than the Person for which such ratio is being
determined and any wholly owned Restricted Subsidiary of such Person), in
each case for such period.
"Consolidated Income Tax Expense" means, with respect to any
Person, for any period, the provision for federal, state, local and
foreign income taxes of such Person and all Restricted Subsidiaries of
such Person for such period as determined on a consolidated basis in
accordance with GAAP.
"Consolidated Interest Expense" means, with respect to any
Person, for any period, without duplication, the sum of (a) the interest
expense of such Person and the Restricted Subsidiaries of such Person for
such period, including, without limitation, (i) amortization of debt
discount, (ii) the net cost of Interest Rate Agreements (including
amortization of discounts), (iii) the interest portion of any deferred
payment obligation and (iv) amortization of debt issuance costs, plus (b)
the interest component of Capitalized Lease Obligations of such Person and
its Restricted Subsidiaries during such period, plus (c) cash and non-cash
dividends due (whether or not declared) on Redeemable Capital Stock by such
Person and any Restricted Subsidiary of such Person (to any Person other
than the Person for which such calculation is being determined and any
wholly owned Restricted Subsidiary of such Person), in each case as
determined on a consolidated basis in accordance with GAAP; provided that
(x) the Consolidated Interest Expense attributable to interest on any
Indebtedness computed on a pro forma basis and (A) bearing a floating
interest rate shall be computed as if the rate in effect on the date of
computation had been the applicable rate for the entire period and (B)
which was not outstanding during the period for which the computation is
being made but which bears, at the option of the Person for which such
calculation is being determined, a fixed or floating rate of interest,
shall be computed by applying at the option of the Person for which such
calculation is being determined, either the fixed or floating rate, and (y)
in making such computation, the Consolidated Interest Expense attributable
to interest on any Indebtedness under a revolving credit facility computed
on a pro forma basis shall be computed based upon the average daily balance
of such Indebtedness during the applicable period; provided further that,
notwithstanding the foregoing, the interest rate with respect to any
Indebtedness covered by any Interest Rate Agreement shall be deemed to be
the effective interest rate with respect to such Indebtedness after taking
into account such Interest Rate Agreement.
"Consolidated Net Worth" means, with respect to any Person,
at any date, the stockholders' equity of such Person less the amount of
such stockholders' equity attributable to Redeemable Capital Stock or
treasury stock of such Person and any Restricted Subsidiary of such
Person, as determined on a consolidated basis in accordance with GAAP.
"Consolidated Tangible Net Worth" means, with respect to any
Person, as of any date, Consolidated Net Worth less the sum of the net
book amount of all assets, after deducting any reserves applicable
thereto, which would be treated as intangible under GAAP, as presented on
the consolidated financial statements of such Person as of such date.
"Consolidated Non-Cash Charges" means, with respect to any
Person, for any period, the aggregate depreciation, amortization and
other non-cash expenses of such Person and any Restricted Subsidiary of
such Person reducing Consolidated Adjusted Net Income for such period,
determined on a consolidated basis in accordance with GAAP (excluding any
such non-cash charge that requires an accrual of or reserve for cash
charges for any future period).
"Corporate Trust Office" means the principal corporate trust
office of the Trustee, at which at any particular time its corporate
trust business shall be administered, which office on the date of
execution of this Indenture is located at 919 East Main Street, 10th
Floor, Richmond, Virginia 23219, or, for purposes of presenting or
surrendering Notes for payment pursuant to Section 1002, the office of
Harris Trust Company, 88 Pine Street, New York, New York 10005.
"corporation" includes corporations, associations, companies
and business trusts.
"Credit Parties" means the Company and the Security Parties.
"Currency Agreements" means, with respect to any Person, any
spot or forward foreign exchange agreements and currency swap, currency
option or other similar financial agreements or arrangements entered into
by such Person or any of its Restricted Subsidiaries in the ordinary
course of business and designed to protect against or manage exposure to
fluctuations in foreign currency exchange rates.
"Default" means any event that is, or after notice or passage
of time or both would be, an Event of Default.
"Defaulted Interest" has the meaning specified in Section 307.
"Depositary" means The Depository Trust Company, its nominees and
successors.
"Disinterested Director" means, with respect to any
transaction or series of transactions in respect of which the Board of
Directors of any of the Credit Parties is required to deliver a
resolution of the Board of Directors under this Indenture, a member of
the Board of Directors of such Credit Party who does not have any
material direct or indirect financial interest in or with respect to such
transaction or series of transactions.
"Dollar" or "$" means a dollar or other equivalent unit in
such coin or currency of the United States of America as at the time
shall be legal tender for the payment of public and private debts.
"Elebash Agreement" means the agreement for certain marketing
and consulting services dated as of October 11, 1988 and effective as of
July 12, 1988 between the Company and Timberlands, as successors in
interest, and The Elebash Company.
"Equity Value" means, with respect to any Person, an amount
which is equal to (x) the market value of the assets of such Person, less
(y) the liabilities of such Person (including, without limitation,
contingent Indebtedness of such Person).
"Event of Default" has the meaning specified in Section 501.
"Excess Proceeds" has the meaning specified in Section 1022.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Exchange Notes" has the meaning stated in the first recital
of this Indenture and refers to any Exchange Notes containing terms
substantially identical to the Initial Notes (except that (i) such
Exchange Notes shall not contain terms with respect to transfer
restrictions and shall be registered under the Securities Act, (ii)
certain provisions relating to an increase in the stated rate of interest
thereon shall be eliminated) and (iii) such Exchange Notes shall not have
any registration rights that are issued and exchanged for the Initial
Notes in accordance with the Exchange Offer, as provided for in the
Registration Rights Agreement and this Indenture.
"Exchange Offer" means the offer by the Issuers to the
Holders of the Initial Notes to exchange all of the Initial Notes for
Exchange Notes, as provided for in the Registration Rights Agreement.
"Exchange Offer Registration Statement" means the Exchange Offer
Registration Statement as defined in the Registration Rights Agreement.
"Fair Market Value" means, with respect to any asset or
property, the sale value that would be obtained in an arm's-length
transaction between an informed and willing seller under no compulsion to
sell and an informed and willing buyer under no compulsion to buy.
"FinCo" means the Person named as "FinCo" in the first
paragraph of this Indenture until a successor Person shall have become
such pursuant to the applicable provisions of this Indenture, and
thereafter "FinCo" shall mean such successor Person.
"Funded Debt" means, as to any Person, all Indebtedness of
such Person that matures more than one year from the date of its creation
or matures within one year from such date but is renewable or extendible,
at the option of such Person, to a date more than one year from such date
or arises under a revolving credit or similar agreement that obligates
the lender or lenders to extend credit during a period of more than one
year from such date, including, without limitation, all current
maturities and current sinking fund payments in respect of such
Indebtedness whether or not required to be paid within one year from the
date of its creation and, in the case of the Company, Indebtedness in
respect of the Bank Credit Agreement.
"Generally Accepted Accounting Principles" or "GAAP" means,
in the case of a Person formed, organized or incorporated in the United
States, generally accepted accounting principles in the United States,
consistently applied, and, in the case of a Person formed, organized or
incorporated in Canada, generally accepted accounting principles in
Canada, consistently applied, that are in effect on the date of this
Indenture.
"Global Notes" has the meaning set forth in Section 201.
"guarantee" means, as applied to any obligation, (a) a
guarantee (other than by endorsement of negotiable instruments for
collection in the ordinary course of business), direct or indirect, in
any manner, of any part or all of such obligation and (b) an agreement,
direct or indirect, contingent or otherwise, the practical effect of
which is to assure in any way the payment or performance (or payment of
damages in the event of non-performance) of all or any part of such
obligation, including, without limiting the foregoing, the payment of
amounts drawn down by letters of credit.
"Guarantee" means any guarantee of the obligations of the
Issuers under this Indenture and the Notes by any Restricted Subsidiary
of the Company in accordance with the provisions of this Indenture. When
used as a verb, "Guarantee" shall have a corresponding meaning.
"Guarantor" means any Restricted Subsidiary of the Company that
incurs a Guarantee.
"Hancock Loan" means the Timberlands Loan and Maintenance
Agreement, dated as of July 12, 1988, as amended on July 6, 1993, and as
further amended as of the Closing Date, between Timberlands, as successor
in interest, and John Hancock Mutual Life Insurance Company.
"Holder" means the Person in whose name a Note is registered in
the Note Register.
"Indebtedness" means, with respect to any Person, without
duplication, (a) all liabilities of such Person for borrowed money
(including overdrafts), including, without limitation, all obligations,
contingent or otherwise, of such Person in connection with any letters of
credit and acceptances issued under letter of credit facilities, acceptance
facilities or other similar facilities, (b) all obligations of such Person
evidenced by bonds, notes, debentures or other similar instruments, (c) all
indebtedness of such Person created or arising under any conditional sale
or other title retention agreement with respect to property acquired by
such Person (even if 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), but excluding trade payables arising in the ordinary
course of business, (d) all Capitalized Lease Obligations of such Person,
(e) all obligations of such Person under or in respect of Interest Rate
Agreements, Currency Agreements or Commodity Hedge Agreements, (f) all
Indebtedness referred to in (but not excluded from) the preceding clauses
of other Persons and all dividends of other Persons, the payment of which
is secured by (or for which the holder of such Indebtedness has an existing
right, contingent or otherwise, to be secured by) any Lien upon or with
respect to 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 Indebtedness (the amount of such
obligation being deemed to be the lesser of the value of such property or
asset or the amount of the obligation so secured), (g) all guarantees by
such Person of Indebtedness referred to in this definition of any other
Person and (h) all Redeemable Capital Stock of such Person valued at the
greater of its voluntary or involuntary maximum fixed repurchase price plus
accrued and unpaid dividends. For purposes hereof, the "maximum fixed
repurchase price" of any Redeemable Capital Stock which does not have a
fixed repurchase price shall be calculated in accordance with the terms of
such Redeemable Capital Stock as if such Redeemable Capital Stock were
purchased on any date on which Indebtedness shall be required to be
determined pursuant to this Indenture, and if such price is based upon, or
measured by, the fair market value of such Redeemable Capital Stock, such
fair market value shall be determined in good faith by the board of
directors of the issuer of such Redeemable Capital Stock.
"Indenture" means this instrument as originally executed and
as it may from time to time be supplemented or amended by one or more
indentures supplemental hereto entered into pursuant to the applicable
provisions hereof.
"Indenture Obligations" means the obligations of the Issuers
and any other obligors hereunder or under the Notes, to pay principal of
(and premium, if any) and interest on the Notes when due and payable at
Maturity, and all other amounts due or to become due under or in
connection with this Indenture, the Notes and the performance by the
Issuers, the Security Parties, Brant-Allen and any other obligors
hereunder of all other obligations to the Trustee (including all amounts
due to the Trustee under Section 606 hereof) and the Holders under this
Indenture and the Notes, according to the terms hereof and thereof.
"Independent Valuation Agent" means any nationally recognized
investment banking firm, auditing or accounting firm and, with respect to
valuation of timberlands, any entity nationally recognized for providing
appraisals or valuations of timberlands.
"Initial Notes" has the meaning specified in the recitals to
this Indenture.
"Intercreditor Agreement" means the intercreditor agreement
dated as of the Closing Date among the Trustee, the Company, Brant-Allen
and the Agent Bank.
"Interest Payment Date," when used with respect to any Note,
means the Stated Maturity of an installment of interest on such Note.
"Interest Rate Agreements" means any interest rate protection
agreements and other types of interest rate hedging agreements (including,
without limitation, interest rate swaps, caps, floors, collars and similar
agreements) and other related agreements entered into in the ordinary
course of business and designed to protect against or manage exposure to
fluctuations in interest rates.
"Investment" means, with respect to any Person, any direct or
indirect advance, loan or other extension of credit or capital
contribution to (by means of any transfer of cash or other property to
others or any payment for property or services for the account or use of
others), or any purchase, acquisition or ownership by such Person of any
Capital Stock, bonds, notes, debentures or other securities or evidences
of Indebtedness issued or owned by, any other Person and all other items
that would be classified as investments on a balance sheet prepared in
accordance with GAAP. In addition, the fair market value of the net
assets of any Restricted Subsidiary at the time that such Restricted
Subsidiary is designated an Unrestricted Subsidiary shall be deemed to be
an "Investment" made by such Person in such Unrestricted Subsidiary at
such time. "Investments" shall exclude trade credit on commercially
reasonable terms in accordance with normal trade practices.
"Investment Grade" means a rating of the Notes by either S&P
or Moody's, each such rating being in one of such agency's four highest
generic rating categories that signifies investment grade (i.e., BBB- (or
the equivalent) or higher by S&P and Baa3 (or the equivalent) or higher
by Moody's); provided, in each case, such ratings are publicly available;
provided further that in the event Moody's or S&P is no longer in
existence, for purposes of determining whether the Notes are rated
"Investment Grade," such organization may be replaced by a nationally
recognized statistical rating organization (as defined in Rule 436 under
the Securities Act) designated by the Company, notice of which
designation shall be given to the Trustee.
"Issuers" means the Company and FinCo.
"Issuer Request" or "Issuer Order" means a written request or
order signed in the name of each of the Company and FinCo, by its
Chairman of the Board, its Chief Executive Officer, its President, its
Chief Operating Officer, its Chief Financial Officer, any Vice President,
its Treasurer or an Assistant Treasurer, and delivered to the Trustee.
"Lien" means any mortgage, deed of trust, charge, pledge,
lien (statutory or otherwise), privilege, security interest,
hypothecation, assignment for security, claim, or preference or priority
or other encumbrance upon or with respect to any property of any kind,
real or personal, movable or immovable, now owned or hereafter acquired.
A Person shall be deemed to own subject to a Lien any property which such
Person has acquired or holds subject to the interest of a vendor or
lessor under any conditional sale agreement, capital lease or other title
retention agreement.
"Maturity" means, with respect to any Note, the date on which
any principal of such Note becomes due and payable as therein or herein
provided, whether at the Stated Maturity with respect to such principal
or by declaration of acceleration, call for redemption or purchase or
otherwise.
"Moody's" means Moody's Investors Service, Inc. and its
successors.
"Net Cash Proceeds" means, with respect to any Asset Sale
made by any Credit Party or any of its Restricted Subsidiaries, the
proceeds thereof in the form of cash or Cash Equivalents including
payments in respect of deferred payment obligations when received in the
form of, or stock or other assets when disposed for, cash or Cash
Equivalents (except to the extent that such obligations are financed or
sold with recourse to such Credit Party or any of its Restricted
Subsidiaries), net of (i) brokerage commissions and other fees and
expenses (including fees and expenses of legal counsel and investment
banks) related to such Asset Sale, (ii) provisions for all taxes payable
by such Credit Party, any Subsidiary of such Credit Party, or any direct
or indirect owner of such Credit Party or such Subsidiary as a result of
such Asset Sale, (iii) payments made to retire Indebtedness where payment
of such Indebtedness is secured by the assets or properties the subject
of such Asset Sale, (iv) amounts required to be paid to any Person (other
than such Credit Party or any of its Restricted Subsidiaries) owning a
beneficial interest in the assets subject to the Asset Sale and (v)
appropriate amounts to be provided by such Credit Party or any of its
Restricted Subsidiaries, as the case may be, as a reserve required in
accordance with GAAP against any liabilities associated with such Asset
Sale and retained by such Credit Party or any of its Restricted
Subsidiaries, as the case may be, after such Asset Sale, including,
without limitation, pension and other post-employment benefit
liabilities, liabilities related to environmental matters and liabilities
under any indemnification obligations associated with such Asset Sale,
all as reflected in an Officers' Certificate delivered to the Trustee.
"Non-Registration Opinion and Supporting Evidence" has the
meaning specified in Section 312.
"Non-U.S. Person" means a person who is not a U.S. person as
defined in Regulation S.
"Note Register" and "Note Registrar" have the respective
meanings specified in Section 305.
"Notes" has the meaning stated in the first recital of this
Indenture.
"Offer Date" has the meaning set forth in Section 1022.
"Offer Price" has the meaning set forth in Section 1022.
"Officers' Certificate" means a certificate signed by the
Chairman of the Board, the Chief Executive Officer, the President, the
Chief Operating Officer, the Chief Financial Officer or a Vice President,
and by the Treasurer, an Assistant Treasurer, the Secretary or an
Assistant Secretary of each of the Company and Finco, and delivered to
the Trustee.
"Offshore Global Note" has the meaning set forth in Section 201.
"Offshore Note Exchange Date" has the meaning set forth in
Section 203.
"Offshore Definitive Note" has the meaning set forth in Section
201.
"Opinion of Counsel" means a written opinion of legal
counsel, who may be counsel for the Issuers, including an employee of
either of the Issuers, and who shall be reasonably acceptable to the
Trustee.
"Outstanding," when used with respect to Notes, means, as of
the date of determination, all Notes theretofore authenticated and
delivered under this Indenture, except:
(i) Notes theretofore cancelled by the Trustee or delivered to
the Trustee for cancellation;
(ii) Notes, or portions thereof, for whose payment or
repayment at the option of the Holder money in the necessary amount
has been theretofore deposited with the Trustee or any Paying Agent
(other than the Issuers) in trust or set aside and segregated in
trust by the Issuers (if either of the Issuers shall act as its own
Paying Agent) for the Holders of such Notes;
(iii) Notes, except to the extent provided in Sections 1202
and 1203, with respect to which the Issuers have effected
defeasance and/or covenant defeasance as provided in Article
Twelve; and
(iv) Notes which have been paid pursuant to Section 306 or in
exchange for or in lieu of which other Notes have been
authenticated and delivered pursuant to this Indenture, other than
any such Notes in respect of which there shall have been presented
to the Trustee proof satisfactory to it that such Notes are held by
a bona fide purchaser in whose hands such Notes are valid
obligations of the Issuers;
provided, however, that in determining whether the Holders of the requisite
principal amount of the Outstanding Notes have given any request, demand,
authorization, direction, notice, consent or waiver hereunder, and for the
purpose of making the calculations required by TIA Section 313, Notes owned
by either of the Issuers or any other obligor upon the Notes or any
Affiliate of either of Issuers or of such other obligor shall be
disregarded and deemed not to be Outstanding, except that, in determining
whether the Trustee shall be protected in making such calculation or in
relying upon any such request, demand, authorization, direction, notice,
consent or waiver, only Notes which a Responsible Officer of the Trustee
actually knows to be so owned shall be so disregarded. Notes so owned which
have been pledged in good faith may be regarded as Outstanding if the
pledgee establishes to the satisfaction of the Trustee the pledgee's right
to act with respect to such Notes and that the pledgee is not either of the
Issuers or any other obligor upon the Notes or any Affiliate of either of
the Issuers or such other obligor.
"Paying Agent" means any Person (including either of the
Issuers acting as Paying Agent) authorized by the Issuers to pay the
principal of (or premium, if any, on) or interest on any Notes on behalf
of the Issuers.
"Permitted Designee" means (i) a spouse or a lineal
descendant by blood or adoption of a Permitted Holder, (ii) trusts for
the benefit of a Permitted Holder or of any of the persons referred to in
clause (i), (iii) in the event of the death or incompetence of a
Permitted Holder, his estate, heirs, executor, administrator, committee
or other personal representative or (iv) any Person so long as a
Permitted Holder owns at least 50% of the voting power of all classes of
the Voting Stock of such Person.
"Permitted Holders" means Peter M. Brant, Joseph Allen and
their Permitted Designees.
"Permitted Indebtedness" means any of the following:
(a) Indebtedness of the Company under the Bank Credit
Agreement in an aggregate principal amount at any one time
outstanding not to exceed $120.0 million less (x) the amount of any
permanent reductions made by the Company in respect of any term
loans under the Bank Credit Agreement and (y) the amount by which
the aggregate commitment under any revolving credit facility under
the Bank Credit Agreement at any time has been permanently reduced.
(b) Indebtedness of the Issuers pursuant to the Notes or of
any Guarantor pursuant to a Guarantee of the Notes;
(c) Indebtedness of the Company or any Restricted Subsidiary
of the Company outstanding on the date of this Indenture and listed
on Schedule 101(a) hereto;
(d) Indebtedness of the Company owing to any wholly owned
Restricted Subsidiary; provided that any disposition, pledge or
transfer of any such Indebtedness to a Person (other than a
disposition, pledge or transfer to the Company or another wholly
owned Restricted Subsidiary) shall be deemed to be an incurrence of
such Indebtedness by the Company not permitted by this clause (d);
(e) Indebtedness of a Restricted Subsidiary owing to the
Company or to a wholly owned Restricted Subsidiary; provided that
(a) any disposition, pledge or transfer of any such Indebtedness to
a Person (other than a disposition, pledge or transfer to (i) the
Company or a wholly owned Restricted Subsidiary, or (ii) the Banks
as security for obligations under the Bank Credit Agreement by the
Company or a wholly owned Restricted Subsidiary that is a
Guarantor) shall be deemed to be an incurrence of such Indebtedness
by such Restricted Subsidiary not permitted by this clause (e);
(f) guarantees of any Restricted Subsidiary of the Company of
Indebtedness of the Company entered into in accordance with the
provisions of (i) the Bank Credit Agreement or (ii) Section 1011;
(g) Indebtedness of the Company under Currency Agreements,
Interest Rate Agreements and Commodity Hedge Agreements entered
into in the ordinary course of business;
(h) Indebtedness of the Company and its Restricted
Subsidiaries consisting of guarantees, indemnities or obligations
in respect of purchase price adjustments and the balance deferred
and unpaid of any purchase price in connection with the acquisition
or disposition of assets, including, without limitation, shares of
Capital Stock;
(i) any renewals, extensions, substitutions, refinancings or
replacements (each, for purposes of this clause, a "refinancing") of
any Indebtedness incurred pursuant to clauses (b) and (c) of this
definition, including any successive refinancings, so long as (i) any
such new Indebtedness shall be in a principal amount that does not
exceed the principal amount (or, if such Indebtedness being
refinanced provides for an amount less than the principal amount
thereof to be due and payable upon a declaration of acceleration
thereof, such lesser amount as of the date of determination) so
refinanced, plus the lesser of the amount of any premium required to
be paid in connection with such refinancing pursuant to the terms of
the Indebtedness refinanced or the amount of any premium reasonably
determined as necessary to accomplish such refinancing, plus, in
either case, the amount of expenses incurred in connection with such
refinancing, (ii) in the case of any refinancing of Subordinated
Indebtedness, such new Indebtedness is made subordinate to the Notes
at least to the same extent as the Indebtedness being refinanced and
(iii) such new Indebtedness (x) has an Average Life either (A) longer
than the Average Life of the Notes or (B) equal to or greater than
the Average Life of its Indebtedness being refinanced and (y) a final
Stated Maturity either (I) later than the final Stated Maturity of
the Notes or (II) no earlier than the final Stated Maturity of its
Indebtedness being refinanced;
(j) Indebtedness of the Company or its Restricted
Subsidiaries (i) incurred for the purpose of financing (A) all or
any part of the purchase price or cost of construction or
improvement of property, plant, machines, or equipment used in the
business of the Company or such Restricted Subsidiary or (B)
construction of environmental-related capital projects of the
Company and its Restricted Subsidiaries, and (ii) representing
purchase money Indebtedness and Capitalized Lease Obligations;
provided that the aggregate amount of Indebtedness incurred or
outstanding at any given time pursuant to this clause (j) shall not
exceed $7.0 million at any one time outstanding;
(k) Indebtedness of the Company owed to Brant-Allen for cash
borrowed from Brant-Allen; provided that such Indebtedness shall
(i) be subordinated in right of payment to the Notes, (ii) bear no
interest, (iii) not require principal payments of any kind on such
Indebtedness to be repaid prior to the Stated Maturity of the
Notes, and (iv) contain no provisions for remedies (including,
without limitation, any defaults or any other provisions that would
result in the acceleration of the maturity of such Indebtedness);
provided, however, that such Indebtedness may contain provisions
for an acceleration of the maturity of such Indebtedness upon the
acceleration of the Notes;
(l) Indebtedness of the Company owed to Brant-Allen in
connection with services provided by Brant-Allen to the Company
under the Management Services Agreement to the extent such
Indebtedness represents fees in excess of 1% of the revenues (net
of transportation costs) of the Company; provided that such
Indebtedness shall (a) be subordinated in right of payment to the
Notes, (b) bear no interest, (c) not require principal payments of
any kind on such Indebtedness to be repaid prior to the Stated
Maturity of the Notes, and (d) shall contain no provisions for
remedies (including, without limitation, any defaults or any other
provisions that would result in the acceleration of the maturity of
such Indebtedness);
(m) Indebtedness of the Company and any Restricted Subsidiary
in respect of (i) performance bonds of the Company or any Restricted
Subsidiary or surety bonds provided by the Company or any Restricted
Subsidiary in the ordinary course of business in connection with the
operation of its business (which Indebtedness shall be measured as
the exposure of the Company or such Restricted Subsidiary under such
bonds) and (ii) letters of credit; provided that the aggregate amount
of Indebtedness pursuant to this clause (m) shall not exceed $1.0
million at any one time outstanding; and
(n) Indebtedness of the Company in an aggregate principal
amount not in excess of $7.0 million at any one time outstanding.
"Permitted Investments" means, with respect to any Credit
Party, any of the following:
(a) Investments in Cash Equivalents;
(b) Investments in such Credit Party or any wholly owned
Restricted Subsidiary of such Credit Party; provided that, in the
case of Soucy Inc., Investments in Soucy Partners, Riviere du Loup
Finance Ltd. and Arrimage de Gros Cacouna Inc.
shall also be Permitted Investments;
(c) with respect to the Company, intercompany Indebtedness to
the extent permitted under clause (c) of the definition of
"Permitted Indebtedness";
(d) Investments made by a Credit Party or a Restricted
Subsidiary thereof in the form of any stock, bonds, notes,
debentures, partnership or joint venture interests or other
securities that are issued by a third party to such Credit Party or
Restricted Subsidiary solely as partial consideration for the
consummation of an Asset Sale that is otherwise permitted under
Section 1022;
(e) Investments consisting of loans and advances to officers
and employees of the Company for reasonable travel, relocation and
business expenses in the ordinary course of business;
(f) without duplication, Investments consisting of (i) with
respect to the Company, Indebtedness permitted pursuant to
paragraphs (d), (e), (f), (g), (k), (l) and (m) of the definition
of "Permitted Indebtedness" and (ii) with respect to the Security
Parties, Indebtedness permitted pursuant to paragraphs (a), (b) (v)
and (c)(i), (ii) and (iii) of the definition of "Permitted Security
Party Indebtedness";
(g) Investments existing on the date of this Indenture;
(h) Investments by such Credit Party or any Restricted
Subsidiary of such Credit Party in another Person, if as a result
of such Investment (i) such other Person becomes a wholly owned
Restricted Subsidiary of such Credit Party; or (ii) such other
Person is merged or consolidated with or into, transfers or conveys
all or substantially all of its assets to, or is liquidated into,
such Credit Party or a Restricted Subsidiary of such Credit Party;
(i) Investments by Timberlands in (x) shares of Capital Stock
of another Person pursuant to clause (ii) of paragraph (b) under
Section 1018 and (y) a joint venture pursuant to paragraph (d)
under Section 1022;
(j) any Investment involved in, or resulting from, the
receipt or collection by Brant-Allen of payment for newsprint or
other inventory for, or on behalf of, any Credit Party for
remittance to the beneficiary on the Business Day following
availability of funds for that payment; and
(k) without duplication of any of the foregoing, Investments
in an amount not to exceed $1.0 million at any one time
outstanding.
"Permitted Liens" means, with respect to any Credit Party,
the following types of Liens:
(a) Liens (other than Liens securing Indebtedness under the
Bank Credit Agreement) existing as of the date of the issuance of
the Notes;
(b) Liens on property or assets of such Credit Party or any
of its Restricted Subsidiaries securing (i) Indebtedness and other
obligations under the Bank Credit Agreement in a principal amount
not to exceed the principal amount of the outstanding Indebtedness
permitted by clause (i) of the definition of "Permitted
Indebtedness" and (ii) Indebtedness and other obligations under the
Timberlands Loan and the Hancock Loan;
(c) Liens on any property or assets of a Restricted
Subsidiary of such Credit Party granted in favor of such Credit
Party or any wholly owned Restricted Subsidiary of such Credit
Party;
(d) Liens on any property or assets of such Credit Party or
any Restricted Subsidiary of such Credit Party securing the Notes;
(e) any interest or title of a lessor under any Capitalized
Lease Obligation or Sale and Leaseback Transaction that is
permitted to be incurred pursuant to the terms of this Indenture;
(f) statutory Liens of landlords and carriers, warehousemen,
mechanics, suppliers, materialmen, repairmen or other like Liens
arising in the ordinary course of business of such Credit Party or
any Restricted Subsidiary of such Credit Party and with respect to
amounts not yet delinquent for more than 30 days or being contested
in good faith by appropriate proceeding, if a reserve or other
appropriate provision, if any, as shall be required in conformity
with GAAP, shall have been made therefor;
(g) Liens for taxes, assessments, government charges or
claims that are being contested in good faith by appropriate
proceedings promptly instituted and diligently conducted and if a
reserve or other appropriate provision, if any, as shall be
required in conformity with GAAP shall have been made therefor;
(h) Liens incurred or deposits made to secure the performance
of tenders, bids, leases, statutory obligations, surety and appeal
bonds, government contracts, performance bonds and other
obligations of a like nature incurred in the ordinary course of
business (other than contracts for the payment of money);
(i) easements, rights-of-way, restrictions and other similar
charges or encumbrances not interfering in any material respect
with the business of such Credit Party or any Restricted Subsidiary
of such Credit Party incurred in the ordinary course of business;
(j) Liens arising by reason of any judgment, decree or order
of any court so long as such Lien is adequately bonded and any
appropriate legal proceedings that may have been duly initiated for
the review of such judgment, decree or order shall not have been
finally terminated or the period within which such proceedings may
be initiated shall not have expired;
(k) Liens securing Acquired Indebtedness created prior to
(and not in connection with or in contemplation of) the incurrence
of such Indebtedness by such Credit Party or any Restricted
Subsidiary of such Credit Party); provided that such Lien does not
extend to any property or assets of such Credit Party or any
Restricted Subsidiary of such Credit Party other than the assets
acquired in connection with the incurrence of such Acquired
Indebtedness;
(l) Liens securing obligations of such Credit Party under
Interest Rate Agreements, Commodity Hedge Agreements or Currency
Agreements that are permitted to be incurred pursuant to the terms
of this Indenture, or any collateral for the Indebtedness to which
such Interest Rate Agreements, Commodity Hedge Agreements or
Currency Agreements relate;
(m) Liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment
insurance and other types of social security and government
insurance;
(n) Liens securing reimbursement obligations of such Credit
Party with respect to letters of credit that encumber documents and
other property relating to such letters of credit and the products
and proceeds thereof;
(o) Liens arising from purchase money mortgages and purchase
money security interests (including, where applicable, Liens
securing Indebtedness incurred in connection with purchases of
timber deeds under clause (b)(v) under "Permitted Security Party
Indebtedness") incurred by such Credit Party in the normal and
ordinary course of the business of such Credit Party; provided that
(i) the related Indebtedness shall not be secured by any property
or assets of such Credit Party or any Restricted Subsidiary of such
Credit Party other than the property and assets so acquired and
(ii) the Lien securing such Indebtedness shall be created within 60
days of such acquisition;
(p) Liens securing refinancing Indebtedness incurred under
clause (i) of the definition of "Permitted Indebtedness"; provided
that such Liens only extend to the property or assets securing the
Indebtedness being refinanced, such refinanced Indebtedness was
previously secured by similar Liens on such property or assets and
the Indebtedness (or other obligations) secured by such Liens is
not increased;
(q) Liens securing Indebtedness incurred under paragraph
(c)(v) of the definition of "Permitted Security Party
Indebtedness"; and
(r) any extension, renewal or replacement, in whole or in
part, of any Lien described in the foregoing clauses (a) through
(q); provided that any such extension, renewal or replacement shall
be no more restrictive in any material respect than the Lien so
extended, renewed or replaced and shall not extend to any
additional property or assets.
"Permitted Security Party Indebtedness" means, with respect
to each of the Security Parties, any of the following:
(a) Indebtedness of such Security Party; provided that the
proceeds of such Indebtedness are utilized by such Security Party,
directly or indirectly, to pay down Indebtedness of the Company;
(b) in addition, with respect to Timberlands, the incurrence
of the following:
(i) Indebtedness or obligations of Timberlands under
the Bank Credit Agreement, the Hancock Loan, the Timberlands
Loan, any agreements or documents entered pursuant thereto or
securing obligations thereunder and other Indebtedness
outstanding on the date of this Indenture and listed on a
Schedule 101(b) hereto;
(ii) Indebtedness of Timberlands and its Restricted
Subsidiaries under Currency Agreements or Commodity
Agreements entered into in the ordinary course of business;
(iii) Capitalized Lease Obligations of Timberlands and
its Restricted Subsidiaries and purchase money obligations of
Timberlands and its Restricted Subsidiaries; provided that
the aggregate amount of such Indebtedness does not exceed
$750,000 at any one time outstanding;
(iv) any renewals, extensions, substitutions,
refinancings or replacements (each, for purposes of this
clause, a "refinancing") of any Indebtedness incurred
pursuant to clause (i) of paragraph (b) of this definition,
including any successive refinancings, so long as (A) any
such new Indebtedness shall be in a principal amount that
does not exceed the principal amount (or, if such
Indebtedness being refinanced provides for an amount less
than the principal amount thereof to be due and payable upon
a declaration of acceleration thereof, such lesser amount as
of the date of determination) so refinanced, plus the lesser
of the amount of any premium required to be paid in
connection with such refinancing pursuant to the terms of the
Indebtedness refinanced or the amount of any premium
reasonably determined as necessary to accomplish such
refinancing, plus, in either case, the amount of expenses
incurred in connection with such refinancing, (B) in the case
of any refinancing of Subordinated Indebtedness, such new
Indebtedness is made subordinate to the Notes at least to the
same extent as the Indebtedness being refinanced and (C) such
new Indebtedness (x) has an Average Life either (I) longer
than the Average Life of the Notes or (II) equal to or
greater than the Average Life of its Indebtedness being
refinanced and (y) a final Stated Maturity either (I) later
than the final Stated Maturity of the Notes or (II) no
earlier than the final Stated Maturity of the Indebtedness
being refinanced;
(v) Indebtedness of Timberlands and its Restricted
Subsidiaries (i) for the purpose of financing all or any part
of the purchase price of timber deeds or (ii) in respect of
performance bonds of Timberlands and its Restricted
Subsidiaries or surety bonds provided by Timberlands and its
Restricted Subsidiaries incurred in the ordinary course of
business in connection with the operation of its business
(which Indebtedness shall be measured as the exposure of
Timberlands and such Restricted Subsidiaries under such bonds);
provided that the aggregate amount of Indebtedness incurred
pursuant to this sub-clause (v) shall not exceed $1.5 million
outstanding at any given time;
(vi) the incurrence of Indebtedness by Timberlands for
the purchase by it of timberlands acreage; provided that
prior to each such incurrence that, individually, or together
with other incurrences of such Indebtedness since the Closing
Date or since the date of the most recent valuation required
by this clause (vi), as the case may be, exceeds $3.0
million, Timberlands shall obtain a valuation of a recognized
Independent Valuation Agent certifying that, after the
consummation of such transaction, (x) Timberlands would have
an Equity Value equal to or greater than $28 million (less
the aggregate amount of all income taxes paid by Timberlands
since the Closing Date in connection with the sales of
timberlands acreage) and (y) the total amount of Timberlands'
consolidated Indebtedness shall not exceed 70% of an amount
equal to the sum of its Equity Value and such total
Indebtedness; and provided further that all Indebtedness
incurred pursuant to this sub-clause (vi) shall not exceed
$10.0 million outstanding at any given time;
(vii) the incurrence of Indebtedness by a joint venture
of Timberlands created in accordance with paragraph (d) under
Section 1022; provided that prior to each such incurrence
that, individually, or together with other incurrences of
such Indebtedness since the Closing Date or since the date of
the most recent valuation required by this clause (vii), as
the case may be, exceeds $3.0 million, Timberlands shall
obtain a valuation of a recognized Independent Valuation
Agent certifying that, after the consummation of such
transaction, the total amount of such joint venture's
Indebtedness shall not exceed 50% of an amount equal to the
sum of its Equity Value and such total Indebtedness;
(viii)Indebtedness of Timberlands owing to any wholly
owned Restricted Subsidiary; provided that any disposition,
pledge or transfer of any such Indebtedness to a Person
(other than a disposition, pledge or transfer to Timberlands
or another wholly owned Restricted Subsidiary) shall be
deemed to be an incurrence of such Indebtedness by
Timberlands not permitted by this clause (viii); and
(ix) Indebtedness of a wholly owned Restricted Subsidiary
owing to Timberlands or to a wholly owned Restricted
Subsidiary; provided that any disposition, pledge or transfer
of any such Indebtedness to a Person (other than a disposition,
pledge or transfer to Timberlands or a wholly owned Restricted
Subsidiary) shall be deemed to be an incurrence of such
Indebtedness by such Restricted Subsidiary not permitted by
this clause (ix).
(c) in addition, with respect to Soucy Inc., the incurrence
of the following:
(i) the incurrence of Indebtedness by Soucy Partners
owed to Soucy Inc. and to the other partners of Soucy
Partners for cash borrowed from such entities; provided that
such Indebtedness (A) shall bear no interest, (B) shall not
require principal payments of any kind on such Indebtedness
to be repaid prior to the Stated Maturity of the Notes, and
(C) shall contain no provisions for remedies (including,
without limitation, any defaults or any other provisions that
would result in the acceleration of the maturity of such
Indebtedness); provided, that such Indebtedness may contain
provisions for an acceleration of the maturity of such
Indebtedness upon the acceleration of the Notes;
(ii) Indebtedness of Soucy Inc. owing to any Restricted
Subsidiary; provided that any disposition, pledge or transfer
of any such Indebtedness to a Person (other than a
disposition, pledge or transfer to Soucy Inc. or another
Restricted Subsidiary) shall be deemed to be an incurrence of
such Indebtedness by Soucy Inc. not permitted by this clause
(ii);
(iii) Indebtedness of a Restricted Subsidiary owing to
Soucy Inc. or to a wholly owned Restricted Subsidiary;
provided that any disposition, pledge or transfer of any such
Indebtedness to a Person (other than a disposition, pledge or
transfer to Soucy Inc. or a wholly owned Restricted
Subsidiary) shall be deemed to be an incurrence of such
Indebtedness by such Restricted Subsidiary not permitted by
this clause (iii);
(iv) Indebtedness of Soucy Inc. and its Restricted
Subsidiaries under Currency Agreements, Interest Agreements
and Commodity Hedge Agreements entered into in the ordinary
course of business; and
(v) other Indebtedness of Soucy Inc. and its Restricted
Subsidiaries in an aggregate principal amount not in excess
of $72.0 million at any one time outstanding (including
Indebtedness outstanding on the Closing Date); provided that
Soucy Inc. will not, and will not permit any of its
Restricted Subsidiaries to, incur any Indebtedness under this
clause (c)(v) for the purposes of financing any dividend or
distribution to its equityholders or to make any Investment
in any Person (other than its Restricted Subsidiaries and in
the other Credit Parties and their Restricted Subsidiaries).
"Person" means any individual, corporation, limited liability
company, partnership, joint venture, association, joint-stock company,
trust, unincorporated organization or government or any agency or
political subdivision thereof.
"Definitive Notes" has the meaning set forth in Section 201.
"Place of Payment" means the office or agency maintained by
the Issuers where the principal of (and premium, if any, on) and interest
on the Notes are payable as specified in Section 1002.
"Predecessor Note" of any particular Note, means every
previous Note evidencing all or a portion of the same debt as that
evidenced by such particular Note; and, for the purposes of this
definition, any Note authenticated and delivered under Section 306 in
exchange for or in lieu of a mutilated, destroyed, lost or stolen Note
shall be deemed to evidence the same debt as the mutilated, destroyed,
lost or stolen Note.
"Preferred Stock" means, with respect to any Person, any and
all shares, interests, participations or other equivalents (however
designated) of such Person's preferred or preference stock whether now
outstanding, or issued after the Closing Date, and including, without
limitation, all classes and series of preferred or preference stock of
such Person.
"Private Placement Legend" has the meaning set forth in Section
203.
"Public Equity Offering" means an offer and sale of common
stock (which is Qualified Capital Stock) of the Company pursuant to a
registration statement that has been declared effective by the Commission
pursuant to the Securities Act (other than a registration statement on
Form S-8 or otherwise relating to equity securities issuable under any
employee benefit plan of the Company).
"Qualified Capital Stock" of any Person means any and all
Capital Stock of such Person other than Redeemable Capital Stock.
"Qualified Institutional Buyer" means "Qualified Institutional
Buyer" within the meaning of Rule 144A under the Securities Act.
"Redeemable Capital Stock" means any class or series of
Capital Stock that, either by its terms, by the terms of any security
into which it is convertible or exchangeable or by contract or otherwise,
is, or upon the happening of an event or passage of time would be,
required to be redeemed prior to the final Stated Maturity of the Notes
or is redeemable at the option of the Holder thereof at any time prior to
such final Stated Maturity, or is convertible into or exchangeable for
debt securities at any time prior to such final Stated Maturity.
"Redemption Date," when used with respect to any Note to be
redeemed, in whole or in part, means the date fixed for such redemption
by or pursuant to this Indenture.
"Redemption Price," when used with respect to any Note to be
redeemed, in whole or in part, means the price at which it is to be
redeemed pursuant to this Indenture.
"Registration Rights Agreement" means the Registration Rights
Agreement dated as of December 1, 1997, between the Issuers and the
initial purchasers of the Initial Notes.
"Registration Statement" means the Registration Statement as
defined in the Registration Rights Agreement.
"Regular Record Date" has the meaning specified in Section 301.
"Regulation S Certificate" has the meaning specified in Section
312.
"Responsible Officer," when used with respect to the Trustee,
means any vice president, any assistant secretary, any assistant
treasurer, any trust officer or assistant trust officer, or any other
officer of the Trustee customarily performing functions similar to those
performed by any of the above-designated officers, and also means, with
respect to a particular corporate trust matter, any other officer to whom
such matter is referred because of his or her knowledge of and
familiarity with the particular subject.
"Restricted Payment" means, with respect to any Credit Party
other than Soucy Inc., any of the following:
(i) the declaration or payment of any dividend on, or the
making of any distribution to holders of, any shares of the Capital
Stock of such Credit Party (other than dividends or distributions
payable solely in shares of its Qualified Capital Stock or in
options, warrants or other rights to acquire such shares of
Qualified Capital Stock);
(ii) the purchase, redemption or other acquisition or
retirement for value, directly or indirectly, of any shares of
Capital Stock of such Credit Party or any Capital Stock of any
Affiliate of such Credit Party (other than Capital Stock of any
wholly owned Subsidiary) or any options, warrants or other rights
to acquire such shares of Capital Stock;
(iii) the making of any principal payment on, or the
repurchase, redemption, defeasance or other acquisition or
retirement for value of, prior to any scheduled principal payment,
sinking fund payment or maturity, any Subordinated Indebtedness;
(iv) the making of any Investment (other than any Permitted
Investment) in any Person; or
(v) the making of any payments to any Affiliate of the
Company (other than the Company and its Subsidiaries) as
compensation for management services, except through the issuance
of Qualified Capital Stock of the Company.
"Restricted Subsidiary" means, with respect to any Credit
Party, any Subsidiary of such Credit Party other than an Unrestricted
Subsidiary of such Credit Party.
"Rule 144A Certificate" has the meaning specified in Section 312.
"Sale and Leaseback Transaction" means any transaction or
series of related transactions pursuant to which any Credit Party or a
Subsidiary of such Credit Party sells or transfers any property or asset
in connection with the leasing, or the resale against installment
payments, of such property or asset to the seller or transferor.
"S&P" means Standard and Poor's Ratings Group, a division of
McGraw-Hill, Inc., and its successors.
"Securities Act" means the Securities Act of 1933, as amended.
"Security Parties" means Timberlands and Soucy Inc.
"Shelf Registration Statement" means the Shelf Registration
Statement as defined in the Registration Rights Agreement.
"Soucy Inc." means F.F. Soucy, Inc.
"Soucy Collateral" means 65% of the issued and outstanding
Capital Stock of Soucy Inc.
"Soucy Partners" means F.F. Soucy, Inc. & Partners, Limited
Partnership.
"Soucy Restricted Payment" means, with respect to Soucy Inc.,
any of the following:
(i) the declaration or payment of any dividend on, or the
making of any distribution to holders of, any shares of the Capital
Stock of Soucy Inc. (other than dividends or distributions payable
solely in shares of its Qualified Capital Stock or in options,
warrants or other rights to acquire such shares of Qualified
Capital Stock);
(ii) the purchase, redemption or other acquisition or
retirement for value, directly or indirectly, of any shares of
Capital Stock of Soucy Inc. or any Capital Stock of any Affiliate
of Soucy Inc. (other than Capital Stock of any wholly owned
Subsidiary) or any options, warrants or other rights to acquire
such shares of Capital Stock; or
(iii) the making of any Investment in Brant-Allen, the
Permitted Holders or any of their Affiliates (other than the other
Credit Parties and their respective Subsidiaries); provided that
any Investment involved in, or resulting from, the receipt or
collection by Brant-Allen of payment for newsprint or other
inventory for, or on behalf of, Soucy Inc. for remittance to the
beneficiary on the Business Day following availability of funds for
that payment shall not be an Investment prohibited by this clause
(iii).
"Special Record Date" for the payment of any Defaulted
Interest on the Notes means a date fixed by the Trustee pursuant to
Section 307.
"Stated Maturity" means, when used with respect to any Note
or any installment of interest thereon, the date specified in such Note
as the fixed date on which the principal of such Note or such installment
of interest is due and payable, and, when used with respect to any other
Indebtedness, means the date specified in the instrument governing such
Indebtedness as the fixed date on which the principal of such
Indebtedness, or any installment of interest thereon, is due and payable.
"Subordinated Indebtedness" means, with respect to
Indebtedness of (i) the Company, Indebtedness that is expressly
subordinated in right of payment to the Notes, (ii) Timberlands,
Indebtedness that is expressly subordinated to the Hancock Loan (or other
Indebtedness of Timberlands of the same ranking) and (iii) Soucy Inc.,
Indebtedness that is expressly subordinated to the Indebtedness of Soucy
Inc. under a bank credit agreement with National Bank of Canada, in
effect as of the Closing Date (or other Indebtedness of Soucy Inc.
with the same ranking).
"Subsidiary" means, with respect to any Credit Party, any
Person a majority of the equity ownership or Voting Stock of which is at
the time owned, directly or indirectly, by such Credit Party or by one or
more other Subsidiaries of such Credit Party or by such Credit Party and
one or more other Subsidiaries of such Credit Party.
"Surviving Entity" has the meaning set forth in Section 801.
"Timberlands" means Bear Island Timberlands Company, L.L.C.
"Timberlands Collateral" means all of the issued and
outstanding Capital Stock of Timberlands owned by Brant-Allen.
"Timberlands Loan" means the $32 million senior secured
two-year term loan facility and $3 million revolving credit facility
pursuant to the agreement dated as of the Closing Date among Brant-Allen,
the lenders from time to time parties thereto and Toronto Dominion
(Texas), Inc., as administrative agent.
"Total Committed Debt" means, with respect to any Credit
Party, at any date, the total Funded Debt of such Credit Party (and its
Restricted Subsidiaries), including, with respect to the Company, without
limitation, the Notes and unused commitments under the Bank Credit
Agreement.
"Total Market Value of Equity" of any Person means, as of any
date of determination, the sum of (1) the product of (i) the aggregate
number of outstanding primary shares of common stock of such Person
(which shall not include any options or warrants on, or securities
convertible or exchangeable into, shares of such common stock) and (ii)
the average closing price of such common stock over the 20 consecutive
trading days immediately preceding such date of determination, plus (2)
the stated liquidation preference of any outstanding shares of preferred
stock of such Person outstanding as of such date of determination.
"Trust Indenture Act" or "TIA" means the Trust Indenture Act
of 1939 as in force at the date as of which this Indenture was executed,
except as provided in Section 905.
"Trustee" means the Person named as the "Trustee" in the
first paragraph of this Indenture until a successor Trustee shall have
become such pursuant to the applicable provisions of this Indenture, and
thereafter "Trustee" shall mean or include each Person who is then a
Trustee hereunder.
"United States" means the United States of America (including
the states and the District of Columbia), its territories, its
possessions and other areas subject to its jurisdiction.
"Unrestricted Subsidiary" means, with respect to any Credit
Party other than Soucy Inc., (a) any Subsidiary of such Credit Party, that
at the time of determination shall be an Unrestricted Subsidiary (as
designated by the Board of Directors of any such Credit Party, as provided
below) and (b) any Subsidiary of any such Unrestricted Subsidiary. The
Board of Directors of any Credit Party other than Soucy Inc. may designate
any Subsidiary (including any newly acquired or newly formed Subsidiary) to
be an Unrestricted Subsidiary so long as (i) neither such Credit Party nor
any Restricted Subsidiary is directly or indirectly liable for any
Indebtedness of such Subsidiary, (ii) no default with respect to any
Indebtedness of such Subsidiary would permit (upon notice, lapse of time or
otherwise) any holder of any other Indebtedness of such Credit Party or any
Restricted Subsidiary to declare a default on such other Indebtedness or
cause the payment thereof to be accelerated or payable prior to its stated
maturity, (iii) any Investment in such Subsidiary made as a result of
designating such Subsidiary an Unrestricted Subsidiary will not violate the
provisions of Section 1026, (iv) neither such Credit Party nor any
Restricted Subsidiary has a contract, agreement or obligation of any kind,
whether written or oral, with such Subsidiary other than those that might
be obtained at the time from persons who are not Affiliates of such Credit
Party, and (v) neither such Credit Party nor any Restricted Subsidiary has
any obligation (1) to subscribe for additional shares of Capital Stock or
other equity interest in such Subsidiary, or (2) to maintain or preserve
such Subsidiary's financial condition or to cause such Subsidiary to
achieve certain levels of operating results. Soucy Inc. will not designate
any of its Subsidiaries to be an Unrestricted Subsidiary. Any such
designation by the Board of Directors of such Credit Party shall be
evidenced to the Trustee by filing a board resolution with the Trustee
giving effect to such designation. The Board of Directors of such Credit
Party may designate any Unrestricted Subsidiary as a Restricted Subsidiary
if immediately after giving effect to such designation, there would be no
Default or Event of Default under this Indenture and the Company could
incur $1.00 of additional Indebtedness (other than Permitted Indebtedness)
pursuant to clause (iii) of Section 1008.
"U.S. Government Obligations" means securities that are (x)
direct obligations of the United States of America for the timely payment
of which its full faith and credit is pledged or (y) obligations of a
Person controlled or supervised by and acting as an agency or
instrumentality of the United States of America the timely payment of
which is unconditionally guaranteed as a full faith and credit obligation
by the United States of America, which, in either case, are not callable
or redeemable at the option of the issuer thereof, and shall also include
a depository receipt issued by a bank (as defined in Section 3(a)(2) of
the Securities Act), as custodian with respect to any such U.S.
Government Obligation or a specific payment of principal of or interest
on any such U.S. Government Obligation held by such custodian for the
account of the holder of such depository receipt; provided that (except
as required by law) such custodian is not authorized to make any
deduction from the amount payable to the holder of such depository
receipt from any amount received by the custodian in respect of the U.S.
Government Obligation or the specific payment of principal of or interest
on the U.S.
Government Obligation evidenced by such depository receipt.
"U.S. Global Note" has the meaning set forth in Section 201.
"U.S. Definitive Note" has the meaning set forth in Section 201.
"Vice President," when used with respect to either of the
Issuers or the Trustee, means any vice president, whether or not
designated by a number or a word or words added before or after the title
"vice president."
"Voting Stock" means any class or classes of Capital Stock
pursuant to which the holders thereof have the general voting power under
ordinary circumstances to elect at least a majority of the board of
directors, managers or trustees of any Person (irrespective of whether or
not, at the time, stock of any other class or classes shall have, or
might have, voting power by reason of the happening of any contingency).
"Wood Supply Agreement" means the agreement for the supply of
wood dated as of the Closing Date between Timberlands and the Company.
SECTION 102. Compliance Certificates and Opinions.
Upon any application or request by the Issuers to the Trustee
to take any action under any provision of this Indenture, the Issuers
shall furnish to the Trustee an Officers' Certificate stating that all
conditions precedent, if any, provided for in this Indenture (including
any covenant compliance with which constitutes a condition precedent)
relating to the proposed action have been complied with and an Opinion of
Counsel to the effect that in the opinion of such counsel all such
conditions precedent, if any, have been complied with, except that in the
case of any such application or request as to which the furnishing of any
such documents is specifically required by any provision of this
Indenture relating to such particular application or request, no
additional certificate or opinion need be furnished.
Every certificate or opinion with respect to compliance with
a covenant or condition provided for in this Indenture (other than
pursuant to Section 1007) shall include:
(1) a statement to the effect that each individual or firm
signing such certificate or opinion has read such covenant or
condition and the definitions herein relating thereto;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(3) a statement to the effect that, in the opinion of each
such individual or such firm, he or she has or they have made such
examination or investigation as is necessary to enable him, her or
them to express an informed opinion as to whether or not such
covenant or condition has been complied with; and
(4) a statement as to whether, in the opinion of each such
individual or such firm, such covenant or condition has been
complied with.
SECTION 103. Form of Documents Delivered to Trustee.
In any case where several matters are required to be
certified by, or covered by an opinion of, any specified Person, it is
not necessary that all such matters be certified by, or covered by the
opinion of, only one such Person, or that they be so certified or covered
by only one document, but one such Person may certify or give an opinion
with respect to some matters and one or more other such Persons as to
other matters, and any such Person may certify or give an opinion as to
such matters in one or several documents.
Any certificate or opinion of an officer of the Issuers may
be based, insofar as it relates to legal matters, upon a certificate or
opinion of, or representations by, counsel, unless such officer knows, or
in the exercise of reasonable care should know, that the certificate or
opinion or representations with respect to the matters upon which his or
her certificate or opinion is based are erroneous. Any such certificate
or Opinion of Counsel may be based, insofar as it relates to factual
matters, upon a certificate or opinion of, or representations by, an
officer or officers of the Issuers stating that the information with
respect to such factual matters is in the possession of the Issuers,
unless such counsel knows, or in the exercise of reasonable care should
know, that the certificate or opinion or representations with respect to
such matters are erroneous.
Where any Person is required to make, give or execute two or
more applications, requests, consents, certificates, statements, opinions
or other instruments under this Indenture, they may, but need not, be
consolidated and form one instrument.
SECTION 104. Acts of Holders.
(a) Any request, demand, authorization, direction, notice,
consent, waiver or other action provided by this Indenture to be given or
taken by Holders of the Outstanding Notes may be embodied in and
evidenced by one or more instruments of substantially similar tenor
signed by such Holders in person or by agents duly appointed in writing.
Except as herein otherwise expressly provided, such action shall become
effective when such instrument or instruments are delivered to the
Trustee and, where it is hereby expressly required, to the Issuers. Such
instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of the Holders
signing such instrument or instruments. Proof of execution of any such
instrument or of a writing appointing any such agent shall be sufficient
for any purpose of this Indenture and conclusive in favor of the Trustee
and the Issuers, if made in the manner provided in this Section.
(b) The fact and date of the execution by any Person of any
such instrument or writing may be proved by the affidavit of a witness of
such execution or by a certificate of a notary public or other officer
authorized by law to take acknowledgments of deeds, certifying that the
individual signing such instrument or writing acknowledged to him the
execution thereof. Where such execution is by a signer acting in a
capacity other than his or her individual capacity, such certificate or
affidavit shall also constitute sufficient proof of authority. The fact
and date of the execution of any such instrument or writing, or the
authority of the Person executing the same, may also be proved in any
other manner which the Trustee deems sufficient.
(c) The principal amount and serial numbers of Notes held by
any Person, and the date of holding the same, shall be proved by the Note
Register.
(d) If the Issuers shall solicit from the Holders of Notes
any request, demand, authorization, direction, notice, consent, waiver or
other Act, the Issuers may, at their option, by or pursuant to Board
Resolution, fix in advance a record date for the determination of Holders
entitled to give such request, demand, authorization, direction, notice,
consent, waiver or other Act, but the Issuers shall have no obligation to
do so. Notwithstanding TIA Section 316(c), such record date shall be the
record date specified in or pursuant to such Board Resolution, which
shall be a date not earlier than the date 30 days prior to the first
solicitation of Holders generally in connection therewith and not later
than the date such solicitation is completed. If such a record date is
fixed, such request, demand, authorization, direction, notice, consent,
waiver or other Act may be given before or after such record date, but
only the Holders of record at the close of business on such record date
shall be deemed to be Holders for the purposes of determining whether
Holders of the requisite proportion of Outstanding Notes have authorized
or agreed or consented to such request, demand, authorization, direction,
notice, consent, waiver or other Act, and for that purpose the
Outstanding Notes shall be computed as of such record date; provided that
no such authorization, agreement or consent by the Holders on such record
date shall be deemed effective unless it shall become effective pursuant
to the provisions of this Indenture not later than eleven months after
the record date.
(e) Any request, demand, authorization, direction, notice,
consent, waiver or other Act of the Holder of any Note shall bind every
future Holder of the same Note and the Holder of every Note issued upon
the registration of transfer thereof or in exchange therefor or in lieu
thereof in respect of anything done, omitted or suffered to be done by
the Trustee or the Issuers in reliance thereon, whether or not notation
of such action is made upon such Note.
SECTION 105. Notices, etc., to Trustee, Issuers and Agent Bank.
Any request, demand, authorization, direction, notice,
consent, waiver or Act of Holders or other documents provided or
permitted by this Indenture (or related documentation, including, without
limitation, the Collateral Documents) to be made upon, given or furnished
to, or filed with,
(1) the Trustee by any Holder or by the Issuers shall be
sufficient for every purpose hereunder if made, given, furnished or
filed in writing to or with the Trustee at its Corporate Trust
Office, Attention: Corporate Trust Trustee Administration,
(2) the Issuers by the Trustee or by any Holder shall be
sufficient for every purpose hereunder (unless otherwise herein
expressly provided) if in writing and mailed, first-class postage
prepaid, to the Issuers addressed to them at the address of their
principal office, for the attention of the Chief Financial Officer,
specified in the first paragraph of this Indenture or at any other
address previously furnished in writing to the Trustee by the
Issuers, or
(3) the Agent Bank by the Issuers, the Trustee or any Holder
shall be sufficient for any purpose hereunder if made, given,
furnished or delivered, in writing to or with the Agent Bank
addressed to it as set forth in the Bank Credit Agreement, or at
any other address previously furnished in writing to the Issuers
and the Trustee by the Agent Bank.
SECTION 106. Notice to Holders; Waiver.
Where this Indenture provides for notice of any event to
Holders of Notes by the Issuers or the Trustee, such notice shall be
sufficiently given (unless otherwise herein expressly provided) if in
writing and mailed, first-class postage prepaid, to each such Holder
affected by such event, at its address as it appears in the Note
Register, not later than the latest date, and not earlier than the
earliest date, prescribed for the giving of such notice. In any case
where notice to Holders is given by mail, neither the failure to mail
such notice, nor any defect in any notice so mailed, to any particular
Holder shall affect the sufficiency of such notice with respect to other
Holders. Any notice mailed to a Holder in the manner herein prescribed
shall be conclusively deemed to have been received by such Holder,
whether or not such Holder actually receives such notice.
In case, by reason of the suspension of or irregularities in
regular mail service or by reason of any other cause, it shall be
impractical to mail notice of any event to Holders when such notice is
required to be given pursuant to any provision of this Indenture, then
any manner of giving such notice as shall be satisfactory to the Trustee
shall be deemed to be sufficient giving of such notice for every purpose
hereunder.
Where this Indenture provides for notice in any manner, such
notice may be waived in writing by the Person entitled to receive such
notice, either before or after the event, and such waiver shall be the
equivalent of such notice. Waivers of notice by Holders shall be filed
with the Trustee, but such filing shall not be a condition precedent to
the validity of any action taken in reliance upon such waiver.
SECTION 107. Effect of Headings and Table of Contents.
The Article and Section headings herein and the Table of
Contents are for convenience only and shall not affect the construction
hereof.
SECTION 108. Successors and Assigns.
All covenants and agreements in this Indenture by the Issuers
shall bind their successors and assigns, whether so expressed or not.
SECTION 109. Separability Clause.
In case any provision in this Indenture or in any Note shall
be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.
SECTION 110. Benefits of Indenture.
Nothing in this Indenture or in the Notes, express or
implied, shall give to any Person, other than the parties hereto, any
Authenticating Agent, any Paying Agent, any Notes Registrar and their
successors hereunder and the Holders any benefit or any legal or
equitable right, remedy or claim under this Indenture.
SECTION 111. Governing Law.
This Indenture and the Notes shall be governed by and
construed in accordance with the law of the State of New York. Upon the
effectiveness of the Shelf Registration Statement or the consummation of
the Exchange Offer, this Indenture will be subject to the provisions of
the Trust Indenture Act that are required to be part of this Indenture
and shall, to the extent applicable, be governed by such provisions; and,
if and to the extent that any provision of this Indenture limits,
qualifies or conflicts with any other provision included in this
Indenture which is required to be included in this Indenture by any
of Sections 310 to 318, inclusive, of the Trust Indenture Act, such
required provision shall control.
SECTION 112. Legal Holidays.
In any case where any Interest Payment Date or Stated
Maturity or Maturity of any Note shall not be a Business Day at any Place
of Payment, then (notwithstanding any other provision of this Indenture
or of any Note) payment of interest or principal (and premium, if any)
need not be made at such Place of Payment on such date, but may be made
on the next succeeding Business Day at such Place of Payment with the
same force and effect as if made on the Interest Payment Date or at the
Stated Maturity or Maturity; provided that no interest shall accrue for
the period from and after such Interest Payment Date, Stated Maturity or
Maturity, as the case may be.
SECTION 113. Trust Indenture Act Controls.
If any provision of this Indenture limits, qualifies or
conflicts with another provision which is required to be included in this
Indenture by the TIA, the provision required by the TIA shall control.
SECTION 114. No Recourse Against Others.
A director, officer, employee, stockholder, incorporator or
member, as such, of Brant-Allen or any Credit Party and the subsidiaries
of the Credit Parties (other than a Guarantor) shall not have any
liability for any obligations of the Issuers under the Notes, any
Guarantee or this Indenture, as applicable, or for any claim based on, in
respect of or by reason of such obligations or their creation. By
accepting a Note, each Holder shall waive and release all such liability.
The waiver and release shall be part of the consideration for the issue
of the Notes.
ARTICLE TWO
NOTE FORMS
SECTION 201. Forms Generally.
The Initial Notes shall be known as the "10% Senior Secured
Notes due 2007" and the Exchange Notes shall be known as the "10% Series
B Senior Secured Notes due 2007," in each case, of the Issuers. The Notes
and the Trustee's certificate of authentication shall be in substantially
the forms set forth in this Article, with such appropriate insertions,
omissions, substitutions and other variations as are required or
permitted by this Indenture, and may have such letters, numbers or other
marks of identification and such legends or endorsements placed thereon
as may be required to comply with the rules of any securities exchange or
as may, consistently herewith, be determined by the officers of the
Issuers executing such Notes, as evidenced by their execution of the
Notes. Any portion of the text of any Note may be set forth on the
reverse thereof, with an appropriate reference thereto on the face of the
Note.
The definitive Notes shall be printed, lithographed or
engraved on steel-engraved borders or may be produced in any other
manner, all as determined by the officers of the Issuers executing such
Notes, as evidenced by their execution of such Notes.
Initial Notes offered and sold in reliance on Rule 144A under
the Securities Act may be issued in the form of one or more permanent
global Notes in substantially the form set forth in Exhibit A and contain
each of the legends set forth in Section 203 (the "U.S. Global Note"),
deposited with the Trustee or its duly appointed agent, as custodian for
the Depositary or its nominee, duly executed by the Issuers and
authenticated by the Trustee as hereinafter provided. The aggregate
principal amount of the U.S. Global Note may from time to time be
increased or decreased by adjustments made on the records of the Trustee
or its duly appointed agent, as custodian for the Depositary or its
nominee, and noted on the schedule to the U.S. Global Note, as
hereinafter provided; provided that, regardless of such adjustments and
notations, the aggregate principal amount of the Notes shall not exceed
the aggregate principal amount of the Notes then Outstanding and shall in
no event exceed $100,000,000.
Initial Notes offered and sold in offshore transactions in
reliance on Regulation S under the Securities Act shall be issued in the
form of a single permanent global Note in substantially the form set
forth in Exhibit A (the "Offshore Global Note") deposited with the
Trustee or its duly appointed agent, as custodian for the Depositary or
its nominee, duly executed by the Issuers and authenticated by the
Trustee as hereinafter provided. The aggregate principal amount of the
Offshore Global Note may from time to time be increased or decreased by
adjustments made in the records of the Trustee or its duly appointed
agent, as custodian for the Depositary or its nominee, and noted on the
schedule to the U.S. Global Note, as herein provided; provided that,
regardless of such adjustments and notations, the aggregate principal
amount of the Notes shall not exceed the aggregate principal amount of
the Notes then Outstanding and shall in no event exceed $100,000,000.
Initial Notes issued pursuant to Section 305 in exchange for or
upon transfer of beneficial interests in the U.S. Global Note or the
Offshore Global Note shall be (i) in the form of permanent certificated
Notes substantially in the form set forth in Exhibit A and contain the
Private Placement Legend as set forth in Section 203 (the "U.S. Definitive
Notes") or (ii) in the form of permanent certificated Notes substantially
in the form set forth in Exhibit A (the "Offshore Definitive Notes"),
respectively, as hereinafter provided.
The Offshore Definitive Notes and the U.S. Definitive Notes are
sometimes collectively herein referred to as the "Definitive Notes." The
U.S. Global Note and the Offshore Global Note are sometimes collectively
referred to as the "Global Notes."
Exchange Notes shall be issued substantially in the form set
forth in Exhibit A.
SECTION 202. Form of Trustee's Certificate of Authentication.
Subject to Section 611, the Trustee's certificate of
authentication shall be in substantially the following form:
This is one of the Notes referred to in the within-mentioned
Indenture.
CRESTAR BANK,
as Trustee
Dated: December 1, 1997 By: s/s S. A. McMahon
____________________
Authorized Signatory
SECTION 203. Restrictive Legends.
Unless and until (i) an Initial Note is sold pursuant to an
effective Shelf Registration Statement or (ii) an Initial Note is
exchanged for an Exchange Note in an Exchange Offer pursuant to an
effective Exchange Offer Registration Statement, in each case pursuant to
the Registration Rights Agreement, (A) each U.S. Global Note and U.S.
Definitive Note shall bear the following legend set forth below (the
"Private Placement Legend") on the face thereof and (B) the Offshore
Definitive Notes and Offshore Global Note shall bear the Private
Placement Legend on the face thereof until at least 41 days after the
Closing Date (the "Offshore Note Exchange Date") and receipt by the
Issuers and the Trustee of a certificate substantially in the form
provided in Section 204:
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY
STATE OR OTHER SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY
INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED,
TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION OR UNLESS THE TRANSACTION IS EXEMPT
FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF
(1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS
DEFINED IN RULE 144A UNDER THE SECURITIES ACT ("RULE 144A")) OR (B)
IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS SECURITY IN AN
"OFFSHORE TRANSACTION" PURSUANT TO RULE 903 OR 904 OF REGULATION S,
(2) AGREES THAT IT WILL NOT PRIOR TO (X) THE DATE WHICH IS TWO YEARS
(OR SUCH SHORTER PERIOD OF TIME AS PERMITTED BY RULE 144 UNDER THE
SECURITIES ACT OR ANY SUCCESSOR PROVISION THEREUNDER) AFTER THE LATER
OF THE ORIGINAL ISSUE DATE HEREOF (OR OF ANY PREDECESSOR OR THIS
SECURITY) OR THE LAST DAY ON WHICH THE ISSUERS OR ANY AFFILIATE OF
THE ISSUERS WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF
THIS SECURITY) AND (Y) SUCH LATER DATE, IF ANY, AS MAY BE REQUIRED BY
APPLICABLE LAWS (THE "RESALE RESTRICTION TERMINATION DATE"), OFFER,
SELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO THE ISSUERS OR
ANY SUBSIDIARY THEREOF, (B) PURSUANT TO A REGISTRATION STATEMENT
WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR
SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE
144A, TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED
INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A THAT PURCHASES FOR ITS
OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO
WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON
RULE 144A, (D) PURSUANT TO OFFERS AND SALES TO NON-U.S. PERSONS THAT
OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S
UNDER THE SECURITIES ACT, PURSUANT TO RULE 904 OF REGULATION S, OR
(E) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND (3) AGREES THAT IT WILL GIVE
TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE
SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND; PROVIDED THAT THE
ISSUERS, THE TRUSTEE, THE TRANSFER AGENT AND THE REGISTRAR SHALL HAVE
THE RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER (I) PURSUANT TO
CLAUSE (D) OR (E) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL,
CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM,
AND (II) IN EACH OF THE FOREGOING CASES, TO REQUIRE THAT A
CERTIFICATION OF TRANSFER IN THE FORM APPEARING ON THE OTHER SIDE OF
THIS SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE
TRUSTEE. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER
AFTER THE RESALE RESTRICTION TERMINATION DATE. AS USED HEREIN, THE
TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE
THE RESPECTIVE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE
SECURITIES ACT.
Each Global Note, whether or not an Initial Note, shall also
bear the following legend on the face thereof:
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK
CORPORATION ("DTC") TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF
TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS
REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT
IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER
USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL
INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN
INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN
WHOLE, BUT NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR
THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF
THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN
ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN SECTIONS 311 AND 312
OF THE INDENTURE.
SECTION 204. Form of Certificate to Be Delivered upon
Termination of Restricted Period.
On or after January 10, 1998
CRESTAR BANK
919 East Main Street, 10th Floor
Richmond, Virginia 23219
Attention: Corporate Trust Department
Re: BEAR ISLAND PAPER COMPANY, L.L.C. (the "Company")
BEAR ISLAND FINANCE COMPANY II ("FinCo" and,
together with the Company, the "Issuers")
10% Senior Secured Notes due 2007 (the "Notes")
Ladies and Gentlemen:
This letter relates to $__________ principal amount of Notes
represented by the offshore global note certificate (the "Offshore Global
Note"). Pursuant to Section 203 of the Indenture dated as of December 1,
1997 relating to the Notes (the "Indenture"), we hereby certify that (1)
we are the beneficial owner of such principal amount of Notes represented
by the Offshore Global Note and (2) we are a Non-U.S. Person to whom the
Notes could be transferred in accordance with Rule 904 of Regulation S
promulgated under the Securities Act of 1933, as amended ("Regulation
S"). Accordingly, you are hereby requested to issue an Offshore
Definitive Note representing the undersigned's interest in the principal
amount of Notes represented by the Offshore Global Note, all in the
manner provided by the Indenture.
You and the Issuers are entitled to rely upon this letter and
are irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceedings or official
inquiry with respect to the matters covered hereby. Terms used in this
certificate have the meanings set forth in Regulation S.
Very truly yours,
[Name of Holder]
By:____________________________________________________________
Authorized Signature
ARTICLE THREE
THE NOTES
SECTION 301. Amount.
The aggregate principal amount of Notes which may be
authenticated and delivered under this Indenture is limited to
$100,000,000, except for Notes authenticated and delivered upon
registration of transfer of, or in exchange for, or in lieu of, other
Notes pursuant to Section 304, 305, 306, 311, 312, 906, 1012 or 1022 or
pursuant to an Exchange Offer.
The Stated Maturity of the Notes shall be December 1, 2007,
and they shall bear interest at the rate of 10% per annum from December
1, 1997, or from the most recent Interest Payment Date to which interest
has been paid or duly provided for, payable on June 1, 1998 and
semi-annually thereafter on June 1 and December 1 in each year, until the
principal thereof is paid in full and to the Person in whose name the
Note (or any predecessor Note) is registered at the close of business on
the May 15 or November 15 immediately preceding such Interest Payment
Date (each, a "Regular Record Date"). If a payment date is a date other
than a Business Day at a place of payment, payment may be made at that
place on the next succeeding day that is a Business Day and no interest
shall accrue for the intervening period. Interest will be computed on the
Notes as specified in Section 310 hereof.
The principal of (and premium, if any) and interest on the
Notes shall be payable at the office or agency of the Issuers maintained
for such purpose in The City of New York, or at such other office or
agency of the Issuers as may be maintained for such purpose; provided,
however, that, at the option of the Issuers, interest may be paid (a) by
check mailed to addresses of the Persons entitled thereto as such
addresses shall appear on the Note Register or (b) by wire transfer to an
account in the United States maintained by the payee.
Holders shall have the right to require the Issuers to
purchase their Notes, in whole or in part, in the event of a Change of
Control pursuant to Section 1012 and in the event of certain Asset Sales
pursuant to Section 1022.
The Notes shall be redeemable as provided in Article Eleven
and in the Notes.
SECTION 302. Denominations.
The Notes shall be issuable only in registered form without
coupons and only in denominations of $1,000 and any integral multiple
thereof.
SECTION 303. Execution, Authentication, Delivery and Dating.
The Notes shall be executed on behalf of each Issuer by its
Chairman of the Board, its Chief Executive Officer, its President, its
Chief Operating Officer, its Chief Financial Officer or a Vice President.
The signature of any of these officers on the Notes may be the manual or
facsimile signatures of the present or any future such authorized officer
and may be imprinted or otherwise reproduced on the Notes.
Notes bearing the manual or facsimile signatures of
individuals who were at any time the proper officers of an Issuer shall
bind such Issuer, notwithstanding that such individuals or any of them
have ceased to hold such offices prior to the authentication and delivery
of such Notes or did not hold such offices at the date of such Notes.
On Issuer Order, the Trustee shall authenticate for original
issue Initial Notes in an aggregate principal amount not to exceed
$100,000,000. On Issuer Order, the Trustee shall authenticate for
original issue Exchange Notes in an aggregate principal amount not to
exceed $100,000,000; provided that such Exchange Notes shall be issuable
only upon the valid surrender for cancellation of Initial Notes of a like
aggregate principal amount in accordance with an Exchange Offer pursuant
to the Registration Rights Agreement. In each case, the Trustee shall be
entitled to receive an Officers' Certificate and an Opinion of Counsel of
the Issuers that it may reasonably request in connection with such
authentication of Notes. Such order shall specify the amount of Notes to
be authenticated and the date on which the original issue of Notes is to
be authenticated.
Each Note shall be dated the date of its authentication.
No Note shall be entitled to any benefit under this Indenture
or be valid or obligatory for any purpose unless there appears on such
Note a certificate of authentication substantially in the form provided
for herein duly executed by the Trustee by manual signature of an
authorized signatory, and such certificate upon any Note shall be
conclusive evidence, and the only evidence, that such Note has been duly
authenticated and delivered hereunder and is entitled to the benefits of
this Indenture.
In case the Company, pursuant to Article Eight, shall be
consolidated or merged with or into any other Person or shall convey,
transfer, lease or otherwise dispose of its properties and assets
substantially as an entirety to any Person, and the successor Person
resulting from such consolidation, or surviving such merger, or into
which the Company shall have been merged, or the Person which shall have
received a conveyance, transfer, lease or other disposition as aforesaid,
shall have executed an indenture supplemental hereto with the Trustee
pursuant to Article Eight, any of the Notes authenticated or delivered
prior to such consolidation, merger, conveyance, transfer, lease or other
disposition may, from time to time, at the request of the successor
Person, be exchanged for other Notes executed in the name of the
successor Person with such changes in phraseology and form as may be
appropriate, but otherwise in substance of like tenor as the Notes
surrendered for such exchange and of like principal amount; and the
Trustee, upon Issuer Request of the successor Person, shall authenticate
and deliver Notes as specified in such request for the purpose of such
exchange. If Notes shall at any time be authenticated and delivered in
any new name of a successor Person pursuant to this Section 303 in
exchange or substitution for or upon registration of transfer of any
Notes, such successor Person, at the option of the Holders but without
expense to them, shall provide for the exchange of all Notes at the time
Outstanding for Notes authenticated and delivered in such new name.
SECTION 304. Temporary Notes.
Pending the preparation of definitive Notes, the Issuers may
execute, and upon Issuer Order the Trustee shall authenticate and
deliver, temporary Notes which are printed, lithographed, typewritten,
mimeographed or otherwise produced, in any authorized denomination,
substantially of the tenor of the definitive Notes in lieu of which they
are issued and with such appropriate insertions, omissions, substitutions
and other variations as the officers executing such Notes may determine,
as conclusively evidenced by their execution of such Notes.
If temporary Notes are issued, the Issuers will cause
definitive Notes to be prepared without unreasonable delay. After the
preparation of definitive Notes, the temporary Notes shall be
exchangeable for definitive Notes, upon surrender of the temporary Notes
at the office or agency of the Issuers in a Place of Payment, without
charge to the Holder. Upon surrender for cancellation of any one or more
temporary Notes, the Issuers shall execute and, upon Issuer Order, the
Trustee shall authenticate and make available for delivery in exchange
therefor a like principal amount of definitive Notes of authorized
denominations. Until so exchanged the temporary Notes shall in all
respects be entitled to the same benefits under this Indenture as
definitive Notes.
SECTION 305. Registration, Registration of Transfer and Exchange.
The Notes Registrar (as defined below) shall keep at its
Corporate Trust Office a register for the Notes (the register maintained
in the Corporate Trust Office of the Trustee and in any other office or
agency of the Issuers in a Place of Payment being herein sometimes
collectively referred to as the "Note Register") in which, subject to
such reasonable regulations as the Issuers may prescribe, the Issuers
shall provide for the registration of Notes and of transfers of Notes.
The Note Register shall be in written form or any other form capable of
being converted into written form within a reasonable time. At all
reasonable times, the Note Register shall be open to inspection by the
Trustee if it is not the Notes Registrar. The Trustee is hereby initially
appointed, and the Trustee accepts its appointment, as note registrar
(the Trustee in such capacity, together with any successor Trustee in
such capacity, the "Note Registrar") for the purpose of registering Notes
and transfers of Notes as herein provided.
Upon surrender for registration of transfer of any Note at
the office or agency in a Place of Payment, the Issuers shall execute,
and the Trustee shall authenticate and make available for delivery, in
the name of the designated transferee, one or more new Notes, of any
authorized denominations and of a like aggregate principal amount and
tenor.
At the option of the Holder, Notes may be exchanged for other
Notes, of any authorized denomination and of a like aggregate principal
amount, upon surrender of the Notes to be exchanged at such office or
agency. Whenever any Notes are so surrendered for exchange, the Issuers
shall execute, and the Trustee shall authenticate and make available for
delivery, the Notes which the Holder making the exchange is entitled to
receive; provided that no exchange of Initial Notes for Exchange Notes
shall occur until the Initial Notes to be exchanged for the Exchange Notes
shall be cancelled by the Trustee.
All Notes issued upon any registration of transfer or
exchange of Notes shall be the valid obligations of the Issuers,
evidencing the same debt, and entitled to the same benefits under this
Indenture, as the Notes surrendered upon such registration of transfer or
exchange.
Every Note presented or surrendered for registration of
transfer or for exchange shall (if so required by the Issuers or the Note
Registrar) be duly endorsed, or be accompanied by a written instrument of
transfer, in form satisfactory to the Issuers and the Note Registrar,
duly executed by the Holder thereof or his or her attorney duly
authorized in writing.
No service charge shall be made for any registration of
transfer or exchange of Notes, but the Issuers may require payment of a
sum sufficient to cover any tax or other governmental charge that may be
imposed in connection with any registration of transfer or exchange of
Notes, other than exchanges pursuant to Section 304, 906, 1012, 1022 or
1108 not involving any transfer.
The Issuers shall not be required to issue, register the
transfer of or exchange any Note which has been surrendered for repayment
at the option of the Holder, except the portion, if any, of such Note not
to be so repaid.
SECTION 306. Mutilated, Destroyed, Lost and Stolen Notes.
If any mutilated Note is surrendered to the Trustee, the
Issuers shall execute and the Trustee shall authenticate and make
available for delivery in exchange therefor a new Note of like tenor and
principal amount and bearing a number not contemporaneously outstanding,
or, in case any such mutilated Note has become or is about to become due
and payable, the Issuers in their discretion may, instead of issuing a
new Note, pay such Note.
If there shall be delivered to the Issuers and to the Trustee
(i) evidence to their satisfaction of the destruction, loss or theft of any
Note and (ii) such security or indemnity as may be required by them to save
each of them and any agent of either of them harmless, then, in the absence
of notice to the Issuers or the Trustee that such Note has been acquired by
a bona fide purchaser, the Issuers shall execute and upon Issuer Order the
Trustee shall authenticate and make available for delivery, in lieu of any
such destroyed, lost or stolen Note, a new Note of like tenor and principal
amount and bearing a number not contemporaneously outstanding, or, in case
any such destroyed, lost or stolen Note has become or is about to become
due and payable, the Issuers in their discretion may, instead of issuing a
new Note, pay such Note.
Upon the issuance of any new Note under this Section, the
Issuers may require the payment of a sum sufficient to cover any tax or
other governmental charge that may be imposed in relation thereto and any
other expenses (including the fees and expenses of the Trustee) connected
therewith.
Every new Note issued pursuant to this Section in lieu of any
destroyed, lost or stolen Note, shall constitute an original additional
contractual obligation of the Issuers, whether or not the destroyed, lost
or stolen Note shall be at any time enforceable by anyone, and shall be
entitled to all the benefits of this Indenture equally and
proportionately with any and all other Notes duly issued hereunder.
The provisions of this Section are exclusive and shall
preclude (to the extent lawful) all other rights and remedies with
respect to the replacement or payment of mutilated, destroyed, lost or
stolen Notes.
SECTION 307. Payment of Interest; Interest Rights Preserved.
Interest on any Note which is payable, and is punctually paid
or duly provided for, on any Interest Payment Date shall be paid to the
Person in whose name such Note (or one or more Predecessor Notes) is
registered at the close of business on the Regular Record Date for such
interest at the Place of Payment; provided, however, that each
installment of interest on any Note may at the Issuers' option be paid
(i) by mailing a check for such interest, payable to or upon the written
order of the Person entitled thereto pursuant to Section 308, to the
address of such Person as it appears on the Note Register or (ii) by wire
transfer to an account located in the United States maintained by the
payee.
Any interest on any Note which is payable, but is not
punctually paid or duly provided for, on any Interest Payment Date, other
than on an Interest Payment Date that is not a Business Day at the place
of payment, shall forthwith cease to be payable to the Holder on the
relevant Regular Record Date by virtue of having been such Holder, and
such defaulted interest and, if applicable, interest on such defaulted
interest (to the extent lawful) at the rate specified in the Notes (such
defaulted interest and, if applicable, interest thereon herein
collectively called "Defaulted Interest") may be paid by the Issuers, at
their election in each case, as provided in clause (1) or (2) below:
(1) The Issuers may elect to make payment of any Defaulted
Interest to the Persons in whose names the Notes (or their
respective Predecessor Notes) are registered at the close of
business on a Special Record Date for the payment of such
Defaulted Interest, which shall be fixed in the following manner.
The Issuers shall notify the Trustee in writing of the amount of
Defaulted Interest proposed to be paid on each Note and the date of
the proposed payment, and at the same time the Issuers shall
deposit with the Trustee an amount of money equal to the aggregate
amount proposed to be paid in respect of such Defaulted Interest or
shall make arrangements satisfactory to the Trustee for such
deposit on or prior to the date of the proposed payment, such money
when deposited to be held in trust for the benefit of the Persons
entitled to such Defaulted Interest as in this clause provided.
Thereupon the Trustee shall fix a Special Record Date for the
payment of such Defaulted Interest which shall be not more than 15
days and not less than 10 days prior to the date of the proposed
payment and not less than 10 days after the receipt by the Trustee
of the notice of the proposed payment. The Trustee shall promptly
notify the Issuers of such Special Record Date and, in the name and
at the expense of the Issuers , shall cause notice of the proposed
payment of such Defaulted Interest and the Special Record Date
therefor to be given in the manner provided in Section 106, not
less than 10 days prior to such Special Record Date. Notice of the
proposed payment of such Defaulted Interest and the Special Record
Date therefor having been so given, such Defaulted Interest shall
be paid to the Persons in whose name the Registered Notes (or their
respective Predecessor Notes) are registered at the close of
business on such Special Record Date and shall no longer be payable
pursuant to the following clause (2).
(2) The Issuers may make payment of any Defaulted Interest on
the Notes in any other lawful manner not inconsistent with the
requirements of any securities exchange on which such Notes may be
listed, and upon such notice as may be required by such exchange,
if, after notice given by the Issuers to the Trustee of the
proposed payment pursuant to this clause, such manner of payment
shall be deemed practicable by the Trustee.
Subject to the foregoing provisions of this Section and
Section 305, each Note delivered under this Indenture upon registration
of transfer of or in exchange for or in lieu of any other Note shall
carry the rights to interest accrued and unpaid, and to accrue, which
were carried by such other Note.
SECTION 308. Persons Deemed Owners.
Prior to due presentment of a Note for registration of
transfer, the Issuers, the Trustee and any agent of the Issuers or the
Trustee may treat the Person in whose name such Note is registered as the
owner of such Note for the purpose of receiving payment of principal of
(and premium, if any, on) and (subject to Sections 305 and 307) interest on
such Note and for all other purposes whatsoever, whether or not such Note
be overdue, and none of the Issuers, the Trustee or any agent of the
Issuers or the Trustee shall be affected by notice to the contrary.
SECTION 309. Cancellation.
All Notes surrendered for payment, repayment at the option of
the Holder, registration of transfer or exchange shall, if surrendered to
any Person other than the Trustee, be delivered to the Trustee. All Notes
so delivered to the Trustee shall be promptly cancelled by it. The
Issuers may at any time deliver to the Trustee for cancellation any Notes
previously authenticated and delivered hereunder which the Issuers may
have acquired in any manner whatsoever, and may deliver to the Trustee
(or to any other Person for delivery to the Trustee) for cancellation any
Notes previously authenticated hereunder which the Issuers have not
issued and sold, and all Notes so delivered shall be promptly cancelled
by the Trustee. If the Issuers shall so acquire any of the Notes,
however, such acquisition shall not operate as a redemption or
satisfaction of the indebtedness represented by such Notes unless and
until the same are surrendered to the Trustee for cancellation. No Notes
shall be authenticated in lieu of or in exchange for any Notes cancelled
as provided in this Section, except as expressly permitted by this
Indenture. All cancelled Notes held by the Trustee shall be disposed of
by the Trustee in accordance with its customary procedures unless by
Issuer Order the Issuers shall direct that cancelled Notes be returned to
it.
SECTION 310. Computation of Interest.
Interest on the Notes shall be computed on the basis of a
360-day year of twelve 30-day months.
SECTION 311. Book-Entry Provisions for Global Notes.
(a) Each Global Note initially shall (i) be registered in the
name of the Depositary for such Global Notes or the nominee of such
Depositary, (ii) be delivered to the Trustee or its duly authorized agent
as custodian for such Depositary and (iii) bear legends as set forth in
Section 203.
Members of, or participants in, the Depositary ("Agent
Members") shall have no rights under this Indenture with respect to any
Global Note, and the Depositary or the nominee of such Depositary may be
treated by the Issuers, the Trustee and any agent of the Issuers or the
Trustee as the absolute owner of such Global Note for all purposes
whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the
Issuers, the Trustee or any agent of the Issuers or the Trustee from giving
effect to any written certification, proxy or other authorization furnished
by the Depositary or impair, as between the Depositary and its Agent
Members, the operation of customary practices governing the exercise of the
rights of a beneficial owner of any Note. The registered holder of a Global
Note may grant proxies and otherwise authorize any person, including Agent
Members and persons that may hold interests through Agent Members, to take
any action which a Holder is entitled to take under this Indenture or the
Notes.
(b) Interests of beneficial owners in a Global Note may be
transferred in accordance with the applicable rules and procedures of the
Depositary and the provisions of Section 312. Transfers of a Global Note
shall be limited to transfers of such Global Note in whole, but not in
part, to the Depositary, its successors or their respective nominees,
except (i) as otherwise set forth in Section 312 and (ii) U.S. Definitive
Notes or Offshore Definitive Notes shall be transferred to all beneficial
owners in exchange for their beneficial interests in the U.S. Global Note
or the Offshore Global Note, respectively, in the event that the
Depositary notifies the Issuers that it is unwilling or unable to
continue as Depositary for the applicable Global Note or the Depositary
ceases to be a "Clearing Agency" registered under the Exchange Act and a
successor depositary is not appointed by the Issuers within 90 days. In
connection with a transfer of an entire Global Note to beneficial owners
pursuant to clause (ii) of this paragraph (b), the applicable Global Note
shall be deemed to be surrendered to the Trustee for cancellation, and
the Issuers shall execute, and the Trustee shall authenticate and
deliver, to each beneficial owner identified by the Depositary in
exchange for its beneficial interest in the applicable Global Note, an
equal aggregate principal amount at maturity of U.S. Definitive Notes (in
the case of the U.S. Global Note) or Offshore Definitive Notes (in the
case of the Offshore Global Note), as the case may be, of authorized
denominations in an amount equal to the aggregate principal amount of
such beneficial interest.
(c) Any beneficial interest in one of the Global Notes that
is transferred to a person who takes delivery in the form of an interest
in the other Global Note will, upon transfer, cease to be an interest in
such Global Note and become an interest in the other Global Note and,
accordingly, will thereafter be subject to all transfer restrictions, if
any, and other procedures applicable to beneficial interests in such
other Global Note for as long as it remains such an interest.
(d) Any U.S. Definitive Note delivered in exchange for an
interest in the U.S. Global Note pursuant to paragraph (b) of this
Section shall, unless such exchange is made on or after the Resale
Restriction Termination Date and except as otherwise provided in Section
312, bear the Private Placement Legend.
SECTION 312. Transfer Provisions.
Unless and until (i) an Initial Note is sold pursuant to an
effective Registration Statement, or (ii) an Initial Note is exchanged for
an Exchange Note in the Exchange Offer pursuant to an effective
Registration Statement, in each case, pursuant to the Registration Rights
Agreement, the following provisions shall apply:
(a) General. The provisions of this Section 312 shall apply
to all transfers involving any Definitive Notes and any beneficial
interest in any Global Note.
(b) Certain Definitions. As used in this Section 312 only,
"delivery" of a certificate by a transferee or transferor means the
delivery to the Note Registrar by such transferee or transferor of the
applicable certificate duly completed; "holding" includes both possession
of a Definitive Note and ownership of a beneficial interest in a Global
Note, as the context requires; "transferring" a Global Note means
transferring that portion of the principal amount of the transferor's
beneficial interest therein that the transferor has notified the Note
Registrar that it has agreed to transfer; and "transferring" a Definitive
Note means transferring that portion of the principal amount thereof that
the transferor has notified the Note Registrar that it has agreed to
transfer.
As used in this Indenture, "Regulation S Certificate" means a
certificate substantially in the form set forth in Section 313; "Rule
144A Certificate" means a certificate substantially in the form set forth
in Section 314; and "Non-Registration Opinion and Supporting Evidence"
means a written opinion of counsel reasonably acceptable to the Issuers
to the effect that, and such other certification or information as the
Issuers may reasonably require to confirm that, the proposed transfer is
being made pursuant to an exemption from, or in a transaction not subject
to, the registration requirements of the Securities Act.
(c) [Intentionally Omitted]
(d) Deemed Delivery of a Rule 144A Certificate in Certain
Circumstances. A Rule 144A Certificate, if not actually delivered, will
be deemed delivered if (A) (i) the transferor advises the Issuers and the
Trustee in writing that the relevant offer and sale were made in
accordance with the provisions of Rule 144A (or, in the case of a
transfer of a Definitive Note, the transferor checks the box provided on
the Definitive Notes to that effect) and (ii) the transferee advises the
Issuers and the Trustee in writing that (x) it and, if applicable, each
account for which it is acting in connection with the relevant transfer,
is a qualified institutional buyer within the meaning of Rule 144A, (y)
it is aware that the transfer of Notes to it is being made in reliance on
the exemption from the provisions of Section 5 of the Securities Act
provided by Rule 144A, and (z) prior to the proposed date of transfer it
has been given the opportunity to obtain from the Issuers the information
referred to in Rule 144A(d)(4), and has either declined such opportunity
or has received such information (or, in the case of a transfer of a
Definitive Note, the transferee signs the certification provided on the
Definitive Notes to that effect); or (B) the transferor holds the U.S.
Global Note and is transferring to a transferee that will take delivery
in the form of the U.S. Global Note.
(e) Procedures and Requirements.
1. If the proposed transfer occurs prior to the Offshore Note
Exchange Date, and the proposed transferor holds:
(A) a U.S. Definitive Note which is surrendered to the Note
Registrar, and the proposed transferee or transferor, as
applicable:
(i) delivers (or is deemed to have delivered pursuant
to clause (d) above) a Rule 144A Certificate and the proposed
transferee requests delivery in the form of a U.S. Definitive
Note, then the Note Registrar shall (x) register such
transfer in the name of such transferee and record the date
thereof in its books and records, (y) cancel such surrendered
U.S. Definitive Note and (z) deliver a new U.S. Definitive
Note to such transferee duly registered in the name of such
transferee in principal amount equal to the principal amount
being transferred of such surrendered U.S. Definitive Note;
(ii) delivers (or is deemed to have delivered pursuant
to clause (d) above) a Rule 144A Certificate and the proposed
transferee is or is acting through an Agent Member and
requests that the proposed transferee receive a beneficial
interest in the U.S. Global Note, then the Note Registrar
shall (x) cancel such surrendered U.S. Definitive Note, (y)
record an increase in the principal amount of the U.S. Global
Note equal to the principal amount being transferred of such
surrendered U.S. Definitive Note and (z) notify the
Depositary in accordance with the procedures of the
Depositary that it approves of such transfer; or
(iii) delivers a Regulation S Certificate and the
proposed transferee is or is acting through an Agent Member
and requests that the proposed transferee receive a
beneficial interest in the Offshore Global Note, then the
Note Registrar shall (x) cancel such surrendered U.S.
Definitive Note, (y) record an increase in the principal
amount of the Offshore Global Note equal to the principal
amount being transferred of such surrendered U.S. Definitive
Note and (z) notify the Depositary in accordance with the
procedures of the Depositary that it approves of such
transfer.
In any of the cases described in this Section 312(e)(1)(A),
the Note Registrar shall deliver to the transferor a new U.S.
Definitive Note in principal amount equal to the principal amount
not being transferred of such surrendered U.S. Definitive Note, as
applicable.
(B) the U.S. Global Note, and the proposed transferee or
transferor, as applicable:
(i) delivers (or is deemed to have delivered pursuant
to clause (d) above) a Rule 144A Certificate and the proposed
transferee requests delivery in the form of a U.S. Definitive
Note, then the Note Registrar shall (w) register such
transfer in the name of such transferee and record the date
thereof in its books and records, (x) record a decrease in
the principal amount of the U.S. Global Note in an amount
equal to the beneficial interest therein being transferred,
(y) deliver a new U.S. Definitive Note to such transferee
duly registered in the name of such transferee in principal
amount equal to the amount of such decrease and (z) notify
the Depositary in accordance with the procedures of the
Depositary that it approves of such transfer;
(ii) delivers (or is deemed to have delivered pursuant
to clause (d) above) a Rule 144A Certificate and the proposed
transferee is or is acting through an Agent Member and
requests that the proposed transferee receive a beneficial
interest in the U.S. Global Note, then the transfer shall be
effected in accordance with the procedures of the Depositary
therefor; or
(iii) delivers a Regulation S Certificate and the
proposed transferee is or is acting through an Agent Member
and requests that the proposed transferee receive a
beneficial interest in the Offshore Global Note, then the
Note Registrar shall (w) register such transfer in the name
of such transferee and record the date thereof in its books
and records, (x) record a decrease in the principal amount of
the U.S. Global Note in an amount equal to the beneficial
interest therein being transferred, (y) record an increase in
the principal amount of the Offshore Global Note equal to the
amount of such decrease and (z) notify the Depositary in
accordance with the procedures of the Depositary that it
approves of such transfer.
(C) the Offshore Global Note, and the proposed transferee or
transferor, as applicable:
(i) delivers (or is deemed to have delivered pursuant to
clause (d) above) a Rule 144A Certificate and the proposed
transferee requests delivery in the form of a U.S. Definitive
Note, then the Note Registrar shall (w) register such transfer
in the name of such transferee and record the date thereof in
its books and records, (x) record a decrease in the principal
amount of the Offshore Global Note in an amount equal to the
beneficial interest therein being transferred, (y) deliver a
new U.S. Definitive Note to such transferee duly registered in
the name of such transferee in principal amount equal to the
amount of such decrease and (z) notify the Depositary in
accordance with the procedures of the Depositary that it
approves of such transfer;
(ii) delivers (or is deemed to have delivered pursuant
to clause (d) above) a Rule 144A Certificate and the proposed
transferee is or is acting through an Agent Member and
requests that the proposed transferee receive a beneficial
interest in the U.S. Global Note, then the Note Registrar
shall (x) record a decrease in the principal amount of the
Offshore Global Note in an amount equal to the beneficial
interest therein being transferred, (y) record an increase in
the principal amount of the U.S. Global Note equal to the
amount of such decrease and (z) notify the Depositary in
accordance with the procedures of the Depositary that it
approves of such transfer; or
(iii) delivers a Regulation S Certificate and the
proposed transferee is or is acting through an Agent Member
and requests that the proposed transferee receive a
beneficial interest in the Offshore Global Note, then the
transfer shall be effected in accordance with the procedures
of the Depositary therefor; provided, however, that until the
Offshore Note Exchange Date occurs, beneficial interests in
the Offshore Global Note may be held only in or through
accounts maintained at the Depositary by Euroclear or Cedel
(or by Agent Members acting for the account thereof), and no
person shall be entitled to effect any transfer or exchange
that would result in any such interest being held otherwise
than in or through such an account.
2. If the proposed transfer occurs on or after the Offshore
Notes Exchange Date and the proposed transferor holds:
(A) a U.S. Definitive Note which is surrendered to the Note
Registrar, and the proposed transferee or transferor, as
applicable:
(i) delivers (or is deemed to have delivered pursuant
to clause (d) above) a Rule 144A Certificate and the proposed
transferee requests delivery in the form of a U.S. Definitive
Note, then the procedures set forth in Section
312(e)(1)(A)(i) shall apply;
(ii) delivers (or is deemed to have delivered pursuant
to clause (d) above) a Rule 144A Certificate and the proposed
transferee is or is acting through an Agent Member and
requests that the proposed transferee receive a beneficial
interest in the Offshore Global Note, then the procedures set
forth in Section 312(e)(1)(A)(ii) shall apply; or
(iii) delivers a Regulation S Certificate, then the
Note Registrar shall cancel such surrendered U.S. Definitive
Note and at the direction of the transferee, either:
(x) register such transfer in the name of such
transferee, record the date thereof in its books and
records and deliver a new Offshore Definitive Note to
such transferee in principal amount equal to the
principal amount being transferred of such surrendered
U.S. Definitive Note, or
(y) if the proposed transferee is or is acting
through an Agent Member, record an increase in the
principal amount of the Offshore Global Note equal to
the principal amount being transferred of such
surrendered U.S. Definitive Note and notify the
Depositary in accordance with the procedures of the
Depositary that it approves of such transfer.
In any of the cases described in this Section
312(e)(2)(A)(i), (ii) or (iii)(x), the Note Registrar shall deliver
to the transferor a new U.S. Definitive Note in principal amount
equal to the principal amount not being transferred of such
surrendered U.S.
Definitive Note, as applicable.
(B) the U.S. Global Note, and the proposed transferee or
transferor, as applicable:
(i) delivers (or is deemed to have delivered pursuant
to clause (d) above) a Rule 144A Certificate and the proposed
transferee requests delivery in the form of a U.S. Definitive
Note, then the procedures set forth in Section
312(e)(1)(B)(i) shall apply; or
(ii) delivers (or is deemed to have delivered pursuant
to clause (d) above) a Rule 144A Certificate and the proposed
transferee is or is acting through an Agent Member and
requests that the proposed transferee receive a beneficial
interest in the U.S. Global Note, then the procedures set
forth in Section 312(e)(1)(B)(ii) shall apply; or
(iii) delivers a Regulation S Certificate, then the
Note Registrar shall (x) record a decrease in the principal
amount of the U.S. Global Note in an amount equal to the
beneficial interest therein being transferred, (y) notify the
Depositary in accordance with the procedures of the
Depositary that it approves of such transfer and (z) at the
direction of the transferee, either:
(x) register such transfer in the name of such
transferee, record the date thereof in its books and
records and deliver a new Offshore Definitive Note to
such transferee in principal amount equal to the amount
of such decrease, or
(y) if the proposed transferee is or is acting
through an Agent Member, record an increase in the
principal amount of the Offshore Global Note equal to
the amount of such decrease.
(C) an Offshore Definitive Note which is surrendered to the
Note Registrar, and the proposed transferee or transferor, as
applicable:
(i) delivers (or is deemed to have delivered pursuant
to clause (d) above) a Rule 144A Certificate and the proposed
transferee is or is acting through an Agent Member and
requests that the proposed transferee receive a beneficial
interest in the U.S. Global Note, then the Note Registrar
shall (x) cancel such surrendered Offshore Definitive Note,
(y) record an increase in the principal amount of the U.S.
Global Note equal to the principal amount being transferred
of such surrendered Offshore Definitive Note and (z) notify
the Depositary in accordance with the procedures of the
Depositary that it approves of such transfer;
(ii) where the proposed transferee is or is acting
through an Agent Member, requests that the proposed
transferee receive a beneficial interest in the Offshore
Global Note, then the Note Registrar shall (x) cancel such
surrendered Offshore Definitive Note, (y) record an increase
in the principal amount of the Offshore Global Note equal to
the principal amount being transferred of such surrendered
Offshore Definitive Note and (z) notify the Depositary in
accordance with the procedures of the Depositary that it
approves of such transfer; or
(iii) does not make a request covered by Section
312(e)(2)(C)(i) or Section 312(e)(2)(C)(ii), then the Note
Registrar shall (x) register such transfer in the name of
such transferee and record the date thereof in its books and
records, (y) cancel such surrendered Offshore Definitive Note
and (z) deliver a new Offshore Definitive Note to such
transferee duly registered in the name of such transferee in
principal amount equal to the principal amount being
transferred of such surrendered Offshore Definitive Note.
In any of the cases described in this Section 312(e)(2)(C), the
Note Registrar shall deliver to the transferor a new Offshore Definitive
Note in principal amount equal to the principal amount not being
transferred of such surrendered Offshore Definitive Note, as applicable.
(D) the Offshore Global Note, and the proposed transferee or
transferor, as applicable:
(i) delivers (or is deemed to have delivered pursuant
to clause (d) above) a Rule 144A Certificate and the proposed
transferee is or is acting through an Agent Member and
requests that the proposed transferee receive a beneficial
interest in the U.S. Global Note, then the Note Registrar
shall (x) record a decrease in the principal amount of the
Offshore Global Note in an amount equal to the beneficial
interest therein being transferred, (y) record an increase in
the principal amount of the U.S. Global Note equal to the
amount of such decrease and (z) notify the Depositary in
accordance with the procedures of the Depositary that it
approves of such transfer;
(ii) where the proposed transferee is or is acting
through an Agent Member, requests that the proposed
transferee receive a beneficial interest in the Offshore
Global Note, then the transfer shall be effected in
accordance with the procedures of the Depositary therefor; or
(iii) does not make a request covered by Section
312(e)(2)(D)(i) or Section 312(e)(2)(D)(ii), then the Note
Registrar shall (w) register such transfer in the name of
such transferee and record the date thereof in its books and
records, (x) record a decrease in the principal amount of the
Offshore Global Note in an amount equal to the beneficial
interest therein being transferred, (y) deliver a new
Offshore Definitive Note to such transferee duly registered
in the name of such transferee in principal amount equal to
the amount of such decrease and (z) notify the Depositary in
accordance with the procedures of the Depositary that it
approves of such transfer.
(f) Execution, Authentication and Delivery of Definitive
Notes. In any case in which the Note Registrar is required to deliver a
Definitive Note to a transferee or transferor, the Issuers shall execute,
and the Trustee shall authenticate and make available for delivery, such
Definitive Notes.
(g) Certain Additional Terms Applicable to Definitive Notes.
Any transferee entitled to receive a Definitive Note may request that the
principal amount thereof be evidenced by one or more Definitive Notes in
any authorized denomination or denominations and the Note Registrar shall
comply with such request if all other transfer restrictions are
satisfied.
(h) Transfers Not Covered by Section 312(e). The Note
Registrar shall effect and record, upon receipt of a written request from
the Issuers so to do, a transfer not otherwise permitted by Section
312(e), such recording to be done in accordance with the otherwise
applicable provisions of Section 312(e), upon the furnishing by the
proposed transferor or transferee of a Non-Registration Opinion and
Supporting Evidence.
(i) General. By its acceptance of any Note bearing the
Private Placement Legend, each Holder of such Note acknowledges the
restrictions on transfer of such Note set forth in this Indenture and in
the Private Placement Legend and agrees that it will transfer such Note
only as provided in this Indenture. The Note Registrar shall not register
a transfer of any Note unless such transfer complies with the
restrictions with respect thereto set forth in this Indenture. The Note
Registrar shall not be required to determine (but may rely upon a
determination made by the Issuers) the sufficiency of any such
certifications, legal opinions or other information.
(j) Private Placement Legend. Upon the transfer, exchange or
replacement of Notes not bearing the Private Placement Legend, the Note
Registrar shall deliver Notes that do not bear the Private Placement
Legend. Upon the transfer, exchange or replacement of Notes bearing the
Private Placement Legend, the Note Registrar shall deliver only Notes
that bear the Private Placement Legend unless (i) the circumstances exist
contemplated by the fifth paragraph of Section 201 (with respect to an
Offshore Definitive Note) or the requested transfer is at least two years
after the original issue date of the Initial Note (with respect to any
Definitive Notes), (ii) there is delivered to the Note Registrar an
Opinion of Counsel reasonably satisfactory to the Issuers and the Trustee
to the effect that neither such legend nor the related restrictions on
transfer are required in order to maintain compliance with the provisions
of the Securities Act or (iii) such Notes are exchanged for Exchange
Notes pursuant to an Exchange Offer.
SECTION 313. Form of Regulation S Certificate.
Regulation S Certificate
To: Crestar Bank,
as Trustee (the "Trustee")
919 East Main Street, 10th Floor
Richmond, Virginia 23219
Attention: Corporate Trust Trustee Administration
Re: Bear Island Paper Company, L.L.C. (the "Company")
Bear Island Finance Company II ("Finco" and,
together with the Company, the "Issuers")
10% Senior Secured Notes due 2007 (the "Notes")
Ladies and Gentlemen:
In connection with our proposed sale of $____ aggregate
principal amount of Notes, we confirm that such sale has been effected
pursuant to and in accordance with Regulation S ("Regulation S") under
the Securities Act of 1933, as amended (the "Securities Act"), and
accordingly, we hereby certify as follows:
1. The offer of the Notes was not made to a person in the
United States (unless such person or the account held by it for
which it is acting is excluded from the definition of "U.S. person"
pursuant to Rule 902(o) of Regulation S under the circumstances
described in Rule 902(i)(3) of Regulation S) or specifically
targeted at an identifiable group of U.S. citizens abroad.
2. Either (a) at the time the buy order was originated, the
buyer was outside the United States or we and any person acting on
our behalf reasonably believed that the buyer was outside the
United States or (b) the transaction was executed in, on or through
the facilities of a designated offshore securities market, and
neither we nor any person acting on our behalf knows that the
transaction was prearranged with a buyer in the United States.
3. Neither we, any of our affiliates, nor any person acting
on our or their behalf has made any directed selling efforts in the
United States in contravention of the requirements of Rule 903(b)
or Rule 904(b) of Regulation S, as applicable.
4. The proposed transfer of Notes is not part of a plan or
scheme to evade the registration requirements of the Securities
Act.
5. If we are a dealer or a person receiving a selling
concession or other fee or remuneration in respect of the Notes,
and the proposed transfer takes place before the Offshore Note
Exchange Date referred to in the Indenture, or we are an officer or
director of either of the Issuers or a distributor, we certify that
the proposed transfer is being made in accordance with the
provisions of Rules 903 and 904(c) of Regulation S.
You and the Issuers are entitled to rely upon this
Certificate and are irrevocably authorized to produce this Certificate or
a copy hereof to any interested party in any administrative or legal
proceeding or official inquiry with respect to the matters covered
hereby. Terms used in this certificate have the meanings set forth in
Regulation S.
Very truly yours,
[NAME OF SELLER]
By:__________________________
Name:
Title:
Address:
Date of this Certificate: __________ __, 199_
SECTION 314. Form of Rule 144A Certificate.
Rule 144A Certificate
To: Crestar Bank,
as Trustee (the "Trustee")
919 East Main Street, 10th Floor
Richmond, Virginia 23219
Attention: Corporate Trust Trustee Administration
Re: Bear Island Paper Company, L.L.C. (the "Company")
Bear Island Finance Company II ("Finco" and,
together with the Company, the "Issuers")
10% Senior Secured Notes due 2007 (the "Notes")
Ladies and Gentlemen:
In connection with our proposed sale of $____ aggregate
principal amount of Notes, we confirm that such sale has been effected
pursuant to and in accordance with Rule 144A ("Rule 144A") under the
Securities Act of 1933, as amended (the "Securities Act"). We are aware
that the transfer of Notes to us is being made in reliance on the
exemption from the provisions of Section 5 of the Securities Act provided
by Rule 144A. Prior to the date of this Certificate we have been given
the opportunity to obtain from the Issuers the information referred to in
Rule 144A(d)(4), and have either declined such opportunity or have
received such information.
You and the Issuers are entitled to rely upon this
Certificate and are irrevocably authorized to produce this Certificate or
a copy hereof to any interested party in any administrative or legal
proceeding or official inquiry with respect to the matters covered
hereby.
Very truly yours,
[NAME OF PURCHASER]
By:__________________________
Name:
Title:
Address:
Date of this Certificate: __________ __, 199_
SECTION 315. CUSIP Numbers.
The Issuers in issuing the Notes may use "CUSIP" numbers (if
then generally in use), and, if so, the Trustee shall use "CUSIP" numbers
in notices to Holders as a convenience to Holders; provided that any such
notice may state that no representation is made as to the correctness of
such numbers either as printed on the Notes or as contained in any notice
and that reliance may be placed only on the other identification numbers
printed on the Notes. The Issuers will promptly notify the Trustee of any
change in the CUSIP numbers.
ARTICLE FOUR
SATISFACTION AND DISCHARGE
SECTION 401. Satisfaction and Discharge of Indenture.
This Indenture, upon Issuer Request, shall cease to be of
further effect with respect to the Notes (except as to any surviving
rights of registration of transfer or exchange of Notes expressly
provided for herein) and the Trustee, at the expense of the Company,
shall execute proper instruments acknowledging satisfaction and discharge
of this Indenture when
(1) either
(A) (i) all the Notes theretofore authenticated and
delivered (other than Notes which have been destroyed, lost
or stolen and which have been replaced or paid as provided in
Section 306) and (ii) Notes for whose payment money has
theretofore been deposited in trust with the Trustee or any
Paying Agent or segregated and held in trust by the Company
and thereafter repaid to the Company or discharged from such
trust, as provided in Section 1003, have been delivered to
the Trustee for cancellation; or
(B) all Notes not theretofore delivered to the Trustee
for cancellation
(i) have become due and payable, or
(ii) will become due and payable at their Stated
Maturity within one year, or
(iii) are to be called for redemption within one
year under arrangements satisfactory to the Trustee for
the giving of notice of redemption by the Trustee in
the name of the Issuers, at the expense of the Company,
and the Company, FinCo or any Guarantor has irrevocably
deposited or caused to be deposited with the Trustee as trust
funds in trust for such purpose an amount sufficient to pay
and discharge the entire indebtedness on such Notes not
theretofore delivered to the Trustee for cancellation, for
principal of (and premium, if any, on) and interest on the
Notes to the date of such deposit (in the case of Notes which
have become due and payable) or to the Stated Maturity or
Redemption Date, as the case may be;
(2) the Company, FinCo or any Guarantor has paid or caused to
be paid all other sums payable hereunder by the Issuers; and
(3) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all
conditions precedent herein provided for herein relating to the
satisfaction and discharge of this Indenture have been complied
with.
Notwithstanding the satisfaction and discharge of this
Indenture, the obligations of the Issuers to the Trustee under Section
606, the obligations of the Issuers to any Authenticating Agent under
Section 611 and, if money shall have been deposited with the
Trustee pursuant to subclause (B) of clause (1) of this Section, the
obligations of the Trustee under Section 402 and the last paragraph of
Section 1003 shall survive.
SECTION 402. Application of Trust Money.
Subject to the provisions of the last paragraph of Section
1003, all money deposited with the Trustee pursuant to Section 401 shall
be held in trust and applied by it, in accordance with the provisions of
the Notes and this Indenture, to the payment, either directly or through
any Paying Agent (including either of the Issuers acting as its own
Paying Agent) as the Trustee may determine, to the Persons entitled
thereto, of the principal (and premium, if any) and interest for whose
payment such money has been deposited with the Trustee; but such money
need not be segregated from other funds except to the extent required by
law.
ARTICLE FIVE
REMEDIES
SECTION 501. Events of Default.
"Event of Default," wherever used herein, means any one of
the following events (whatever the reason for such Event of Default and
whether it shall be voluntary or involuntary or be effected by operation
of law or pursuant to any judgment, decree or order of any court or any
order, rule or regulation of any administrative or governmental body):
(1) default in the payment of any interest on any Note when
it becomes due and payable and continuance of such default for a
period of 30 days;
(2) default in the payment of the principal of or premium, if
any, on any Note at its Maturity (upon acceleration, optional
redemption, required purchase or otherwise);
(3) default in the performance, or breach, of the provisions
of Article Eight, the failure to make or consummate a Change of
Control Offer in accordance with the provisions of Section 1012 or
the failure to make or consummate an Excess Proceeds Offer in
accordance with the provisions of Section 1022;
(4) default in the performance, or breach, of any covenant or
warranty of the Company, any Security Party, Brant-Allen or any
Guarantor contained in this Indenture or any Guarantee (other than
a default in the performance, or breach, of a covenant or warranty
which is specifically dealt with in clause (1), (2) or (3) above)
and continuance of such default or breach for a period of 30 days
after there has been given, by registered or certified mail, to the
Company by the Trustee or to the Company and the Trustee by the
Holders of at least 25% in aggregate principal amount of all
Outstanding Notes a written notice specifying such default or
breach and requiring it to be remedied and stating that such notice
is a "Notice of Default" hereunder;
(5) (A) one or more defaults in the payment of principal of
(or premium, if any, on) Indebtedness of the Company, any Security
Party, any Guarantor or any of their respective Restricted
Subsidiaries aggregating $5.0 million or more, when the same
becomes due and payable at the stated maturity thereof, and such
default or defaults shall have continued after any applicable grace
period and shall not have been cured or waived or (B) Indebtedness
of the Company, any Security Party, any Guarantor or any of their
respective Restricted Subsidiaries aggregating $5.0 million or more
shall have been accelerated or otherwise declared due and payable,
or required to be prepaid or repurchased (other than by regularly
scheduled required prepayment prior to the stated maturity
thereof);
(6) any Holder of any Indebtedness in excess of $5.0 million
in the aggregate of the Company, any Security Party, any Guarantor
or any of their respective Restricted Subsidiaries shall notify the
Trustee of the intended sale or disposition of any assets of any
such party that have been pledged to or for the benefit of such
Person to secure such Indebtedness or shall commence proceedings,
or take action (including by way of set-off) to retain in
satisfaction of any such Indebtedness, or to collect on, seize,
dispose of or apply, any such assets of the Company, any Security
Party, any Guarantor or any of their respective Restricted
Subsidiaries pursuant to the terms of any agreement or instrument
evidencing any such Indebtedness or in accordance with applicable
law;
(7) one or more final judgments or orders shall be rendered
against the Company, any Security Party, any Guarantor or any of
their respective Restricted Subsidiaries for the payment of money,
either individually or in an aggregate amount, in excess of $5.0
million and shall not be discharged and either (A) an enforcement
proceeding shall have been commenced by any creditor upon such
judgment or order or (B) there shall have been a period of 30
consecutive days during which a stay of enforcement of such
judgment or order, by reason of a pending appeal or otherwise, was
not in effect;
(8) any Guarantee ceases in any material respect to be in
full force and effect or is declared null and void or any Guarantor
denies that it has any further liability under any Guarantee, or
gives notice to such effect (other than by reason of the
termination of this Indenture or the release of any such Guarantee
in accordance with this Indenture);
(9) the entry of a decree or order by a court having
jurisdiction in the premises adjudging the Company, any Security
Party, any Guarantor or any of their respective Restricted
Subsidiaries a bankrupt or insolvent, or approving as properly
filed a petition seeking reorganization, arrangement, adjustment or
composition of or in respect of the Company, any Security Party,
any Guarantor or any of their respective Restricted Subsidiaries
under a Bankruptcy Law or any other applicable federal or state
law, or appointing a receiver, liquidator, assignee, trustee,
sequestrator (or other similar official) of the Company, any
Security Party, any Guarantor or any of their respective Restricted
Subsidiaries or of any substantial part of its property, or
ordering the winding up or liquidation of its affairs, and the
continuance of any such decree or order unstayed and in effect for
a period of 60 consecutive days;
(10) the institution by the Company, any Security Party, any
Guarantor or any of their respective Restricted Subsidiaries of
proceedings to be adjudicated a bankrupt or insolvent, or the
consent by it to the institution of bankruptcy or insolvency
proceedings against it, or the filing by it of a petition or answer
or consent seeking reorganization or relief under a Bankruptcy Law
or any other applicable federal or state law, or the consent by it
to the filing of any such petition or to the appointment of a
receiver, liquidator, assignee, trustee, sequestrator (or other
similar official) of the Company, any Security Party, any Guarantor
or any of their respective Restricted Subsidiaries or of any
substantial part of its property, or the making by it of a general
assignment for the benefit of creditors, or the admission by it in
writing of its inability to pay its debts generally as they become
due;
(11) any of the Collateral Documents shall cease in any
material respect to be in full force and effect or shall cease in
any material respect to give the Trustee and any collateral trustee
under the Collateral Documents the Liens, rights, powers and
privileges purported to be created thereby; or
(12) default in the performance, or breach, of any covenant
or warranty of the Issuers, the Security Parties or Brant-Allen
under the Collateral Documents and continuance of such default for
a period of 30 days after written notice thereof shall have been
given as provided in clause (4) above.
SECTION 502. Acceleration of Maturity; Rescission and Annulment.
If an Event of Default (other than an Event of Default
specified in clause (9) or (10) of Section 501) occurs and is continuing,
then in every such case the Trustee, or the Holders of not less than 25% in
aggregate principal amount of the Outstanding Notes by written notice to
the Company (and to the Trustee if such notice is given by the Holders),
may, and the Trustee, upon the written request of such Holders, shall
declare the principal of, premium, if any, and accrued interest on all of
the Outstanding Notes immediately due and payable, and upon any such
declaration all such amounts payable in respect of the Notes shall become
immediately due and payable. If an Event of Default specified in clause (9)
or (10) of Section 501 occurs and is continuing, then the principal of,
premium, if any, and accrued interest on all of the Outstanding Notes shall
ipso facto become and be immediately due and payable without any
declaration or other act on the part of the Trustee or any Holder of Notes.
At any time after a declaration of acceleration has been made
and before a judgment or decree for payment of the money due has been
obtained by the Trustee as hereinafter in this Article provided, the
Holders of a majority in aggregate principal amount of the Outstanding
Notes, by written notice to the Company and the Trustee, may rescind and
annul such declaration and its consequences if:
(1) the Issuers have paid or deposited with the Trustee a
sum sufficient to pay
(A) all overdue interest on all Outstanding Notes,
(B) all unpaid principal of (and premium, if any, on)
any Outstanding Notes that has become due otherwise than by
such declaration of acceleration, together with interest on
such unpaid principal at the rate borne by such Notes,
(C) to the extent that payment of such interest is
lawful, interest on overdue interest and overdue principal at
the rate or rates borne by such Notes, and
(D) all sums paid or advanced by the Trustee hereunder
and the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel; and
(2) all Events of Default, other than the non-payment of
amounts of principal of (or premium, if any, on) or interest on
Notes which have become due solely by such declaration of
acceleration, have been cured or waived as provided in Section 513.
No such rescission shall affect any subsequent default or impair any
right consequent thereon.
Notwithstanding the preceding paragraph, in the event of a
declaration of acceleration in respect of the Notes because of an Event of
Default specified in Section 501(5) shall have occurred and be continuing,
such Event of Default and all consequences thereof (including, without
limitation, any acceleration or resulting payment default) shall be
automatically annulled, waived and rescinded if the Indebtedness that is
the subject of such Event of Default has been discharged or the holders
thereof have rescinded their declaration of acceleration in respect of such
Indebtedness or the default that is the basis for such Event of Default has
been cured, and written notice of such discharge or rescission or cure, as
the case may be, shall have been given to the Trustee by the Issuers and
countersigned by the holders of such Indebtedness or a trustee, fiduciary
or agent for such holders, within 30 days after such declaration of
acceleration in respect of the Notes, and no other Event of Default has
occurred during such 30-day period which has not been cured or waived
during such period.
SECTION 503. Collection of Indebtedness and Suits for
Enforcement by Trustee.
The Issuers covenant that if
(1) default is made in the payment of any installment of
interest on any Note when such interest becomes due and payable and
such default continues for a period of 30 days, or
(2) default is made in the payment of the principal of (or
premium, if any, on) any Note at the Maturity thereof,
then the Issuers will, upon demand of the Trustee, pay to the Trustee for
the benefit of the Holders of such Notes, the whole amount then due and
payable on such Notes for principal (and premium, if any) and interest,
and interest on any overdue principal (and premium, if any) and, to the
extent that payment of such interest shall be legally enforceable, upon
any overdue installment of interest, at the rate borne by such Notes,
and, in addition thereto, such further amount as shall be sufficient to
cover the costs and expenses of collection, including the reasonable
compensation, expenses, disbursements and advances of the Trustee, its
agents and counsel.
If the Issuers fail to pay such amounts forthwith upon such
demand, the Trustee, in its own name as trustee of an express trust, may
institute a judicial proceeding for the collection of the sums so due and
unpaid, may prosecute such proceeding to judgment or final decree and may
enforce the same against the Issuers or any Guarantor (in accordance with
the applicable Guarantee) or any other obligor upon such Notes and
collect the moneys adjudged or decreed to be payable in the manner
provided by law out of the property of the Issuers, any Guarantor or any
other obligor upon such Notes, wherever situated.
If an Event of Default occurs and is continuing, the Trustee
may in its discretion proceed to protect and enforce its rights and the
rights of the Holders by such appropriate judicial proceedings as the
Trustee shall deem most effectual to protect and enforce any such rights,
whether for the specific enforcement of any covenant or agreement in this
Indenture or in aid of the exercise of any power granted herein, or to
enforce any other proper remedy.
SECTION 504. Trustee May File Proofs of Claim.
In case of the pendency of any receivership, insolvency,
liquidation, bankruptcy, reorganization, arrangement, adjustment,
composition or other judicial proceeding relative to the Issuers or any
other obligor, including any Guarantor, upon the Notes or the property of
the Issuers or of such other obligor or their creditors, the Trustee
(irrespective of whether the principal of the Notes shall then be due and
payable as therein expressed or by declaration or otherwise and
irrespective of whether the Trustee shall have made any demand on the
Issuers for the payment of overdue principal, premium, if any, or
interest) shall be entitled and empowered, by intervention in such
proceeding or otherwise,
(i) to file and prove a claim for the whole amount of
principal (and premium, if any) and interest owing and unpaid in
respect of the Notes and to file such other papers or documents as
may be necessary or advisable in order to have the claims of the
Trustee (including any claim for the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and
counsel) and of the Holders allowed in such judicial proceeding,
and
(ii) to collect and receive any moneys or other property
payable or deliverable on any such claims and to distribute the
same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator
or other similar official in any such judicial proceeding is hereby
authorized by each Holder to make such payments to the Trustee and, in
the event that the Trustee shall consent to the making of such payments
directly to the Holders, to pay to the Trustee any amount due it for the
reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, and any other amounts due the Trustee
under Section 606.
Nothing herein contained shall be deemed to authorize the
Trustee to authorize or consent to or accept or adopt on behalf of any
Holder any plan of reorganization, arrangement, adjustment or composition
affecting the Notes or the rights of any Holder thereof or to authorize
the Trustee to vote in respect of the claim of any Holder in any such
proceeding.
SECTION 505. Trustee May Enforce Claims Without Possession of
Notes.
All rights of action and claims under this Indenture, the
Notes or any Guarantees may be prosecuted and enforced by the Trustee
without the possession of any of the Notes or the production thereof in
any proceeding relating thereto, and any such proceeding instituted by
the Trustee shall be brought in its own name as trustee of an express
trust, and any recovery of judgment shall, after provision for the
payment of the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel, be for the ratable
benefit of the Holders of the Notes in respect of which such judgment has
been recovered.
SECTION 506. Application of Money Collected.
Any money collected by the Trustee pursuant to this Article
shall be applied in the following order, at the date or dates fixed by
the Trustee and, in case of the distribution of such money on account of
principal (or premium, if any) or interest, upon presentation of the
Notes and the notation thereon of the payment if only partially paid and
upon surrender thereof if fully paid:
First: To the payment of all amounts due the Trustee under
Section 606;
Second: To the Holders in payment of the amounts then due and
unpaid for principal of (and premium, if any, on) and interest on
the Notes in respect of which or for the benefit of which such
money has been collected, ratably, without preference or priority
of any kind, according to the amounts due and payable on such Notes
for principal (and premium, if any) and interest, respectively; and
Third: The balance, if any, to the Person or Persons entitled
thereto, including the Issuers or any other obligor on the Notes,
as their interests may appear or as a court of competent
jurisdiction may direct.
SECTION 507. Limitation on Suits.
No Holder of any Note shall have any right to institute any
proceeding, judicial or otherwise, with respect to this Indenture, or for
the appointment of a receiver or trustee, or for any other remedy
hereunder, unless
(1) such Holder has previously given written notice to the
Trustee of a continuing Event of Default;
(2) the Holders of not less than 25% in aggregate principal
amount of the Outstanding Notes shall have made a written request
to the Trustee to institute proceedings in respect of such Event of
Default in its own name as Trustee hereunder;
(3) such Holder or Holders have offered to the Trustee
reasonable indemnity against the costs, expenses and liabilities to
be incurred in compliance with such request;
(4) the Trustee for 60 days after its receipt of such notice,
request and offer of indemnity has failed to institute any such
proceeding; and
(5) no direction inconsistent with such written request has
been given to the Trustee during such 60-day period by the Holders
of a majority in principal amount of the Outstanding Notes;
it being understood and intended that no one or more of such Holders
shall have any right in any manner whatever by virtue of, or by availing
of, any provision of this Indenture, any Note or any Guarantee to affect,
disturb or prejudice the rights of any other Holders, or to obtain or to
seek to obtain priority or preference over any other of such Holders or
to enforce any right under this Indenture, any Note or any Guarantee,
except in the manner herein provided and for the equal and ratable
benefit of all Holders.
SECTION 508. Unconditional Right of Holders to Receive
Principal, Premium and Interest.
Notwithstanding any other provision in this Indenture or the
Intercreditor Agreement, the Holder of any Note shall have the right,
which is absolute and unconditional, to receive payment, as provided
herein (including, if applicable, Article Eleven) of the principal of
(and premium, if any, on) and (subject to Section 307) interest on, such
Note on the respective Stated Maturities expressed in such Note and to
institute suit for the enforcement of any such payment, and such rights
shall not be impaired without the consent of such Holder.
SECTION 509. Restoration of Rights and Remedies.
If the Trustee or any Holder has instituted any proceeding to
enforce any right or remedy under this Indenture and such proceeding has
been discontinued or abandoned for any reason, or has been determined
adversely to the Trustee or to such Holder, then and in every such case,
subject to any determination in such proceeding, the Issuers, the Trustee
and the Holders of Notes shall be restored severally and respectively to
their former positions hereunder and thereafter all rights and remedies of
the Trustee and the Holders shall continue as though no such proceeding had
been instituted.
SECTION 510. Rights and Remedies Cumulative.
Except as otherwise provided with respect to the replacement
or payment of mutilated, destroyed, lost or stolen Notes in the last
paragraph of Section 306, no right or remedy herein conferred upon or
reserved to the Trustee or to the Holders of Notes is intended to be
exclusive of any other right or remedy, and every right and remedy shall,
to the extent permitted by law, be cumulative and in addition to every
other right and remedy given hereunder or now or hereafter existing at
law or in equity or otherwise. The assertion or employment of any right
or remedy hereunder, or otherwise, shall not prevent the concurrent
assertion or employment of any other appropriate right or remedy.
SECTION 511. Delay or Omission Not Waiver.
No delay or omission of the Trustee or of any Holder of any
Note to exercise any right or remedy accruing upon any Event of Default
shall impair any such right or remedy or constitute a waiver of any such
Event of Default or an acquiescence therein. Every right and remedy given
by this Article or by law to the Trustee or to the Holders may be
exercised from time to time, and as often as may be deemed expedient, by
the Trustee or by the Holders, as the case may be.
SECTION 512. Control by Holders.
The Holders of not less than a majority in aggregate
principal amount of the Outstanding Notes shall have the right to direct
the time, method and place of conducting any proceeding for any remedy
available to the Trustee, or exercising any trust or power conferred on
the Trustee; provided that the Trustee may refuse to follow any direction
that
(1) conflicts with any rule of law or with this Indenture,
(2) might involve it in personal liability, or
(3) the Trustee determines may be unjustly prejudicial to the
Holders of Notes;
and, subject to Section 315 of the Trust Indenture Act, the Trustee may
take any other action deemed proper by the Trustee which is not
inconsistent with such direction.
SECTION 513. Waiver of Past Defaults.
Subject to Section 902 and the last paragraph of Section 502,
the Holders of not less than a majority in aggregate principal amount of
the Outstanding Notes may, on behalf of the Holders of all the Notes,
waive any past or existing defaults and its consequences under this
Indenture or any Guarantee, except a continuing default
(1) in respect of the payment of the principal of (or
premium, if any, on) or interest on any Note as specified in
clauses (1) and (2) of Section 501, or
(2) in respect of a covenant or provision hereof which under
Article Nine hereunder cannot be modified or amended without the
consent of the Holder of each Outstanding Note affected.
Upon any such waiver, any such default shall cease to exist,
and any Event of Default arising therefrom shall be deemed to have been
cured, for every purpose of this Indenture and any Guarantee; but no such
waiver shall extend to any subsequent or other default or Event of
Default or impair any right consequent thereon.
SECTION 514. Waiver of Stay or Extension Laws.
Each of the Issuers, the Security Parties, Brant-Allen, any
Guarantors and any other obligors on the Notes covenants (to the extent
that it may lawfully do so) that it will not at any time insist upon, or
plead, or in any manner whatsoever claim or take the benefit or advantage
of, any stay or extension law wherever enacted, now or at any time
hereafter in force, which may affect the covenants or the performance of
this Indenture; and each of the Issuers, the Security Parties,
Brant-Allen, any Guarantors and any other obligors on the Notes (to the
extent that they may lawfully do so) hereby expressly waives all benefit
or advantage of any such law and covenants that it will not hinder, delay
or impede the execution of any power herein granted to the Trustee, but
will suffer and permit the execution of every such power as though no
such law had been enacted.
ARTICLE SIX
THE TRUSTEE
SECTION 601. Notice of Defaults.
Within five days after the earlier of receipt from the Issuers
of notice of the occurrence of any Default or Event of Default hereunder or
the date when such Default or Event of Default becomes known to the
Trustee, the Trustee shall transmit to each Holder of the Notes, in the
manner and to the extent provided in TIA Section 313(c), notice of such
Default or Event of Default hereunder known to the Trustee, unless such
Default or Event of Default shall have been cured or waived; provided,
however, that, except in the case of a Default or an Event of Default in
the payment of the principal of (or premium, if any, on) or interest on any
Note, the Trustee shall be protected in withholding such notice if and so
long as the board of directors, the executive committee or a trust
committee of directors and/or Responsible Officers of the Trustee in good
faith determine that withholding of such notice is in the interest of the
Holders; and provided further that in the case of any Default of the
character specified in Section 501(4) with respect to Notes, no such notice
to Holders shall be given until at least 60 days after the occurrence
thereof.
SECTION 602. Certain Rights of Trustee.
Subject to the provisions of TIA Sections 315(a) through
315(d) (determined as if the TIA were applicable to this Indenture at all
times):
(1) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent,
order, bond, debenture, note, other evidence of indebtedness or
other paper or document believed by it to be genuine and to have
been signed or presented by the proper party or parties;
(2) any request or direction of the Issuers mentioned herein
shall be sufficiently evidenced by an Issuer Request or Issuer
Order and any resolution of the Board of Directors of either Issuer
may be sufficiently evidenced by a Board Resolution of such Issuer;
(3) whenever in the administration of this Indenture the
Trustee shall deem it desirable that a matter be proved or
established prior to taking, suffering or omitting any action
hereunder, the Trustee (unless other evidence be herein
specifically prescribed) may, in the absence of bad faith on its
part, rely upon an Officers' Certificate;
(4) the Trustee may consult with counsel of its selection and
the advice of such counsel or any Opinion of Counsel shall be full
and complete authorization and protection in respect of any action
taken, suffered or omitted by it hereunder in good faith and in
reliance thereon;
(5) the Trustee shall be under no obligation to exercise any of
the rights or powers vested in it by this Indenture at the request or
direction of any of the Holders of Notes pursuant to this Indenture,
unless such Holders shall have offered to the Trustee reasonable
security or indemnity against the costs, expenses and liabilities
which might be incurred by it in compliance with such request or
direction;
(6) the Trustee shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction,
consent, order, bond, debenture, note, other evidence of
indebtedness or other paper or document, but the Trustee, in its
discretion, may make such further inquiry or investigation into
such facts or matters as it may see fit;
(7) the Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or
through agents or attorneys and the Trustee shall not be
responsible for any misconduct or negligence on the part of any
agent or attorney appointed with due care by it hereunder;
(8) the Trustee shall not be liable for any action taken,
suffered or omitted by it in good faith and believed by it to be
authorized or within the discretion or rights or powers conferred
upon it by this Indenture; and
(9) the Trustee shall not be deemed to have notice of any
Default or Event of Default unless a Responsible Officer of the
Trustee has actual knowledge thereof or unless written notice of
any event which is in fact such a default is received by the
Trustee at the Corporate Trust Office of the Trustee, and such
notice references the Notes and this Indenture.
The Trustee shall not be required to expend or risk its own
funds or otherwise incur any financial liability in the performance of
any of its duties hereunder, or in the exercise of any of its rights or
powers if it shall have reasonable grounds for believing that repayment
of such funds or adequate indemnity against such risk or liability is not
reasonably assured to it.
SECTION 603. Trustee Not Responsible for Recitals or Issuance
of Notes.
The recitals contained herein and in the Notes, except for the
Trustee's certificates of authentication, shall be taken as the statements
of the Issuers, and neither the Trustee nor any Authenticating Agent
assumes any responsibility for their correctness. The Trustee makes no
representations as to the validity or sufficiency of this Indenture or of
the Notes, except that the Trustee represents that it is duly authorized to
execute and deliver this Indenture, authenticate the Notes and perform its
obligations hereunder, including holding the security constituted by the
Collateral Documents and exercising its rights and performing its
obligations as Trustee under the Collateral Documents for the benefit of
the Holders, including acting as fonde de pouvoir for the Holders under the
Hypothec Agreement; and that the statements to be made by it in its
Statement of Eligibility on Form T-1 supplied to the Issuers will be true
and accurate, subject to the qualifications set forth therein. Neither the
Trustee nor any Authenticating Agent shall be accountable for the use or
application by the Issuers of Notes or the proceeds thereof.
SECTION 604. May Hold Notes.
The Trustee, any Authenticating Agent, any Paying Agent, any
Note Registrar or any other agent of the Issuers or of the Trustee, in
its individual or any other capacity, may become the owner or pledgee of
Notes and, subject to TIA Sections 310(b) and 311, may otherwise deal
with the Issuers with the same rights it would have if it were not
Trustee, Authenticating Agent, Paying Agent, Note Registrar or such other
agent.
SECTION 605. Money Held in Trust.
All money received by the Trustee shall, until used or
applied as herein provided, be held in trust hereunder for the purposes
for which they were received. Money held by the Trustee in trust
hereunder need not be segregated from other funds except to the extent
required by law. The Trustee shall be under no liability for interest on
any money received by it hereunder except as otherwise agreed in writing
with the Issuers.
SECTION 606. Compensation and Reimbursement.
The Issuers agree:
(1) to pay to the Trustee from time to time such compensation
as shall be agreed in writing between the Issuers and the Trustee
for all services rendered by it hereunder (which compensation shall
not be limited by any provision of law in regard to the
compensation of a trustee of an express trust);
(2) except as otherwise expressly provided herein, to
reimburse the Trustee upon its request for all reasonable expenses,
disbursements and advances incurred or made by the Trustee in
accordance with any provision of this Indenture (including the
reasonable compensation and the expenses and disbursements of its
agents and counsel), except any such expense, disbursement or
advance as may be attributable to its negligence or bad faith; and
(3) to indemnify each of the Trustee or any predecessor
Trustee (in its capacity as Trustee) and its agents for, and to
hold it harmless against, any and all loss, liability, damage,
claim or expense, including taxes (other than taxes based on the
income of the Trustee) incurred without negligence or bad faith on
its part, arising out of or in connection with the acceptance or
administration of the trust or trusts hereunder, including the
costs and expenses of defending itself against any claim or
liability in connection with the exercise or performance of any of
its powers or duties hereunder.
The obligations of the Issuers under this Section to
compensate the Trustee, to pay or reimburse the Trustee for expenses,
disbursements and advances and to indemnify and hold harmless the Trustee
shall constitute additional indebtedness hereunder and shall survive the
satisfaction and discharge of this Indenture. As security for the
performance of such obligations of the Issuers, the Trustee shall have a
claim prior to the Notes upon all property and funds held or collected by
the Trustee as such, except funds held in trust for the payment of
principal of (and premium, if any, on) or interest on particular Notes.
When the Trustee incurs expenses or renders services in
connection with an Event of Default specified in Section 501(9) or
Section 501(10), the expenses (including the reasonable charges and
expenses of its counsel) of and the compensation of the Trustee for the
services are intended to constitute expenses of administration under any
applicable Federal or state bankruptcy, insolvency or other similar law.
SECTION 607. Corporate Trustee Required; Eligibility.
There shall at all times be a Trustee hereunder which shall
be eligible to act as Trustee under TIA Section 310(a)(1) and (5) and
shall have a combined capital and surplus of at least $50,000,000. If
such corporation publishes reports of condition at least annually,
pursuant to law or to the requirements of federal, state, territorial or
District of Columbia supervising or examining authority, then for the
purposes of this Section, the combined capital and surplus of such
corporation shall be deemed to be its combined capital and surplus as set
forth in its most recent report of condition so published. If at any time
the Trustee shall cease to be eligible in accordance with the provisions
of this Section, it shall resign immediately in the manner and with the
effect hereinafter specified in this Article. A Trustee who resigns shall
be subject to TIA Section 311(a) to the extent indicated therein.
SECTION 608. Resignation and Removal; Appointment of Successor.
(a) No resignation or removal of the Trustee and no
appointment of a successor Trustee pursuant to this Article shall become
effective until the acceptance of appointment by the successor Trustee in
accordance with the applicable requirements of Section 609.
(b) The Trustee may resign at any time with respect to the
Notes by giving written notice thereof to the Company. If the instrument
of acceptance by a successor Trustee required by Section 609 shall not
have been delivered to the Trustee within 30 days after the giving of
such notice of resignation, the resigning Trustee may petition any court
of competent jurisdiction for the appointment of a successor Trustee with
respect to the Notes.
(c) The Trustee may be removed at any time with respect to
the Notes by Act of the Holders of not less than a majority in principal
amount of the Outstanding Notes, delivered to the Trustee and to the
Issuers. If the instrument of acceptance by a successor Trustee required
by Section 609 shall not have been delivered to the Trustee within 30
days after the giving of such notice of removal, the Trustee being
removed may petition any court of competent jurisdiction for the
appointment of a successor Trustee with respect to the Notes.
(d) If at any time:
(1) the Trustee shall fail to comply with the provisions of
TIA Sections 310(a)(1) and (5) and 310(b), or
(2) the Trustee shall cease to be eligible under Section 607
and shall fail to resign after written request therefor by the
Issuers or by any Holder who has been a bona fide Holder of a Note
for at least six months, or
(3) the Trustee shall become incapable of acting or shall be
adjudged a bankrupt or insolvent or an order for relief is entered
into with respect to the Trustee under any Bankruptcy Law or a
receiver of the Trustee or of its property shall be appointed or
any public officer shall take charge or control of the Trustee or
of its property or affairs for the purpose of rehabilitation,
conservation or liquidation,
then, in any such case, (i) the Issuers, by a Board Resolution, may
remove the Trustee with respect to all Notes, or (ii) subject to TIA
Section 315(e), any Holder who has been a bona fide Holder of a Note for
at least six months may, on behalf of himself and all others similarly
situated, petition any court of competent jurisdiction for the removal of
the Trustee with respect to all Notes and the appointment of a successor
Trustee or Trustees.
(e) If the Trustee shall resign, be removed or become incapable
of acting, or if a vacancy shall occur in the office of Trustee for any
cause, with respect to the Notes, the Issuers, by a Board Resolution, shall
promptly appoint a successor Trustee. If, within one year after such
resignation, removal or incapability, or the occurrence of such vacancy, a
successor Trustee with respect to the Notes shall be appointed by Act of
the Holders of a majority in aggregate principal amount of the Outstanding
Notes delivered to the Issuers and the retiring Trustee, the successor
Trustee so appointed shall, forthwith upon its acceptance of such
appointment, become the successor Trustee with respect to the Notes and to
that extent supersede the successor Trustee appointed by the Issuers. If no
successor Trustee with respect to the Notes shall have been so appointed by
the Issuers or the Holders and accepted appointment in the manner
hereinafter provided, any Holder who has been a bona fide Holder of a Note
for at least six months may, on behalf of himself and all others similarly
situated, petition any court of competent jurisdiction for the appointment
of a successor Trustee with respect to the Notes.
(f) The Issuers shall give notice of each resignation and
each removal of the Trustee with respect to the Notes and each
appointment of a successor Trustee with respect to the Notes to the
Holders of Notes in the manner provided for in Section 106. Each notice
shall include the name of the successor Trustee with respect to the Notes
and the address of its Corporate Trust Office.
SECTION 609. Acceptance of Appointment by Successor.
(a) Each successor Trustee shall execute, acknowledge and
deliver to the Issuers and to the retiring Trustee an instrument
accepting such appointment, and thereupon the resignation or removal of
the retiring Trustee shall become effective and such successor Trustee,
without any further act, deed or conveyance, shall become vested with all
the rights, powers, trusts and duties of the retiring Trustee under this
Indenture; but, on the request of the Issuers or the successor Trustee,
such retiring Trustee shall, upon payment of its charges, execute and
deliver an instrument transferring to such successor Trustee all the
rights, powers and trusts of the retiring Trustee and shall duly assign,
transfer and deliver to such successor Trustee all property and money
held by such retiring Trustee hereunder. The successor Trustee and the
retiring Trustee will, to the extent the successor Trustee deems it
necessary or advisable, execute and deliver such further assignments,
conveyances and instruments to vest the successor trustee with all of the
rights, powers and security constituted by the Collateral Documents in
favor of the Trustee for the benefit of the Holders and, in the case of
the Hypothec Agreement, to confirm that the successor Trustee is acting
as fonde de pouvoir for the Holders under the Hypothec Agreement.
(b) Upon request of any such successor Trustee, the Issuers,
the Security Parties and Brant-Allen shall execute any and all
instruments for more fully and certainly vesting in and confirming to
such successor Trustee all rights, powers and trusts referred to in
paragraph (a) of this Section.
(c) No successor Trustee shall accept its appointment unless
at the time of such acceptance, such successor Trustee shall be qualified
and eligible under this Article.
SECTION 610. Merger, Conversion, Consolidation or Succession to
Business.
Any corporation into which the Trustee may be merged or
converted or with which it may be consolidated, or any corporation
resulting from any merger, conversion or consolidation to which the
Trustee shall be a party, or any corporation succeeding to all or
substantially all the corporate trust business of the Trustee, shall be
the successor of the Trustee hereunder, provided such corporation shall
be otherwise qualified and eligible under this Article, without the
execution or filing of any paper or any further act on the part of any of
the parties hereto. In case any Notes shall have been authenticated, but
not delivered, by the Trustee then in office, any successor by merger,
conversion or consolidation to such authenticating Trustee may adopt such
authentication and deliver the Notes so authenticated with the same
effect as if such successor Trustee had itself authenticated such Notes.
In case at that time any of the Notes shall not have been authenticated,
any successor Trustee may authenticate such Notes either in the name of
any predecessor hereunder or in the name of the successor Trustee. In all
such cases such certificates shall have the full force which it is
anywhere in the Notes or in this Indenture provided that the certificate
of authentication the Trustee shall have; provided, however, that the
right to adopt the certificate of authentication of any predecessor
Trustee or to authenticate Notes in the name of any predecessor Trustee
shall apply only to its successor or successors by merger, conversion or
consolidation.
SECTION 611. Appointment of Authenticating Agent.
At any time when any of the Notes remain Outstanding, the
Trustee may appoint an Authenticating Agent or Agents with respect to the
Notes which shall be authorized to act on behalf of the Trustee to
authenticate Notes and the Trustee shall give written notice of such
appointment to all Holders of Notes with respect to which such
Authenticating Agent will serve, in the manner provided for in Section 106.
Notes so authenticated shall be entitled to the benefits of this Indenture
and shall be valid and obligatory for all purposes as if authenticated by
the Trustee hereunder. Any such appointment shall be evidenced by an
instrument in writing signed by a Responsible Officer of the Trustee, and a
copy of such instrument shall be promptly furnished to the Issuers.
Wherever reference is made in this Indenture to the authentication and
delivery of Notes by the Trustee or the Trustee's certificate of
authentication, such reference shall be deemed to include authentication
and delivery on behalf of the Trustee by an Authenticating Agent and a
certificate of authentication executed on behalf of the Trustee by an
Authenticating Agent. Each Authenticating Agent shall be acceptable to the
Issuers and shall at all times be a corporation organized and doing
business under the laws of the United States of America, any state thereof
or the District of Columbia, authorized under such laws to act as
Authenticating Agent, having a combined capital and surplus of not less
than $50,000,000 and subject to supervision or examination by federal or
state authority. If such corporation publishes reports of condition at
least annually, pursuant to law or to the requirements of said supervising
or examining authority, then for the purposes of this Section, the combined
capital and surplus of such corporation shall be deemed to be its combined
capital and surplus as set forth in its most recent report of condition so
published. If at any time an Authenticating Agent shall cease to be
eligible in accordance with the provisions of this Section, it shall resign
immediately in the manner and with the effect specified in this Section.
Any Authenticating Agent by the acceptance of its appointment
shall be deemed to have agreed with the Trustee that it will perform and
carry out the duties of an Authenticating Agent herein set forth
including, among other things, the duties to authenticate and deliver
Notes when presented to it in connection with exchanges or transfers of
Notes (but not upon the original issue thereof or in cases of replacement
of Notes mutilated, defaced, lost or stolen); it will furnish from time
to time as requested by the Issuers or the Trustee appropriate records of
all transactions carried out by it as authenticating agent and will
furnish the Issuers or the Trustee such other information and reports by
it as the Issuers or the Trustee may reasonably require; it is eligible
for appointment as Authenticating Agent and will notify the Issuers and
the Trustee promptly if it shall cease to be so qualified; it will
indemnify the Trustee against any loss, liability or expense incurred by
the Trustee and will defend any claims asserted against the Trustee by
reason of any acts or failures to act of the authenticating agent but it
shall have no liability for any action taken by it at the specific
direction of the Trustee.
Any corporation into which an Authenticating Agent may be
merged or converted or with which it may be consolidated, or any
corporation resulting from any merger, conversion or consolidation to
which such Authenticating Agent shall be a party, or any corporation
succeeding to the corporate agency or corporate trust business of an
Authenticating Agent, shall continue to be an Authenticating Agent,
provided such corporation shall be otherwise eligible under this Section,
without the execution or filing of any paper or any further act on the
part of the Trustee or the Authenticating Agent.
An Authenticating Agent may resign at any time by giving
written notice thereof to the Trustee and to the Issuers. The Trustee may
at any time terminate the agency of an Authenticating Agent by giving
written notice thereof to such Authenticating Agent and to the Issuers.
Upon receiving such a notice of resignation or upon such a termination,
or in case at any time such Authenticating Agent shall cease to be
eligible in accordance with the provisions of this Section, the Trustee
may appoint a successor Authenticating Agent which shall be acceptable to
the Issuers and shall give written notice of such appointment to all
Holders of Notes, in the manner provided for in Section 106. Any
successor Authenticating Agent upon acceptance of its appointment
hereunder shall become vested with all the rights, powers and duties of
its predecessor hereunder, with like effect as if originally named as an
Authenticating Agent. No successor Authenticating Agent shall be
appointed unless eligible under the provisions of this Section.
The Issuers agree to pay to each Authenticating Agent from
time to time such compensation for its services under this Section as
shall be agreed in writing between the Issuers and such Authenticating
Agent.
If an appointment is made pursuant to this Section, the Notes
may have endorsed thereon, in addition to the Trustee's certificate of
authentication, an alternate certificate of authentication in the
following form:
This is one of the Notes designated therein referred to in
the within-mentioned Indenture.
CRESTAR BANK,
as Trustee
By__________________________________
as Authenticating Agent
By__________________________________
Authorized Officer
SECTION 612. Appointment of Trustee as Fonde de Pouvoir.
The Trustee is hereby appointed and hereby accepts its
appointment as fonde de pouvoir (power of attorney) of the Holders as
contemplated by article 2692 of the Civil Code of Quebec to enter into,
to take and to hold, on behalf of, and for the benefit of each of the
Holders, any hypothec granted to secure payment of the Notes, and to
exercise such power and duties which are conferred upon the Trustee under
any deed of hypothec or herein or under any other agreement. Any person
who becomes a Holder shall be deemed to have consented to and confirmed
the Trustee as fonde de pouvoir and to have ratified as of the date he or
she becomes a Holder all actions taken by the fonde de pouvoir.
ARTICLE SEVEN
HOLDERS' LISTS AND REPORTS BY TRUSTEE
SECTION 701. Disclosure of Names and Addresses of Holders.
Every Holder of Notes, by receiving and holding the same,
agrees with the Issuers and the Trustee that none of the Issuers or the
Trustee or any agent of any of them shall be held accountable by reason of
the disclosure of any such information as to the names and addresses of the
Holders in accordance with TIA Section 312, regardless of the source from
which such information was derived, and that the Trustee shall not be held
accountable by reason of mailing any material pursuant to a request made
under TIA Section 312(b).
SECTION 702. Reports by Trustee.
Within 60 days after May 15 of each year commencing with the
first May 15 after the first issuance of Notes pursuant to this
Indenture, the Trustee if required shall transmit to the Holders of Notes
(with a copy to the Issuers at the Place of Payment), in the manner and
to the extent provided in TIA Section 313(c), a brief report dated as of
such May 15 that complies with TIA Section 313(a). The Trustee also shall
comply with TIA Sections 313(b) and 313(c).
ARTICLE EIGHT
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
SECTION 801. Issuers May Consolidate, etc., Only on Certain
Terms.
Each of the Credit Parties shall not, in a single transaction
or through a series of related transactions, consolidate with or merge
with or into any other Person or sell, assign, convey, transfer, lease or
otherwise dispose of all or substantially all of its properties and
assets to any other Person or Persons or permit any of its Restricted
Subsidiaries to enter into any such transaction or series of related
transactions if such transaction or series of related transactions, in
the aggregate, would result in the sale, assignment, conveyance,
transfer, lease or other disposition of all or substantially all of the
properties and assets of such Credit Party and its Restricted
Subsidiaries on a consolidated basis to any other Person or Persons,
unless at the time and immediately after giving effect thereto:
(i) either (A) such Credit Party shall be the continuing
corporation (or limited liability company) or (B) the Person (if
other than such Credit Party) formed by such consolidation or into
which such Credit Party or such Restricted Subsidiary is merged or
the Person that acquires by sale, assignment, conveyance, transfer,
lease or disposition all or substantially all the properties and
assets of such Credit Party and its Restricted Subsidiaries on a
consolidated basis (the "Surviving Entity") (1) will be a
corporation, partnership, limited liability company or trust duly
organized and validly existing under the laws of the United States of
America, any state thereof or the District of Columbia, and (2) will
expressly assume, by an indenture supplemental hereto, executed and
delivered to the Trustee, in form satisfactory to the Trustee, the
due and punctual payment of the principal of (and premium, if any)
and interest on all the Notes and the performance and observance of
every other obligation of this Indenture on the part of such Credit
Party to be performed or observed;
(ii) immediately after giving effect to such transaction or
series of transactions on a pro forma basis (and treating any
obligation of such Credit Party or any Subsidiary incurred in
connection with or as a result of such transaction or series of
transactions as having been incurred at the time of such
transaction), no Default or Event of Default will have occurred and
be continuing;
(iii) immediately after giving effect to such transaction or
series of transactions on a pro forma basis (and treating any
obligation of such Credit Party or any Subsidiary incurred in
connection with or as a result of such transaction or series of
transactions as having been incurred at the time of such
transaction), the Consolidated Net Worth of such Credit Party (or
of the Surviving Entity if such Credit Party is not the continuing
obligor under this Indenture) is equal to or greater than the
Consolidated Net Worth of such Credit Party immediately prior to
the consummation of such transaction or series of transactions with
the appropriate adjustments;
(iv) with respect to the Company and Soucy Inc., immediately
after giving effect to such transaction or series of transactions
on a pro forma basis (on the assumption that the transaction or
series of transactions occurred on the first day of the
four-quarter period immediately prior to the consummation of such
transaction or series of transactions with the appropriate
adjustments with respect to the transaction or series of
transactions being included in such pro forma calculation), (I) in
the case of the Company, the Company (or the Surviving Entity, if
as a result of such transaction or transactions, the Company does
not continue as an obligor under this Indenture) could incur at
least $1.00 of additional Indebtedness (other than Permitted
Indebtedness) under the provisions of Section 1008 and (II) in the
case of Soucy Inc., Soucy Inc. (or the Surviving Entity, if as a
result of such transaction or transactions, Soucy Inc. does not
continue as a party under this Indenture) could incur $1.00 of
additional Indebtedness under clause (c)(v) of the definition of
"Permitted Security Party Indebtedness";
(v) each Guarantor, if any, unless it is the other party to
the transactions described above, shall have by supplemental
indenture confirmed that its Guarantee will apply to such Person's
obligations under this Indenture and under the Notes; and
(vi) if any of the property or assets of such Credit Party or
any of its Subsidiaries would thereupon become subject to any Lien,
the provisions of Section 1010 or 1016, as the case may be, are
complied with; provided that the provisions of this Section 801 will
not apply to any transaction consummated under (x) clause (i) or (ii)
of paragraph (b) under Section 1018 and (y) paragraph (d) under
Section 1022.
In connection with any such consolidation, merger, sale,
assignment, conveyance, transfer, lease or other disposition, the
relevant Credit Party or the Surviving Entity shall have delivered to the
Trustee an Officers' Certificate (attaching the authentic computations to
demonstrate compliance with clauses (iii) and (iv) above) and an Opinion
of Counsel, in form and substance reasonably satisfactory to the Trustee,
each stating that such consolidation, merger, sale, assignment,
conveyance, transfer, lease or other disposition, and if a supplemental
indenture is required in connection with such transaction, such
supplemental indenture, complies with this Section 801 and that all
conditions precedent herein provided for relating to such transaction
have been complied with.
SECTION 802. Successor Substituted.
Upon any consolidation or merger, or any sale, assignment,
conveyance, transfer, lease or other disposition of all or substantially
all of the properties and assets of any Credit Party or its Subsidiaries
in accordance with Sections 801, the successor Person formed by such
consolidation or into which such Credit Party or such Subsidiary is
merged or the successor Person to which such sale, assignment,
conveyance, transfer or lease is made shall succeed to, and be
substituted for, and may exercise every right and power of, such Credit
Party under this Indenture with the same effect as if such successor had
been named as such Credit Party herein; and thereafter, except in the
case of a lease, such Credit Party shall be discharged from all
obligations and covenants under this Indenture and the Notes.
ARTICLE NINE
SUPPLEMENTAL INDENTURES
SECTION 901. Supplemental Indentures Without Consent of Holders.
Without the consent of any Holders, the Issuers, the Security
Parties, Brant-Allen or any Guarantor, when authorized by or pursuant to
a Board Resolution, and the Trustee, at any time and from time to time,
may enter into one or more indentures supplemental hereto, on form
satisfactory to the Trustee, for any of the following purposes:
(1) to evidence the succession of another Person to the
Issuers, the Security Parties, a Guarantor or any other obligor on
the Notes, and the assumption by any such successor of the
covenants of the Issuers, the Security Parties, Brant-Allen, a
Guarantor or any other obligor, as the case may be, in this
Indenture and in the Notes and in any Guarantee in accordance with
Article Eight;
(2) to add to the covenants of the Issuers, the Security
Parties, Brant-Allen, any Guarantor or any other obligor upon the
Notes for the benefit of the Holders of the Notes or to surrender
any right or power conferred upon the Issuers, the Securities
Parties, or any Guarantor or any other obligor upon the Notes, as
applicable, in this Indenture, in the Notes, the Collateral
Documents or in any Guarantee;
(3) to cure any ambiguity, or to correct or supplement any
provision in this Indenture, the Notes or in any Guarantee which
may be defective or inconsistent with any other provision in this
Indenture, the Notes, the Collateral Documents or any Guarantee or
make any other provisions with respect to matters or questions
arising under this Indenture, the Notes or any Guarantee; provided
that, in each case, such provisions shall not adversely affect the
interests of the Holders of the Notes;
(4) to comply with the requirements of the Commission in
order to effect or maintain the qualification of this Indenture
under the Trust Indenture Act;
(5) to add a Guarantor of the Notes under this Indenture;
(6) to evidence and provide the acceptance of the appointment
of a successor Trustee under this Indenture; or
(7) to mortgage, pledge, hypothecate or grant a security
interest in favor of the Trustee for the benefit of the Holders of
the Notes as additional security for the payment and performance of
obligations of the Issuers, the Security Parties, any Guarantor and
any other obligor under this Indenture, in any property, or assets,
including any of which are required to be mortgaged, pledged or
hypothecated, or in which a security interest is required to be
granted to the Trustee pursuant to this Indenture or otherwise.
SECTION 902. Supplemental Indentures with Consent of Holders.
With the consent of the Holders of not less than a majority in
principal amount of all Outstanding Notes that are affected thereby, by Act
of said Holders delivered to the Issuers, the Security Parties,
Brant-Allen, any Guarantor and the Trustee, such entities, when authorized
by or pursuant to their respective Board Resolutions, and the Trustee may
enter into an indenture or indentures supplemental hereto for the purpose
of adding any provisions to or changing in any manner or eliminating any of
the provisions of this Indenture or of modifying in any manner the rights
of the Holders of Notes under this Indenture; provided, however, that no
such supplemental indenture shall, without the consent of the Holder of
each Outstanding Note affected thereby,
(1) change the Stated Maturity of the principal of, or any
installment of interest on, any Note, or reduce the principal
amount thereof (or premium, if any) or the rate of interest thereon
or change the coin or currency in which the principal of any Note
or any premium or the interest thereon is payable, or impair the
right to institute suit for the enforcement of any such payment
after the Stated Maturity thereof (or, in the case of redemption,
on or after the Redemption Date);
(2) amend, change or modify any of the provisions of Section
1012 or 1022 including any definitions relating thereto;
(3) reduce the percentage in principal amount of the
Outstanding Notes, the consent of whose Holders is required for any
such supplemental indenture or the consent of whose holders is
required for any waiver of compliance with certain provisions of
this Indenture or certain defaults hereunder and their consequences
provided for in this Indenture;
(4) modify any provisions of this Section, Section 513 or
Section 1028, except to increase the percentage in principal amount
of the Outstanding Notes required to take any of the actions
described therein or to provide that certain additional provisions
of this Indenture cannot be modified or waived without the consent
of the Holder of each Note affected thereby;
(5) except as otherwise permitted under Article Eight and
Section 1018, consent to the assignment or transfer by the Issuers,
the Security Parties, Brant-Allen or any of their respective
Subsidiaries of any of their rights or obligations under this
Indenture; or
(6) amend or modify any of the provisions of this Indenture
or the Notes or any Guarantee of the Notes or any of the Collateral
Documents relating to the Collateral in any manner adverse to the
Holders of the Notes.
It shall not be necessary for any Act of Holders under this
Section to approve the particular form of any proposed supplemental
indenture, but it shall be sufficient if such Act shall approve the
substance thereof.
SECTION 903. Execution of Supplemental Indentures.
In executing, or accepting the additional trusts created by,
any supplemental indenture permitted by this Article or the modifications
thereby of the trusts created by this Indenture, the Trustee shall be
entitled to receive, and shall be fully protected in relying upon, an
Opinion of Counsel stating that the execution of such supplemental
indenture is authorized or permitted by this Indenture. The Trustee may,
but shall not be obligated to, enter into any such supplemental indenture
which affects the Trustee's own rights, duties or immunities under this
Indenture or otherwise.
SECTION 904. Effect of Supplemental Indentures.
Upon the execution of any supplemental indenture under this
Article, this Indenture shall be modified in accordance therewith, and
such supplemental indenture shall form a part of this Indenture for all
purposes; and every Holder of Notes theretofore or thereafter
authenticated and delivered hereunder shall be bound thereby.
SECTION 905. Conformity with Trust Indenture Act.
Every supplemental indenture executed pursuant to this
Article shall conform to the requirements of the Trust Indenture Act as
then in effect.
SECTION 906. Reference in Notes to Supplemental Indentures.
Notes authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article may, and shall if
required by the Trustee, bear a notation in form approved by the Trustee
as to any matter provided for in such supplemental indenture. If the
Issuers shall so determine, new Notes so modified as to conform, in the
opinion of the Trustee and the Issuers, to any such supplemental
indenture may be prepared and executed by the Issuers and authenticated
and delivered by the Trustee in exchange for Outstanding Notes.
SECTION 907. Notice of Supplemental Indentures.
Promptly after the execution by the Issuers and the Trustee
of any supplemental indenture pursuant to the provisions of Section 902,
the Issuers shall give notice thereof to the Holders of each Outstanding
Note affected, in the manner provided for in Section 106, setting forth
in general terms the substance of such supplemental indenture.
ARTICLE TEN
COVENANTS
SECTION 1001. Payment of Principal, Premium, If Any, and
Interest.
The Issuers covenant and agree for the benefit of the Holders
of Notes that they will duly and punctually pay the principal of (and
premium, if any, on) and interest on the Notes in accordance with the
terms of the Notes and this Indenture.
SECTION 1002. Maintenance of Office or Agency.
The Issuers will maintain in The City of New York an office
or agency where Notes may be presented or surrendered for payment (the
"Place of Payment"), where Notes may be surrendered for registration of
transfer or exchange and where notices and demands to or upon the Issuers
in respect of the Notes and this Indenture may be served. The Issuers
hereby designate the Corporate Trust Office as the Place of Payment.
The Issuers will give prompt written notice to the Trustee of
the location, and any change in the location, of the Place of Payment. If
at any time the Issuers shall fail to maintain any such required office
or agency or shall fail to furnish the Trustee with the address thereof,
such presentations, surrenders, notices and demands may be made or served
at the Corporate Trust Office of the Trustee, and the Issuers hereby
appoint the same as their agent to receive such respective presentations,
surrenders, notices and demands.
The Issuers may also from time to time designate one or more
other offices or agencies where the Notes may be presented or surrendered
for any or all such purposes and may from time to time rescind any such
designation; provided, however, that no such designation or rescission
shall in any manner relieve the Issuers of their obligation to maintain
an office or agency in accordance with the requirements set forth above
for Notes for such purposes. The Issuers will give prompt written notice
to the Trustee of any such designation or rescission and of any change in
the location of any such other office or agency.
SECTION 1003. Money for Notes Payments to Be Held in Trust.
If either of the Issuers shall at any time act as its own
Paying Agent with respect to the Notes, it will, on or before each due date
of the principal of (and premium, if any) or interest on any of the Notes,
segregate and hold in trust for the benefit of the Persons entitled thereto
a sum sufficient to pay the principal (and premium, if any) or interest so
becoming due until such sums shall be paid to such Persons or otherwise
disposed of as herein provided and will promptly notify the Trustee of its
action or failure so to act.
Whenever the Issuers shall have one or more Paying Agents for
the Notes, they will, prior to or on each due date of the principal of
(and premium, if any, on) or interest on any Notes, deposit with a Paying
Agent a sum sufficient to pay the principal (and premium, if any) or
interest so becoming due, such sum to be held in trust for the benefit of
the Persons entitled to such principal, premium or interest, and (unless
such Paying Agent is the Trustee) the Issuers will promptly notify the
Trustee of their action or failure so to act.
The Issuers will cause each Paying Agent (other than the
Trustee) to execute and deliver to the Trustee an instrument in which
such Paying Agent shall agree with the Trustee, subject to the provisions
of this Section, that such Paying Agent will:
(1) hold all sums held by it for the payment of the principal
of (and premium, if any) and interest on the Notes in trust for the
benefit of the Persons entitled thereto until such sums shall be
paid to such Persons or otherwise disposed of as herein provided;
(2) give the Trustee notice of any default by the Issuers (or
any other obligor upon the Notes) in the making of any payment of
principal of (or premium, if any) or interest on the Notes; and
(3) at any time during the continuance of any such default,
upon the written request of the Trustee, forthwith pay to the
Trustee all sums so held in trust by such Paying Agent.
The Issuers may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose,
pay, or by Issuer Order direct any Paying Agent to pay, to the Trustee
all sums held in trust by the Issuers or such Paying Agent, such sums to
be held by the Trustee upon the same trusts as those upon which sums were
held by the Issuers or such Paying Agent; and, upon such payment by any
Paying Agent to the Trustee, such Paying Agent shall be released from all
further liability with respect to such sums.
Any money deposited with the Trustee or any Paying Agent, or
then held by the Issuers, in trust for the payment of the principal of (and
premium, if any) or interest on any Note and remaining unclaimed for one
year after such principal (and premium, if any) or interest has become due
and payable shall be paid to the Issuers on Issuer Request, or (if then
held by the Issuers) shall be discharged from such trust; and the Holder of
such Note shall thereafter, as an unsecured general creditor, look only to
the Issuers for payment thereof, and all liability of the Trustee or such
Paying Agent with respect to such trust money, and all liability of the
Issuers as trustee thereof, shall thereupon cease; provided, however, that
the Trustee or such Paying Agent, before being required to make any such
repayment, may at the expense of the Issuers cause to be published once, in
a newspaper published in the English language, customarily published on
each Business Day and of general circulation in the Borough of Manhattan,
The City of New York, notice that such money remains unclaimed and that,
after a date specified therein, which shall not be less than 30 days from
the date of such notification or publication, any unclaimed balance of such
money then remaining will be repaid to the Issuers.
SECTION 1004. Corporate Existence.
Subject to Article Eight and Section 1018, each of the
Issuers, the Security Parties and Brant-Allen will do or cause to be done
all things necessary to preserve and keep in full force and effect the
limited liability company or corporate, as the case may be, or other
existence, rights (charter and statutory) and franchises of such entity
and any Restricted Subsidiary of such entity; provided, however, that,
subject to the other provisions of this Indenture, each such entity shall
not be required to preserve any such right or franchise, or the existence
of any Restricted Subsidiary, if the Board of Directors shall determine
that the preservation thereof is no longer desirable in the conduct of
the business of such entity and its Subsidiaries as a whole and that the
loss thereof is not disadvantageous in any material respect to the
Holders.
SECTION 1005. Payment of Taxes and Other Claims.
Each of the Issuers, the Security Parties and Brant-Allen
will pay or discharge or cause to be paid or discharged, before the same
shall become delinquent, (a) all taxes, assessments and governmental
charges levied or imposed upon such entity, if any, or any Subsidiary or
upon the income, profits or property of such entity, if any, or any
Subsidiary and (b) all lawful claims for labor, materials and supplies,
which, if unpaid, would by law become a lien (other than a Permitted
Lien) upon the property of such entity or any Subsidiary; provided,
however, that such entity shall not be required to pay or discharge or
cause to be paid or discharged any such tax, assessment, charge or claim
whose amount, applicability or validity is being contested in good faith
by appropriate proceedings.
SECTION 1006. Maintenance of Properties.
Each of the Issuers and the Security Parties will cause all
material properties owned by such entity or any Restricted Subsidiary or
used or held for use in the conduct of its business or the business of any
Restricted Subsidiary to be maintained and kept in good condition and
working order (except ordinary wear and tear) and supplied with all
necessary equipment and will cause to be made all reasonably necessary
repairs, renewals, replacements, betterments and improvements thereof, all
as in the reasonable judgment of such entity may be necessary so that the
business carried on in connection therewith may be properly and
advantageously conducted at all times; provided, however, that nothing in
this Section shall prevent such entity or any of its respective Restricted
Subsidiaries from discontinuing the maintenance or operation of any of such
properties if such discontinuance is, in the judgment of such entity,
desirable in the conduct of its business or the business of any Restricted
Subsidiary and not, in the judgment of such entity, disadvantageous in any
material respect to the Holders.
SECTION 1007. Statement by Officers as to Default.
(a) The Company will deliver to the Trustee, within 120 days
after the end of each fiscal year, a brief certificate from the principal
executive officer, principal financial officer or principal accounting
officer of the Company as to his or her knowledge of each of the Credit
Parties' compliance with all conditions and covenants under this
Indenture since the beginning of such quarter or such year, as the case
may be. For purposes of this Section 1007(a), such compliance shall be
determined without regard to any period of grace or requirement of notice
under this Indenture.
(b) When any Default has occurred and is continuing under
this Indenture, or if the trustee for or the holder of any other evidence
of Indebtedness of the Issuers or any Subsidiary gives any notice or
takes any other action with respect to a claimed default (other than with
respect to Indebtedness in the principal amount of less than $5,000,000),
the Company shall deliver to the Trustee by registered or certified mail
or by telegram, telex or facsimile transmission an Officers' Certificate
specifying such event, notice or other action within five Business Days
of its occurrence.
SECTION 1008. Limitation on Indebtedness of the Company.
The Company shall not, and shall not permit any Restricted
Subsidiary of the Company to, create, issue, assume, guarantee or in any
manner become directly or indirectly liable for the payment of, or
otherwise incur (collectively, "incur"), any Indebtedness (including any
Acquired Indebtedness), other than Permitted Indebtedness, except for
Indebtedness (including Acquired Indebtedness) of the Company so long as at
the time of such incurrence or issuance the Consolidated Fixed Charge
Coverage Ratio for the Company for the four full fiscal quarters
immediately preceding the incurrence of such Indebtedness, taken as one
period (and after giving pro forma effect to (i) the incurrence of such
Indebtedness and (if applicable) the application of the net proceeds
therefrom, including to refinance other Indebtedness, as if such
Indebtedness were incurred, and the application of such proceeds had
occurred, on the first day of such four-quarter period, (ii) the
incurrence, repayment or retirement of any other Indebtedness by the
Company and its Restricted Subsidiaries since the first day of such
four-quarter period as if such Indebtedness were incurred, repaid or
retired on the first day of such four-quarter period (except that, in
making such computation, the amount of Indebtedness under any revolving
credit facility shall be computed based upon the average daily balance of
such Indebtedness during such four-quarter period) and (iii) the
acquisition (whether by purchase, merger or otherwise) or disposition
(whether by sale, merger or otherwise) of any company, entity or business
acquired or disposed of by the Company or its Restricted Subsidiaries, as
the case may be, since the first day of such four-quarter period, as if
such acquisition or disposition had occurred on the first day of such
four-quarter period), would have been at least equal to 2.0 to 1.0.
SECTION 1009. Limitation on Restricted Payments by the Company.
(a) The Company shall not, and shall not permit any
Restricted Subsidiary of the Company to, directly or indirectly, make any
Restricted Payment unless at the time of, and immediately after giving
effect to, the proposed Restricted Payment (the amount of any such
Restricted Payment, if other than cash, as determined by the Board of
Directors of the Company, whose determination shall be conclusive and
evidenced by a Board Resolution), (1) no Default or Event of Default
shall have occurred and be continuing, (2) the Company could incur at
least $1.00 of additional Indebtedness (other than Permitted
Indebtedness) pursuant to Section 1008 and (3) the aggregate amount of
all Restricted Payments declared or made after the date of this Indenture
shall not exceed the sum of:
(A) 50% of the Consolidated Adjusted Net Income of the
Company accrued on a cumulative basis during the period beginning
on the first day of the Company's first fiscal quarter after the
date of this Indenture and ending on the last day of the Company's
last fiscal quarter ending prior to the date of such proposed
Restricted Payment (or, if such aggregate cumulative Consolidated
Adjusted Net Income shall be a loss, minus 100% of such loss); plus
(B) 75% of the aggregate net cash proceeds received after the
date of this Indenture by the Company as capital contributions or
from the issuance or sale (other than to any Subsidiary) of shares
of Qualified Capital Stock of the Company (including upon the
exercise of options, warrants or rights) or warrants, options or
rights to purchase shares of Qualified Capital Stock of the
Company; provided that, after the date upon which the Company shall
have reduced its Total Committed Debt to an amount that is not
greater than $105 million, such calculation shall be adjusted to
100% of the aggregate net cash proceeds of such transactions
occurring after such date; plus
(C) 75% of the aggregate net cash proceeds received after the
date of this Indenture by the Company from the issuance or sale
(other than to any Subsidiary) of debt securities or shares of
Redeemable Capital Stock that have been converted into or exchanged
for shares of Qualified Capital Stock of the Company, to the extent
such securities were originally sold for cash, together with the
aggregate net cash proceeds received by the Company at the time of
such conversion or exchange; provided that, after the date upon which
the Company shall have reduced its Total Committed Debt to an amount
that is not greater than $105 million, such calculation shall be
adjusted to 100% of the aggregate net proceeds of such transactions
occurring after such date; plus
(D) to the extent not otherwise included in the Consolidated
Adjusted Net Income of the Company, an amount equal to the net
reduction in Investments (other than reductions in Permitted
Investments) in Unrestricted Subsidiaries resulting from the
payments in cash of interest on Indebtedness, dividends, repayments
of loans or advances, or other transfers of assets, in each case to
the Company or a Restricted Subsidiary after the date of this
Indenture from any Unrestricted Subsidiary or from the
redesignation of an Unrestricted Subsidiary as a Restricted
Subsidiary (valued in each case as provided in the definition of
Investment), not to exceed the total amount of Investments (other
than Permitted Investments) made in such Unrestricted Subsidiary by
the Company and its Restricted Subsidiaries.
(b) Notwithstanding paragraph (a) above, the Company may take
the following actions so long as no Default or Event of Default shall
have occurred and be continuing:
(i) the payment of any dividend or the making of any
distribution within 60 days after the date of declaration thereof,
if at such date of declaration the payment of such dividend or
distribution would have complied with the provisions of paragraph
(a) above and such payment will be deemed to have been paid on such
date of declaration for purposes of the calculation required by
paragraph (a) above;
(ii) the purchase, redemption or other acquisition or
retirement for value of any shares of Capital Stock of the Company
by conversion into, or by or in exchange for, or out of the net
cash proceeds of a substantially concurrent issuance and sale
(other than to a Subsidiary) of, shares of Qualified Capital Stock
of the Company;
(iii) the purchase, redemption, defeasance or other
acquisition or retirement for value of any Subordinated
Indebtedness of the Company by conversion into, or by or in
exchange for, or out of the net cash proceeds of a substantially
concurrent issuance and sale (other than to a Subsidiary) of,
shares of Qualified Capital Stock of the Company;
(iv) the purchase of any Subordinated Indebtedness of the
Company at a purchase price not greater than 101% of the principal
amount thereof in the event of a change of control in accordance
with provisions substantially similar to those of Section 1012;
provided that prior to such purchase the Change of Control Offer as
provided in Section 1012 has been made with respect to the Notes
and all Notes validly tendered for payment in connection with such
Change of Control Offer have been purchased;
(v) the purchase, redemption, defeasance or other acquisition
or retirement for value of Subordinated Indebtedness of the Company
in exchange for, or out of the net cash proceeds of a substantially
concurrent incurrence (other than to a Subsidiary) of, new
Subordinated Indebtedness of the Company so long as (A) the
principal amount of such new Subordinated Indebtedness does not
exceed the principal amount (or, if such Subordinated Indebtedness
being refinanced provides for an amount less than the principal
amount thereof to be due and payable upon a declaration of
acceleration thereof, such lesser amount as of the date of
determination) of the Subordinated Indebtedness being so purchased,
redeemed, defeased, acquired or retired, plus the lesser of the
amount of any premium required to be paid in connection with such
refinancing pursuant to the terms of the Subordinated Indebtedness
being refinanced or the amount of any premium reasonably determined
by the Company as necessary to accomplish such refinancing, plus,
in either case, the amount of expenses of the Company incurred in
connection with such refinancing, (B) such new Subordinated
Indebtedness is subordinated to the Notes to the same extent as
such Subordinated Indebtedness so purchased, redeemed, defeased,
acquired or retired and (C) such new Subordinated Indebtedness has
(x) an Average Life either (I) longer than the Average Life of the
Notes or (II) equal to or greater than the Average Life of the
Subordinated Indebtedness that is being purchased, redeemed,
defeased, acquired or retired and (y) a final Stated Maturity of
principal either (I) later than the final Stated Maturity of the
principal of the Notes or (II) no earlier than the Subordinated
Indebtedness being purchased, redeemed, defeased, acquired or
retired;
(vi) the payment by the Company of certain amounts on account
of that portion of the federal, state, local and foreign income tax
liability of the direct and indirect equityholders of the Company
that is attributable to their interests in the Company determined at
the highest combined marginal federal, state, local and foreign tax
rate for the taxable year applicable to the type of entity or
individual with respect to taxes of which the payment is to be made
pursuant to this clause (vi); provided, however, that if any direct
holder of an equity interest in the Company is not treated as a
pass-through entity by a taxing authority and, as a result, such
direct holder has a tax liability attributable to its ownership of an
equity interest in the Company, the Company shall make no payment to
any indirect holder of an equity interest in the Company that owns
such interest through such direct holder with respect to the tax
imposed by such taxing authority, but will, in all events, pay such
tax liability of the direct holder; provided further that the amount
of the payments pursuant to this clause (vi) for any taxable year
shall not exceed the product of the taxable income of the Company for
such taxable year multiplied by the highest combined marginal
federal, state and local tax rate for the taxable year applicable to
the type of entity or individual with respect to taxes of which the
payment is to be made pursuant to this clause (vi);
(vii) the payment of a distribution by the Company on the
Closing Date for Brant-Allen to recover expenses incurred on behalf
of the Credit Parties in connection with the Acquisition, the
Timberlands Acquisition and the related financings; provided that
such dividend shall not exceed an aggregate of $2.0 million;
(viii)the payment by the Company of management fees to
Brant-Allen (or any of its Subsidiaries or Affiliates) in an amount
per annum not in excess of 3% of the revenues (less transportation
costs) of the Company in the applicable fiscal year, of which no
more than one third may be in cash; and
(ix) the payment of a distribution by the Company on the
Closing Date to Brant-Allen in an amount equal to the total
federal, state, local and foreign tax liabilities of Brant-Allen,
Peter Brant and Joseph Allen arising as a result of their direct
and indirect ownership of equity interests in the Company's
predecessor, Bear Island Paper Company, L.P., during 1997 through
the Closing Date, as calculated by the Company's Vice President of
Finance and recalculated by the Company's independent accountants;
provided, however, that the amount of the payment pursuant to this
clause (ix) shall not exceed the product of the taxable income of
such predecessor during such period multiplied by the highest
combined marginal federal, state and local tax rates applicable to
the type of entity or individual with respect to taxes of which the
payment is to be made pursuant to this clause (ix) in the United
States during 1997.
The actions described in clauses (i), (ii), (iii), (iv) and (viii) (to
the extent that the fees paid in cash referred to in clause (viii) exceed
1% of the revenues (less transportation costs) of the Company) of this
paragraph (b) shall be Restricted Payments that shall be permitted to be
taken in accordance with this paragraph (b) but shall reduce the amount
that would otherwise be available for Restricted Payments under clause
(3) of paragraph (a) above and the actions described in clauses (v),
(vi), (vii), (viii) (to the extent that the fees paid in cash referred to
in clause (viii) do not exceed 1% of the revenues (less transportation
costs) of the Company) and (ix) of this paragraph (b) shall be Restricted
Payments that shall be permitted to be taken in accordance with this
paragraph (b) and shall not reduce the amount that would otherwise be
available for Restricted Payments under clause (3) of paragraph (a).
(c) In computing Consolidated Adjusted Net Income of the
Company under paragraph (a) above, (1) the Company shall use audited
financial statements for the portions of the relevant period for which
audited financial statements are available on the date of determination
and unaudited financial statements and other current financial data based
on the books and records of the Company for the remaining portion of such
period and (2) the Company shall be permitted to rely in good faith on
the financial statements and other financial data derived from the books
and records of the Company that are available on the date of
determination. In addition, in computing the amounts under clauses (B)
and (C) under paragraph (a) above, to the extent that the Company issues
shares of Qualified Capital Stock to Brant-Allen in exchange for
management fees under the Management Services Agreement, the value of
such shares shall be excluded.
SECTION 1010. Limitation on Liens of the Company.
The Company shall not, and shall not permit any Restricted
Subsidiary of the Company to, directly or indirectly, create, incur,
assume or suffer to exist any Lien of any kind (other than Permitted
Liens) on or with respect to any of its property or assets, including any
shares of stock or indebtedness of any Restricted Subsidiary of the
Company, whether owned at the date of this Indenture or thereafter
acquired, or any income, profits or proceeds therefrom, or assign or
otherwise convey any right to receive income thereon, unless (x) in the
case of any Lien securing Subordinated Indebtedness, the Notes are
secured by a Lien on such property, assets or proceeds that is senior in
priority to such Lien and (y) in the case of any other Lien, the Notes
are equally and ratably secured with the obligation or liability so
secured by such Lien, in each case, for so long as such obligation is
secured by such Lien.
SECTION 1011. Guarantees by Restricted Subsidiaries of the
Company.
(a) If, after the Closing Date, the Company or any of its
Subsidiaries acquires or forms a Restricted Subsidiary, the Company shall
cause any such Restricted Subsidiary to (i) execute and deliver to the
Trustee a supplemental indenture in form and substance reasonably
satisfactory to such Trustee pursuant to which such Restricted Subsidiary
shall guarantee all of the obligations of the Company with respect to the
Notes issued under such Indenture on a senior basis and (ii) deliver to
such Trustee an opinion of counsel reasonably satisfactory to such
Trustee to the effect that such supplemental indenture has been duly
executed and delivered by such Restricted Subsidiary and is in compliance
with the terms of this Indenture.
(b) Notwithstanding the foregoing, any Guarantee of the Notes
created pursuant to the provisions described in the foregoing paragraph (a)
shall provide by its terms that it shall be automatically and
unconditionally released and discharged upon any sale, exchange or
transfer, to any Person not a Restricted Subsidiary of the Company, of all
of the Capital Stock in, or all or substantially all the assets of, such
Restricted Subsidiary (which sale, exchange or transfer is not prohibited
by this Indenture).
SECTION 1012. Purchase of Notes upon a Change of Control.
(a) If a Change of Control shall occur at any time, then each
Holder of Notes will have the right to require that the Issuers purchase
such Holder's Notes, in whole or in part in integral multiples of $1,000,
at a purchase price (the "Change of Control Purchase Price") in cash in
an amount equal to 101% of the principal amount thereof, plus accrued
interest, if any, to the date of purchase (the "Change of Control
Purchase Date"), pursuant to the offer described below (the "Change of
Control Offer") and the other procedures set forth in this Indenture.
(b) Within 20 days following any Change of Control, the
Issuers shall notify the Trustee thereof and give written notice of such
Change of Control to each Holder of Notes by first-class mail, postage
prepaid, at the address of such Holder appearing in the security
register, stating, among other things, (i) the purchase price and the
purchase date, which shall be a Business Day no earlier than 30 days nor
later than 60 days from the date such notice is mailed, or such later
date as is necessary to comply with requirements under the Exchange Act
or any applicable securities laws or regulations; (ii) that any Note not
tendered will continue to accrue interest; (iii) that, unless the Issuers
default in the payment of the purchase price, any Notes accepted for
payment pursuant to the Change of Control Offer shall cease to accrue
interest after the Change of Control Purchase Date; (iv) that Holders
electing to have any Notes purchased pursuant to a Change of Control
Offer shall be required to surrender the Notes, with the form entitled
"Option of Holder to Elect Purchase" on the reverse of the Notes
completed, to the Paying Agent at the address specified in the notice
prior to the close of business on the third Business Day preceding the
Change of Control Purchase Date; (v) that Holders shall be entitled to
withdraw their election if the Paying Agent receives, not later than the
close of business on the second Business Day preceding the Change of
Control Purchase Date, a telegram, telex, facsimile transmission or
letter setting forth the name of the Holder, the principal amount of
Notes delivered for purchase, and a statement that such Holder is
withdrawing its election to have such Notes purchased; (vi) that Holders
whose Notes are being purchased only in part shall be issued new Notes
equal in principal amount to the unpurchased portion of the Notes
surrendered, which unpurchased portion must be equal to $1,000 in
principal amount or an integral multiple thereof; (vii) the instructions
that the Holders of Notes must follow in order to tender their Notes; and
(viii) the circumstances and relevant facts regarding such Change of
Control.
(c) The Issuers will not be required to make a Change of
Control Offer if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements set
forth in this Indenture applicable to a Change of Control Offer made by the
Issuers and purchases all Notes validly tendered and not withdrawn under
such Change of Control Offer.
(d) The Issuers shall comply with the applicable tender offer
rules, including Rule l4e-l under the Exchange Act, and any other
applicable securities laws and regulations in connection with a Change of
Control Offer.
(e) The Issuers shall not, and shall not permit any
Restricted Subsidiary to, create or permit to exist or become effective
any restriction (other than restrictions existing or under Indebtedness
as in effect on the date of this Indenture or under any agreement that
extends, renews, refinances or replaces any agreement governing such
restrictions or Indebtedness, provided that the restrictions contained in
such new agreement are no more restrictive than those under or pursuant
to the agreement so extended, renewed, refinanced or replaced) that would
materially impair the ability of the Issuers to make a Change of Control
Offer to purchase the Notes or, if such Change of Control Offer is made,
to pay for the Notes tendered for purchase.
SECTION 1013. Limitation on Indebtedness of the Security
Parties.
Each of the Security Parties shall not, and shall not permit
any of its Restricted Subsidiaries to, incur Indebtedness (including any
Acquired Indebtedness), other than Permitted Security Party Indebtedness.
SECTION 1014. Limitation on Restricted Payments by Timberlands.
(a) Timberlands shall not, and shall not permit any of its
Restricted Subsidiaries to, directly or indirectly, make any Restricted
Payment, unless at the time of, and immediately after giving effect to,
the proposed Restricted Payment (the amount of any such Restricted
Payment, if other than cash, as determined by the Board of Directors of
Timberlands, whose determination shall be conclusive and evidenced by a
Board Resolution), (1) no Default or Event of Default shall have occurred
and be continuing, (2) the Company could incur at least $1.00 of
additional Indebtedness (other than Permitted Indebtedness) pursuant to
Section 1008 and (3) the aggregate amount of all Restricted Payments by
Timberlands declared or made after the date of this Indenture shall not
exceed the sum of:
(A) 50% of the Consolidated Adjusted Net Income of
Timberlands accrued on a cumulative basis during the period
beginning on the first day of Timberlands' first fiscal quarter
after the date of this Indenture and ending on the last day of
Timberlands' last fiscal quarter ending prior to the date of such
proposed Restricted Payment (or, if such aggregate cumulative
Consolidated Adjusted Net Income shall be a loss, minus 100% of
such loss); plus
(B) 75% of the aggregate net cash proceeds received after the
date of this Indenture by Timberlands as capital contributions or
from the issuance or sale (other than to any Subsidiary) of shares
of Qualified Capital Stock of Timberlands (including upon the
exercise of options, warrants or rights) or warrants, options or
rights to purchase shares of Qualified Capital Stock of
Timberlands; provided that, after the date upon which the Company
shall have reduced its Total Committed Debt to an amount that is
not greater than $105 million, such calculation shall be adjusted
to 100% of the aggregate net cash proceeds of such transactions
occurring after such date; plus
(C) 75% of the aggregate net cash proceeds received after the
date of this Indenture by Timberlands from the issuance or sale
(other than to any Subsidiary) of debt securities or shares of
Redeemable Capital Stock that have been converted into or exchanged
for shares of Qualified Capital Stock of Timberlands, to the extent
such securities were originally sold for cash, together with the
aggregate net cash proceeds received by Timberlands at the time of
such conversion or exchange; provided that, after the date upon
which the Company shall have reduced its Total Committed Debt to an
amount that is not greater than $105 million, such calculation
shall be adjusted to 100% of the aggregate net proceeds of such
transactions occurring after such date; plus
(D) to the extent not otherwise included in the Consolidated
Adjusted Net Income of Timberlands, an amount equal to the net
reduction in Investments (other than reductions in Permitted
Investments) in Unrestricted Subsidiaries resulting from the
payments in cash of interest on Indebtedness, dividends, repayments
of loans or advances, or other transfers of assets, in each case to
Timberlands or a Restricted Subsidiary after the date of this
Indenture from any Unrestricted Subsidiary or from the
redesignation of an Unrestricted Subsidiary as a Restricted
Subsidiary (valued in each case as provided in the definition of
Investment), not to exceed the total amount of Investments (other
than Permitted Investments) in such Unrestricted Subsidiary by
Timberlands and its Restricted Subsidiaries.
(b) Notwithstanding paragraph (a) above, Timberlands may take
the following actions so long as no Default or Event of Default shall
have occurred and be continuing:
(i) the payment of any dividend or the making of any
distribution within 60 days after the date of declaration thereof,
if at such date of declaration the payment of such dividend or such
distribution would have complied with the provisions of paragraph
(a) above and such payment shall be deemed to have been paid on
such date of declaration for purposes of the calculation required
by paragraph (a) above;
(ii) the purchase, redemption or other acquisition or
retirement for value of any shares of Capital Stock of Timberlands in
exchange for, or out of the net cash proceeds of a substantially
concurrent issuance and sale (other than to any Subsidiary) of,
shares of Qualified Capital Stock of Timberlands;
(iii) the purchase, redemption, defeasance or other
acquisition or retirement for value of any Subordinated
Indebtedness of Timberlands in exchange for, or out of the net cash
proceeds of a substantially concurrent issuance and sale (other
than to any Subsidiary) of, shares of Qualified Capital Stock of
Timberlands;
(iv) the purchase, redemption, defeasance or other
acquisition or retirement for value of Subordinated Indebtedness of
Timberlands in exchange for, or out of the net cash proceeds of a
substantially concurrent incurrence (other than to a Subsidiary)
of, new Subordinated Indebtedness of Timberlands so long as (A) the
principal amount of such new Indebtedness does not exceed the
principal amount (or, if such Subordinated Indebtedness being
refinanced provides for an amount less than the principal amount
thereof to be due and payable upon a declaration of acceleration
thereof, such lesser amount as of the date of determination) of the
Subordinated Indebtedness being so purchased, redeemed, defeased,
acquired or retired, plus the lesser of the amount of any premium
required to be paid in connection with such refinancing pursuant to
the terms of the Subordinated Indebtedness being refinanced or the
amount of any premium reasonably determined by Timberlands as
necessary to accomplish such refinancing, plus, in either case, the
amount of expenses of Timberlands incurred in connection with such
refinancing, (B) such new Subordinated Indebtedness is subordinated
to the Notes to the same extent as such Subordinated Indebtedness
so purchased, redeemed, defeased, acquired or retired and (C) such
new Subordinated Indebtedness has (x) an Average Life either (I)
longer than the Average Life of the Notes or (II) equal to or
greater than the Average Life of the Subordinated Indebtedness that
is being purchased, redeemed, defeased, acquired or retired and (y)
a final Stated Maturity of principal either (I) later than the
final Stated Maturity of principal of the Notes or (II) no earlier
than the Subordinated Indebtedness being purchased, redeemed,
defeased, acquired or retired;
(v) the payment by Timberlands of certain amounts on account of
that portion of the federal, state, local and foreign income tax
liability of the direct and indirect equityholders of Timberlands
that is attributable to their interests in Timberlands determined at
the highest combined marginal federal, state, local and foreign tax
rate for the taxable year applicable to the type of entity or
individual with respect to taxes of which the payment is to be made
pursuant to this clause (v); provided, however, that if any direct
holder of an equity interest in Timberlands is not treated as a
pass-through entity by a taxing authority and, as a result, such
direct holder has a tax liability attributable to its ownership of an
equity interest in Timberlands, Timberlands shall make no payment to
any indirect holder of an equity interest in Timberlands that owns
such interest through such direct holder with respect to the tax
imposed by such taxing authority, but will, in all events, pay such
tax liability of the direct holder; provided further that the amount
of the payments pursuant to this clause (v) shall not exceed the
product of the taxable income of Timberlands multiplied by the
highest combined marginal federal, state and local tax rate for the
taxable year applicable to the type of entity or individual with
respect to taxes of which the payment is to be made pursuant to this
clause (v);
(vi) the payment by Timberlands of any dividend or
distribution to Brant-Allen (A) to enable Brant-Allen to repay or
prepay all or a portion of principal, premium or interest on the
Indebtedness under the Timberlands Loan or (B) from the proceeds of
any Asset Sale by Timberlands to enable Brant-Allen to repay or
prepay all or a portion of the principal, premium or interest on
Indebtedness under the Timberlands Loan or Indebtedness of the
Company in accordance with paragraph (b) of Section 1022; and
(vii) the payment of a distribution by Timberlands on the
Closing Date to Brant-Allen (A) to cover or recover expenses
incurred on behalf of the Credit Parties and the escrow deposit by
Brant-Allen in connection with the Acquisition, the Timberlands
Acquisition and the related financings and (B) in an amount equal
to the total federal, state, local and foreign tax liabilities of
Brant-Allen, Peter Brant and Joseph Allen arising as a result of
their direct and indirect ownership of equity interests in
Timberlands' predecessor, Bear Island Timberlands Company, L.P.,
during 1997 through the Closing Date, as calculated by Timberlands'
Vice President of Finance and recalculated by Timberlands'
independent accountants; provided that such distribution shall not
exceed an aggregate of $5.3 million.
The actions described in clauses (i), (ii) and (iii) of this paragraph
(b) shall be Restricted Payments that shall be permitted to be taken in
accordance with this paragraph (b) but shall reduce the amount that would
otherwise be available for Restricted Payments under clause (3) of
paragraph (a) above and the actions described in clauses (iv), (v), (vi)
and (vii) of this paragraph (b) shall be Restricted Payments that shall
be permitted to be taken in accordance with this paragraph (b) and shall
not reduce the amount that would otherwise be available for Restricted
Payments under clause (3) of paragraph (a).
(c) In computing Consolidated Adjusted Net Income of
Timberlands under paragraph (a) above, (1) Timberlands shall use audited
financial statements for the portions of the relevant period for which
audited financial statements are available on the date of determination and
unaudited financial statements and other current financial data based on
the books and records of Timberlands for the remaining portion of such
period and (2) Timberlands shall be permitted to rely in good faith on the
financial statements and other financial data derived from the books and
records of Timberlands that are available on the date of determination.
SECTION 1015. Limitation on Certain Restricted Payments by
Soucy Inc.
Soucy Inc. shall not make any Soucy Restricted Payment
unless, immediately after giving effect to such Soucy Restricted Payment,
the Consolidated Tangible Net Worth of Soucy Inc. will be equal to or
greater than Cdn$32.0 million; provided that this Section 1015 shall not
apply to (i) any dividends or distributions by Soucy Inc. to Brant-Allen
in order to repay Indebtedness of Brant-Allen in accordance with Section
1018 or Section 1022 or (ii) the payment by Soucy Inc. of management,
transportation, sales and royalty fees to Brant-Allen in accordance with
clause (b)(v) of Section 1021.
SECTION 1016. Limitation on Liens of the Security Parties.
Each of the Security Parties shall not, and shall not permit
any of its Restricted Subsidiaries to, directly or indirectly, create,
incur, assume or suffer to exist any Lien of any kind (other than
Permitted Liens) on or with respect to any of its property or assets,
including any shares of stock or indebtedness of any Restricted
Subsidiary, whether owned at the date of this Indenture or thereafter
acquired, or any income, profits or proceeds therefrom, or assign or
otherwise convey any right to receive income thereon.
SECTION 1017. Limitation on Guarantees of Company Indebtedness
by the Security Parties and Their Restricted Subsidiaries.
(a) Each of the Security Parties shall not, and shall not
permit any of its Restricted Subsidiaries, directly or indirectly, to
guarantee, assume or in any other manner become liable for the payment of
any Indebtedness of the Company; provided that such Security Party or
such Restricted Subsidiary may do so if (i) (A) in any case when such
entity is not then already a Guarantor, such entity simultaneously
executes and delivers a supplemental indenture to this Indenture
providing for a Guarantee of payment of the Notes by such entity and (B)
with respect to any guarantee of Subordinated Indebtedness of the Company
by any such entity, any such guarantee shall be subordinated to such
entity's Guarantee with respect to the Notes at least to the same extent
as such Subordinated Indebtedness of the Company is subordinated to the
Notes and (ii) such Restricted Subsidiary waives and shall not in any
manner whatsoever claim or take the benefit or advantage of, any rights
of reimbursement, indemnity or subrogation or any other rights against
the Company or any other Restricted Subsidiary of the Company as a result
of any payment by such Restricted Subsidiary under its Guarantee.
(b) Notwithstanding the foregoing, any Guarantee of the Notes
created pursuant to the provisions described in the foregoing paragraph
(a) shall provide by its terms that it shall be automatically and
unconditionally released and discharged upon the release by the holders
of the Indebtedness of the Company described in the preceding paragraph
of their guarantee by such Restricted Subsidiary (including any deemed
release upon payment in full of all obligations under such Indebtedness),
at a time when (A) no other Indebtedness of the Company has been
guaranteed by such Restricted Subsidiary or (B) the holders of all such
other Indebtedness which is guaranteed by such Restricted Subsidiary also
release their guarantee by such Restricted Subsidiary (including any
deemed release upon payment in full of all obligations under such
Indebtedness).
SECTION 1018. Limitation on Sales of Collateral Stock by
Brant-Allen and Certain Other Transactions by Brant-Allen.
(a) Brant-Allen shall not, and shall not permit any of its
Subsidiaries or other Affiliates to, directly or indirectly, (i) sell, or
agree to sell, any of the shares of Capital Stock of Timberlands or Soucy
Inc., (ii) create, incur, assume, or suffer to exist any Lien of any kind
(other than Liens incurred in connection with the Bank Credit Agreement,
the Timberlands Loan or the Notes) on or with respect to the shares of
Capital Stock of Timberlands or Soucy Inc. or (iii) permit Timberlands or
Soucy Inc., in a single transaction or through a series of related
transactions, to consolidate with or merge with or into any other Person
or sell, assign, convey, transfer, lease or otherwise dispose of all or
substantially all of its properties and assets to any other Person or
Persons.
(b) Notwithstanding the foregoing, Brant-Allen may allow the
following:
(i) Brant-Allen may, directly or indirectly, sell, convey,
transfer or otherwise dispose of all of (but not less than all of)
the shares of Capital Stock of either of the Security Parties for
cash;
(ii) Brant-Allen may, directly or indirectly, sell, convey,
transfer or otherwise dispose of all or any portion of its shares of
Capital Stock in Timberlands (and Brant-Allen may permit Timberlands
to sell, convey, transfer or otherwise dispose of all or
substantially all of its assets) in exchange for consideration
consisting of the shares of Capital Stock of another entity or of a
combination of cash and the shares of Capital Stock of another
entity, but only if (A) such entity is required to file (and is
filing) reports pursuant to Section 12 or Section 15 of the
Securities Exchange Act of 1934, (B) such shares of Capital Stock are
freely tradeable on a national securities exchange (as such term is
defined in Section 6 of the Exchange Act) or automated quotation
system, or can become freely tradeable on such exchange or quotation
system within 90 days of receipt by Brant-Allen of such Capital
Stock, (C) such entity has a Total Market Value of Equity of not less
than $250 million and (D) the Indebtedness, if any, of such entity is
rated Investment Grade; and
(iii) Any transaction or transactions (other than those
specified in (i) and (ii) above) complying with the provisions of
Article Eight; provided that the consideration to Brant-Allen for
such transaction is cash and/or shares of Capital Stock of the
Surviving Entity;
provided that (x) the Net Cash Proceeds, if any, of any such transaction
shall be utilized to repay Indebtedness of the Credit Parties in the same
order of priority as provided for the Net Cash Proceeds of the Asset
Sales of Timberlands or Soucy Inc., as the case may be, under paragraph
(b) of Section 1022 (and that any such Net Cash Proceeds that are not so
utilized shall be treated as Excess Proceeds of an Asset Sale by the
relevant Security Party under such Section 1022); (y) if the Surviving
Entity of such transaction is not one of the Security Parties,
Brant-Allen causes the shares of Capital Stock of the Surviving Entity
that are beneficially owned, directly or indirectly, by Brant-Allen or
the Permitted Holders to become subject to a Lien in favor of the Trustee
on behalf of the Holders that is at least of the same ranking as the Lien
securing the shares of Capital Stock of the applicable Security Party
prior to such transaction or series of transactions; provided that
Brant-Allen may subsequently sell, convey, transfer or otherwise dispose
of all or a portion of such shares of Capital Stock (and the Trustee
shall release the Lien secured by such shares of Capital Stock
immediately prior to such sale, conveyance, transfer or other disposal)
if the Net Cash Proceeds of such transactions are utilized in accordance
with clause (x) of this proviso; and (z) no transaction may be concluded
in accordance with the foregoing if any such transaction shall involve
the two Security Parties, and the Surviving Entity shall be Soucy Inc.
SECTION 1019. Limitation on Proceeds of Asset Sales by
Subsidiaries.
Brant-Allen shall utilize all dividends or distributions made
to it from the Credit Parties from the Net Cash Proceeds of Asset Sales
by such Credit Parties, after deducting the amount of any federal, state,
local and foreign taxes owed by Brant-Allen or its owners as a result of
such Asset Sales, dividends or distributions, to repay Indebtedness of
Brant-Allen or the Credit Parties as provided in clause (b) or (c) of
Section 1022.
SECTION 1020. Limitation on Issuances and Sales of Capital
Stock of Subsidiaries.
Each of the Credit Parties (i) shall not permit any of its
Subsidiaries to issue any Capital Stock (other than to such Credit Party or
a wholly owned Subsidiary) and (ii) shall not permit any Person (other than
such Credit Party or a wholly owned Subsidiary) to own any Capital Stock of
any of its Subsidiaries; provided that this Section 1020 shall not apply to
the ownership by the partners of Soucy Inc. of their partnership interests
in Soucy Partners or any joint venture established by Timberlands pursuant
to paragraph (d) of Section 1022.
SECTION 1021. Limitation on Transactions with Affiliates.
(a) Each of the Credit Parties shall not, and shall not
permit any of its Restricted Subsidiaries to, directly or indirectly,
enter into or suffer to exist any transaction or series of related
transactions (including, without limitation, the sale, purchase, exchange
or lease of assets, property or services) with, or for the benefit of,
any Affiliate of such Credit Party or any of its Restricted Subsidiaries
(other than such Credit Party or a wholly owned Restricted Subsidiary of
such Credit Party) unless (i) such transaction or series of transactions
is on terms that are no less favorable to such Credit Party or such
Restricted Subsidiary, as the case may be, than those that could have
been obtained in an arm's-length transaction with third parties that are
not Affiliates, (ii) with respect to any transaction or series of related
transactions involving aggregate consideration equal to or greater than
$1.0 million, such Credit Party delivers an officers' certificate to the
Trustee certifying that such transaction or series of transactions
complies with clause (i) above and such transaction or series of related
transactions has been approved by a majority of the Disinterested
Directors of such Credit Party or, in the event no members of the Board
of Directors of such Credit Party are Disinterested Directors with
respect to any transaction or series of transactions included in this
clause (ii), such Credit Party shall obtain a written opinion from a
nationally recognized investment banking firm certifying that such
transaction or series of related transactions is fair to such Credit
Party or its Restricted Subsidiary, as the case may be, from a financial
point of view and (iii) with respect to any transaction or series of
related transactions including aggregate consideration in excess of $5.0
million, such Credit Party shall obtain a written opinion from a
nationally recognized investment banking firm to the effect set forth in
the preceding clause (ii).
(b) The foregoing provisions in paragraph (a) shall not
restrict (i) any Credit Party from paying reasonable and customary regular
compensation and fees, expense reimbursement and customary indemnification
to directors of such Credit Party or any of its Restricted Subsidiaries who
are not employees of such Credit Party or any such Restricted Subsidiary;
(ii) transactions pursuant to the Wood Supply Agreement and the Elebash
Agreement, in each case, as in effect on the date of this Indenture which
(A) comply with clause (i) of the foregoing paragraph (a) and (B) are in
the ordinary course of business; (iii) transactions pursuant to the
Management Services Agreement for aggregate payments by the Company to
Brant-Allen (or any of its Subsidiaries or Affiliates) in an amount per
annum not in excess of 3% of the revenues (net of transportation costs) of
the Company in the applicable fiscal year; provided that (A) at all times,
up to 33 1/3% of such fees may be paid by the Company to Brant-Allen in
cash and (B) the remainder of such fees may be paid by the Company to
Brant-Allen in cash only at such times as such payment is permitted under
Section 1009 and, at all other times, only in the form of Capital Stock of
the Company or Indebtedness of the Company if such Indebtedness shall (w)
be subordinated in right of payment to the Notes, (x) bear no interest, (y)
not require principal payments of any kind on such Indebtedness to be
repaid prior to the Stated Maturity of the Notes, and (z) contain no
provisions for remedies (including, without limitation, any defaults or any
other provisions that would result in the acceleration of the maturity of
such Indebtedness); (iv) the payment by Soucy Inc. of management,
transportation, sales and royalty fees to Brant-Allen (or any of its
Subsidiaries or Affiliates) in an amount per annum not in excess of 9.73%
of the consolidated sales (net of transportation costs) of Soucy Inc. in
the applicable year; (v) the payment by Soucy Partners of management,
transportation, sales and royalty fees to Soucy Inc. in an amount per annum
not in excess of 3% of the cumulative annual sales (net of transportation
costs) of Soucy Partners; (vi) the sales and marketing of newsprint by
Brant-Allen for, or on behalf of, Soucy Inc. and its Subsidiaries
consistent with past practice or in the ordinary course of business; and
(vii) Restricted Payments that are permitted by the provisions of this
Indenture described above under Section 1009 or 1014.
SECTION 1022. Limitation on Sale of Assets.
(a) Each of the Credit Parties shall not, and shall not
permit any of its Restricted Subsidiaries to, consummate any Asset Sale
unless (i) the consideration received by such Credit Party or such
Restricted Subsidiary for such Asset Sale is not less than the Fair
Market Value of the assets sold (as determined by the Board of Directors
of such Credit Party, whose determination shall be conclusive and
evidenced by a Board Resolution) and (ii) the consideration received by
such Credit Party or the relevant Restricted Subsidiary in respect of
such Asset Sale consists of at least 75% cash or Cash Equivalents;
provided that the amount of (x) any liabilities (as shown on the most
recent balance sheet of such Credit Party) of such Credit Party or any of
its Restricted Subsidiaries (other than contingent liabilities and
liabilities that are by their terms subordinated to the Notes or any
guarantee thereof) that are assumed by the transferee of any such assets
pursuant to a customary novation agreement that releases such Credit
Party or such Restricted Subsidiary from further liability and (y) any
securities, notes or other obligations received by such Credit Party or
any such Restricted Subsidiary from such transferee that are promptly
converted by such Credit Party or such Restricted Subsidiary into cash or
Cash Equivalents (to the extent of the cash or Cash Equivalents
received), shall be deemed to be cash or Cash Equivalents, as the case
may be, for purposes of this provision; and provided further that, (A) as
Asset Sales reduce Timberlands' timberlands below 40,000 acres, the
Company shall obtain contract rights to purchase amounts of wood
sufficient to replace the wood supply which the Company anticipated
receiving from the timberlands subject to such further sales and (B)
Timberlands may consummate Asset Sales of timberlands in exchange for
securities, notes or other obligations of the transferee in such Asset
Sales, so long as it does not hold, at any one time, in excess of $1.0
million of such securities, notes or obligations.
(b) If any Credit Party or any Restricted Subsidiary
consummates an Asset Sale, such Credit Party or such Restricted
Subsidiary may use the Net Cash Proceeds thereof, within 12 months after
such Asset Sale, (i) to invest (or enter into a legally binding agreement
to invest) in properties and assets to replace the properties and assets
that were the subject of the Asset Sale or in properties and assets
(including Capital Stock or other securities purchased in connection with
the acquisition of Capital Stock or property of another Person) that will
be used in businesses of such Credit Party or such Restricted Subsidiary
and any of their respective Restricted Subsidiaries, as the case may be,
existing on the Closing Date, and that will be reflected as non-current
assets on the balance sheet of the relevant Credit Party or Restricted
Subsidiary, as the case may be, in accordance with GAAP; provided that,
in the case of the Company, such properties and assets shall become
subject to a Lien in favor of the Trustee on behalf of the Holders that
is of at least the same ranking as the Lien securing the assets that were
subject to such Asset Sale; or (ii) to repay certain Indebtedness, as
follows:
(A) in the case of the Company or its Restricted
Subsidiaries, to permanently repay or prepay any then outstanding
subordinated Indebtedness of the Company or any Indebtedness of its
Restricted Subsidiaries;
(B) in the case of Timberlands or its Restricted
Subsidiaries, to make payments in the following order of priority:
(i) to repay or prepay all or part of the principal, premium, if
any, and interest on the Hancock Loan or to make a dividend payment
or a distribution to enable Brant-Allen to repay or prepay all or
part of the principal, premium, if any, and interest on the
Timberlands Loan; and (ii) if the Hancock Loan and the Timberlands
Loan shall have been repaid, to the extent permitted by applicable
law, to make a dividend payment or distribution to enable
Brant-Allen to make a capital contribution to the Company to enable
the Company to permanently reduce Total Committed Debt of the
Company under the Bank Credit Agreement; and
(C) in the case of Soucy Inc. or its Restricted Subsidiaries,
to make payments in the following order of priority: (i) to
permanently reduce the Total Committed Debt of Soucy Inc. or its
Restricted Subsidiaries or (ii) to the extent permitted by
applicable law, to make a dividend payment or distribution,
directly or indirectly, to enable Brant-Allen (x) to make a capital
contribution to the Company to enable the Company to permanently
reduce the Total Committed Debt of the Company under the Bank
Credit Agreement, (y) to repay or prepay all or part of the
Timberlands Loan, or (z) to make a capital contribution to
Timberlands to enable Timberlands to repay or prepay all or part of
the Hancock Loan.
With respect to clause (i) of this paragraph (b), if any such legally
binding agreement to invest such Net Cash Proceeds is terminated, then such
Credit Party or its Restricted Subsidiary, as the case may be, may, within
90 days of such termination or within 12 months of such Asset Sale,
whichever is later, invest such Net Cash Proceeds as provided in clause (i)
(without regard to the parenthetical contained in such clause (i) above).
The amount of such Net Cash Proceeds or, in the case of any Asset Sale by
Soucy Partners or its Subsidiaries, Soucy Inc.'s pro rata share of such Net
Cash Proceeds not so used as set forth above in this paragraph (b)
constitutes "Excess Proceeds."
(c) When the aggregate amount of Excess Proceeds with respect
to any of the Credit Parties and its Restricted Subsidiaries exceeds
$15.0 million, the relevant Credit Party shall, within 15 Business Days,
make an offer to purchase (an "Excess Proceeds Offer") from all Holders
of Notes, on a pro rata basis, in accordance with the procedures set
forth below, but only if the consummation of such offer is permitted by
applicable law, the maximum principal amount (expressed as a multiple of
$1,000) of Notes that may be purchased with the Excess Proceeds. The
offer price as to each Note shall be payable in cash in an amount equal
to 101% of the principal amount of such Note plus accrued interest, if
any (the "Offered Price"), to the date such Excess Proceeds Offer is
consummated (the "Offer Date"). To the extent that the aggregate
principal amount of Notes tendered pursuant to an Excess Proceeds Offer
is less than the Excess Proceeds, the relevant Credit Party may use such
deficiency for general corporate purposes. If the aggregate principal
amount of Notes validly tendered and not withdrawn by Holders thereof
exceeds the Excess Proceeds, Notes to be purchased shall be selected on a
pro rata basis. Upon completion of such Exceeds Proceeds Offer, the
amount of Excess Proceeds shall be reset to zero.
(d) Whenever the Excess Proceeds received by any of the
Credit Parties exceed $15.0 million, such Excess Proceeds shall be set
aside by such Credit Party in a separate account pending (i) deposit with
the Trustee or a paying agent of the amount required to purchase the
Notes tendered in an Excess Proceeds Offer, (ii) delivery by such Credit
Party of the Offered Price to the holders of the Notes tendered in an
Excess Proceeds Offer and (iii) application, as set forth above, of
Excess Proceeds for general corporate purposes. Such Excess Proceeds may
be invested in Cash Equivalents, provided that the maturity date of any
investment shall not be later than the Offer Date. Each of the Credit
Parties shall be entitled to any interest or dividends accrued, earned or
paid on such Cash Equivalents.
(e) If any Credit Party becomes obligated to make an Excess
Proceeds Offer pursuant to clause (c) above, the Notes shall be purchased
by such Credit Party, at the option of the Holders thereof, in whole or
in part in integral multiples of $1,000, on a date that is not earlier
than 30 days and not later than 60 days from the date the notice is given
to holders, or such later date as may be necessary for such Credit Party
to comply with the requirements under the Exchange Act, subject to
proration in the event the amount of Excess Proceeds is less than the
aggregate Offered Price of all Notes tendered.
(f) Within 15 days after the obligation of any Credit Party
to make an Excess Proceeds Offer arises, such Credit Party shall notify
the Trustee thereof and give written notice of such Excess Proceeds Offer
to each Holder of Notes by first-class mail, postage prepaid, at the
address of such Holder appearing in the Note Register, stating (i) the
Offered Price and the Offer Date, which shall be a Business Day no
earlier than 30 days nor later than 60 days from the date such notice is
mailed, or such later date as is necessary to comply with requirements
under the Exchange Act or any applicable securities laws or regulations;
(ii) that any Note not tendered will continue to accrue interest; (iii)
that, unless such Credit Party defaults in the payment of the Offered
Price, any Notes accepted for payment pursuant to the Excess Proceeds
Offer shall cease to accrue interest after the date of purchase; (iv)
that Holders electing to have any Notes purchased pursuant to an Excess
Proceeds Offer shall be required to surrender the Notes, with the form
entitled "Option of Holder to Elect Purchase" on the reverse of the Notes
completed, to the Paying Agent at the address specified in the notice
prior to the close of business on the third Business Day preceding the
Offer Date; (v) that Holders shall be entitled to withdraw their election
if the Paying Agent receives, not later than the close of business on the
second Business Day preceding the Offer Date, a telegram, telex,
facsimile transmission or letter setting forth the name of the Holder,
the principal amount of Notes delivered for purchase, and a statement
that such Holder is withdrawing its election to have such Notes
purchased; (vi) that Holders whose Notes are being purchased only in part
shall be issued new Notes equal in principal amount to the unpurchased
portion of the Notes surrendered, which unpurchased portion must be equal
to $1,000 in principal amount or an integral multiple thereof; (vii) the
instructions that the Holders of Notes must follow in order to tender
their Notes; and (viii) the circumstances and relevant facts regarding
such Excess Proceeds Offer.
(g) The Company shall comply to the extent applicable with
the requirements of the tender offer rules, including Rule 14e-1 under
the Exchange Act, and any other applicable securities laws and
regulations in connection with an Excess Proceeds Offer.
(h) Notwithstanding the foregoing provisions of Section 1022,
Timberlands may contribute, sell, convey, transfer, lease or otherwise
dispose of all or a portion of its properties or assets into a joint
venture with another entity in exchange for Capital Stock of such joint
venture, but only if (i) the Indebtedness of the entity that is the joint
venture partner of Timberlands is rated Investment Grade; (ii) an
Independent Valuation Agent shall provide a valuation that, on a pro forma
basis, the total amount of the Indebtedness of such joint venture following
the contributions by the joint venture partners shall not exceed 50% of an
amount equal to the sum of its Equity Value and such total Indebtedness;
(iii) dividends or distributions on the Capital Stock of the joint venture
held, directly or indirectly, by Brant-Allen shall be utilized, after
deducting the amount of any federal, state and local taxes owed by
Brant-Allen or its owners as a result of such dividends or distributions,
to repay Indebtedness of Timberlands and the Company in the same order of
priority as provided for the proceeds of Asset Sales of Timberlands under
clause (B) under paragraph (b) of this Section 1022; (iv) if, following the
establishment of the joint venture it will not be a Subsidiary for purposes
of this Indenture, then the joint venture shall nonetheless be required to
adhere to the limitation on the incurrence of Indebtedness by joint
ventures provided for in clause (vii) of paragraph (b) under the definition
of "Permitted Security Party Indebtedness"; and (v) the Capital Stock in
such joint venture owned by Timberlands becomes subject to the security
interest of the Timberlands Collateral.
SECTION 1023. Limitation on Sale and Leaseback Transactions.
Each of the Credit Parties shall not, and shall not permit
any of its Restricted Subsidiaries to, directly or indirectly, enter into
any Sale and Leaseback Transaction with respect to any property or assets
(whether now owned or hereafter acquired), unless (i) the sale or
transfer of such property or assets to be leased is treated as an Asset
Sale and all of the relevant parties comply with Section 1022, (ii) such
Credit Party or such Restricted Subsidiary would be permitted to incur
Indebtedness under Section 1008 or 1013, as the case may be, in the
amount of the Attributable Value of the Indebtedness incurred in respect
of such Sale and Leaseback Transaction and (iii) such Credit Party or
such Restricted Subsidiary would be permitted to grant a Lien under
Section 1010 or 1016, as the case may be, to secure the amount of the
Attributable Value in respect of such Sale and Leaseback Transaction.
SECTION 1024. Limitation on Dividends and Other Payment
Restrictions Affecting Restricted Subsidiaries.
Each of the Credit Parties other than Soucy Inc. shall not, and
shall not permit any of its Restricted Subsidiaries to, directly or
indirectly, create or otherwise cause or suffer to exist or become
effective any encumbrance or restriction of any kind on the ability of any
Restricted Subsidiary to (a) pay dividends, in cash or otherwise, or make
any other distributions on or in respect of its Capital Stock, (b) pay any
Indebtedness owed to such Credit Party or any other Restricted Subsidiary
of such Credit Party, (c) make loans or advances to such Credit Party or
any other Restricted Subsidiary of such Credit Party, (d) transfer any of
its properties or assets to such Credit Party or any other Restricted
Subsidiary of such Credit Party (other than customary restrictions on
transfers of property subject to a Lien permitted under this Indenture that
would not materially adversely affect such Credit Party's ability to
satisfy its obligations under the Notes and this Indenture) or (e)
guarantee any Indebtedness of such Credit Party or any other Restricted
Subsidiary of such Credit Party, except for such encumbrances or
restrictions existing under or by reason of (i) this Indenture, the Bank
Credit Agreement, as originally executed, the Timberlands Loan, the Hancock
Loan and any documents or agreements entered into pursuant thereto or
securing obligations thereunder and any other agreement in effect on the
Closing Date and listed on Schedule 1024(a) attached to this Indenture,
(ii) applicable law, (iii) customary provisions restricting subletting or
assignment of any lease or assignment of any other contract to which such
Credit Party or any Restricted Subsidiary of such Credit Party is a party
or to which any of their respective properties or assets are subject, (iv)
any agreement or other instrument of a Person acquired by such Credit Party
or any Restricted Subsidiary of such Credit Party in existence at the time
of such acquisition (but not created in contemplation thereof), which
encumbrance or restriction is not applicable to any Person, or the
properties or assets of any Person, other than the Person, or the property
or assets of the Person, so acquired, (v) any encumbrance or restriction
contained in contracts for sales of assets permitted by Section 1022 with
respect to the assets to be sold pursuant to such contract and (vi) any
encumbrance or restriction existing under any agreement that extends,
renews, refinances or replaces the agreements containing the encumbrances
or restrictions in the foregoing clauses (i) and (iv); provided that the
terms and conditions of any such encumbrances or restrictions are not
materially less favorable to the Holders of the Notes than those under or
pursuant to the agreement so extended, renewed, refinanced or replaced.
SECTION 1025. Limitation on Conduct of Business.
Each of the Credit Parties shall not, and shall not permit
any of its Subsidiaries to, conduct any business other than the business
such Credit Party and its Subsidiaries was conducting on the Closing Date
or businesses reasonably similar or related thereto.
SECTION 1026. Limitation on Unrestricted Subsidiaries.
Each of the Credit Parties shall not make, and shall not
permit any of its Restricted Subsidiaries to make, any Investments in any
of its Unrestricted Subsidiaries if, at the time thereof, the aggregate
amount of such Investments would exceed the amount of Restricted Payments
then permitted to be made pursuant to Section 1009, 1014 or 1015, as the
case may be. Any Investments in Unrestricted Subsidiaries permitted to be
made pursuant to this Section 1026 (i) shall be treated as the making of
a Restricted Payment in calculating the amount of Restricted Payments
made by such Credit Party and (ii) may be made in cash or property.
SECTION 1027. Reports.
The Company shall file on a timely basis with the Commission,
to the extent such filings are accepted by the Commission, and whether or
not the Company has a class of securities registered under the Exchange
Act, the annual reports, quarterly reports and other documents that the
Company would be required to file if it were subject to Section 13 or 15 of
the Exchange Act. The Company shall also be required (a) to provide to the
Trustee, and to make available to each Holder of Notes promptly upon
request, without cost to such Holder, copies of such reports and documents
within 15 days after the date on which the Company files such reports and
documents with the Commission or the date on which the Company would be
required to file such reports and documents if the Company were so
required, and (b) if filing such reports and documents with the Commission
is not accepted by the Commission or is prohibited under the Exchange Act,
to make available, at the Company's cost, copies of such reports and
documents to any prospective holder of Notes promptly upon request.
In addition, the Company will be required to provide to the
Trustee, and to make available to each Holder of the Notes promptly upon
request, without cost to such Holder, as soon as possible, but in any
event within 90 days after the end of the relevant fiscal year, a copy of
the audited financial statements of each of the Security Parties.
SECTION 1028. Waiver of Certain Covenants.
The Issuers, the Security Parties, Brant-Allen and any of
their respective Restricted Subsidiaries may omit in any particular
instance to comply with any term, provision or condition set forth in
Sections 1005 to 1027, inclusive, if before or after the time for such
compliance the Holders of at least a majority in aggregate principal
amount of all Outstanding Notes affected by such term, provision or
covenant, by Act of such Holders, waive such compliance in such instance
with such term, provision or condition, but no such waiver shall extend
to or affect such term, provision or condition except to the extent so
expressly waived, and, until such waiver shall become effective, the
obligations of the Issuers, the Security Parties, Brant-Allen, any of
their respective Restricted Subsidiaries and the duties of the Trustee,
as applicable, in respect of any such term, provision or condition shall
remain in full force and effect.
ARTICLE ELEVEN
REDEMPTION OF SECURITIES
SECTION 1101. Right of Redemption.
The Notes may or shall, as the case may be, be redeemed, as a
whole or from time to time in part, subject to the conditions and at the
Redemption Prices specified in the form of Note, together with accrued
interest to the Redemption Date.
In addition, notwithstanding the foregoing, at any time prior
to December 1, 2000, the Issuers may redeem up to 20% of the aggregate
principal amount of the Notes within 60 days of one or more Public Equity
Offerings with the net proceeds of such offering at a Redemption Price
equal to 110% of the principal amount thereof, together with accrued and
unpaid interest, if any, to the Redemption Date (subject to the right of
Holders of record on relevant Regular Record Dates to receive interest
due on relevant Interest Payment Dates); provided that immediately after
giving effect to any such redemption, at least $80 million aggregate
principal amount of the Notes originally issued remains outstanding.
SECTION 1102. Applicability of Article.
Redemption of Notes at the election of the Issuers or
otherwise, as permitted or required by any provision of this Indenture or
the Notes, shall be made in accordance with such provision and this
Article.
SECTION 1103. Election to Redeem; Notice to Trustee.
The election of the Issuers to redeem any Notes pursuant to
Section 1101 or the Notes shall be evidenced by a Board Resolution. In
case of any redemption at the election of the Issuers, the Issuers shall,
at least 60 days prior to the Redemption Date fixed by the Issuers
(unless a shorter notice shall be satisfactory to the Trustee), notify
the Trustee in writing of such Redemption Date and of the principal
amount of Notes to be redeemed and shall deliver to the Trustee such
documentation and records as shall enable the Trustee to select the Notes
to be redeemed pursuant to Section 1104. In the case of any redemption of
Notes prior to the expiration of any restriction on such redemption
provided in the terms of such Notes or elsewhere in this Indenture, the
Issuers shall furnish the Trustee with an Officers' Certificate
evidencing compliance with such restriction.
SECTION 1104. Selection by Trustee of Notes to Be Redeemed.
If less than all the Notes are to be redeemed, the particular
Notes to be redeemed shall be selected not more than 60 days prior to the
Redemption Date by the Trustee, from the Outstanding Notes not previously
called for redemption, by pro rata, by lot or by such other method as the
Trustee shall deem fair and appropriate and which may provide for the
selection for redemption of portions of the principal of Notes; provided,
however, that no such partial redemption shall reduce the portion of the
principal amount of a Note not redeemed to less than $1,000.
The Trustee shall promptly notify the Issuers in writing of
the Notes selected for redemption and, in case of any Notes selected for
partial redemption, the principal amount thereof to be redeemed.
For all purposes of this Indenture, unless the context
otherwise requires, all provisions relating to redemption of Notes shall
relate, in the case of any Note redeemed or to be redeemed only in part,
to the portion of the principal amount of such Note which has been or is
to be redeemed.
SECTION 1105. Notice of Redemption.
Notice of redemption shall be given in the manner provided
for in Section 106 not less than 30 nor more than 60 days prior to the
Redemption Date, to each Holder of Notes to be redeemed.
All notices of redemption shall state:
(1) the Redemption Date,
(2) the Redemption Price and the amount of accrued interest
to the Redemption Date payable as provided in Section 1107, if any,
(3) if less than all Outstanding Notes are to be redeemed,
the identification (and, in the case of a partial redemption, the
principal amounts) of the particular Notes to be redeemed,
(4) in case any Note is to be redeemed in part only, the
notice which relates to such Note shall state that on and after the
Redemption Date, upon surrender of such Note, the Holder will
receive, without charge, a new Note or Notes of authorized
denominations for the principal amount thereof remaining
unredeemed,
(5) that on the Redemption Date the Redemption Price (and
accrued interest, if any, to the Redemption Date payable as
provided in Section 1107) will become due and payable upon each
such Note, or the portion thereof, to be redeemed, and that
interest thereon will cease to accrue on and after said date, and
(6) the place or places where such Notes are to be
surrendered for payment of the Redemption Price and accrued
interest, if any.
Notice of redemption of Notes to be redeemed at the election
of the Issuers shall be given by the Issuers or, at the Issuers' request,
by the Trustee in the name and at the expense of the Issuers.
SECTION 1106. Deposit of Redemption Price.
On or prior to any Redemption Date, the Issuers shall deposit
with the Trustee or with a Paying Agent (or, if either of the Issuers is
acting as its own Paying Agent, segregate and hold in trust as provided
in Section 1003) an amount of money sufficient to pay the Redemption
Price of, and accrued interest on (if any), all the Notes which are to be
redeemed on that date.
If the Issuers comply with the preceding paragraph and the
other provisions of this Section and payment of the Notes called for
redemption is not otherwise prohibited, interest on the Notes to be
redeemed will cease to accrue on the applicable Redemption Date, whether
or not such Notes are presented for payment. Notwithstanding anything
herein to the contrary, if any Notes surrendered for redemption in the
manner provided in the Notes shall not be so paid upon the surrender for
redemption because of the failure of the Issuers to comply with the
preceding paragraph, interest shall continue to accrue and be paid from
the Redemption Date until such payment is made on the unpaid principal,
and, to the extent lawful, on any interest not paid on such unpaid
principal in each case at the rate and in the manner provided.
SECTION 1107. Notes Payable on Redemption Date.
Notice of redemption having been given as aforesaid, the
Notes so to be redeemed shall, on the Redemption Date, become due and
payable at the Redemption Price therein specified (together with accrued
interest, if any, to the Redemption Date), and from and after such date
(unless the Issuers shall default in the payment of the Redemption Price
and accrued interest) such Notes shall cease to bear interest. Upon
surrender of any such Note for redemption in accordance with said notice,
such Note shall be paid by the Issuers at the Redemption Price, together
with accrued interest, if any, to the Redemption Date; provided, however,
that installments of interest whose Stated Maturity is on or prior to the
Redemption Date shall be payable to the Holders of such Notes, or one or
more Predecessor Notes, registered as such at the close of business on
the relevant Record Dates according to their terms and the provisions of
Section 307.
If any Note called for redemption shall not be so paid upon
surrender thereof for redemption, the principal (and premium, if any)
shall, until paid, bear interest from the Redemption Date at the rate
borne by the Notes.
SECTION 1108. Notes Redeemed in Part.
Any Note which is to be redeemed only in part shall be
surrendered at the office or agency of the Issuers maintained for such
purpose pursuant to Section 1002 (with, if the Issuers or the Trustee so
require, due endorsement by, or a written instrument of transfer in form
satisfactory to the Issuers and the Trustee duly executed by, the Holder
thereof or such Holder's attorney duly authorized in writing), and the
Issuers shall execute, and the Trustee shall authenticate and deliver to
the Holder of such Note without service charge, a new Note or Notes, of any
authorized denomination as requested by such Holder, in aggregate principal
amount equal to and in exchange for the unredeemed portion of the principal
of the Note so surrendered.
ARTICLE TWELVE
DEFEASANCE AND COVENANT DEFEASANCE
SECTION 1201. Issuers' Option to Effect Defeasance or Covenant
Defeasance.
The Issuers may, at their option and at any time, effect
defeasance of the Notes under Section 1202, or covenant defeasance of the
Notes under Section 1203, in accordance with the terms of the Notes and
in accordance with this Article.
SECTION 1202. Defeasance and Discharge.
Upon the Issuers' exercise under Section 1201 of the option
applicable to this Section 1202, the Issuers, the Security Parties,
Brant-Allen and any Guarantors shall be deemed to have been discharged
from their obligations with respect to the Outstanding Notes and any
Guarantees, respectively, on the date the conditions set forth in Section
1204 are satisfied (hereinafter, "defeasance"). For this purpose, such
defeasance means that the Issuers, Brant-Allen and the Guarantors, if
any, shall be deemed to have paid and discharged the entire indebtedness
represented by the Outstanding Notes, which shall thereafter be deemed to
be "Outstanding" only for the purposes of Section 1205 and the other
Sections of this Indenture referred to in (A) and (B) below, and the
Issuers, the Security Parties, Brant-Allen and any Guarantors shall be
deemed to have satisfied all their other obligations under the Notes and
this Indenture insofar as the Notes are concerned (and the Trustee, at
the expense of the Issuers, shall execute proper instruments
acknowledging the same), except for the following which shall survive
until otherwise terminated or discharged hereunder: (A) the rights of
Holders of Outstanding Notes to receive, solely from the trust fund
described in Section 1204 and as more fully set forth in such Section,
payments in respect of the principal of, premium, if any, and interest on
such Notes when such payments are due from the trust referred to below,
(B) the Issuers' obligations under Sections 304, 305, 306, 1002 and 1003,
(C) the rights, powers, trusts, duties and immunities of the Trustee
under this Indenture and (D) this Article Twelve. Subject to compliance
with this Article Twelve, the Issuers may exercise their option under
this Section 1202 notwithstanding the prior exercise of their option
under Section 1203 with respect to such Notes.
SECTION 1203. Covenant Defeasance.
Upon the Issuers' exercise under Section 1201 of the option
applicable to this Section 1203, the Issuers, the Security Parties,
Brant-Allen and the Guarantors, if any, shall be released from their
obligations under Section 802 and Sections 1005 through 1027 with respect
to the Outstanding Notes on and after the date the conditions set forth
in Section 1204 are satisfied (hereinafter, "covenant defeasance"), and
such Notes shall thereafter be deemed not to be "Outstanding" for the
purposes of any direction, waiver, consent or declaration or Act of
Holders (and the consequences of any thereof) in connection with such
covenants, but shall continue to be deemed "Outstanding" for all other
purposes hereunder. For this purpose, such covenant defeasance means
that, with respect to such Outstanding Notes, the Company, the Security
Parties, Brant-Allen and any Guarantor, as applicable, may omit to comply
with and shall have no liability in respect of any term, condition or
limitation set forth in any such covenant, whether directly or
indirectly, by reason of any reference elsewhere herein to any such
covenant or by reason of reference in any such covenant to any other
provision herein or in any other document and such omission to comply
shall not constitute a Default or an Event of Default under Section
501(3) or 501(4) or otherwise, as the case may be, but, except as
specified above, the remainder of this Indenture and such Notes shall be
unaffected thereby.
SECTION 1204. Conditions to Defeasance or Covenant Defeasance.
The following shall be the conditions to application of
either Section 1202 or Section 1203 to the Outstanding Notes:
(1) The Issuers shall irrevocably deposit or cause to be
deposited with the Trustee (or another trustee satisfying the
requirements of Section 607 who shall agree to comply with the
provisions of this Article Twelve applicable to it), as trust funds
in trust for the purpose of making the following payments,
specifically pledged as security for, and dedicated solely to, the
benefit of the Holders of such Notes, (A) an amount in cash in United
States Dollars, or (B) U.S. Government Obligations which through the
scheduled payment of principal and interest in respect thereof in
accordance with their terms will provide, not later than one day
before the due date of any payment of principal (including any
premium) and interest, if any, on such Notes, money in an amount, or
(C) a combination thereof, in each case in such amounts as will be
sufficient, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification
thereof delivered to the Trustee, to pay and discharge, and which
shall be applied by the Trustee (or other qualifying trustee) to pay
and discharge, the principal of (and premium, if any, on) and
interest on such Outstanding Notes on the Stated Maturity (or upon
redemption, if applicable) of such principal (and premium, if any) or
installment of interest; provided that the Trustee (or such
qualifying trustee) shall have been irrevocably instructed to apply
such money or the proceeds of such U.S. Government Obligations to
said payments with respect to such Notes.
(2) No Default or Event of Default with respect to such Notes
shall have occurred and be continuing on the date of such deposit
or, insofar as paragraph (9) and (10) of Section 501 are concerned,
at any time during the period ending on the 91st day after the date
of such deposit (it being understood that this condition shall not
be deemed satisfied until the expiration of such period).
(3) Such defeasance or covenant defeasance shall not result
in a breach or violation of, or constitute a default under, this
Indenture or any material agreement or instrument to which the
Issuers, the Security Parties or any Guarantor is a party or by
which it is bound.
(4) In the case of an election under Section 1202, the
Issuers shall have delivered to the Trustee an Opinion of Counsel
or a copy of a private letter ruling to the Issuers from the
Internal Revenue Service, substantially to the effect that the
Holders of such Notes will not recognize income, gain or loss for
federal income tax purposes as a result of such defeasance and will
be subject to federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if such
defeasance had not occurred.
(5) In the case of an election under Section 1203, the
Issuers shall have delivered to the Trustee an Opinion of Counsel
or a copy of a private letter ruling to the Issuers from the
Internal Revenue Service substantially to the effect that the
Holders of the Notes Outstanding will not recognize income, gain or
loss for federal income tax purposes as a result of such covenant
defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have
been the case if such covenant defeasance had not occurred.
(6) The Issuers shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that
all conditions precedent provided for relating to either the
defeasance under Section 1202 or the covenant defeasance under
Section 1203, as the case may be, have been complied with.
SECTION 1205. Deposited Money and Government Obligations to Be
Held in Trust; Other Miscellaneous Provisions.
Subject to the provisions of the last paragraph of Section
1003, all money and U.S. Government Obligations (including the proceeds
thereof) deposited with the Trustee (or other qualifying trustee,
collectively for purposes of this Section 1205, the "Trustee") pursuant
to Sections 1204 and 1206 in respect of such Outstanding Notes shall be
held in trust and applied by the Trustee, in accordance with the
provisions of such Notes and this Indenture, to the payment, either
directly or through any Paying Agent (including either of the Issuers
acting as its own Paying Agent) as the Trustee may determine, to the
Holders of such Notes of all sums due and to become due thereon in
respect of principal (and premium, if any) and interest, but such money
need not be segregated from other funds except to the extent required by
law.
The Issuers shall pay and indemnify the Trustee against any
tax, fee or other charge imposed on or assessed against the U.S.
Government Obligations deposited pursuant to Section 1204 or the
principal and interest received in respect thereof other than any such
tax, fee or other charge which by law is for the account of the Holders
of such Outstanding Notes.
Anything in this Article Twelve to the contrary
notwithstanding, the Trustee shall deliver or pay to the Issuers from
time to time upon Issuer Request any money or U.S. Government Obligations
(or other property and any proceeds therefrom) held by it as provided in
Section 1204 which, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification
thereof delivered to the Trustee, are in excess of the amount thereof
which would then be required to be deposited to effect an equivalent
defeasance or covenant defeasance, as applicable, in accordance with this
Article.
SECTION 1206. Reinstatement.
If the Trustee or any Paying Agent is unable to apply any
money in accordance with Section 1205 by reason of any order or judgment
of any court or governmental authority enjoining, restraining or
otherwise prohibiting such application, then the Issuers' obligations
under this Indenture and such Notes shall be revived and reinstated as
though no deposit had occurred pursuant to Section 1202 or 1203, as the
case may be, until such time as the Trustee or Paying Agent is permitted
to apply all such money in accordance with Section 1205; provided,
however, that if the Issuers make any payment of principal of (or
premium, if any) or interest on any such Note following the reinstatement
of their obligations, the Issuers shall be subrogated to the rights of
the Holders of such Notes to receive such payment from the money held by
the Trustee or Paying Agent.
ARTICLE THIRTEEN
RELEASE OF COLLATERAL AND TERMINATION OF COVENANTS
SECTION 1301. Release of Soucy Collateral.
At any time when either (i) the Company shall have reduced
its Total Committed Debt to an amount that is not greater than $145
million or (ii) the Notes shall be rated Investment Grade, all of the
Soucy Collateral shall be released from the Lien and security interest in
the Soucy Collateral created by this Indenture (as set forth in Article
Fourteen hereof) and the Soucy Pledge Agreement, at the sole cost and
expense of the Issuers, and the Trustee shall release such Soucy
Collateral in accordance with the provisions of Section 1403.
SECTION 1302. Termination of Covenants of Soucy Inc.
At any time when either (i) the Company shall have reduced
its Total Committed Debt to an amount that is not greater than $145
million or (ii) the Notes shall be rated Investment Grade, all of the
covenants and other provisions of this Indenture with respect to Soucy
Inc. shall terminate.
ARTICLE FOURTEEN
SECURITY
SECTION 1401. Collateral Documents.
In order to secure the due and punctual payment of the
principal of (premium, if any) and interest on the Notes when and as the
same shall be due and payable, whether on an Interest Payment Date, at
Maturity, by acceleration, call for redemption, or otherwise, and
interest on the overdue principal, premium and interest, if any, of the
Notes and performance of all other obligations of the Issuers, the
Security Parties and Brant-Allen to the Holders or the Trustee under this
Indenture and the Notes, according to the terms hereunder or thereunder,
(i) the Company shall, on the Closing Date, make an assignment of its
right, title and interest in and to the Company Collateral to the
Trustee, (ii) Brant-Allen shall, on the Closing Date, make an assignment
of its right, title and interest in and to the Timberlands Collateral and
the Soucy Collateral to the Trustee, in each case pursuant to the
Collateral Documents and to the extent therein provided and (iii) each of
the Company and Brant-Allen appoints and agrees to confirm and ratify the
appointment of the Trustee, or its duly authorized agent, to hold the
Company Collateral, the Timberlands Collateral and the Soucy
Collateral, as the case may be, for the benefit of the Holders on the
terms and conditions set forth in the Collateral Documents and, in the
case of the Soucy Collateral, to act as the fonde de pouvoir of the
Holders under the Hypothec Agreement. Each Holder, by its acceptance of a
Note, consents and agrees to the terms of the Collateral Documents
(including, without limitation, the provisions providing for foreclosure
and release of Collateral) as the same may be in effect or may be amended
from time to time in accordance with the terms thereof and hereof.
Subject to the rights of the lenders party to the Bank Credit Agreement
and the Intercreditor Agreement, the Company and Brant-Allen each (a)
will forever warrant and defend the title to the Collateral against the
claims of all persons whatsoever, (b) will execute, acknowledge and
deliver to the Trustee such further assignments, transfers, assurances or
other instruments, and (c) will do or cause to be done all such acts and
things as may be necessary or proper, in each case to assure and confirm
to the Trustee the security interest in the Collateral contemplated
hereby and by the Collateral Documents or any part thereof, as from time
to time constituted, so as to render the same available for the security
and benefit of this Indenture and of the Notes secured hereby, according
to the intent and purposes herein expressed. The Company and Brant-Allen
shall take, or cause their respective Subsidiaries to take, any and all
actions reasonably required to cause the Collateral Documents to create
and maintain, as security for the Indenture Obligations of the Issuers,
the Security Parties and Brant-Allen, a valid and enforceable Lien in and
on the Collateral, in favor of the Trustee, subject to no other Liens
(other than Liens in and on the Collateral securing the obligations of
the Company, Brant-Allen and Timberlands, as the case may be, under the
Bank Credit Agreement, the Timberlands Loan and the Hancock Loan, as the
case may be and (ii) other Liens permitted by this Indenture).
The Trustee represents, warrants and covenants to and in
favor of the Issuers, Brant-Allen and the Security Parties that the
Trustee has all necessary corporate power and authority to enter into and
exercise its rights and perform its obligations under the Collateral
Documents, to act as Trustee for the benefit of the Holders in accordance
with the terms of the Collateral Documents and, in the case of the
Hypothec Agreement, to act as fonde de pouvoir of the Holders in
accordance with the terms of the Hypothec Agreement.
SECTION 1402. Recording, etc.
(a) The Issuers will cause, at their own expense and at the
request of the Trustee, the Collateral Documents and this Indenture and
all amendments or supplements thereto to be registered, recorded and
filed or re-recorded, re-filed and renewed in such manner and in such
place or places, if any, as may be required by law in order fully to
preserve and protect the security interests created under the Collateral
Documents and to effectuate and preserve the security therein of the
Holders and all rights of the Trustee as provided in the Collateral
Documents.
(b) The Issuers shall furnish to the Trustee, within 30 days
after June 1 in each year beginning with June 1, 1998, an Opinion of
Counsel, dated as of such date, either (i) stating that, in the opinion
of such counsel, such action has been taken with respect to the
recording, registering, filing, re-recording, re-registering and refiling
of all supplemental indentures, financing statements, continuation
statements or other instruments of further assurance as is necessary to
maintain the Lien of the Collateral Documents and reciting with respect
to the security interests in the Collateral the details of such action or
referring to prior Opinions of Counsel in which such details are given,
and stating that all financing statements and continuation statements
have been executed and filed that are necessary fully to preserve and
protect the rights of the Holders and the Trustee hereunder and under the
Collateral Documents with respect to the security interests in the
Collateral or (ii) stating that, in the opinion of such counsel, no such
action is necessary to maintain such Lien and assignment.
SECTION 1403. Release of Collateral.
The release of any Collateral from the terms of this
Indenture and the Collateral Documents shall not be deemed to impair the
security under this Indenture in contravention of the provisions hereof
and thereof, if and to the extent the Collateral is released pursuant to
this Indenture and the Collateral Documents. To the extent applicable,
the Issuers shall cause TIA ss. 313(b), relating to reports, and TIA ss.
314(d), relating to the release of property or securities from the Lien
and security interest of the Collateral Documents and relating to the
substitution therefor of any property or securities to be subjected to
the Lien and security interest of any Collateral Document, to be complied
with. Any certificate or opinion required by TIA ss. 314(d) may be made
by Officers of the Issuers except in cases where TIA ss. 314(d) requires
that such certificate or opinion be made by an independent Person, which
Person shall be an independent engineer, appraiser, or other expert
selected or approved by the Trustee in the exercise of reasonable care.
SECTION 1404. Suits to Protect the Collateral.
The Trustee shall have power to institute and to maintain
such suits and proceedings as it may deem expedient to prevent any
impairment of the Collateral by any acts which may be unlawful or in
violation of the Collateral Documents or this Indenture, and such suits
and proceedings as the Trustee may deem expedient to preserve or protect
its interests and the interests of the Holders in the Collateral
(including power to institute and maintain suits or proceedings to
restrain the enforcement of or compliance with any legislative or other
governmental enactment, rule or order that may be unconstitutional or
otherwise invalid if the enforcement of, or compliance with, such
enactment, rule or order would impair the security hereunder or be
prejudicial to the interests of the Holders or the Trustee).
SECTION 1405. Authorization of Intercreditor Agreement.
The Trustee is authorized to enter into the Intercreditor
Agreement on behalf of the Holders to provide for the allocation of
rights with respect to the Collateral among the Agent Bank, Toronto
Dominion (Texas), Inc., as administrative agent under the Timberlands
Loan, and the Trustee.
SECTION 1406. Authorization of Receipt of Funds by the
Trustee Under the Collateral Documents.
The Trustee is authorized to enter into the Intercreditor
Agreement on behalf of the Holders, to receive any funds for the benefit
of the Holders distributed under the Collateral Documents, and to make
further distributions of such funds to the Holders according to the
provisions of this Indenture and the Intercreditor Agreement. The Trustee
is further authorized to enter into such amendments to the Collateral
Documents as are required to add additional Collateral or to release
Collateral from the Lien created by the Collateral Documents as provided
by the terms of the Collateral Documents or of the disposition of such
Collateral as is permitted by the Indenture.
IN WITNESS WHEREOF, the parties hereto have caused this
Indenture to be duly executed as of the day and year first above written.
BEAR ISLAND PAPER COMPANY, L.L.C.
By: /s/ Edward D. Sherrick
_________________________________
Name: Edward D. Sherrick
Title: Vice President of Finance
BEAR ISLAND FINANCE COMPANY II
By: /s/ Edward D. Sherrick
__________________________________
Name: Edward D. Sherrick
Title: Vice President of Finance
BEAR ISLAND TIMBERLANDS COMPANY, L.L.C.
By: /s/ Edward D. Sherrick
__________________________________
Name: Edward D. Sherrick
Title: Vice President of Finance
F.F. SOUCY, INC., for itself and not as
general partner of F.F. Soucy, Inc. &
Partners, Limited Partnership
By: /s/ Edward D. Sherrick
___________________________________
Name: Edward D. Sherrick
Title: Vice President of Finance
BRANT-ALLEN INDUSTRIES, INC.
By: /s/ Edward D. Sherrick
_________________________________
Name: Edward D. Sherrick
Title: Senior Vice President
CRESTAR BANK, as Trustee
By: /s/ S.A. McMahon
_________________________________
Name: S.A. McMahon
Title: Vice President
Exhibit A
[FACE OF NOTE]
BEAR ISLAND PAPER COMPANY, L.L.C.
BEAR ISLAND FINANCE COMPANY II
10% [Series B]**** Senior Secured Note due 2007
[CUSIP]/[CINS/ISIN]*
No. _______ $_________________
BEAR ISLAND PAPER COMPANY, L.L.C., a Virginia limited
liability company (the "Company"), and BEAR ISLAND FINANCE COMPANY II, a
Delaware corporation ("FinCo" and, together with the Company, the
"Issuers," which terms include any successors under the Indenture
hereinafter referred to), for value received, promises to pay to
[___________]/[Cede & Co.]*, or its registered assigns, the principal sum
[of __________________________________ Dollars ($___________)]/[indicated
on the Schedule hereto]**, on December 1, 2007.
[Initial Interest Rate: 10% per annum.]***
[Interest Rate: 10% per annum.]****
Interest Payment Dates: June 1 and December 1 of each year
commencing June 1, 1998.
Regular Record Dates: May 15 and November 15 of each year.
Reference is hereby made to the further provisions of this
Note set forth on the reverse hereof, which further provisions shall for
all purposes have the same effect as if set forth at this place.
IN WITNESS WHEREOF, the Issuers have caused this Note to be
signed manually or by facsimile by their duly authorized officers.
- - ------------
* Include only for Offshore Notes.
** Include only for Global Notes.
*** Include only for Initial Notes.
**** Include only for Exchange Notes.
Date: ___________________________ BEAR ISLAND PAPER COMPANY, L.L.C.
By:________________________________
Name:
Title:
BEAR ISLAND FINANCE COMPANY II
By:________________________________
Name:
Title:
(Form of Trustee's Certificate of Authentication)
This is one of the 10% [Series B]** Senior Secured Notes due 2007
referred to in the within-mentioned Indenture.
CRESTAR BANK, as Trustee
Dated: __________ By:_____________________________
Authorized Signatory
- - ------------
** Include only for Exchange Note.
[REVERSE SIDE OF NOTE]
BEAR ISLAND PAPER COMPANY, L.L.C.
BEAR ISLAND FINANCE COMPANY II
10% [Series B]** Senior Secured Note due 2007
1. Principal and Interest.
The Issuers will pay the principal of this Note on December
1, 2007.
The Issuers promise to pay interest on the principal amount
of this Note on each Interest Payment Date, as set forth below, at the
rate of 10% per annum [(subject to adjustment as provided below)]*
[except that interest accrued on this Note pursuant to the fourth
paragraph of this Section 1 for periods prior to the applicable Exchange
Date (as such term is defined in the Registration Rights Agreement
referred to below) will accrue at the rate or rates borne by the Notes
from time to time during such periods].**
Interest will be payable semi-annually (to the Holders of
record of the Notes (or any Predecessor Notes) at the close of business
on the May 15 or November 15 immediately preceding the Interest Payment
Date) on each Interest Payment Date, commencing June 1, 1998.
[The Holder of this Note is entitled to the benefits of the
Registration Rights Agreement, dated December 1, 1997, among the Issuers
and the Purchasers named therein (the "Registration Rights Agreement").
If either (i) the Exchange Offer Registration Statement (as such term is
defined in the Registration Rights Agreement) is not filed with the
Commission on or prior to the 90th calendar day following the Original
Issue Date (as such term is defined in the Registration Rights
Agreement), (ii) the Exchange Offer Registration Statement is not
declared effective on or prior to the 180th calendar day following the
Original Issue Date, (iii) the Exchange Offer (as such term is defined in
the Registration Rights Agreement) is not consummated or, if required, a
Shelf Registration Statement (as such term is defined in the Registration
Rights Agreement) with respect to the Notes is not declared effective on
or prior to the 210th calendar day following the Original Issue Date or
(iv) the Exchange Offer Registration Statement is declared effective but
- - ------------
* Include only for Initial Note.
** Include only for Exchange Notes.
thereafter ceases to be effective or usable (each such event referred to in
clauses (i) through (iv) above, a "Registration Default"), then the
interest rate borne by the Notes shall be increased by one-half of one
percent per annum with respect to the first 90-day period following such
Registration Default. The amount of such additional interest will increase
by an additional one-half of one percent per annum to a maximum of one and
one-half percent per annum for each subsequent 90-day period until such
Registration Default has been cured. Upon (w) the filing of the Exchange
Offer Registration Statement after the 90-day period described in clause
(i) above, (x) the effectiveness of the Exchange Offer Registration
Statement after the 180-day period described in clause (ii) above, (y) the
consummation of the Exchange Offer or the effectiveness of a Shelf
Registration Statement, as the case may be, after the 210-day period
described in clause (iii) above or (z) the cure of any Registration Default
described in clause (iv) above, the interest rate borne by this Note from
the date of such filing, effectiveness, consummation or cure, as the case
may be, shall be reduced to the original interest rate if the Issuers are
otherwise in compliance with such requirements; provided, however, that if,
after any such reduction in interest rate, a different event specified in
clause (i), (ii), (iii) or (iv) above occurs, the interest rate shall again
be increased pursuant to the foregoing provisions.]*
Interest on this Note will accrue from the most recent date
to which interest has been paid [on this Note or the Note surrendered in
exchange herefor]** or, if no interest has been paid, from December 1,
1997; provided that, if there is no existing default in the payment of
interest and if this Note is authenticated between a Regular Record Date
referred to on the face hereof and the next succeeding Interest Payment
Date, interest shall accrue from such Interest Payment Date. Interest
will be computed on the basis of a 360-day year of twelve 30-day months.
The Issuers shall pay interest on overdue principal and
premium, if any, and interest on overdue installments of interest, to the
extent lawful, at a rate per annum equal to the rate of interest
applicable to the Notes.
2. Method of Payment.
Subject to the next paragraph, the Issuers will pay interest
(except defaulted interest) on the principal amount of the Notes on each
June 1 and December 1 to the Persons who are Holders (as reflected in the
Note Register at the close of business on the May 15 or November 15
immediately preceding the Interest Payment Date), in each case, even if
the Note is cancelled on registration of transfer or registration of
exchange after such Regular Record Date; provided that, with respect to
- - -------------
* Include only for Initial Note.
** Include only for Exchange Note
the payment of principal, the Issuers will make payment to the Holder that
surrenders this Note to any Paying Agent on or after December 1, 2007.
The Issuers will pay principal (premium, if any) and interest
in money of the United States that at the time of payment is legal tender
for payment of public and private debts. However, the Issuers may pay
principal (premium, if any) and interest by their check payable in such
money. The Issuers may pay interest on the Notes either (a) by mailing a
check for such interest to a Holder's registered address (as reflected in
the Note Register) or (b) by wire transfer to an account located in the
United States maintained by the payee. If a payment date is a date other
than a Business Day at a place of payment, payment may be made at that
place on the next succeeding day that is a Business Day and no interest
shall accrue for the intervening period.
3. Paying Agent and Registrar.
Initially, the Trustee will act as Paying Agent and
Registrar. The Issuers may change any Paying Agent or Registrar upon
written notice thereto. The Issuers, any Subsidiary or any Affiliate of
any of them may act as Paying Agent, Registrar or co-registrar.
4. Indenture; Limitations.
The Issuers issued the Notes under an Indenture dated as of
December 1, 1997 (the "Indenture"), among the Issuers, the Security
Parties, Brant-Allen and Crestar Bank, as trustee (the "Trustee").
Capitalized terms herein are used as defined in the Indenture unless
otherwise indicated. The terms of the Notes include those stated in the
Indenture and those made part of the Indenture by reference to the Trust
Indenture Act. The Notes are subject to all such terms, and Holders are
referred to the Indenture and the Trust Indenture Act for a statement of
all such terms. To the extent permitted by applicable law, in the event
of any inconsistency between the terms of this Note and the terms of the
Indenture, the terms of the Indenture shall control.
The Notes are senior secured obligations of the Issuers. The
Indenture limits the aggregate principal amount of the Notes to
$100,000,000.
5. Redemption.
The Issuers may, at their option, redeem the Notes as a whole
or from time to time in part, at any time on or after December 1, 2002, on
not less than 30 nor more than 60 days' prior notice at the Redemption
Prices (expressed as percentages of principal amount) set forth below,
together with accrued interest, if any, to the redemption date, if redeemed
during the 12-month period beginning on December 1 of the years indicated
below (subject to the right of Holders of record on relevant record dates
to receive interest due on an interest payment date):
YEAR REDEMPTION PRICE
2002 105.000%
2003 103.333%
2004 101.667%
2005 and thereafter 100.000%
In addition, notwithstanding the foregoing, at any time prior
to December 1, 2000, the Issuers may redeem up to 20% of the aggregate
principal amount of the Notes within 60 days of one or more Public Equity
Offerings with the net proceeds of such offering at a Redemption Price
equal to 110% of the principal amount thereof, together with accrued and
unpaid interest, if any, to the Redemption Date (subject to the right of
Holders of record on relevant Regular Record Dates to receive interest
due on relevant Interest Payment Dates); provided that immediately after
giving effect to any such redemption, at least $80 million aggregate
principal amount of the Notes originally issued remains outstanding.
If less than all the Notes are to be redeemed, the particular
Notes to be redeemed will be selected prior to the redemption date by the
Trustee, if the Notes are listed on a national securities exchange, in
accordance with the rules of that exchange or, if the Notes are not so
listed, either on a pro rata basis, by lot or by such other method as the
Trustee will deem fair and appropriate; provided, however, that no such
partial redemption will reduce the principal amount of a Note not
redeemed to be held by a holder to less than $1,000. Notice of redemption
will be mailed, first-class postage prepaid, at least 30 but not more
than 60 days before the redemption date to each holder of Notes to be
redeemed at its registered address. On and after the redemption date,
interest will cease to accrue on Notes or portions thereof called for
redemption and accepted for payment.
6. Repurchase upon a Change in Control and Asset Sales.
Upon the occurrence of (a) a Change of Control, the Issuers
are obligated to make an offer to purchase all Outstanding Notes at a
redemption price of 101% of the principal amount thereof, plus accrued
interest, if any, to the date of purchase and (b) Asset Sales, the
Issuers may be obligated to make offers to purchase Notes with a portion
of the Net Cash Proceeds of such Asset Sales at a redemption price of
101% of the principal amount thereof plus accrued interest, if any, to
the date of purchase.
7. Denominations; Transfer; Exchange.
The Notes are in registered form without coupons, in
denominations of $1,000 and multiples of $1,000 in excess thereof. A
Holder may register the transfer or exchange of Notes in accordance with
the Indenture. The Note Registrar may require a Holder, among other
things, to furnish appropriate endorsements and transfer documents and to
pay any taxes and fees required by law or permitted by the Indenture.
8. Persons Deemed Owners.
A Holder may be treated as the owner of a Note for all
purposes.
9. Unclaimed Money.
If money for the payment of principal (premium, if any) or
interest remains unclaimed for one year, the Trustee and the Paying Agent
will pay the money back to the Issuers at their request. After that,
Holders entitled to the money must look to the Issuers for payment,
unless an abandoned property law designates another Person, and all
liability of the Trustee and such Paying Agent with respect to such money
shall cease.
10. Discharge Prior to Maturity.
If the Issuers irrevocably deposit, or cause to be deposited,
with the Trustee money or U.S. Government Obligations sufficient to pay
the then outstanding principal of (premium, if any) and accrued interest
on the Notes (a) to maturity, the Issuers will be discharged from the
Indenture and the Notes, except in certain circumstances for certain
sections thereof, and (b) to the Stated Maturity, the Issuers will be
discharged from certain covenants set forth in the Indenture.
11. Amendment; Supplement; Waiver.
Subject to certain exceptions, the Indenture or the Notes may
be amended or supplemented with the consent of the Holders of at least a
majority in aggregate principal amount of the Notes then outstanding, and
any existing default or compliance with any provision may be waived with
the consent of the Holders of a majority in aggregate principal amount of
the Notes then outstanding. Without notice to or the consent of any
Holder, the parties thereto may amend or supplement the Indenture or the
Notes to, among other things, cure any ambiguity, defect or inconsistency
and make any change that does not adversely affect the rights of any
Holder.
12. Restrictive Covenants.
The Indenture contains certain covenants, including, without
limitation, covenants with respect to the following matters: (i)
limitation on Indebtedness of the Company; (ii) limitation on Restricted
Payments by the Company; (iii) limitation on Liens of the Company; (iv)
guarantees by Restricted Subsidiaries of the Company; (v) purchase of
Notes upon a Change of Control; (vi) limitation on Indebtedness of the
Security Parties; (vii) limitation on Restricted Payments by Timberlands;
(viii) limitation on certain Restricted Payments by Soucy Inc.; (ix)
limitation on Liens of the Security Parties; (x) limitation on guarantees
of Company Indebtedness by the Security Parties and their Restricted
Subsidiaries; (xi) limitation on sales of Collateral Stock by Brant-Allen
and certain other transaction by Brant-Allen; (xii) limitation on
proceeds of Asset Sales by Subsidiaries; (xiii) limitation on issuances
and sales of Capital Stock of Subsidiaries; (xiv) limitation on
transactions with Affiliates; (xv) limitation on sale of assets; (xvi)
limitation on Sale and Leaseback Transactions; (xvii) limitation on
dividends and other payment restrictions affecting Restricted
Subsidiaries; (xviii) limitation on conduct of business; (xix) limitation
on Unrestricted Subsidiaries and (xx) reports. Within 120 days after the
end of each fiscal year, the Issuers must report to the Trustee on each
of the Credit Parties' compliance with such limitations.
13. Successor Persons.
When a successor person or other entity assumes all the
obligations of its predecessor under the Notes and the Indenture, the
predecessor person will be released from those obligations.
14. Remedies for Events of Default.
If an Event of Default, as defined in the Indenture, occurs
and is continuing, the Trustee or the Holders of not less than 25% in
aggregate principal amount of the Outstanding Notes may declare all the
Notes to be immediately due and payable. If a bankruptcy or insolvency
default with respect to the Company, any Security Party, any Guarantor or
any of their respective Subsidiaries occurs and is continuing, the Notes
automatically become immediately due and payable. Holders may not enforce
the Indenture or the Notes except as provided in the Indenture. The
Trustee may require indemnity satisfactory to it before it enforces the
Indenture or the Notes. Subject to certain limitations, Holders of not
less than a majority in aggregate principal amount of the Outstanding
Notes may direct the Trustee in its exercise of any trust or power.
15. Trustee Dealings with Issuers.
The Trustee under the Indenture, in its individual or any
other capacity, may become the owner or pledgee of Notes and may make
loans to, accept deposits from, perform services for, and otherwise deal
with, the Issuers and their Affiliates as if it were not the Trustee.
16. No Recourse Against Others.
A director, officer, employee or stockholder, as such, of the
Credit Parties or FinCo shall not have any liability for any obligations
of the Issuers under the Notes, the Indenture or the Collateral Documents
or for any claim based on, in respect of or by reason of such obligations
or their creation. Each Holder of the Notes by accepting a Note waives
and releases all such liability. The waiver and release are part of the
consideration for the issue of the Notes.
17. Governing Law.
THE INDENTURE AND THE NOTES SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK.
18. Authentication.
This Note shall not be valid until the Trustee signs the
certificate of authentication on the other side of this Note.
19. Abbreviations.
Customary abbreviations may be used in the name of a Holder
or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of
survivorship and not as tenants in common), CUST (= Custodian) and
U/G/M/A (= Uniform Gifts to Minors Act).
The Issuers will furnish to any Holder upon written request
and without charge a copy of the Indenture. Requests may be made to Bear
Island Paper Company, L.L.C. and Bear Island Finance Company II, 10026
Old Ridge Road, Ashland, Virginia 23005, Attention:
Chief Financial Officer.
[FORM OF TRANSFER NOTICE]
FOR VALUE RECEIVED the undersigned registered holder hereby
sell(s), assign(s) and transfer(s) unto
Insert Taxpayer Identification No.
____________________________________________________________________________
____________________________________________________________________________
(Please print or typewrite name and address including zip code of assignee)
____________________________________________________________________________
the within Note and all rights thereunder, hereby irrevocably constituting
____________________________________________________________________________
and appointing attorney to transfer such Note on the books of the Issuers
with full power of substitution in the premises.
[THE FOLLOWING PROVISION TO BE INCLUDED
ON ALL CERTIFICATES
EXCEPT PERMANENT OFFSHORE DEFINITIVE
CERTIFICATES]
In connection with any transfer of this Note occurring prior
to the date which is two years after the later of the date of original
issuance of this Note and the last date, if any, on which this Note was
owned by the Issuers or any of their respective Affiliates, the
undersigned confirms that without utilizing any general solicitation or
general advertising:
[Check One]
[ ](a) this Note is being transferred in compliance with the exemption
from registration under the Securities Act of 1933, as amended,
provided by Rule 144A thereunder;
[ ](b) this Note is being transferred pursuant to, and in compliance
with Regulation S under the Securities Act of 1933;
[ ](c) this Note is being transferred pursuant to an effective
registration statement and a prospectus is being delivered in
accordance with the Securities Act of 1933, as amended;
or
[ ](d) this Note is being transferred other than in accordance with
(a) above and documents are being furnished which comply with
the conditions of transfer set forth in this Note and the
Indenture.
If none of the foregoing boxes is checked, the Trustee or other Registrar
shall not be obligated to register this Note in the name of any Person
other than the Holder hereof unless and until the conditions to any such
transfer of registration set forth herein and in Section 312 of the
Indenture shall have been satisfied.
Date: ____________________________
__________________________________
NOTICE: The signature to this
assignment must correspond with
the name as written upon the
face of the within-mentioned
instrument in every particular,
without alteration or any
change whatsoever.
Signature Guarantee:____________________________
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED.
Signatures must be guaranteed by an "eligible guarantor
institution" meeting the requirements of the Note Registrar, which
requirements include membership or participation in the Security Transfer
Agent Medallion Program ("STAMP") or such other "signature guarantee
program" as may be determined by the Note Registrar in addition to, or in
substitution for, STAMP, all in accordance with the Securities Exchange
Act of 1934, as amended.
The undersigned represents and warrants that it is purchasing
this Note for its own account or an account with respect to which it
exercises sole investment discretion and that it and any such account is a
"qualified institutional buyer" within the meaning of Rule 144A under the
Securities Act of 1933, as amended, and is aware that the sale to it is
being made in reliance on Rule 144A and acknowledges that it has received
such information regarding the Issuers as the undersigned has requested
pursuant to Rule 144A or has determined not to request such information and
that it is aware that the transferor is relying upon the undersigned's
foregoing representations in order to claim the exemption from registration
provided by Rule 144A.
Dated:_____________________________ __________________________________
NOTICE: To be executed by an
executive officer
OPTION OF HOLDER TO ELECT PURCHASE
If you wish to have this Note purchased by the Issuers
pursuant to Section 1012 or Section 1022 of the Indenture, check the
Box: [ ].
If you wish to have a portion of this Note purchased by the
Issuers pursuant to Section 1012 or Section 1022 of the Indenture, state
the amount (in original principal amount) below:
$_____________________.
Date:_________________________
Your Signature:_________________________
(Sign exactly as your name appears on the other side of this Note)
Signature Guarantee:_______________________________
Signatures must be guaranteed by an "eligible guarantor
institution" meeting the requirements of the Note Registrar, which
requirements include membership or participation in the Security Transfer
Agent Medallion Program ("STAMP") or such other "signature guarantee
program" as may be determined by the Note Registrar in addition to, or in
substitution for, STAMP, all in accordance with the Securities Exchange
Act of 1934, as amended.
Schedule 101(a)
Indebtedness of the Company or Restricted Subsidiary of the Company
outstanding on the date of the Indenture (paragraph (e) of definition of
Permitted Indebtedness)
1. $305,000 principal amount for a purchase money obligation dated
July 9, 1997, between the Company and Honeywell-Measurex Systems,
Inc., with respect to the MX Open System;
2. $200,000 principal amount for a purchase money obligation dated
August 15, 1997, between the Company and Voith Sulzer Paper
Technology North America, Inc., for a ceramic center roll, with an
additional $165,000 due upon delivery on January 1999.
3. $137,967 principal amount for a purchase money obligation dated
April 17, 1995, between the Company and Andritz Sprout Bauer, Inc.,
for a refiner topwinder feeder (production equipment) due by
December 31, 1998;
4. Indebtedness owed to CCA Financial, Inc., with respect to
certain leased equipment, in an amount not exceeding $123,326.
5. $55,000 principal for a purchase money obligation dated March
31, 1997, between the Company and Majiq, Inc. for a Majiq Trim
Package.
6. Approximately $3.7 million of principal, premium and accrued
interest under the Company's 10.375% senior secured notes due 2004
which has been fully defeased in accordance with the term of the
Indenture of Mortgage and Deed of Trust dated as of October 15,
1987 (which the parties agree shall not be refinanced);
Schedule 101(b)
Indebtedness of Timberlands outstanding on the date of the Indenture
(paragraph (h)(i) of the definition of "Permitted Security Party
Indebtedness")
1. $189,250 promissory note payable to Olger et als due on January 1,
1998, with 6% interest;
2. $178,400 promissory note payable to Rucks et als due in three
annual installments on January 31, 1998, 1999 and 2000, with
interest at 7% per annum;
3. $100,856 purchase money note payable to William A. Cooke, Inc.,
collateralized by a deed of trust on certain timberlands, due in 8
equal annual principal and interest installments of $17,219
beginning on November 13, 1997, payable and due on November 13,
2005; and
4. $105,393 purchase money note payable to William A. Cook,
collateralized by a deed of trust on certain timberlands, due in 8
equal annual principal and interest installments of $17,993.56
beginning on November 13, 1997, payable and due on November 13,
2005.
5. Indebtedness owed to Brant-Allen with respect to the allocation
of expenses of Timberlands.
SCHEDULE 1024(a)
NONE
<PAGE>
EXHIBIT 4.3
Registration Rights Agreement
Dated as of December 1, 1997
among
Bear Island Paper Company, L.L.C. and
Bear Island Finance Company II
and
TD Securities (USA) Inc. and
Salomon Brothers Inc
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made
and entered into on December 1, 1997 among BEAR ISLAND PAPER
COMPANY, L.L.C., a Virginia limited liability company (the
"Company"), and BEAR ISLAND FINANCE COMPANY II, a Delaware
corporation ("FinCo" and, together with the Company, the
"Issuers"), and TD SECURITIES (USA) INC. ("TD Securities") and
SALOMON BROTHERS INC ("Salomon Brothers" and, together with TD
Securities, the "Initial Purchasers").
This Agreement is made pursuant to the Purchase
Agreement dated November 21, 1997 between the Issuers and the
Initial Purchasers (the "Purchase Agreement"), which provides for
the sale by the Issuers to the Initial Purchasers of an aggregate
of $100,000,000 principal amount of the Issuers' 10% Senior
Secured Notes due 2007 (the "Initial Notes"). In order to induce
the Initial Purchasers to enter into the Purchase Agreement, the
Issuers have agreed to provide to the Initial Purchasers and
their direct and indirect transferees the registration rights set
forth in this Agreement. The execution of this Agreement is a
condition to the closing under the Purchase Agreement.
In consideration of the foregoing, the parties hereto
agree as follows:
1. Definitions. As used in this Agreement, the
following capitalized defined terms shall have the following
meanings:
"1933 Act" shall mean the Securities Act of 1933, as
amended from time to time, and the rules and regulations of
the Securities and Exchange Commission promulgated
thereunder.
"1934 Act" shall mean the Securities Exchange Act of
1934, as amended from time to time, and the rules and
regulations of the Securities and Exchange Commission
promulgated thereunder.
"Closing Time" shall mean the Closing Time as defined
in the Purchase Agreement.
"Company" shall have the meaning set forth in the
preamble of this Agreement and also includes the Company's
successors.
"Depositary" shall mean The Depository Trust Company,
or any other depositary appointed by the Issuers; provided,
however, that any such depositary must have an address in
the Borough of Manhattan, in The City of New York.
"Exchange Notes" shall mean the 10% Senior Secured
Notes due 2007 issued by the Issuers under the Indenture
containing terms identical to the Initial Notes (except that
(i) interest thereon shall accrue from the last interest
payment date on which interest was paid on the Initial Notes
or, if no such interest has been paid, from the Original
Issue Date, (ii) the transfer restrictions thereon shall be
eliminated and (iii) certain provisions relating to an
increase in the stated rate of interest thereon shall be
eliminated), to be offered to Holders of Initial Notes in
exchange for Initial Notes pursuant to the Exchange Offer.
"Exchange Offer" shall mean the exchange offer by the
Issuers of Exchange Notes for Registrable Notes pursuant to
Section 2(a) hereof.
"Exchange Offer Registration" shall mean a registration
under the 1933 Act effected pursuant to Section 2(a) hereof.
"Exchange Offer Registration Statement" shall mean an
exchange offer registration statement on Form S-4 (or, if
applicable, on another appropriate form), and all amendments
and supplements to such registration statement, in each case
including the Prospectus contained therein, all exhibits
thereto and all material incorporated by reference therein.
"FinCo" shall have the meaning set forth in the
preamble of this Agreement and also includes FinCo's
successors.
"GAAP" shall have the meaning set forth in the
Indenture.
"Holders" shall mean the Initial Purchasers, for so
long as they own any Registrable Notes, and each of their
successors, assigns and direct and indirect transferees who
become registered holders of Registrable Notes under the
Indenture.
"Indenture" shall mean the Indenture relating to the
Initial Notes and Exchange Notes dated as of December 1,
1997 between the Issuers and Crestar Bank, as Trustee, as
the same may be amended from time to time in accordance with
the terms thereof.
"Initial Notes" shall have the meaning set forth in the
preamble of this Agreement.
"Issuers" shall have the meaning set forth in the
preamble of this Agreement and also includes each of the
Issuers' successors.
"Initial Purchasers" shall have the meaning set forth
in the preamble of this Agreement.
"Majority Holders" shall mean the Holders of a majority
of the aggregate principal amount of outstanding Registrable
Notes; provided that whenever the consent or approval of
Holders of a specified percentage of Registrable Notes is
required hereunder, Registrable Notes held by the Issuers or
any of their affiliates (as such term is defined in Rule 405
under the 1933 Act) shall be disregarded in determining
whether such consent or approval was given by the Holders of
such required percentage or amount.
"Managing Underwriters" means the investment banker or
investment bankers and manager or managers that shall
administer an underwritten offering determined in accordance
with Section 4.
"Original Issue Date" shall mean the date on which the
Initial Notes are issued under the Indenture.
"Participating Broker-Dealer" shall have the meaning
set forth in Section 3(f) of this Agreement.
"Person" shall mean an individual, partnership,
corporation, limited liability company, trust or
unincorporated organization, or a government or agency or
political subdivision thereof.
"Prospectus" shall mean the prospectus included in a
Registration Statement, including any preliminary
prospectus, and any such prospectus as amended or
supplemented by any prospectus supplement, including a
prospectus supplement with respect to the terms of the
offering of any portion of the Registrable Notes covered by
a Shelf Registration Statement, and by all other amendments
and supplements to a prospectus, including post-effective
amendments, and in each case including all material
incorporated by reference therein.
"Purchase Agreement" shall have the meaning set forth
in the preamble of this Agreement.
"Registrable Notes" shall mean the Initial Notes;
provided, however, that certain Initial Notes shall cease to
be Registrable Notes when (i) a Registration Statement with
respect to such Initial Notes shall have been declared
effective under the 1933 Act and such Initial Notes shall
have been disposed of pursuant to such Registration
Statement, (ii) such Initial Notes may be distributed to the
public pursuant to Rule 144(k) (or any similar provision
then in force, but not Rule 144A) under the 1933 Act, (iii)
such Initial Notes shall have ceased to be outstanding, (iv)
such Initial Notes have been exchanged by a person other
than a Broker-Dealer for Exchange Notes upon consummation of
the Exchange Offer or (v) following the exchange by a
Participating Broker-Dealer in the Exchange Offer of an
Initial Note for an Exchange Note, the date on which that
Exchange Note is sold to a purchaser who receives from that
Participating Broker-Dealer on or before the date of that
sale a copy of the Prospectus.
"Registration Expenses" shall mean any and all expenses
incident to performance of or compliance by the Issuers with
this Agreement, including without limitation: (i) all SEC,
stock exchange or National Association of Securities
Dealers, Inc. (the "NASD") registration and filing fees,
(ii) all fees and expenses incurred in connection with
compliance with state or other securities or blue sky laws
and compliance with the rules of the NASD (including
reasonable fees and disbursements of counsel for any
underwriters or Holders in connection with state or other
securities or blue sky qualification, if any, of any of the
Exchange Notes or Registrable Notes in any United States
jurisdiction referred to in Section 3(d)), (iii) all
expenses of any Persons in preparing or assisting in
preparing, word processing, printing and distributing any
Registration Statement, any Prospectus, any amendments or
supplements thereto, any underwriting agreements, securities
sales agreements, certificates representing the Registrable
Notes or Exchange Notes and other documents relating to the
performance of and compliance with this Agreement, (iv) all
rating agency fees, (v) all fees and expenses incurred in
connection with the listing, if any, of any of the
Registrable Notes or Exchange Notes on any securities
exchange or exchanges, (vi) all fees and disbursements
relating to the qualification of the Indenture under
applicable securities laws, (vii) the fees and disbursements
of counsel for the Issuers and of the independent public
accountants of the Issuers, including the expenses of any
special audits or "cold comfort" letters required by or
incident to such performance and compliance, (viii) in the
case of a Shelf Registration Statement, subject to Section
2(c), the reasonable fees and disbursements of one counsel
for the Holders of Registrable Notes (which counsel shall be
selected by the Majority Holders), (ix) the fees and
expenses of a "qualified independent underwriter" as defined
by Conduct Rule 2720 of the NASD (if required by the NASD
rules) in connection with the offering of the Registrable
Notes or Exchange Notes, (x) the fees and expenses of the
Trustee, including its counsel, and any exchange agent or
custodian, and (xi) any fees and disbursements of the
underwriters customarily required to be paid by issuers or
sellers of securities and the reasonable fees and expenses
of any special experts retained by the Issuers in connection
with any Registration Statement, but excluding fees of
counsel to the underwriters or the Holders and underwriting
discounts and commissions and transfer taxes, if any,
relating to the sale or disposition of Registrable Notes by
a Holder.
"Registration Statement" shall mean any registration
statement of the Issuers which covers any of the Exchange
Notes or Registrable Notes pursuant to the provisions of
this Agreement, and all amendments and supplements to any
such Registration Statement, including post-effective
amendments, in each case including the Prospectus contained
therein, all exhibits thereto and all material incorporated
by reference therein.
"Rule 144" shall mean Rule 144 promulgated under the
1933 Act, or any successor rule to similar effect.
"Salomon Brothers" shall have the meaning set forth in
the preamble of this Agreement and also includes each of
Salomon Brothers' successors.
"SEC" shall mean the Securities and Exchange
Commission.
"Shelf Registration" shall mean a registration effected
pursuant to Section 2(b) hereof.
"Shelf Registration Statement" shall mean a "shelf"
registration statement of the Issuers pursuant to the
provisions of Section 2(b) of this Agreement which covers
all of the Registrable Notes on an appropriate form under
Rule 415 under the 1933 Act, or any similar rule that may be
adopted by the SEC, and all amendments and supplements to
such registration statement, including post-effective
amendments, in each case including the Prospectus contained
therein, all exhibits thereto and all material incorporated
by reference therein.
"TD Securities" shall have the meaning set forth in the
preamble of this Agreement and also includes each of TD
Securities' successors.
"Trustee" shall mean the trustee with respect to the
Initial Notes and Exchange Notes under the Indenture.
2. Registration Under the 1933 Act. (a) Exchange
Offer Registration. To the extent not prohibited by any
applicable law or applicable interpretation of the Staff of the
SEC, the Issuers at their cost, shall use their best efforts
(A) to file within 90 days after the Original Issue Date with the
SEC an Exchange Offer Registration Statement covering the offer
by the Issuers to the Holders to exchange all of the Registrable
Notes for Exchange Notes, (B) to cause such Exchange Offer
Registration Statement to be declared effective by the SEC within
180 days after the Original Issue Date, (C) to cause such
Exchange Offer Registration Statement to remain effective until
the closing of the Exchange Offer and (D) to consummate the
Exchange Offer within 210 days after the Original Issue Date.
The Exchange Notes will be issued under the Indenture. Upon the
effectiveness of the Exchange Offer Registration Statement, the
Issuers shall promptly commence the Exchange Offer, it being the
objective of such Exchange Offer to enable each Holder (other
than Participating Broker-Dealers (as defined in Section 3(f)))
eligible and electing to exchange Registrable Notes for Exchange
Notes (assuming that such Holder is not an affiliate of the
Issuers within the meaning of Rule 405 under the 1933 Act,
acquires the Exchange Notes in the ordinary course of such
Holder's business and has no arrangements or understandings with
any person to participate in the Exchange Offer for the purpose
of distributing the Exchange Notes) to trade such Exchange Notes
from and after their receipt without any limitations or
restrictions under the 1933 Act and without material restrictions
under the securities laws of a substantial proportion of the
several states of the United States.
In connection with the Exchange Offer, the Issuers shall:
(i) mail to each Holder a copy of the Prospectus
forming part of the Exchange Offer Registration Statement,
together with an appropriate letter of transmittal and
related documents;
(ii) keep the Exchange Offer open for not less than 30
days after the date notice thereof is mailed to the Holders
(or longer if required by applicable law);
(iii) use the services of the Depositary for the
Exchange Offer with respect to Initial Notes evidenced by
global certificates;
(iv) permit Holders to withdraw tendered Registrable
Notes at any time prior to the close of business, New York
City time, on the last business day on which the Exchange
Offer shall remain open, by sending to the institution
specified in the notice, a telegram, telex, facsimile
transmission or letter setting forth the name of such
Holder, the principal amount of Registrable Notes delivered
for exchange, and a statement that such Holder is
withdrawing his election to have such Registrable Notes
exchanged; and
(v) otherwise comply in all material respects with all
applicable laws relating to the Exchange Offer.
As soon as practicable after the close of the Exchange
Offer, the Issuers shall:
(i) accept for exchange Registrable Notes duly
tendered and not validly withdrawn pursuant to the Exchange
Offer in accordance with the terms of the Exchange Offer
Registration Statement and the letter of transmittal which
is an exhibit thereto;
(ii) deliver, or cause to be delivered, to the Trustee
for cancellation all Registrable Notes so accepted for
exchange by the Issuers; and
(iii) cause the Trustee promptly to authenticate
and deliver Exchange Notes to each Holder of Registrable
Notes equal in amount to the Registrable Notes of such
Holder so accepted for exchange.
Interest on each Exchange Note will accrue from the
last payment date on which interest was paid on the Registrable
Notes surrendered in exchange therefor or, if no interest has
been paid on the Registrable Notes, from the Original Issue Date.
The Exchange Offer shall not be subject to any conditions, other
than that the Exchange Offer, or the making of any exchange by a
Holder, does not violate applicable law or any applicable
interpretation of the Staff of the SEC. Each Holder of
Registrable Notes (other than Participating Broker-Dealers) who
wishes to exchange such Registrable Notes for Exchange Notes in
the Exchange Offer will be required to represent that (i) it is
not an affiliate of the Issuers, (ii) any Exchange Notes to be
received by it were acquired in the ordinary course of business
and (iii) at the time of the commencement of the Exchange Offer
it has no arrangement with any person to participate in the
distribution (within the meaning of the 1933 Act) of the Exchange
Notes. The Issuers shall inform the Initial Purchasers of the
names and addresses of the Holders to whom the Exchange Offer is
made, and the Initial Purchasers shall have the right to contact
such Holders and otherwise facilitate the tender of Registrable
Notes in the Exchange Offer.
(b) Shelf Registration. (i) If, because of any change
in law or applicable interpretations thereof by the Staff of the
SEC, the Issuers are not permitted to effect the Exchange Offer
as contemplated by Section 2(a) hereof, or (ii) if for any other
reason the Exchange Offer is not consummated within 210 days
following the Original Issue Date, or (iii) if, within 120 days
after the Closing Time (as defined in the Purchase Agreement) any
Holder (other than the Initial Purchasers) gives the Issuers
written notice that it is not eligible to participate in the
Exchange Offer or (iv) upon the request of any Initial Purchaser
(with respect to any Registrable Notes which it acquired directly
from the Issuers), within 120 days after the Closing Time (as
defined in the Purchase Agreement), that such Initial Purchaser
shall hold Registrable Notes which it acquired directly from the
Issuers and if such Initial Purchaser is not permitted, in the
opinion of counsel to such Initial Purchaser, pursuant to
applicable law or applicable interpretation of the Staff of the
SEC, to participate in the Exchange Offer, the Issuers shall, at
their cost,
(A) as promptly as practicable, file with the SEC a
Shelf Registration Statement relating to the offer and sale
of the Registrable Notes by the Holders from time to time in
accordance with the methods of distribution elected by the
Majority Holders of such Registrable Notes and set forth in
such Shelf Registration Statement, and use their best
efforts to cause such Shelf Registration Statement to be
declared effective by the SEC within 210 days after the
Original Issue Date. In the event that the Issuers are
required to file a Shelf Registration Statement upon the
request of any Holder (other than an Initial Purchaser) not
eligible to participate in the Exchange Offer pursuant to
clause (iii) above or upon the request of any Initial
Purchaser pursuant to clause (iv) above, the Issuers shall
file and have declared effective by the SEC both an Exchange
Offer Registration Statement pursuant to Section 2(a) with
respect to all Registrable Notes and a Shelf Registration
Statement (which may be a combined Registration Statement
with the Exchange Offer Registration Statement) with respect
to offers and sales of Registrable Notes held by such Holder
or such Initial Purchaser after completion of the Exchange
Offer; provided that, with respect to Exchange Notes
received by an Initial Purchaser in exchange for any portion
of an unsold allotment of Initial Notes, the Issuers may, if
permitted by current interpretations by the Commissions's
staff, file a post-effective amendment to the Exchange Offer
Registration Statement containing the information required
by Regulation S-K Items 507 and/or 508, as applicable, in
satisfaction of its obligations under this Section 2(b) with
respect thereto, and any such Exchange Offer Registration
Statement, as so amended, shall be referred to herein as,
and governed by (for so long as such interpretation of the
Commission shall continue to be effective) the provisions
herein applicable to, a Shelf Registration Statement.
(B) use their best efforts to keep the Shelf
Registration Statement continuously effective (subject to
the provisions of this Agreement that permit the Issuers to
suspend the use of any Prospectus contained in a Shelf
Registration Statement) in order to permit the Prospectus
forming part thereof to be usable by Holders for a period of
two years from the date the Shelf Registration Statement is
declared effective by the SEC (or one year from the date the
Shelf Registration Statement is declared effective if such
Shelf Registration Statement is filed upon the request of
any Initial Purchaser pursuant to clause (iv) above) or such
shorter period which will terminate when (i) all of the
Registrable Notes covered by the Shelf Registration
Statement have been sold pursuant to the Shelf Registration
Statement, (ii) the date on which, in the written opinion of
counsel to the Issuers, all of the Registrable Notes then
held by the Holders (which are not affiliates of Issuers)
may be sold by such Holders in the public United States
securities markets without registration under the 1933 Act
pursuant to Rule 144(k) under the 1933 Act or any successor
provision thereto or (iii) the date on which there ceases to
be outstanding any Registrable Notes; and
(C) notwithstanding any other provisions hereof, use
their best efforts to ensure that (1) any Shelf Registration
Statement and any amendment thereto and any Prospectus
forming part thereof and any supplement thereto complies in
all material respects with the 1933 Act and the rules and
regulations thereunder, (2) any Shelf Registration Statement
and any amendment thereto does not, when it becomes
effective, contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein
or necessary to make the statements therein not misleading
and (3) any Prospectus forming part of any Shelf
Registration Statement, and any supplement to such
Prospectus (as amended or supplemented from time to time),
does not include an untrue statement of a material fact or
omit to state a material fact necessary in order to make the
statements, in light of the circumstances under which they
were made, not misleading.
The Issuers further agree, if necessary, to supplement
or amend the Shelf Registration Statement if reasonably requested
by the Majority Holders with respect to information relating to
the Holders and otherwise as required by Section 3(b) below, to
use reasonable efforts to cause any such amendment to become
effective and such Shelf Registration to become usable as soon as
thereafter practicable and to furnish to the Holders of
Registrable Notes copies of any such supplement or amendment
promptly after its being used or filed with the SEC.
(c) Expenses. The Issuers shall be liable for and pay
all Registration Expenses in connection with the registration
pursuant to Section 2(a) or 2(b) and (x) in the case of any Shelf
Registration Statement, will reimburse the Holders and the
Initial Purchasers for the reasonable fees and disbursements of
one firm or counsel to act as counsel for the Holders of the
Registrable Notes in connection therewith and (y) in the case of
an Exchange Offer Registration Statement, will reimburse the
Initial Purchasers, as applicable, for the reasonable fees and
disbursements of one firm or counsel in connection therewith;
provided that, in the case of clauses (x) and (y): (A) such firm
shall be Shearman & Sterling, New York, New York (or, in the case
of clause (x), such other firm or counsel designated in writing
by the Majority Holders within 15 days of the initial filing of
the Shelf Registration Statement and approved by the Issuers) and
(B) the reasonable fees and expenses of such firm shall not
exceed $20,000. Each Holder shall pay all expenses of its
counsel other than as set forth in the preceding sentence,
underwriting discounts and commissions and transfer taxes, if
any, relating to the sale or disposition of such Holder's
Registrable Notes pursuant to the Shelf Registration Statement.
(d) Effective Registration Statement. (i) The
Issuers will be deemed not to have used their best efforts to
cause the Exchange Offer Registration Statement or the Shelf
Registration Statement, as the case may be, to become, or to
remain, effective during the requisite period if it voluntarily
takes any action that would result in any such Registration
Statement not being declared effective or in the Holders of
Registrable Notes covered thereby not being able to exchange or
offer and sell such Registrable Notes during that period unless
(A) such action is required by applicable law or (B) such action
is taken by the Issuers in good faith and for valid business
reasons (not including avoidance of the Issuers' obligations
hereunder), including the acquisition or divestiture of assets,
so long as the Issuers promptly comply with the requirements of
Section 3(k) hereof, if applicable.
(ii) An Exchange Offer Registration Statement pursuant
to Section 2(a) hereof or a Shelf Registration Statement pursuant
to Section 2(b) hereof will not be deemed to have become
effective unless it has been declared effective by the SEC;
provided, however, that if, after it has been declared effective,
the offering of Registrable Notes pursuant to a Registration
Statement is interfered with by any stop order, injunction or
other order or requirement of the SEC or any other governmental
agency or court, such Registration Statement will be deemed not
to have been effective during the period of such interference,
until the offering of Registrable Notes pursuant to such
Registration Statement may legally resume.
(e) Increase in Interest Rate. In the event that
(i) the Exchange Offer Registration Statement is not filed with
the SEC on or prior to the 90th calendar day following the
Original Issue Date, (ii) the Exchange Offer Registration
Statement is not declared effective on or prior to the 180th
calendar day following the Original Issue Date, (iii) the
Exchange Offer is not consummated or, if required, a Shelf
Registration Statement with respect to the Registrable Notes is
not declared effective on or prior to the 210th calendar day
following the Original Issue Date, or (iv) the Exchange Offer
Registration Statement is declared effective but thereafter
ceases to be effective or usable (each such event referred to in
clauses (i)-(iv) above, a "Registration Default"), the per annum
interest rate borne by the Initial Notes shall be increased by
one-half of one percent (0.5%) with respect to the first 90-day
period following such Registration Default, payable in cash on
each interest payment date, such interest rate to increase by an
additional one-half of one percent (0.5%) for each subsequent 90-
day period until such Registration Default has been cured, up to
a maximum increase of one and one-half percent (1.5%) per annum.
Upon (w) the filing of the Exchange Offer Registration Statement
after the 90-day period described in clause (i) above, (x) the
effectiveness of the Exchange Offer Registration Statement after
the 180-day period described in clause (ii) above, (y) the
consummation of the Exchange Offer or the effectiveness of a
Shelf Registration Statement, as the case may be, after the 210-
day period described in clause (iii) above or (z) the cure of any
Registration Default described in clause (iv) above, the interest
rate borne by the Initial Notes from the date of such filing,
effectiveness, consummation or cure, as the case may be, will be
reduced to the original interest rate if the Issuers are
otherwise in compliance with such requirements; provided,
however, that if, after any such reduction in interest rate, a
different event specified in clause (i), (ii), (iii) or (iv)
above occurs, the interest rate will again be increased pursuant
to the foregoing provisions. A Holder of Registrable Notes who
has failed to provide the information requested of that Holder by
the Issuers pursuant to the penultimate paragraph Section 3
within the time period specified in that paragraph, and such
failure has prejudiced the ability of the Issuers to comply with
their obligations under this Agreement to file any Registration
Statement within the required period of time, will not receive
the benefit of any increase in the interest rate on the Initial
Notes pursuant to this Section 2(e).
(f) Specific Enforcement. Without limiting the
remedies available to the Initial Purchasers and the Holders, the
Issuers acknowledge that any failure by the Issuers to comply
with their obligations under Section 2(a) and Section 2(b) hereof
may result in material irreparable injury to the Initial
Purchasers or the Holders for which there is no adequate remedy
at law, that it will not be possible to measure damages for such
injuries precisely and that, in the event of any such failure,
the Initial Purchasers or any Holder may obtain such relief as
may be required to specifically enforce the Issuers' obligations
under Section 2(a) and Section 2(b) hereof.
3. Registration Procedures. In connection with the
registration obligations of the Issuers with respect to the
Registration Statements pursuant to Sections 2(a) and 2(b)
hereof, the Issuers shall:
(a) prepare and file with the SEC a Registration
Statement, within the time period specified in Section 2, on
the appropriate form under the 1933 Act, which form (i)
shall be selected by the Issuers, (ii) shall, in the case of
a Shelf Registration, be available for the sale of the
Registrable Notes by the selling Holders thereof and (iii)
shall comply as to form in all material respects with the
requirements of the applicable form and include or
incorporate by reference all financial statements required
by the SEC to be filed therewith, and use their best efforts
to cause such Registration Statement to become effective and
remain effective in accordance with Section 2 hereof;
(b) prepare and file with the SEC such amendments and
post-effective amendments to each Registration Statement as
may be necessary under applicable law to keep such
Registration Statement effective for the applicable period;
cause each Prospectus to be supplemented by any required
prospectus supplement, and as so supplemented to be filed
pursuant to Rule 424 under the 1933 Act; and comply with the
provisions of the 1933 Act with respect to the disposition
of all securities covered by each Registration Statement
during the applicable period in accordance with the intended
method or methods of distribution by the selling Holders
thereof;
(c) in the case of a Shelf Registration, (i) notify
each Holder of Registrable Notes, at least five days prior
to filing, that a Shelf Registration Statement with respect
to the Registrable Notes is being filed and advising such
Holders that the distribution of Registrable Notes (or an
amendment thereto) will be made in accordance with the
method elected by the Majority Holders and designated by the
Majority Holders in a notice given by them to the Company;
and (ii) furnish to each Holder of Registrable Notes, to
counsel for the Initial Purchasers, and/or the Holders and
to each underwriter of an underwritten offering of
Registrable Notes, if any, without charge, as many copies of
each Prospectus, including each preliminary Prospectus, and
any amendment or supplement thereto and such other documents
as such Holder, counsel or underwriter may reasonably
request, including, if such Holder, counsel or underwriter
so requests, financial statements and schedules and all
exhibits (including those incorporated by reference) in
order to facilitate the public sale or other disposition of
the Registrable Notes pursuant to the Shelf Registration
Statement; and (iii) subject to the last paragraph of this
Section 3, hereby consent to the use of the Prospectus or
any amendment or supplement thereto by each of the selling
Holders of Registrable Notes covered by the Shelf
Registration Statement in connection with the offering and
sale of the Registrable Notes covered by the Prospectus or
any amendment or supplement thereto;
(d) use their best efforts to register or qualify the
Registrable Notes under all applicable state securities or
"blue sky" laws of such United States jurisdictions as the
Majority Holders of Registrable Notes covered by a
Registration Statement or, in the case of an underwritten
offering of Registrable Notes, the Managing Underwriter of
such underwritten offering, if any, shall reasonably request
by the time the applicable Registration Statement is
declared effective by the SEC, cooperate with the Holders in
connection with any filings required to be made with the
NASD, keep each such registration or qualification effective
during the period such Registration Statement is required to
be effective and do any and all other acts and things
requested in writing by such Majority Holders or Managing
Underwriters which may be reasonably necessary or advisable
to enable such Holder to consummate the disposition in each
such jurisdiction of such Registrable Notes owned by such
Holder; provided, however, that neither of the Issuers shall
be required to (i) qualify as a foreign corporation or as a
dealer in securities in any jurisdiction where it would not
otherwise be required to qualify but for this Section 3(d)
or (ii) take any action which would subject it to general
service of process or taxation in any such jurisdiction if
it is not then so subject;
(e) in the case of a Shelf Registration, notify each
Holder of Registrable Notes and counsel for the Initial
Purchasers promptly and, if requested by such Holder or
counsel, confirm such advice in writing promptly (i) when a
Registration Statement has become effective and when any
post-effective amendments and supplements thereto become
effective, (ii) of any request by the SEC or any state
securities authority for post-effective amendments and
supplements to a Registration Statement and Prospectus or
for additional information after the Registration Statement
has become effective, (iii) of the issuance by the SEC or
any state securities authority of any stop order suspending
the effectiveness of a Registration Statement or the
initiation of any proceedings for that purpose, (iv) if,
between the effective date of a Registration Statement and
the closing of any sale of Registrable Notes covered
thereby, the representations and warranties of the Issuers
contained in any underwriting agreement, securities sales
agreement or other similar agreement, if any, relating to
such offering cease to be true and correct in all material
respects, (v) of the receipt by the Issuers of any
notification with respect to the suspension of the
qualification of the Registrable Notes for sale in any
jurisdiction or the initiation or threatening of any
proceeding for such purpose, (vi) of the happening of any
event or the discovery of any facts during the period a
Shelf Registration Statement is effective which makes any
statement made in such Registration Statement or the related
Prospectus untrue in any material respect or which requires
the making of any changes in such Registration Statement or
Prospectus in order to make the statements therein not
misleading and (vii) of any determination by the Issuers
that a post-effective amendment to a Registration Statement
would be appropriate;
(f) (A) in the case of an Exchange Offer, (i) include
in the Exchange Offer Registration Statement a "Plan of
Distribution" section covering the use of the Prospectus
included in the Exchange Offer Registration Statement by
broker-dealers who have exchanged their Registrable Notes
for Exchange Notes for the resale of such Exchange Notes,
(ii) furnish to each broker-dealer who desires to
participate in the Exchange Offer, without charge, as many
copies of each Prospectus included in the Exchange Offer
Registration Statement, including any preliminary
prospectus, and any amendment or supplement thereto, as such
broker-dealer may reasonably request, (iii) include in the
Exchange Offer Registration Statement a statement to the
effect that any broker-dealer who holds Registrable Notes
acquired for its own account as a result of market-making
activities or other trading activities (a "Participating
Broker-Dealer"), and who receives Exchange Notes for
Registrable Notes pursuant to the Exchange Offer, may be a
statutory underwriter and must deliver a prospectus meeting
the requirements of the 1933 Act in connection with any
resale of such Exchange Notes, (iv) subject to the last
paragraph of this Section 3, consent to the use of the
Prospectus forming part of the Exchange Offer Registration
Statement or any amendment or supplement thereto, by any
broker-dealer in connection with the sale or transfer of the
Exchange Notes covered by the Prospectus or any amendment or
supplement thereto in accordance with the 1933 Act, and (v)
include in the transmittal letter or similar documentation
to be executed by an exchange offeree in order to
participate in the Exchange Offer (x) the following
provision:
If the undersigned is not a broker-dealer, the
undersigned represents that it is not engaged in, and
does not intend to engage in, a distribution of
Exchange Notes. If the undersigned is a broker-dealer,
the undersigned represents that it will receive
Exchange Notes for its own account in exchange for
Registrable Notes and that the Registrable Notes to be
exchanged for Exchange Notes were acquired by it as a
result of market-making activities or other trading
activities and acknowledges that it will deliver a
prospectus meeting the requirements of the 1933 Act in
connection with any resale of such Exchange Notes
pursuant to the Exchange Offer; however, by so
acknowledging and by delivering a prospectus, the
undersigned will not be deemed to admit that it is an
"underwriter" within the meaning of the 1933 Act;
and (y) a statement to the effect that by making the
acknowledgment described in subclause (x) and by delivering
a Prospectus in connection with the exchange of Registrable
Notes, the broker-dealer will not be deemed to admit that it
is an underwriter within the meaning of the 1933 Act;
(B) to the extent any Participating Broker-Dealer
notifies the Issuers in writing that it is participating in
the Exchange Offer, use their best efforts to cause to be
delivered at the request of an entity stating that it
represents the Participating Broker-Dealers (which entity
shall be TD Securities, unless it elects not to act as such
representative) only one, if any, "cold comfort" letter with
respect to the Prospectus in the form existing on the last
date for which exchanges are accepted pursuant to the
Exchange Offer and with respect to each subsequent amendment
or supplement, if any, effected during the period specified
in clause (C) below;
(C) to the extent any Participating Broker-Dealer
notifies the Issuers in writing that it is participating in
the Exchange Offer, use their best efforts to maintain the
effectiveness of the Exchange Offer Registration Statement
for a period of 30 days following the closing of the
Exchange Offer; and
(D) the Issuers shall not be required to amend or
supplement the Prospectus contained in the Exchange Offer
Registration Statement as would otherwise be contemplated by
Section 3(b), or take any other action as a result of this
Section 3(f), for a period exceeding 180 days after the last
date for which exchanges are accepted pursuant to the
Exchange Offer (as such period may be extended by the
Issuers) and Participating Broker-Dealers shall not be
authorized by the Issuers to, and shall not, deliver such
Prospectus after such period in connection with resales
contemplated by this Section 3;
(g) (i) in the case of an Exchange Offer, furnish
counsel for the Initial Purchasers and, (ii) in the case of
a Shelf Registration, furnish counsel for the Holders of
Registrable Notes with copies of any request by the SEC or
any state securities authority for amendments or supplements
to a Registration Statement and Prospectus or for additional
information;
(h) make best efforts to obtain the withdrawal of any
order suspending the effectiveness of a Registration
Statement as soon as practicable and provide immediate
notice to each Holder of the withdrawal of any such order;
(i) in the case of a Shelf Registration, furnish to
each Holder of Registrable Notes included within the
coverage of such Shelf Registration, without charge, at
least one conformed copy of each Registration Statement and
any post-effective amendment thereto (without documents
incorporated therein by reference or exhibits thereto);
(j) in the case of a Shelf Registration, cooperate
with the selling Holders of Registrable Notes to facilitate
the timely preparation and delivery of certificates
representing Registrable Notes to be sold and not bearing
any restrictive legends; and cause such Registrable Notes to
be in such denominations (consistent with the provisions of
the Indenture) and registered in such names as the selling
Holders or the underwriters, if any, covered in the Shelf
Registration may reasonably request at least two business
days prior to the closing of any sale of such Registrable
Notes pursuant to such Shelf Registration Statement;
(k) in the case of a Shelf Registration, upon the
occurrence of any event or the discovery of any facts, each
as contemplated by Section 3(e)(vi) hereof, use their best
efforts to prepare a post-effective amendment or supplement
to a Registration Statement or the related Prospectus or any
document incorporated therein by reference or file any other
required document so that, as thereafter delivered to the
purchasers of the Registrable Notes, such Prospectus will
not contain at the time of such delivery any untrue
statement of a material fact or omit to state a material
fact necessary to make the statements therein, in light of
the circumstances under which they were made, not
misleading. The Issuers agree to notify each Holder to
suspend use of the Prospectus as promptly as practicable
after the occurrence of such an event, and each Holder
hereby agrees to suspend use of the Prospectus until the
Issuers have amended or supplemented the Prospectus to
correct such misstatement or omission. At such time as such
public disclosure is otherwise made or the Issuers determine
that such disclosure is not necessary, in each case to
correct any misstatement of a material fact or to include
any omitted material fact, the Issuers agree promptly to
notify each Holder of such determination and to furnish each
Holder such numbers of copies of the Prospectus, as amended
or supplemented, as such Holder may reasonably request;
(l) obtain a CUSIP number for all Exchange Notes, or
Registrable Notes, as the case may be, not later than the
effective date of a Registration Statement, and provide the
Trustee with printed certificates for the Exchange Notes or
the Registrable Notes, as the case may be, in a form
eligible for deposit with the Depositary;
(m) (i) cause the Indenture to be qualified under the
Trust Indenture Act of 1939, as amended (the "TIA"), in
connection with the registration of the Exchange Notes, or
Registrable Notes, as the case may be, (ii) cooperate with
the Trustee and the Holders to effect such changes to the
Indenture as may be required for the Indenture to be so
qualified in accordance with the terms of the TIA and
(iii) execute, and use their best efforts to cause the
Trustee to execute, all documents as may be required to
effect such changes, and all other forms and documents
required to be filed with the SEC to enable the Indenture to
be so qualified in a timely manner;
(n) in the case of a Shelf Registration, enter into
agreements (including underwriting agreements) and take all
other customary and reasonably appropriate actions
(including those reasonably requested by the Majority
Holders) in order to expedite or facilitate the disposition
of such Registrable Notes and, in such connection, whether
or not an underwriting agreement is entered into and whether
or not the registration is an underwritten registration:
(i) make such representations and warranties to
the Holders of such Registrable Notes and the
underwriters, if any, in form, substance and scope as
are customarily made by issuers to underwriters in
similar underwritten offerings as may be reasonably
requested by them;
(ii) obtain opinions of counsel to the Issuers and
updates thereof (which counsel and opinions (in form,
scope and substance) shall be reasonably satisfactory
to the Managing Underwriters, if any, and the holders
of a majority in principal amount of the Registrable
Notes being sold) addressed to each selling Holder and
the underwriters, if any, covering the matters
customarily covered in opinions requested in sales of
securities or underwritten offerings and such other
matters as may be reasonably requested by such Holders
and underwriters;
(iii) obtain "cold comfort" letters and
updates thereof from the Issuers' independent certified
public accountants addressed to the underwriters, if
any, and use reasonable best efforts to have such
letters addressed to the selling Holders of Registrable
Notes, such letters to be in customary form and
covering matters of the type customarily covered in
"cold comfort" letters to underwriters in connection
with similar underwritten offerings;
(iv) enter into a securities sales agreement with
the Holders and an agent of the Holders providing for,
among other things, the appointment of such agent for
the selling Holders for the purpose of soliciting
purchases of Registrable Notes, which agreement shall
be in form, substance and scope customary for similar
offerings;
(v) if an underwriting agreement is entered into,
cause the same to set forth indemnification provisions
and procedures substantially equivalent to the
indemnification provisions and procedures set forth in
Section 5 hereof with respect to the underwriters and
all other parties to be indemnified pursuant to said
Section; and
(vi) deliver such documents and certificates as
may be reasonably requested in writing and as are
customarily delivered in similar offerings.
The actions referred to in clauses (i) through (vi) above
shall be done at (i) the effectiveness of such Registration
Statement (and, if appropriate, each post-effective
amendment thereto) and (ii) each closing under any
underwriting or similar agreement as and to the extent
required thereunder. In the case of any underwritten
offering, the Issuers shall provide written notice to the
Holders of all Registrable Notes of such underwritten
offering at least 15 days prior to the filing of a
prospectus supplement for such underwritten offering. Such
notice shall (x) offer each such Holder the right to
participate in such underwritten offering, (y) specify a
date, which shall be no earlier than 10 days following the
date of such notice, by which such Holder must inform the
Issuers of its intent to participate in such underwritten
offering and (z) include the instructions such Holder must
follow in order to participate in such underwritten
offering;
(o) in the case of a Shelf Registration, make
available for inspection during business hours (at the
offices where normally kept) by representatives of the
Majority Holders of the Registrable Notes and any Managing
Underwriters participating in any disposition pursuant to a
Shelf Registration Statement and any counsel or accountant
retained by such Majority Holders or Managing Underwriters,
all financial and other records, pertinent corporate
documents and properties of the Issuers reasonably requested
by any such persons, and cause the respective officers,
directors, employees, and any other agents of the Issuers to
supply all information reasonably requested by any such
representative, underwriter, special counsel or accountant
in connection with a Registration Statement as is customary
for similar due diligence examinations; provided, that such
persons shall first agree in writing with the Issuers that
any information that is designated in writing by the
Issuers, in good faith, as confidential at the time of
delivery of such information shall be kept confidential by
such person, unless such disclosure is made in connection
with a court proceeding or required by law, or such
information becomes available to the public generally or
through a third party without an accompanying obligation of
confidentiality;
(p) (i) in the case of an Exchange Offer, a reasonable
time prior to the filing of any Exchange Offer Registration
Statement, any Prospectus forming a part thereof, any
amendment to an Exchange Offer Registration Statement or
amendment or supplement to a Prospectus, provide copies of
such document to the Initial Purchasers, and make such
changes in any such document prior to the filing thereof as
any of the Initial Purchasers or their counsel may
reasonably request; (ii) in the case of a Shelf
Registration, a reasonable time prior to filing any Shelf
Registration Statement, any Prospectus forming a part
thereof, any amendment to such Shelf Registration Statement
or amendment or supplement to such Prospectus, provide
copies of such document to the Holders of Registrable Notes,
to the Initial Purchasers, to counsel on behalf of the
Majority Holders or to the Managing Underwriter or
Underwriters of an underwritten offering of Registrable
Notes, if any, and make such changes in any such document
prior to the filing thereof as the Holders of Registrable
Notes, TD Securities on behalf of such Holders, their
counsel and any Managing Underwriter may reasonably request
in writing unless the Issuers or their counsel reasonably
object to such changes; and (iii) cause the representatives
of the Issuers to be available for discussion of such
document as shall be reasonably requested in writing by the
Holders of Registrable Notes, TD Securities on behalf of
such Holders or any Managing Underwriter and shall not at
any time make any filing of any such document of which such
Holders, TD Securities on behalf of such Holders, their
counsel or any Managing Underwriter shall not have
previously been advised and furnished a copy or to which
such Holders, TD Securities on behalf of such Holders, their
counsel or any underwriter shall reasonably object;
(q) in the case of a Shelf Registration, use their
best efforts to cause all Registrable Notes to be listed on
any securities exchange on which similar debt securities
issued by the Issuers are then listed if requested in
writing by the Majority Holders or by the Managing
Underwriters of an underwritten offering of Registrable
Notes, if any;
(r) in the case of a Shelf Registration, use their
best efforts to cause the Registrable Notes to be rated with
the appropriate rating agencies, if so requested by the
Majority Holders or by the underwriter or underwriters of an
underwritten offering of Registrable Notes, if any, unless
the Registrable Notes are already so rated;
(s) otherwise use their best efforts to comply with
all applicable rules and regulations of the SEC and make
available to their security holders, as soon as reasonably
practicable, an earnings statement covering at least
12 months which shall satisfy the provisions of
Section 11(a) of the 1933 Act and Rule 158 thereunder; and
(t) cooperate and assist in any filings required to be
made with the NASD and in the performance of any due
diligence investigation by any underwriter and its counsel.
In the case of a Shelf Registration Statement, the
Issuers may (as a condition to such Holder's participation in the
Shelf Registration and subject to Section 2(e)) require each
Holder of Registrable Notes to furnish to the Issuers, within 20
days after the Issuers have requested such information, such
information regarding such Holder and the proposed distribution
by such Holder of such Registrable Notes as the Issuers may from
time to time reasonably request in writing.
In the case of a Shelf Registration Statement, each
Holder agrees (a) to furnish the information requested to be
furnished pursuant to the immediately preceding sentence within
the time period specified therein and (b) that, upon receipt of
any notice from the Issuers of the happening of any event or the
discovery of any facts, each of the kind described in clauses
(ii) through (vii) of Section 3(e) hereof, such Holder will
forthwith discontinue disposition of Registrable Notes pursuant
to a Registration Statement, and will not deliver any Prospectus
forming a part thereof, until such Holder's receipt of the copies
of the supplemented or amended Prospectus contemplated by Section
3(k) hereof or written notice from the Issuer that the use of the
Prospectus may be resumed, and, if so directed by the Issuers,
such Holder will deliver to the Issuers (at the Issuers' expense)
all copies in its possession, other than permanent file copies
then in such Holder's possession, of the Prospectus covering such
Registrable Notes current at the time of receipt of such notice.
If the Issuers shall give any such notice to suspend the
disposition of Registrable Notes pursuant to a Shelf Registration
Statement as a result of the happening of any event or the
discovery of any facts, each of the kind described in Section
3(e)(vi) hereof, the Issuers shall be deemed to have used their
best efforts to keep the Shelf Registration Statement effective
during such period of suspension provided that the Issuers shall
use their best efforts to file and have declared effective (if an
amendment) as soon as practicable an amendment or supplement to
the Shelf Registration Statement. The period during which the
Registration Statement shall be maintained effective pursuant to
this Agreement shall be extended by the number of days during the
period from and including the date of the giving of such notice
to and including the date when the Holders shall have received
copies of the supplemented or amended Prospectus necessary to
resume such dispositions or written notice from the Issuer that
the use of the Prospectus may be resumed.
4. Underwritten Registrations. If any of the
Registrable Notes covered by any Shelf Registration are to be
sold in an underwritten offering, the investment banker or
investment bankers and manager or managers that will manage the
offering will be such investment bankers of national standing in
the United States as are selected by the Majority Holders of such
Registrable Notes included in such offering and shall be
reasonably acceptable to the Issuers.
No Holder of Registrable Notes may participate in any
underwritten registration hereunder unless such Holder (a) agrees
to sell such Holder's Registrable Notes on the basis provided in
any underwriting arrangements approved by the persons entitled
hereunder to approve such arrangements and (b) completes and
executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents required under the
terms of such underwriting arrangements.
5. Indemnification and Contribution. (a) The
Issuers shall indemnify and hold harmless each Holder, including
the Initial Purchasers and Participating Broker-Dealers, each
underwriter who participates in an offering of Registrable Notes,
their respective affiliates, and their respective directors,
officers, employees and agents, and each Person, if any, who
controls any of such parties within the meaning of Section 15 of
the 1933 Act or Section 20 of the 1934 Act as follows:
(i) against any and all losses, liabilities, claims,
damages and expenses whatsoever, as incurred, arising out of
any untrue statement or alleged untrue statement of a
material fact contained in any Registration Statement (or
any amendment thereto) pursuant to which Exchange Notes or
Registrable Notes were registered under the 1933 Act,
including all documents incorporated therein by reference,
or the omission or alleged omission therefrom of a material
fact required to be stated therein or necessary to make the
statements therein not misleading or arising out of any
untrue statement or alleged untrue statement of a material
fact contained in any Prospectus (or any amendment or
supplement thereto) or the omission or alleged omission
therefrom of a material fact necessary in order to make the
statements therein, in the light of the circumstances under
which they were made, not misleading;
(ii) against any and all losses, liabilities, claims,
damages and expenses whatsoever, as incurred, to the extent
of the aggregate amount paid in settlement of any
litigation, or investigation or proceeding by any
governmental agency or body, commenced or threatened, or of
any claim whatsoever based upon any such untrue statement or
omission, or any such alleged untrue statement or omission;
provided that (subject to Section 5(c) below) any such
settlement is effected with the written consent of the
Issuers; and
(iii) against any and all expenses whatsoever, as
incurred (including reasonable fees and disbursements of
counsel chosen by an indemnified party), reasonably incurred
in investigating, preparing or defending against any
litigation, or investigation or proceeding by any court or
governmental agency or body, commenced or threatened, or any
claim whatsoever based upon any such untrue statement or
omission, or any such alleged untrue statement or omission,
to the extent that any such expense is not paid under
subparagraph (i) or (ii) of this Section 5(a);
provided, however, that (i) this indemnity shall not apply to any
loss, liability, claim, damage or expense to the extent arising
out of an untrue statement or omission or alleged untrue
statement or omission made in reliance upon and in conformity
with written information furnished to the Issuers by the Initial
Purchasers, any Holder, including Participating Broker-Dealers,
or any underwriter expressly for use in the Registration
Statement (or any amendment thereto) or any preliminary
prospectus or the Prospectus (or any amendment or supplement
thereto) and (ii) the Issuers shall not be liable to any
indemnified party under this indemnity agreement with respect to
the Registration Statement or Prospectus to the extent that any
such loss, claim, damage or liability of such indemnified party
results solely from an untrue statement of a material fact
contained in, or the omission of a material fact from, the
Registration Statement or Prospectus which untrue statement or
omission was corrected in an amended or supplemented Registration
Statement or Prospectus, if the person alleging such loss, claim,
damage or liability was not sent or given, at or prior to the
written confirmation of such sale, a copy of the amended or
supplemented Registration Statement or Prospectus if the Issuers
had previously furnished copies thereof to such indemnified party
and if delivery of a prospectus is required by the Act and was
not so made. This indemnity agreement will be in addition to any
liability which the Issuers may otherwise have.
(b) In the case of a Shelf Registration, each Holder
agrees, severally and not jointly, to indemnify and hold harmless
the Issuers, the Initial Purchasers, each underwriter who
participates in an offering of Registrable Notes and the other
selling Holders and each of their respective directors and
officers (including each officer of each of the Issuers who
signed the Registration Statement) and each Person, if any, who
controls the Issuers, each Initial Purchaser, any underwriter or
any other selling Holder within the meaning of Section 15 of the
1933 Act or Section 20 of the 1934 Act, against any and all
losses, liabilities, claims, damages and expenses described in
the indemnity contained in Section 5(a) hereof, as incurred, but
only with respect to untrue statements or omissions, or alleged
untrue statements or omissions, made in the Registration
Statement (or any amendment thereto) or the Prospectus (or any
amendment or supplement thereto) in reliance upon and in
conformity with written information furnished to the Issuers by
such Holder, as the case may be, expressly for use in the
Registration Statement (or any amendment thereto), or the
Prospectus (or any amendment or supplement thereto); provided,
however, that no such Holder shall be liable for any claims
hereunder in excess of the amount of net proceeds received by
such Holder from the sale of Registrable Notes pursuant to such
Shelf Registration Statement.
(c) Each indemnified party shall give notice in
writing as promptly as reasonably practicable to each
indemnifying party of any action commenced against it in respect
of which indemnity may be sought hereunder, but failure to so
notify an indemnifying party shall not relieve such indemnifying
party from any liability hereunder to the extent it is not
materially prejudiced as a result thereof and in any event shall
not relieve it from any liability which it may have otherwise
than on account of this indemnity agreement. An indemnifying
party may participate at its own expense in the defense of any
such action; provided, however, that counsel to the indemnifying
party shall not (except with the consent of the indemnified
party) also be counsel to the indemnified party. In no event
shall the indemnifying parties be liable for fees and expenses of
more than one counsel, in addition to any local counsel, for all
indemnified parties in connection with any one action or separate
but similar or related actions in the same jurisdiction arising
out of the same general allegations or circumstances. No
indemnifying party shall, without the prior written consent of
the indemnified parties, settle or compromise or consent to the
entry of any judgment with respect to any litigation, or any
investigation or proceeding by any governmental agency or body,
commenced or threatened, or any claim whatsoever in respect of
which indemnification or contribution could be sought under this
Section 5 (whether or not the indemnified parties are actual or
potential parties thereof), unless such settlement, compromise or
consent (i) includes an unconditional release of each indemnified
party from all liability arising out of such litigation,
investigation, proceeding or claim and (ii) does not include a
statement as to or an admission of fault, culpability or a
failure to act by or on behalf of any indemnified party.
(d) If at any time an indemnified party shall have
requested an indemnifying party to reimburse the indemnified
party for fees and expenses of counsel, such indemnifying party
agrees that it shall be liable for any settlement of the nature
contemplated by Section 5(a)(ii) hereof effected without its
written consent if (i) such settlement is entered into more than
45 days after receipt by such indemnifying party of the aforesaid
request, (ii) such indemnifying party shall have received notice
of the terms of such settlement at least 30 days prior to such
settlement being entered into and (iii) such indemnifying party
shall not have reimbursed such indemnified party in accordance
with such request prior to the date of such settlement.
(e) If the indemnification provided for in any of the
indemnity provisions set forth in this Section 5 is for any
reason unavailable to or insufficient to hold harmless an
indemnified party in respect of any losses, liabilities, claims,
damages or expenses referred to therein, then each indemnifying
party shall contribute to the aggregate amount of such losses,
liabilities, claims, damages and expenses incurred by such
indemnified party, as incurred, (i) in such proportion as is
appropriate to reflect the relative benefits received by the
Issuers, the Initial Purchaser and the Holders, from the offering
of the Exchange Notes or Registrable Notes included in such
offering or (ii) if the allocation provided by clause (i) is not
permitted by applicable law, in such proportion as is appropriate
to reflect not only the relative benefits referred to in clause
(i) above but also the relative fault of the Issuers, the Initial
Purchasers, and the Holders, in connection with the statements or
omissions which resulted in such losses, liabilities, claims,
damages or expenses, as well as any other relevant equitable
considerations. The relative fault of the Issuers, the Initial
Purchasers, and the Holders shall be determined by reference to,
among other things, whether any such untrue or alleged untrue
statement of a material fact or omission or alleged omission to
state a material fact relates to information supplied by the
Issuers, the Initial Purchasers or the Holders and the parties'
relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission. The Issuers,
the Initial Purchasers and the Holders of the Registrable Notes
agree that it would not be just and equitable if contribution
pursuant to this Section 5 were determined by pro rata allocation
(even if the Initial Purchasers were treated as one entity, and
the Holders were treated as one entity, for such purpose) or by
another method of allocation which does not take account of the
equitable considerations referred to above in this Section 5.
The aggregate amount of losses, liabilities, claims, damages and
expenses incurred by an indemnified party and referred to above
in this Section 5 shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified party in
investigating, preparing or defending against any litigation, or
any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever based upon
any such untrue or alleged untrue statement or omission or
alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the
1933 Act) shall be entitled to contribution from any person who
was not guilty of such fraudulent misrepresentation. For
purposes of this Section 5, each person, if any, who controls an
Initial Purchaser or Holder within the meaning of Section 15 of
the 1933 Act or Section 20 of the 1934 Act shall have the same
rights to contribution as such Initial Purchaser or Holder, and
each director of the Issuers and each officer of the Issuers who
signed the Registration Statement, and each person, if any, who
controls the Issuers within the meaning of Section 15 of the 1933
Act or Section 20 of the 1934 Act shall have the same rights to
contribution as the Issuers. The parties hereto agree that any
underwriting discount or commission or reimbursement of fees paid
to any Initial Purchaser pursuant to the Purchase Agreement shall
not be deemed to be a benefit received by any Initial Purchaser
in connection with the offering of the Exchange Notes or
Registrable Notes in such offering.
6. Miscellaneous. (a) Rule 144 and Rule 144A. For
so long as the Issuers are subject to the reporting requirements
of Section 13 or 15 of the 1934 Act, the Issuers covenant that
they will file the reports required to be filed by them under the
1933 Act and Section 13(a) or 15(d) of the 1934 Act and the rules
and regulations adopted by the SEC thereunder, that if they cease
to be so required to file such reports, they will upon the
request of any Holder of Registrable Notes (i) make publicly
available such information as is necessary to permit sales
pursuant to Rule 144 under the 1933 Act, (ii) deliver such
information to a prospective purchaser as is necessary to permit
sales pursuant to Rule 144A under the 1933 Act and (iii) take
such further action that is reasonable in the circumstances, in
each case, to the extent required from time to time to enable
such Holder to sell its Registrable Notes without registration
under the 1933 Act within the limitation of the exemptions
provided by (x) Rule 144 under the 1933 Act, as such Rule may be
amended from time to time, (y) Rule 144A under the 1933 Act, as
such Rule may be amended from time to time, or (z) any similar
rules or regulations hereafter adopted by the SEC. Upon the
request of any Holder of Registrable Notes, the Issuers will
deliver to such Holder a written statement as to whether they
have complied with such requirements.
(b) No Inconsistent Agreements. The Issuers have not,
as of the date hereof, entered into nor will the Issuers on or
after the date of this Agreement enter into any agreement which
is inconsistent with the rights granted to the Holders of
Registrable Notes in this Agreement or otherwise conflicts with
the provisions hereof. The rights granted to the Holders
hereunder do not in any way conflict with and are not
inconsistent with the rights granted to the holders of the
Issuers' other issued and outstanding securities under any such
agreements.
(c) Amendments and Waivers. The provisions of this
Agreement, including the provisions of this sentence, may not be
amended, modified or supplemented, and waivers or consents to
departures from the provisions hereof may not be given unless the
Issuers have obtained the written consent of Holders of at least
a majority in aggregate principal amount of the outstanding
Registrable Notes affected by such amendment, modification,
supplement, waiver or departure; provided, however, that no
amendment, modification, supplement or waiver or consent to any
departure from the provisions of Section 5 hereof shall be
effective as against any Holder of Registrable Notes unless
consented to in writing by such Holder.
(d) Notices. All notices and other communications
provided for or permitted hereunder shall be made in writing by
hand-delivery, registered first-class mail, telex, telecopier, or
any courier guaranteeing overnight delivery (i) if to a Holder,
at the most current address given by such Holder to the Issuers
by means of a notice given in accordance with the provisions of
this Section 6(d), which address initially is, with respect to an
Initial Purchaser, the address set forth in the Purchase
Agreement; and (ii) if to the Issuers, initially at the Issuers'
address set forth in the Purchase Agreement and thereafter at
such other address, notice of which is given in accordance with
the provisions of this Section 6(d).
All such notices and communications shall be deemed to
have been duly given: at the time delivered by hand, if
personally delivered; five business days after being deposited in
the mail, postage prepaid, if mailed; when receipt is
acknowledged, if telecopied; and on the next business day, if
timely delivered to an air courier guaranteeing overnight
delivery.
Copies of all such notices, demands, or other
communications shall be concurrently delivered by the person
giving the same to the Trustee, at the address specified in the
Indenture.
(e) Successors and Assigns. This Agreement shall
inure to the benefit of and be binding upon the successors,
assigns and transferees of each of the parties, including,
without limitation and without the need for an express
assignment, subsequent Holders; provided that nothing herein
shall be deemed to permit any assignment, transfer or other
disposition of Registrable Notes in violation of the terms hereof
or of the Purchase Agreement or the Indenture. If any transferee
of any Holder shall acquire Registrable Notes, in any manner,
whether by operation of law or otherwise, such Registrable Notes
shall be held subject to all of the terms of this Agreement, and
by taking and holding such Registrable Notes, such Person shall
be conclusively deemed to have agreed to be bound by and to
perform all of the terms and provisions of this Agreement,
including the restrictions on resale set forth in this Agreement
and, if applicable, the Purchase Agreement, and such Person shall
be entitled to receive the benefits hereof.
(f) Third Party Beneficiary. The Holders shall be
third party beneficiaries to the agreements made hereunder
between the Issuers, on the one hand, and the Initial Purchasers,
on the other hand, and the Initial Purchasers shall have the
right to enforce such agreements directly to the extent they deem
such enforcement necessary or advisable to protect their rights
hereunder.
(g) Counterparts. This Agreement may be executed in
any number of counterparts and by the 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.
(h) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise
affect the meaning hereof.
(i) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK.
(j) Severability. In the event that any one or more
of the provisions contained herein, or the application thereof in
any circumstance, is held invalid, illegal or unenforceable, the
validity, legality and enforceability of any such provision in
every other respect and of the remaining provisions contained
herein shall not be affected or impaired thereby.
IN WITNESS WHEREOF, the parties have executed this
Agreement as of the date first written above.
BEAR ISLAND PAPER COMPANY,
L.L.C.
By: /s/ Edward D. Sherrick
____________________________
Name: Edward D. Sherrick
Title: Vice President
of Finance
BEAR ISLAND FINANCE COMPANY II
By: /s/ Edward D. Sherrick
____________________________
Name: Edward D. Sherrick
Title: Vice President
of Finance
Confirmed and accepted as of
the date first above
written:
TD SECURITIES (USA) INC.
SALOMON BROTHERS INC
By: TD SECURITIES (USA) INC.
By: /s/ Rod Ashtaryeh
________________________
Name: Rod Ashtaryeh
Title: Managing Director
<PAGE>
EXHIBIT 4.4
EXECUTION COPY
INTERCREDITOR AGREEMENT
INTERCREDITOR AGREEMENT, dated as of December 1, 1997,
among CRESTAR BANK (the "Trustee"), under the Indenture dated
December 1, 1997 made by Bear Island Paper Company, LLC ("BIPCO")
and Bear Island Finance Company ("FinCo") in favor of the Trustee
(the "Indenture"); TORONTO-DOMINION (TEXAS), INC., as
Administrative Agent under the BIPCO Credit Agreement
(capitalized terms having the definitions set forth in Section 1
below; in such capacity, the "BIPCO Agent"); TORONTO-DOMINION
(TEXAS), INC., in its capacity as Administrative Agent under the
BAI Credit Agreement (in such capacity, the "BAI Agent"); and
BEAR ISLAND PAPER COMPANY, LLC ("BIPCO") and BRANT-ALLEN
INDUSTRIES, INC. ("BAI"; together with BIPCO, the "Borrowers").
W I T N E S S E T H :
WHEREAS, BIPCO, a wholly owned subsidiary of BAI,
intends to make secured borrowings under the BIPCO Credit
Agreement;
WHEREAS, BAI intends to make secured borrowings under
the BAI Credit Agreement;
WHEREAS, BIPCO and its wholly owned subsidiary FinCo
intend to issue secured notes under the Indenture;
WHEREAS, BAI and its affiliates have pledged certain
collateral ("Collateral") to secure their obligations under more
than one of the foregoing agreements;
WHEREAS, the parties hereto desire to set forth their
relative rights in respect of such shared collateral and the
security interests granted therein;
NOW, THEREFORE, in consideration of the premises, the
parties hereto hereby agree as follows:
1. Definitions. (a) Unless otherwise defined herein,
terms defined in the Credit Agreements and the Loan Documents
have the meanings given to them in such documents.
(b) The following terms shall have the following meanings:
"Agreement": this Intercreditor Agreement, as the same
may be amended, supplemented or otherwise modified from time
to time.
"BAI Credit Agreement": the Credit Agreement, dated as
of the date hereof, among the BAI Agent, the BAI Lenders and
BAI, as amended, supplemented or otherwise modified from
time to time; for the purposes hereof, "BAI Credit
Agreement" shall also be deemed to refer to any credit
agreement or similar document entered into by BAI and any
lenders to replace the BAI Credit Agreement in whole or in
part.
"BAI Lenders": the lenders parties from time to time
to the BAI Credit Agreement in their capacity as lenders
thereunder, and their respective successors and assigns.
"BAI Lender Priority Collateral": any and all Lender
Priority Collateral pledged to secure the BAI Obligations.
"BAI Loan Documents": the collective reference to the
BAI Credit Agreement, each "Loan Document" as defined
therein and all other documents that from time to time
evidence the BAI Obligations or secure or support payment or
performance thereof or of any guarantee thereof.
"BAI Loan Parties": BAI and each other Loan Party
under (and as defined in) the BAI Loan Documents, and each
successor and assign of the foregoing.
"BAI Obligations": the Lender Obligations in respect
of the BAI Loan Documents.
"BIPCO Credit Agreement": the Credit Agreement, dated
as of the date hereof, among the BIPCO Agent, the BIPCO
Lenders and BIPCO, as amended, supplemented or otherwise
modified from time to time; for the purposes hereof, "BIPCO
Credit Agreement" shall also be deemed to refer to any
credit agreement or similar document entered into by BIPCO
and any lenders to replace the BIPCO Credit Agreement in
whole or in part.
"BIPCO Lenders": the lenders parties from time to time
to the BIPCO Credit Agreement in their capacity as lenders
thereunder, and their respective successors and assigns.
"BIPCO Lender Priority Collateral": any and all Lender
Priority Collateral pledged to secure the BIPCO Obligations.
"BIPCO Loan Documents": the collective reference to
the BIPCO Credit Agreement, each "Loan Document" as defined
therein and all other documents that from time to time
evidence the BIPCO Obligations or secure or support payment
or performance thereof or of any guarantee thereof.
"BIPCO Loan Parties": BIPCO and each other Loan Party
under (and as defined in) the BIPCO Loan Documents, and each
successor and assign of the foregoing.
"BIPCO Obligations": the Lender Obligations in respect
of the BIPCO Loan Documents.
"BITCO": Bear Island Timberlands Company, LLC, a
Virginia limited liability company.
"BITCO Collateral": the membership interests of BITCO
identified on Schedule 1 of the Timberlands Pledge
Agreement.
"Credit Agreements": the BAI Credit Agreement and the
BIPCO Credit Agreement.
"Lender Obligations": the collective reference to the
unpaid principal of and interest owing under the Credit
Agreements and all other obligations and liabilities of the
Borrowers thereunder, including, without limitation,
interest accruing at the applicable rate provided in the
Credit Agreements after the filing of any petition in
bankruptcy or the commencement of any insolvency,
reorganization or like proceeding, relating to the Borrower
or any other party specified therein, whether or not a claim
for post-filing or post-petition interest is allowed in such
proceeding), whether direct or indirect, absolute or
contingent, due or to become due, or now existing or
hereafter incurred, which may arise under, out of, or in
connection with, the Credit Agreements (including, without
limitation, any obligations under any Interest Rate
Protection Agreement referred to in a Credit Agreement),
this Agreement, the BAI Loan Documents, the BIPCO Loan
Documents or any other document made, delivered or given in
connection therewith, in each case whether on account of
principal, interest, reimbursement obligations, fees,
indemnities, costs, expenses or otherwise, including,
without limitation, all fees and disbursements of counsel
that are required to be paid by the Borrowers pursuant to
the terms of the Credit Agreements, this Agreement or, the
BAI Loan Documents or the BIPCO Loan Documents.
"Lender Priority Collateral": the collective reference
to any and all property from time to time subject to a
security interest to secure payment or performance of the
Lender Obligations or the Trustee Obligations.
"Loan Documents": the BAI Loan Documents and the BIPCO
Loan Documents.
"Loan Parties": the BAI Loan Parties and the BIPCO
Loan Parties.
"Senior Secured Lender": each of the BAI Agent, the
BIPCO Agent, each BAI Lender and each BIPCO Lender.
"Soucy Collateral": the "Pledged Stock" as defined in
the Soucy Pledge Agreement.
"Soucy Pledge Agreement": the Soucy Pledge Agreement
dated as of the date hereof, made by BAI in favor of the
BIPCO Agent and the BAI Agent and, for the purposes of this
Agreement, the notarial deed of hypothec granted on the
Collateral (as defined in the Soucy Pledge Agreement)
pursuant to the laws of the province of Quebec (Canada).
"Subordinated Security Documents": the collective
reference to any and all documents providing for collateral
security, guarantees or negative pledges in connection with
the notes issued under the Indenture as the same may be
amended, supplemented or otherwise modified from time to
time in accordance with Section 6.9 of the BIPCO Credit
Agreement.
"Timberlands Pledge Agreement": the meaning ascribed
in the BAI Credit Agreement.
"Trustee Documents": the collective reference to the
Indenture, the notes issued thereunder and the Subordinated
Security Documents.
"Trustee Obligations": the collective reference to the
unpaid principal of and interest owing under the Indenture
and the notes issued thereunder and all other obligations
and liabilities of BIPCO and FinCo thereunder (including,
without limitation, interest accruing at the then applicable
rate provided in the Indenture and the notes issued
thereunder after the maturity of the principal obligations
owing thereunder and interest accruing at the then
applicable rate provided in the Indenture and the notes
issued thereunder after the filing of any petition in
bankruptcy, or the commencement of any insolvency,
reorganization or like proceeding, relating to BIPCO or
FinCo, whether or not a claim for post-filing or post-
petition interest is allowed in such proceeding), whether
direct or indirect, absolute or contingent, due or to become
due, or now existing or hereafter incurred, which may arise
under, out of, or in connection with, the Indenture, the
notes issued thereunder, this Agreement, or any other
Subordinated Security Document, in each case whether on
account of principal, interest, reimbursement obligations,
fees, indemnities, costs, expenses or otherwise (including,
without limitation, all fees and disbursements of counsel to
the Trustee that are required to be paid by the Borrower or
FinCo pursuant to the terms of the Indenture or this
Agreement or any other Subordinated Security Document).
(c) The words "hereof," "herein" and "hereunder" and words
of similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this
Agreement, and section and paragraph references are to this
Agreement unless otherwise specified.
(d) The meanings given to terms defined herein shall be
equally applicable to both the singular and plural forms of such
terms.
2. Acknowledgements The Trustee (a) acknowledges that the
Borrowers and the other Loan Parties have granted senior priority
security interests in the Lender Priority Collateral to secure
the Lender Obligations and that such security interests are prior
in all respects to the junior security interests in the Lender
Priority Collateral granted to the Trustee, (b) agrees that the
Trustee shall not have any claim to or in respect of the BAI
Lender Priority Collateral, or any proceeds of or realization on
such BAI Lender Priority Collateral, on a parity with or prior to
the claim of the BAI Obligations, nor any claim to or in respect
of the BIPCO Lender Priority Collateral, or any proceeds of or
realization on such BIPCO Lender Priority Collateral, on a parity
with or prior to the claim of the BIPCO Obligations, and (c)
agrees that, notwithstanding such junior security interests and
any rights of the Trustee in respect thereof, (i) so long as the
BAI Obligations have not been paid in full or the commitments
under the BAI Credit Agreement have not been terminated, the
Trustee shall not have any right or claim in respect of the
exercise of rights and remedies of the Senior Secured Lenders in
respect of the BAI Lender Priority Collateral nor shall any
Senior Secured Lender have any obligation regarding any such
exercise or any other obligation or duty in respect of the
interests of the Trustee except as set forth in paragraph 3(d)
hereof, and that the Trustee shall not assert any such claim or
right in any such bankruptcy proceeding or otherwise, and (ii) so
long as the BIPCO Obligations have not been paid in full or the
commitments under the BIPCO Credit Agreement have not been
terminated, the Trustee shall not have any right or claim in
respect of the exercise of rights and remedies of the Senior
Secured Lenders in respect of the BIPCO Lender Priority
Collateral nor shall any Senior Secured Lender have any
obligation regarding any such exercise or any other obligation or
duty in respect of the interests of the Trustee except as set
forth in paragraph 3(d) hereof, and that the Trustee shall not
assert any such claim or right in any such bankruptcy proceeding
or otherwise.
3. Rights in Lender Priority Collateral (a) Notwithstanding
anything to the contrary contained in any filing or agreement to
which the Trustee, the Senior Secured Lenders or the Borrowers
now or hereafter may be a party and irrespective of the time,
order or method of attachment or perfection of the security
interests created by the Loan Documents or the Subordinated
Security Documents, the rules for determining priority under the
Uniform Commercial Code or any other law governing the relative
priorities of secured creditors, (i) any security interest in any
BAI Lender Priority Collateral in favor of or for the benefit of
the Senior Secured Lenders pursuant to the BAI Loan Documents has
and shall have priority, to the extent of any unpaid BAI Loan
Obligations, over any security interest in such BAI Lender
Priority Collateral in favor of or for the benefit of the Trustee
pursuant to the Subordinated Security Documents; and (ii) any
security interest in any BIPCO Lender Priority Collateral in
favor of or for the benefit of the Senior Secured Lenders
pursuant to the BIPCO Loan Documents has and shall have priority,
to the extent of any unpaid BIPCO Loan Obligations, over any
security interest in such BIPCO Lender Priority Collateral in
favor of or for the benefit of the Trustee pursuant to the
Subordinated Security Documents.
(b) (i) So long as the BAI Obligations have not been paid
in full or the commitments under the BAI Credit Agreement have
not been terminated, whether or not any bankruptcy proceeding or
similar event or proceeding has been commenced by or against BAI
or any other BAI Loan Party, (i) the Trustee will not (A)
exercise or seek to exercise any rights or exercise any remedies
with respect to any BAI Lender Priority Collateral, (B) institute
any action or proceeding with respect to such rights or remedies,
including without limitation, any action of foreclosure, (C)
contest, protest or object to any foreclosure proceeding or
action brought by the BAI Agent or any BAI Lender, or any other
exercise by any such party, of any rights and remedies relating
to the BAI Lender Priority Collateral under the Subordinated
Security Documents or otherwise, or any release of any or all of
the BAI Lender Priority Collateral for any purpose, or (D) object
to the forbearance by the BAI Lenders from bringing or pursuing
any foreclosure proceeding or action or any other exercise of any
rights or remedies relating to the BAI Lender Priority
Collateral, and (ii) the BAI Lenders shall have the exclusive
right to enforce rights, exercise remedies and make
determinations regarding release, disposition, or restrictions
with respect to the Lender Priority Collateral; provided, that in
any bankruptcy proceeding or similar event or proceeding
commenced by or against BAI or any other BAI Loan Party, the
Trustee may file a claim or statement of interest with respect to
the Trustee Obligations.
(ii) So long as the BIPCO Obligations have not been paid in full
or the commitments under the BIPCO Credit Agreement have not been
terminated, whether or not any bankruptcy proceeding or similar
event or proceeding has been commenced by or against BIPCO or any
other BIPCO Loan Party, (i) the Trustee will not (A) exercise or
seek to exercise any rights or exercise any remedies with respect
to any BIPCO Lender Priority Collateral, (B) institute any action
or proceeding with respect to such rights or remedies, including
without limitation, any action of foreclosure, (C) contest,
protest or object to any foreclosure proceeding or action brought
by the BIPCO Agent or any BIPCO Lender, or any other exercise by
any such party, of any rights and remedies relating to the BIPCO
Lender Priority Collateral under the Subordinated Security
Documents or otherwise, or any release of any or all of the BIPCO
Lender Priority Collateral for any purpose, or (D) object to the
forbearance by the BIPCO Lenders from bringing or pursuing any
foreclosure proceeding or action or any other exercise of any
rights or remedies relating to the BIPCO Lender Priority
Collateral, and (ii) the BIPCO Lenders shall have the exclusive
right to enforce rights, exercise remedies and make
determinations regarding release, disposition, or restrictions
with respect to the Lender Priority Collateral; provided, that in
any bankruptcy proceeding or similar event or proceeding
commenced by or against BIPCO or any other BIPCO Loan Party, the
Trustee may file a claim or statement of interest with respect to
the Trustee Obligations.
(c) (i) In exercising rights and remedies with respect to
the BAI Lender Priority Collateral, the BAI Lenders may enforce
the provisions of the BAI Loan Documents and exercise remedies
thereunder, all in such order and in such manner as they may
determine in the exercise of their sole discretion. Such
exercise and enforcement shall include, without limitation, the
rights of an agent appointed by them to sell or otherwise dispose
of BAI Lender Priority Collateral upon foreclosure, to incur
expenses in connection with such sale or disposition, and to
exercise all the rights and remedies of a secured lender under
the Uniform Commercial Code of any applicable jurisdiction and of
a secured creditor under bankruptcy or similar laws of any
applicable jurisdiction.
(ii) In exercising rights and remedies with respect to the BIPCO
Lender Priority Collateral, the BIPCO Lenders may enforce the
provisions of the BIPCO Loan Documents and exercise remedies
thereunder, all in such order and in such manner as they may
determine in the exercise of their sole discretion. Such
exercise and enforcement shall include, without limitation, the
rights of an agent appointed by them to sell or otherwise dispose
of BIPCO Lender Priority Collateral upon foreclosure, to incur
expenses in connection with such sale or disposition, and to
exercise all the rights and remedies of a secured lender under
the Uniform Commercial Code of any applicable jurisdiction and of
a secured creditor under bankruptcy or similar laws of any
applicable jurisdiction.
(d) (i) BIPCO Lender Priority Collateral. Subject to the
provisions of paragraph 6 hereof, any money, property, securities
or other direct or indirect distributions of any nature
whatsoever received from the sale, disposition or other
realization upon a forclosure or other exercise of remedies upon
the occurrence and continuance of an Event of Default (as defined
in the Credit Agreements or the Indenture) by any Senior Secured
Party or the Trustee of all or any part of the BIPCO Lender
Priority Collateral (other than the BITCO Collateral and the
Soucy Collateral which constitute a part of the BIPCO Lender
Priority Collateral), regardless of whether such money, property,
securities or other distributions are received directly or
indirectly during the pendency of or in connection with any
bankruptcy, insolvency or other like proceeding or otherwise,
shall be delivered to the BIPCO Agent in the form received, duly
indorsed to such party, if required, and applied by the BIPCO
Agent in the following order:
First, to the payment in full of all costs and expenses
(including, without limitation, attorneys' fees and
disbursements) paid or incurred by the Senior Secured
Lenders in connection with such realization on the BIPCO
Lender Priority Collateral or the protection of any of their
rights and interests therein;
Second, to the payment in full of all BIPCO Obligations
in the order prescribed by Section 2.16 of the BIPCO Credit
Agreement;
Third, to the Trustee for application to the Trustee
Obligations to the full extent thereof at such time; and
Fourth, to pay the appropriate Loan Party or designee
thereof or as a court of competent jurisdiction may direct,
any surplus then remaining.
(ii) BITCO Collateral. Subject to the provisions of paragraph 6
hereof, any money, property, securities or other direct or
indirect distributions of any nature whatsoever received from the
sale, disposition or other realization upon a forclosure or other
exercise of remedies upon the occurrence and continuance of an
Event of Default (as defined in the Credit Agreements or the
Indenture) by any Senior Secured Party or the Trustee of all or
any part of the BITCO Collateral, regardless of whether such
money, property, securities or other distributions are received
directly or indirectly during the pendency of or in connection
with any bankruptcy, insolvency or other like proceeding or
otherwise, shall be delivered to the BAI Agent in the form
received, duly indorsed to such party, if required, and applied
by the BAI Agent in the following order:
First, to the payment in full of all costs and expenses
(including, without limitation, attorneys' fees and
disbursements) paid or incurred by the Senior Secured
Lenders in connection with such realization on the BITCO
Collateral or the protection of any of their rights and
interests therein;
Second, to the payment in full of all BAI Obligations
in the order prescribed by Section 2.13 of the BAI Credit
Agreement;
Third, to the payment in full of all BIPCO Obligations
in the order prescribed by Section 2.16 of the BIPCO Credit
Agreement shall provide;
Fourth, to the Trustee for application to the Trustee
Obligations to the full extent thereof at such time; and
Fifth, to pay to the appropriate Loan Party or designee
thereof or as a court of competent jurisdiction may direct,
any surplus then remaining.
(iii) Soucy Collateral. Subject to the provisions of paragraph
6 hereof, any money, property, securities or other direct or
indirect distributions of any nature whatsoever received from the
sale, disposition or other realization upon a forclosure or other
exercise of remedies upon the occurrence and continuance of an
Event of Default (as defined in the Credit Agreements or the
Indenture) by any Senior Secured Party or the Trustee of all or
any part of the Soucy Collateral, regardless of whether such
money, property, securities or other distributions are received
directly or indirectly during the pendency of or in connection
with any bankruptcy, insolvency or other like proceeding or
otherwise, shall be delivered to the BIPCO Agent or the BAI Agent
in the form received, duly indorsed to such party, if required,
and applied by the BIPCO Agent or the BAI Agent in the following
order:
First, to the payment in full of all costs and expenses
(including, without limitation, attorneys' fees and
disbursements) paid or incurred by the Senior Secured
Lenders in connection with such realization on the Soucy
Collateral or the protection of any of their rights and
interests therein;
Second, pro rata to the payment in full of all BAI
Obligations and BIPCO Obligations, in such order as each of
Section 2.13 of the BAI Credit Agreement and Section 2.16 of
the BIPCO Credit Agreement, respectively, shall provide;
Third, to the Trustee for application to the Trustee
Obligations to the full extent thereof at such time; and
Fourth, to pay to the appropriate Loan Party or
designee thereof or as a court of competent jurisdiction may
direct, any surplus then remaining.
(e) The BAI Lenders' rights with respect to the BAI Lender
Priority Collateral and the BIPCO Lenders' rights with respect to
the BIPCO Lender Priority Collateral shall include, without
limitation, the exclusive right to release at any time any or all
of such collateral from the liens under the Loan Documents and
the Subordinated Security Documents without the consent of the
Trustee and without any duty, obligation or liability arising
from any such action, provided, that such release is in
connection with the exercise of remedies in respect of the items
of Lender Priority Collateral so released. Upon any such sale,
release or other disposition of any Lender Priority Collateral,
the lien and security interest created for the benefit of the
Trustee pursuant to the Subordinated Security Documents in such
Lender Priority Collateral shall be automatically released, and
the Trustee shall execute or cause to be executed such release
documents and instruments and shall take such further actions as
the Senior Secured Lenders shall request.
(f) (A) Subject to the provisions of paragraph 6 hereof,
in the event that:
(i) the BAI Lenders, in exercise of their foreclosure or
similar remedies, have disposed of or otherwise realized
upon the BAI Lender Priority Collateral, or have been repaid
pursuant to a bankruptcy or similar proceeding at the
commencement of which the security interest securing the BAI
Obligations is in effect,
(ii) all of the BAI Obligations have been paid in full and
the commitments under the BAI Credit Agreement have been
terminated,
(iii) after giving effect thereto any BAI Lender Priority
Collateral remains that:
(x) never constituted BIPCO Lender Priority Collateral,
or has been released from the security interests
created by the BIPCO Loan Documents, and
(y) remains pledged pursuant to the Subordinated
Security Documents, and
(iv) at such time there are Trustee Obligations outstanding,
then the Trustee shall have the right to enforce the
provisions of the Subordinated Security Documents in respect
of BAI Lender Priority Collateral.
(B) Subject to the provisions of paragraph 6 hereof, in the
event that:
(i) the BIPCO Lenders, in exercise of their foreclosure or
similar remedies, have disposed of or otherwise realized
upon the BIPCO Lender Priority Collateral, or have been
repaid pursuant to a bankruptcy or similar proceeding at the
commencement of which the security interest securing the
BIPCO Obligations is in effect,
(ii) all of the BIPCO Obligations have been paid in full and
the commitments under the BIPCO Credit Agreement have been
terminated,
(iii) after giving effect thereto any BIPCO Lender Priority
Collateral remains that:
(x) never constituted BAI Lender Priority Collateral
or has been released from the security interests
created by the BAI Loan Documents, and
(y) remains pledged pursuant to the Subordinated
Security Documents, and
(iv) at such time there are Trustee Obligations outstanding,
then the Trustee shall have the right to enforce the
provisions of the Subordinated Security Documents in respect
of the BIPCO Lender Priority Collateral.
4. Obligations Unconditional. All rights, interests,
agreements and obligations of the Senior Secured Lenders and the
Trustee, respectively, hereunder shall remain in full force and
effect irrespective of:
(a) any lack of validity or enforceability of the Loan
Documents or any Trustee Documents;
(b) any change in the time, manner or place of payment of,
or in any other term of, all or any of the Lender Obligations or
Trustee Obligations, or any amendment or waiver or other
modification, including any increase in the amount thereof,
whether by course of conduct or otherwise, of the terms of either
Credit Agreement or any other Loan Document or of the terms of
the Trustee Documents;
(c) any exchange, release or nonperfection of any security
interest in any Lender Priority Collateral or any other
collateral, or any release, amendment, waiver or other
modification, whether in writing or by course of conduct or
otherwise, of all or any of the Lender Obligations or Trustee
Obligations or any guarantee thereof;
(d) the commencement of any bankruptcy or similar
proceeding in respect of either of the Borrowers or any other
Loan Party; or
(e) any other circumstances which otherwise might
constitute a defense available to, or a discharge of, any Loan
Party in respect of the Lender Obligations or of the Trustee in
respect of this Agreement.
5. Waiver of Claims; Waivers of Jury Trial. (a) To the
maximum extent permitted by law, the Trustee waives any claim it
might have against any Senior Secured Lender with respect to, or
arising out of, any action or failure to act or any error of
judgment or negligence on the part of any Senior Secured Lender
or its respective directors, officers, employees or agents with
respect to any exercise of rights or remedies in respect of the
Lender Priority Collateral or any transaction relating to the
Lender Priority Collateral. Neither the BAI Agent, the BIPCO
Agent, any Senior Secured Lender nor any of their respective
directors, officers, employees or agents shall be liable for
failure to demand, collect or realize upon any of the Collateral
or for any delay in doing so or shall be under any obligation to
sell or otherwise dispose of any Collateral upon the request of
any Loan Party, the Trustee or any other Person or to take any
other action whatsoever with regard to the Collateral or any part
thereof.
(b) THE BORROWERS, THE BAI AGENT (ON ITS OWN BEHALF AND ON
BEHALF OF THE BAI LENDERS), THE BIPCO AGENT (ON ITS OWN BEHALF
AND ON BEHALF OF THE BIPCO LENDERS) AND THE TRUSTEE HEREBY
IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL
ACTION OR PROCEEDING RELATING TO THIS AGREEMENT AND FOR
COUNTERCLAIM THEREIN.
6. Provisions Define Relative Rights. This Agreement is
intended solely for the purpose of defining the relative rights
of the BAI Lenders, the BAI Agent, the BIPCO Lenders, the BIPCO
Agent and the Trustee, and no other Person shall have any right,
benefit or other interest under this Agreement. Notwithstanding
anything to the contrary contained herein, this Agreement shall
not modify or amend the rights and obligations of the Borrowers
or any other Loan Party under any Loan Document.
7. Shared Lender Priority Collateral. The BIPCO Agent and
the BAI Agent acknowledge that the Timberlands Pledge Agreement
and the Soucy Pledge Agreement create, in favor of Toronto-
Dominion (Texas), Inc., as secured party thereunder (in such
capacity, the "Agent"), security interests in Collateral to
secure both the BAI Obligations and the BIPCO Obligations. The
BIPCO Agent, on behalf of the BIPCO Lenders, and the BAI Agent,
on behalf of the BAI Lenders, hereby (i) confirm that the Agent
has been appointed as agent of such parties to be the secured
party under the Timberlands Pledge Agreement and the Soucy Pledge
Agreement, (ii) agree with the Agent that in taking and
refraining from actions under the Timberlands Pledge Agreement
(including amendments and waivers with respect thereto), the
Agent shall follow the directions of the Required Lenders under
the BAI Credit Agreement so long as the BAI Credit Agreement
remains outstanding, and thereafter shall follow the directions
of the Required Lenders under the BIPCO Credit Agreement and
(iii) agree with the Agent that in taking and refraining from
actions under the Soucy Pledge Agreement (including amendments
and waivers with respect thereto), the Agent shall follow the
directions of the Required Lenders under the BAI Credit Agreement
and the Required Lenders under the BIPCO Credit Agreement.
8. Payments in Ordinary Course. Notwithstanding any
provision of this Agreement limiting the rights of the holders of
the Trustee Obligations in the Collateral, nothing in this
Agreement shall prohibit BIPCO and FinCo from making payments in
respect of the Trustee Obligations in the ordinary course of
business, whether or not the cash with which such payments are
made constitutes proceeds of Collateral.
9. Termination of Agreement; Acknowledgements. (a) The
rights of the Senior Secured Lenders under this Agreement in
respect of the Collateral securing only the BIPCO Obligations
shall terminate when the BIPCO Obligations have been paid in full
in cash and all commitments to extend credit under the BIPCO
Credit Agreement have terminated. The BIPCO Agent agrees that,
within 30 days after payment in cash of all principal, interest
and other amounts then outstanding under the BIPCO Obligations
and termination of all commitments to extend credit under the
BIPCO Credit Agreement, it will, upon the request of the Trustee,
provide a written acknowledgement of such payment to the Trustee,
which acknowledgement shall also acknowledge that the Senior
Secured Lenders have no further rights under this Agreement in
respect of the Collateral securing only the BIPCO Obligations.
Concurrently with such acknowledgement, the BIPCO Agent will
deliver to the Trustee if any of the Trustee Obligations shall be
outstanding, any items of such Collateral held in the possession
of the BIPCO Agent, provided that if no Trustee Obligations shall
be outstanding, the BIPCO Agent will deliver any such items of
Collateral to the appropriate Loan Party. The BIPCO Agent
acknowledges that prior to such delivery it holds such items of
Collateral for the Trustee in accordance with the terms of this
Agreement, for purposes of perfecting the Trustee's security
interest therein.
(b) The rights of the Senior Secured Lenders under this
Agreement in respect of the Collateral securing only the BAI
Obligations shall terminate when the BAI Obligations have been
paid in full in cash and all commitments to extend credit under
the BAI Credit Agreement have terminated. The BAI Agent agrees
that, within 30 days after payment of all principal, interest and
other amounts then outstanding under the BAI Obligations and
termination of all commitments to extend credit under the BAI
Credit Agreement, it will, upon the request of the Trustee,
provide a written acknowledgement of such payment to the Trustee,
which acknowledgement shall also acknowledge that the Senior
Secured Lenders have no further rights under this Agreement in
respect of the Collateral securing only the BAI Obligations.
Concurrently with such acknowledgement, the BAI Agent will
deliver to the Trustee if any Trustee Obligations shall be
outstanding any items of such Collateral held in the possession
of the BAI Agent, provided that if no Trustee Obligations are
outstanding, the BAI Agent will deliver any such items of
Collateral to the appropriate Loan Party. The BAI Agent
acknowledges that prior to such delivery it holds such items of
Collateral for the Trustee in accordance with the terms of this
Agreement for purposes of perfecting the Trustee's security
interest therein.
(c) The rights of the Senior Secured Lenders under this
Agreement in respect of all Collateral (to the extent not
previously terminated pursuant to paragraphs (a) and (b) above)
shall in any event terminate when all Lender Obligations have
been paid in full in cash and all commitments to extend credit
under the Loan Documents have terminated.
10. Powers Coupled With An Interest. All powers,
authorizations and agencies contained in this Agreement are
coupled with an interest and are irrevocable until the Lender
Obligations are paid in full and the commitments under the Credit
Agreements are terminated.
11. Notices. All notices, requests and demands to or upon
the parties to be effective shall be in writing (or by telex, fax
or similar electronic transfer confirmed in writing) and shall be
deemed to have been duly given or made (i) when delivered by hand
or (ii) if given by mail, when deposited in the mails by
certified mail, return receipt requested, or (iii) if by telex,
fax or similar electronic transfer, when sent and receipt has
been confirmed, addressed as follows:
If to the BAI Agent or
the BIPCO Agent: TORONTO-DOMINION (TEXAS), INC.
909 Fannin Street
Houston, Texas 77010
Attention: Jano Mott
Telecopy: (713) 951-9921
Telephone: (713) 653-8231
If to the Trustee: CRESTAR BANK
Attention: Corporate Trust Department
919 Main Street, 10th Floor
Richmond, Virginia 23219
Telecopy: (804) 782-7855
Telephone: (804) 782-5726
The parties hereto may change their addresses and transmission
numbers for notices by notice in the manner provided in this
Section.
12. Counterparts. This Agreement may be executed by one or
more of the parties on any number of separate counterparts, and
all of said counterparts taken together shall be deemed to
constitute one and the same instrument. A set of the
counterparts of this Agreement signed by all the parties shall be
lodged with the BAI Agent, the BIPCO Agent and the Trustee.
13. Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions
hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such
provision in any other jurisdiction.
14. Integration. This Agreement represents the entire
agreement of the Senior Secured Lenders and the Trustee with
respect to the subject matter hereof and there are no promises or
representations by any of them relative to the subject matter
hereof not reflected herein.
15. Amendments in Writing. None of the terms or provisions
of this Agreement may be waived, amended, supplemented or
otherwise modified except by a written instrument executed by the
BAI Agent, the BIPCO Agent, the Borrowers and the Trustee.
16. Successors and Assigns. (a) This Agreement shall be
binding upon and inure to the benefit of each of the Senior
Secured Lenders and the Trustee and their successors and assigns.
(b) Upon a successor administrative agent becoming the
Administrative Agent under the BAI Credit Agreement or the BIPCO
Credit Agreement, such successor Administrative Agent
automatically shall become the BAI Agent or the BIPCO Agent, as
the case may be, hereunder with all the rights and powers of such
party hereunder, and bound by the provisions hereof, without the
need for any further action on the part of any party hereto.
(c) Upon a successor trustee becoming the Trustee under the
Indenture, such successor Trustee automatically shall become the
Trustee hereunder with all the rights and powers of the Trustee
hereunder, and bound by the provisions hereof, without the need
for any further action on the part of any party hereto.
17. Governing Law; Jurisdiction. This Agreement shall be
governed by, and construed and interpreted in accordance with,
the law of the State of New York, excluding (to the greatest
extent permissible by law) any rule of law that would cause the
application of the laws of any jurisdiction other than the State
of New York. Each party hereto agrees that all judicial
proceedings brought against it arising out of or relating to this
Agreement or its obligations hereunder may be brought in any
federal court of competent jurisdiction in the State, County and
City of New York, and accepts generally and unconditionally the
nonexclusive jurisdiction and venue of such courts.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered as of the day and
year first above written.
TORONTO-DOMINION (TEXAS), INC., as
BAI Agent and as BIPCO Agent, and
as Agent for the BAI Agent and the
BIPCO Agent
By: /s/ Jano Mott
Title: Vice President
CRESTAR BANK, as Trustee
By: /s/ Sarah A. McMahon
Title: Vice President
Consented:
BRANT-ALLEN INDUSTRIES, INC., as Borrower
By: /s/ Edward D. Sherrick
Title: Vice President of Finance
BEAR ISLAND PAPER COMPANY, as Borrower
By: /s/ Edward D. Sherrick
Title: Vice President of Finance
BEAR ISLAND FINANCE COMPANY II
By: /s/ Edward D. Sherrick
Title: Vice President of Finance
<PAGE>
Exhibit 4.5
This document was prepared by, and[Virginia] after recording,
please return to:
Shearman & Sterling
599 Lexington Avenue
New York, New York 10022
ATTN: Andrew Hoffman, Esq.
DEED OF TRUST
from
BEAR ISLAND PAPER COMPANY, L.L.C.,
Grantor successor by merger
to BEAR ISLAND MERGERCO L.L.C.,
successor by conversion to BEAR
ISLAND PAPER COMPANY, L.P.
to
SOUTHERN TITLE SERVICES CORPORATION, Trustee
for the use and
benefit of
CRESTAR BANK,
As Indenture Trustee, Beneficiary
DATED AS OF DECEMBER 1, 1997
This document was prepared by, and after
recording, please return to:
Shearman & Sterling
599 Lexington Avenue
New York, New York 10022
ATTN: Andrew Hoffman, Esq.
DEED OF TRUST
THIS DEED OF TRUST, dated as of December 1, 1997 is made by
BEAR ISLAND PAPER COMPANY, L.L.C., a Virginia limited liability
company ("GRANTOR"), successor by merger to BEAR ISLAND MERGERCO,
L.L.C., successor by conversion to BEAR ISLAND PAPER COMPANY, L.P.,
whose address is P.O. Box 2119, 10026 Old Ridge Rd. (Route 738),
Ashland, Virginia 23005, to SOUTHERN TITLE SERVICES CORPORATION, a
Virginia corporation, ("TRUSTEE") whose address is P.O. Box 399, 17th
Floor, One James Center, 901 East Cary Street, Richmond, Virginia
23218-0399, for the use and benefit of CRESTAR BANK, as Indenture
Trustee for the Holders of the Notes referred to below (in such
capacity, together with its successors and assigns, "BENEFICIARY"),
whose address is 919 East Main Street, Richmond, Virginia 23219.
References to this "DEED OF TRUST" shall mean this instrument and any
and all renewals, modifications, amendments, supplements, extensions,
consolidations, substitutions, spreaders and replacements of this
instrument.
Background
A. Grantor has executed and delivered those certain 10%
Senior Secured Notes due 2007 (such Initial Notes, together with the
Exchange Notes, and any notes issued pursuant to the Indenture to
replace previously issued Initial Notes or Exchange Notes that have
been lost, stolen, mutilated or destroyed, in each case as they may
be further amended, supplemented, replaced, exchanged or otherwise
modified from time to time pursuant to the Indenture, being,
collectively, the "Notes") all of which shall be payable to the
Holders of the Notes in the aggregate principal amount of
$100,000,000 or, if less, the aggregate principal amount of the Notes
outstanding under the Indenture, providing for payment of principal,
premium, if any, and interest at the rate set forth in the Notes and
all other terms and conditions set forth therein. Capitalized terms
not otherwise defined herein shall have the meanings ascribed thereto
in the Indenture, dated as of December 1, 1997, among the Grantor and
Bear Island Finance Company II, as Issuers, Bear Island Timberlands
Company, L.L.C., F.F. Soucy, Inc. and Brant Allen Industries, Inc.
and Crestar Bank, as Indenture Trustee. References in this Deed of
Trust to the "DEFAULT RATE" shall mean such rate of interest per
annum as shall be required by the provisions of the Indenture upon
the occurrence of certain events described therein.
B. Grantor is the owner of the parcel(s) of real property
described on Schedule A attached (such real property, together with
all of the buildings, improvements, structures and fixtures now or
subsequently located thereon (the "IMPROVEMENTS") and growing timber
now or subsequently thereon, being collectively referred to as the
"REAL ESTATE").
C. Pursuant to the terms and conditions of the purchase
agreement, dated as of November 21, 1997, between the Issuers and the
purchasers named therein (the "Initial Purchasers"), the Initial
Purchasers have agreed to purchase the Initial Notes.
D. It is a condition precedent, among others, to the
obligations of such Initial Purchasers to purchase the Initial Notes
that Grantor execute and deliver this Deed of Trust.
Granting Clauses
For good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Grantor agrees that to
secure:
repayment of the principal of and payment of interest
(including, without limitation, interest
accruing after the maturity of the Notes
and interest accruing after the filing of
any petition in bankruptcy, or the
commencement of any insolvency,
reorganization or like proceeding, relating
to Grantor, whether or not a claim for
post-filing or post-petition interest is
allowed in such proceeding) on the Notes
held by each Holder;
payment of all other obligations and
liabilities of Grantor to
Beneficiary and the Holders,
whether direct or indirect,
absolute or contingent, due or to
become due, or now existing or
hereafter incurred, which may
arise under, out of, or in
connection with, the Indenture,
the Notes, this Deed of Trust,
the other Collateral Documents or
any other document made,
delivered or given in connection
herewith or therewith, in each
case whether on account of
principal, interest,
reimbursement obligations,
fees, indemnities, costs,
expenses or otherwise (including,
without limitation, all
reasonable fees and disbursements
of counsel to Beneficiary that
are required to be paid by
Grantor pursuant to the terms of
the Indenture, this Deed of Trust
or any other Collateral
Documents) (the items set forth
in clauses (a) through (c) being
referred to herein collectively
as the "INDEBTEDNESS"); and
the performance and observance of
each obligation, term, covenant
and condition to be performed or
observed by Grantor (the
"OBLIGATIONS") under, in
connection with or pursuant to
the provisions of the Indenture,
the Notes, this Deed of Trust and
any of the other Collateral
Documents;
GRANTOR HEREBY CONVEYS TO TRUSTEE FOR THE BENEFIT OF THE BENEFICIARY
AND THE HOLDERS OF THE NOTES AND HEREBY GRANTS, ASSIGNS, TRANSFERS
AND SETS OVER TO TRUSTEE FOR THE BENEFIT OF THE BENEFICIARY AND THE
HOLDERS OF THE NOTES, IN TRUST FOREVER, WITH GENERAL WARRANTY AND
ENGLISH COVENANTS OF TITLE AND WITH POWER OF SALE AND RIGHT OF ENTRY
AND POSSESSION, AND GRANTS BENEFICIARY AND TRUSTEE A SECURITY
INTEREST IN:
(A) the Real Estate; all (i) trees and timber, including,
without limitation, standing timber and crops, now located
on or hereafter planted or growing in the soil of, or
otherwise attributable to, any of the Premises (as
hereinafter defined), or any part or parcel thereof, and
all additions, substitutions and replacements thereof and
(ii) any and all trees and timber which have been severed,
cut or harvested from the Premises or any part or parcel
thereof ("HARVESTED TIMBER"; all of the foregoing in
clauses (i) and (ii) of this paragraph (A) being referred
to as "TIMBER");
(B) all the estate, right, title, claim or demand
whatsoever of Grantor, in possession or expectancy, in and
to the Real Estate or any part thereof;
(C) all right, title and interest of Grantor in, to and
under all easements, rights of way, gores of land, streets,
ways, alleys, passages, sewer rights, waters, water
courses, water and riparian rights, development rights, air
rights, mineral rights and all estates, rights, titles,
interests, privileges, licenses, tenements, hereditaments
and appurtenances belonging, relating or appertaining to
the Real Estate, and any reversions, remainders, rents,
issues, profits and revenue thereof and all land lying in
the bed of any street, road or avenue, in front of or
adjoining the Real Estate to the center line thereof;
(D) all right, title and interest of Grantor in, to and under
all of the fixtures, chattels, business machines, machinery,
apparatus, equipment, furnishings, fittings and articles of personal
property of every kind and nature whatsoever, and all appurtenances
and additions thereto and substitutions or replacements thereof
(together with, in each case, attachments, components, parts and
accessories) currently owned or subsequently acquired by Grantor and
now or subsequently attached to, or contained in or used or usable in
any way in connection with any operation or letting of the Real
Estate, including but without limiting the generality of the
foregoing, all screens, awnings, shades, blinds, curtains, draperies,
artwork, carpets, rugs, storm doors and windows, furniture and
furnishings, heating, electrical, and mechanical equipment, lighting,
switchboards, plumbing, ventilating, air conditioning and air-cooling
apparatus, refrigerating, and incinerating equipment, escalators,
elevators, loading and unloading equipment and systems, stoves,
ranges, laundry equipment, cleaning systems (including window
cleaning apparatus), telephones, communication systems (including
satellite dishes and antennae), televisions, computers, sprinkler
systems and other fire prevention and extinguishing apparatus and
materials, security systems, motors, engines, machinery, pipes,
pumps, tanks, conduits, appliances, data processing equipment,
fittings and fixtures of every kind and description (all of the
foregoing in this paragraph (D) being referred to as the
"EQUIPMENT");
(E) all right, title and interest of Grantor in and to all
substitutes and replacements of, and all additions and improvements
to, the Real Estate and the Equipment, subsequently acquired by or
released to Grantor or constructed, assembled or placed by Grantor on
the Real Estate, immediately upon such acquisition, release,
construction, assembling or placement, including, without limitation,
any and all building materials whether stored at the Real Estate or
offsite, and, in each such case, without any further mortgage,
conveyance, assignment or other act by Grantor;
(F) all right, title and interest of Grantor in, to and under
all leases, subleases, underlettings, concession agreements,
management agreements, licenses and other agreements relating to the
use or occupancy of the Real Estate or the Equipment or any part
thereof, now existing or subsequently entered into by Grantor and
whether written or oral and all guarantees of any of the foregoing
(collectively, as any of the foregoing may be amended, restated,
extended, renewed or modified from time to time, the "LEASES"), and
all rights of Grantor in respect of cash and securities deposited
thereunder and the right to receive and collect the revenues, income,
rents, issues and profits thereof, together with all other rents,
royalties, issues, profits, revenue, income and other benefits
arising from the use and enjoyment of the Trust Property (as defined
below) (collectively, the "RENTS");
(G) all unearned premiums under insurance policies now or
subsequently obtained by Grantor relating to the Real Estate or
Equipment and Grantor's interest in and to all such insurance
policies and all proceeds of any such insurance policies (including
title insurance policies) including the right to collect and receive
such proceeds, subject to the provisions relating to insurance
generally set forth below; and all awards and other compensation,
including the interest payable thereon and the right to collect and
receive the same, made to the present or any subsequent owner of the
Real Estate or Equipment for the taking by eminent domain,
condemnation or otherwise, of all or any part of the Real Estate or
any easement or other right therein;
(H) all right, title and interest of Grantor in and to (i) all
contracts from time to time executed by Grantor or any manager or
agent on its behalf relating to the ownership, construction,
maintenance, repair, operation, occupancy, sale or financing of the
Real Estate or Equipment or any part thereof and all agreements
relating to the purchase or lease of any portion of the Real Estate
or any property which is adjacent or peripheral to the Real Estate,
together with the right to exercise such options and all leases of
Equipment (collectively, the "CONTRACTS"), (ii) all consents,
licenses, building permits, documents, certificates of occupancy and
other governmental approvals relating to (a) the construction,
completion, occupancy, use or operation of the Real Estate or any
part thereof and (b) the harvesting, cutting, severing,
transportation, storage, processing or handling of the Timber
(collectively, the "PERMITS") and (iii) all drawings, plans,
engineering reports, specifications, land planning, maps, surveys and
information and any other reports and similar or related items
relating to the Real Estate (collectively, the "PLANS");
(I) any and all monies now or subsequently on deposit for the
payment of real estate taxes or special assessments against the Real
Estate or for the payment of premiums on insurance policies covering
the foregoing property or otherwise on deposit with or held by
Beneficiary as provided in this Deed of Trust;
(J) all proceeds, both cash and noncash, of the
foregoing;
provided, however, that in each case with respect to all of the
foregoing such grant is made only to the extent the grant by such
Grantor of a security interest pursuant to this Deed of Trust in its
right, title and interest in such contract, agreement, instrument,
indenture or other general intangible is not prohibited by such
contract, agreement, instrument, indenture or other general
intangible without the consent of any party thereto, would not give
any other party to such contract, agreement, instrument, indenture or
other general intangible the right to terminate its obligations
thereunder, or is permitted with consent if all necessary consents to
such grant of a security interest have been obtained from the other
parties thereto (it being understood that the foregoing shall not be
deemed to obligate such Grantor to obtain such consents); provided
that the foregoing limitation shall not affect, limit, restrict or
impair the grant by such Grantor of a security interest pursuant to
this Deed of Trust in any amounts due or to become due under any such
contract, agreement, instrument, indenture or other general
intangible.
(All of the foregoing property and rights and interests now
owned or held or subsequently acquired by Grantor and described in
the foregoing clauses (A) through (E) are collectively referred to as
the "PREMISES", and those described in the foregoing clauses (A)
through (J) are collectively referred to as the "TRUST PROPERTY").
TO HAVE AND TO HOLD the Trust Property and the rights and
privileges hereby granted unto Trustee and Beneficiary, their
respective successors and assigns IN TRUST FOREVER for the uses and
purposes set forth, until the Indebtedness is fully paid and the
Obligations fully performed.
Terms and Conditions
Grantor further represents, warrants, covenants and
agrees with Trustee and Beneficiary as follows:
1. Warranty of Title. GRANTOR WARRANTS ITS TITLE TO THE
TRUST PROPERTY GENERALLY AND WITH ENGLISH COVENANTS OF TITLE, subject
only to (i) the matters that are set forth in Schedule B of the title
insurance policy or policies being issued to Beneficiary to insure
the lien of this Deed of Trust, (ii) the security interest granted by
Grantor to Beneficiary pursuant to the Company Security and Pledge
Agreement, (iii) liens permitted by the Indenture and (iv) that
certain Deed of Trust, dated as of December 1, 1997, made by Grantor
to Southern Title Services Corporation, as trustee, for the use and
benefit of Toronto-Dominion (Texas), Inc., as Administrative Agent
(the "First Deed of Trust") (the "PERMITTED EXCEPTIONS").
2. Payment of Indebtedness. Grantor shall pay the
Indebtedness at the times and places and in the manner specified in
the Notes, the Indenture and in any other Collateral Document and
shall perform all the Obligations.
3. Requirements. (a) Grantor shall promptly comply with, or
cause to be complied with, and conform to all present and future
laws, statutes, codes, ordinances, orders, judgments, decrees, rules,
regulations and requirements, and irrespective of the nature of the
work to be done, of each of the United States of America, any State
and any municipality, local government or other political subdivision
thereof and any agency, department, bureau, board, commission or
other instrumentality of any of them, now existing or subsequently
created (collectively, "GOVERNMENTAL AUTHORITY") which has
jurisdiction over the Trust Property or relates to the harvesting,
cutting, severance, handling or transporting of Timber, and all
covenants, restrictions and conditions now or later of record which
may be applicable to any of the Trust Property, or to the use, manner
of use, occupancy, possession, operation, maintenance, alteration,
repair or reconstruction of any of the Trust Property, except to the
extent that failure to comply therewith could not, in the aggregate,
reasonably be expected to have a material adverse effect on the
business, assets, property, condition (financial or otherwise) or
prospects of the Grantor and its subsidiaries taken as a whole or the
validity or enforceability of this Deed of Trust, the Indenture or
the other Collateral Documents or the rights or remedies of the
Trustee, the Beneficiary or the Holders hereunder or thereunder. All
present and future laws, statutes, codes, ordinances, orders,
judgments, decrees, rules, regulations and requirements of every
governmental authority applicable to Grantor or to any of the Trust
Property and all covenants, restrictions, and conditions which now or
later may be applicable to any of the Trust Property are collectively
referred to as the "LEGAL REQUIREMENTS".
(b) From and after the date of this Deed of Trust, Grantor
shall not by act or omission permit any building or other improvement
on any premises not subject to the lien created by this Deed of Trust
to rely on the Premises or any part thereof or any interest therein
to fulfill any Legal Requirement, and Grantor hereby assigns to
Beneficiary any and all rights to give consent for all or any portion
of the Premises or any interest therein to be so used. Grantor shall
not by act or omission impair the integrity of any of the Real Estate
so as to constitute an illegal subdivision or to prohibit separately
described parcels of the Premises and Improvements from being
conveyed as separate zoning or tax lots. Grantor represents that the
Premises are not part of a larger tract of land owned by Grantor or
its affiliates or otherwise considered as part of one zoning or tax
lot, or, if they are that any authorization or variance required for
the subdivision of such larger tract which a sale of the Premises
would entail has been obtained from all appropriate Governmental
Authorities so that the Premises and Improvements constitute one
zoning or tax lot capable of being conveyed as such. Any act or
omission by Grantor which would result in a violation of any of the
provisions of this subsection shall be void.
4. Payment of Taxes and Other Impositions. (a) Promptly
when due, Grantor shall pay and discharge all taxes of every kind and
nature (including, without limitation, all real and personal
property, income, franchise, withholding, transfer, gains, profits
and gross receipts taxes), all charges for any easement or agreement
maintained for the benefit of any of the Trust Property, all general
and special assessments, levies, permits, inspection and license
fees, all water and sewer rents and charges, vault taxes and all
other public charges even if unforeseen or extraordinary, imposed
upon or assessed against or which may, in each case, become a lien on
any of the Trust Property, or arising in respect of the occupancy,
use or possession thereof, together with any penalties or interest on
any of the foregoing (all of the foregoing are collectively referred
to as the "IMPOSITIONS"). Grantor shall within 30 days after each due
date deliver to Beneficiary (i) original or copies of receipted bills
and cancelled checks evidencing payment of such Imposition if it is a
real estate tax or other public charge and (ii) evidence acceptable
to Beneficiary showing the payment of any other such Imposition. If
by law any Imposition, at Grantor's option, may be paid in
installments (whether or not interest shall accrue on the unpaid
balance of such Imposition), Grantor may elect to pay such Imposition
in such installments and shall be responsible for the payment of such
installments with interest, if any.
(b) Nothing herein shall affect any right or remedy of
Trustee or Beneficiary under this Deed of Trust or otherwise, without
notice or demand to Grantor, to pay any Imposition after the date
such Imposition shall have become due. Any sums paid by Trustee or
Beneficiary in discharge of any Impositions shall be payable on
demand by Grantor to Trustee or Beneficiary, as the case may be,
together with interest at the Default Rate as set forth above.
(c) Grantor shall have the right before any delinquency
occurs to contest or object in good faith to the amount or validity
of any 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 this Section unless (i) Grantor
has given prior written notice to Beneficiary of Grantor's intent so
to contest or object to an Imposition, (ii) Grantor shall demonstrate
to Beneficiary's satisfaction that the legal proceedings shall
operate conclusively to prevent the sale of the Trust Property, or
any part thereof, to satisfy such Imposition prior to final
determination of such proceedings and (iii) Grantor shall furnish a
good and sufficient bond or surety as requested by and reasonably
satisfactory to Beneficiary in the amount of the Impositions which
are being contested plus any interest and penalty which may be
imposed thereon and which could become a charge against the Real
Estate or any part of the Trust Property.
5. Insurance. (a) Grantor shall maintain or cause to be
maintained on all of the Premises:
(i) property insurance against loss or damage by fire,
lightning, windstorm, tornado, water damage, flood, earthquake and by
such other further risks and hazards as now are or subsequently may
be covered by an "all risk" policy or a fire policy covering
"special" causes of loss, and the policy limits shall be
automatically reinstated after each loss (provided that Grantor shall
not be obligated to maintain the insurance coverage required by this
subparagraph (i) with respect to any portion of the Premises that
consists of a separate tract or parcel containing 75 or more acres on
which (and only for so long as) the average capitalized cost of the
Improvements is less than $50.00 (Fifty Dollars) per acre net of
depreciation (collectively, "UNIMPROVED LANDS"));
(ii) commercial general liability insurance under a policy
including the "broad form CGL endorsement" (or which incorporates the
language of such endorsement), covering all claims for personal
injury, bodily injury or death, or property damage occurring on, in
or about the Premises in an amount not less than $10,000,000 or such
other amount as may be approved by Beneficiary (such $10,000,000
coverage may be satisfied by a combination of primary and excess
limit or umbrella coverage totalling not less than $10,000,000)
combined single limit with respect to injury and property damage
relating to any one occurrence plus such excess limits as Beneficiary
shall request from time to time;
(iii) insurance against rent loss, extra expense or business
interruption in amounts satisfactory to Beneficiary, but not less
than one year's gross rent or gross income (provided that Grantor
shall not be obligated to maintain the insurance coverage required by
this subparagraph (iii) with respect to any Unimproved Lands);
(iv) if any portion of the Premises upon which any Improvements
are located are in an area identified as a special flood hazard area
by the Federal Emergency Management Agency or other applicable
agency, flood insurance in an amount satisfactory to Beneficiary, but
in no event less than the maximum limit of coverage available under
the National Flood Insurance Act of 1968, as amended; and
(v) such other insurance in such amounts as Beneficiary may
reasonably request from time to time against loss or damage by any
other risk commonly insured against by persons occupying or using
like properties in the locality or localities in which the Real
Estate is situated.
(b) Each insurance policy (other than flood insurance)
shall (i) provide that it shall not be cancelled without 30-days'
prior written notice to Beneficiary, and (ii) with respect to all
property insurance, provide for deductibles in an amount reasonably
satisfactory to Beneficiary, contain a "Replacement Cost Endorsement"
(or attaching an agreed amount endorsement satisfactory to
Beneficiary), with loss payable to Beneficiary as its interest may
appear and subject to the provisions of the Intercreditor Agreement,
without contribution, under a "standard" or "New York" mortgagee
clause acceptable to Beneficiary. Each policy shall expressly provide
that any proceeds which are payable to Beneficiary shall be paid by
check payable to the order of Beneficiary only and requiring the
endorsement of Beneficiary. In lieu thereof, the Grantor may satisfy
the foregoing by delivering an irrevocable power of attorney to
Beneficiary authorizing Beneficiary to endorse any check payable
under such policy which is made out to Grantor.
(c) Grantor shall deliver to Beneficiary an original of
each insurance policy required to be maintained, or a certificate of
such insurance acceptable to Beneficiary, together with a copy of the
declaration page for each such policy. Grantor shall (i) pay as they
become due all premiums for such insurance and (ii) not later than 15
days prior to the expiration of each policy to be furnished pursuant
to the provisions of this Section, deliver a renewed policy or
policies, or duplicate original or originals thereof, marked "premium
paid," or accompanied by such other evidence of payment satisfactory
to Beneficiary.
(d) If Grantor is in default of its obligations to insure
or deliver any such prepaid policy or policies, then Beneficiary, at
its option and without notice, may effect such insurance from year to
year, and pay the premium or premiums therefor, and Grantor shall pay
to Beneficiary on demand such premium or premiums so paid by
Beneficiary with interest from the time of payment at the Default
Rate.
(e) Grantor promptly shall comply with and conform to (i)
all provisions of each such insurance policy, and (ii) all
requirements of the insurers applicable to Grantor or to any of the
Trust Property or to the use, manner of use, occupancy, possession,
operation, maintenance, alteration or repair of any of the Trust
Property. Grantor shall not use or permit the use of the Trust
Property in any manner which would permit any insurer to cancel any
insurance policy or void coverage required to be maintained by this
Deed of Trust. Grantor shall give Beneficiary 30 days' prior notice
of any non-renewal or material amendment of each insurance policy
(other than flood insurance) required under this Section 5 of this
Deed of Trust.
(f) If the Trust Property, or any part thereof, shall be
destroyed or damaged, Grantor shall give immediate notice thereof to
Beneficiary. All insurance proceeds shall be paid to Beneficiary to
be held by Beneficiary as collateral to secure the payment and
performance of the Indebtedness and the Obligations. Notwithstanding
the preceding sentence, provided that no Event of Default shall have
occurred and be continuing, Grantor shall have the right to adjust
such loss, and the insurance proceeds relating to such loss shall be
paid over promptly to Grantor; provided that if such insurance
proceeds are received, then Grantor shall either (i) apply such
proceeds promptly after any such damage to repair all such damage
regardless of whether such proceeds are sufficient to pay for the
costs of repair, or (ii) apply such proceeds in any other manner that
complies with Section 1022 of the Indenture.
(g) In the event of foreclosure of this Deed of Trust or
other transfer of title to the Trust Property, all right, title and
interest of Grantor in and to any insurance policies then in force
shall pass to the purchaser or grantee.
(h) Grantor may maintain insurance required under this Deed
of Trust by means of one or more blanket insurance policies
maintained by Grantor; provided, however, that (i) any such policy
shall specify, or Grantor shall furnish to Beneficiary a written
statement from the insurer so specifying, the maximum amount of the
total insurance afforded by such blanket policy that is allocated to
the Premises and the other Trust Property and any sublimits in such
blanket policy applicable to the Premises and the other Trust
Property, (ii) each such blanket policy shall include an endorsement
providing that, in the event of a loss resulting from an insured
peril, insurance proceeds shall be allocated to the Trust Property in
an amount equal to the coverages required to be maintained by Grantor
as provided above and (iii) the protection afforded under any such
blanket policy shall be no less than that which would have been
afforded under a separate policy or policies relating only to the
Trust Property.
(i) Notwithstanding anything to the contrary in this
section, Beneficiary agrees that the types, terms and amounts of
insurance that Grantor maintains as of the date of this Deed of Trust
satisfies the requirements of this Section 5 of this Deed of Trust.
6. Restrictions on Liens and Encumbrances. Except for the
lien of this Deed of Trust, the Permitted Exceptions and any lien
that is permitted by the terms of the Indenture, and except as
expressly permitted under the Indenture, Grantor shall not further
mortgage, nor otherwise encumber the Trust Property nor create or
suffer to exist any lien, charge or encumbrance on the Trust
Property, or any part thereof, whether superior or subordinate to the
lien created by this Deed of Trust and whether recourse or
non-recourse.
7. Due on Sale and Other Transfer Restrictions. Except as
expressly permitted under the Indenture, Grantor shall not sell,
transfer, convey or assign all or any portion of, or any interest in,
the Trust Property.
8. Maintenance; No Alteration; Inspection; Utilities. (a)
Grantor shall maintain or cause to be maintained all the Improvements
in good condition and repair (ordinary wear and tear excepted) and
shall not commit or suffer any waste of the Improvements.
Notwithstanding any other provision of this Deed of Trust, with
respect to Unimproved Lands, the harvesting of Timber and forest
management practices may be carried out in accordance with Best
Management Practices prevailing in the Commonwealth of Virginia with
respect to similarly situated land, which Best Management Practices
are more particularly set forth in the Loggers Guide published by the
Virginia Department of Forestry (December 1988), as the same may be
revised from time to time. Grantor shall repair, restore, replace or
rebuild promptly any part of the Premises which may be damaged or
destroyed by any casualty whatsoever if, as a result of which
casualty, no insurance or condemnation proceeds are received. The
Improvements shall not be demolished or materially altered, nor any
material additions built, without the prior written consent of
Beneficiary.
(b) Beneficiary and any persons authorized by Beneficiary
shall have the right upon reasonable notice and at any reasonable
time to enter and inspect the Premises and all work done, labor
performed and materials furnished in and about the Improvements and
to inspect and make copies of all books, contracts and records of
Grantor relating to the Trust Property.
(c) Grantor shall pay or cause to be paid when due all
utility charges which are incurred for gas, electricity, water or
sewer services furnished to the Premises and all other assessments or
charges of a similar nature, whether public or private, affecting the
Premises or any portion thereof, whether or not such assessments or
charges are liens thereon.
9. Condemnation/Eminent Domain. Immediately upon obtaining
knowledge of the institution of any proceedings for the condemnation
of the Trust Property, or any portion thereof, Grantor will notify
Beneficiary of the pendency of such proceedings. Beneficiary is
hereby authorized and empowered by Grantor to settle or compromise
any claim in connection with such condemnation and to receive all
awards and proceeds thereof to be held by Beneficiary as collateral
to secure the payment and performance of the Indebtedness and the
Obligations. Notwithstanding the preceding sentence, provided no
Event of Default shall have occurred and be continuing, Grantor
shall, at its expense, diligently prosecute any proceeding relating
to such condemnation, settle or compromise any claims in connection
therewith and receive any awards or proceeds thereof, provided that
if any such awards or proceeds thereof are received, then Grantor
shall either (i) apply such proceeds promptly to repair and restore
the Trust Property to its condition prior to such condemnation
regardless of whether such award is sufficient to pay for the costs
of such repair and restoration, or (ii) apply such proceeds in any
other manner that complies with Section 1022 of the Indenture.
10. Restoration. Grantor shall use all insurance proceeds
and all condemnation proceeds and awards received by Grantor to
either (i) promptly restore the Trust Property to its condition prior
to such casualty or condemnation (giving effect to the remaining
configuration of the Premises after such condemnation), and in
compliance with all Legal Requirements, or (ii) in any other manner
which complies with the Indenture.
11. Leases. (a) Except as expressly permitted under the
Bank Credit Agreement or the Indenture, Grantor shall not (i) execute
an assignment or pledge of any Lease relating to all or any portion
of the Trust Property other than in favor of Beneficiary, or (ii)
without the prior written consent of Beneficiary, execute or permit
to exist any Lease of any of the Trust Property, provided that
Grantor may enter into leases having an aggregate term of less than
twelve months (including all extension or renewal terms) which are
primarily for agricultural or recreational hunting purposes
without the prior written consent of Beneficiary.
(b) As to any Lease consented to by
Beneficiary, Granor shall:
(i) promptly perform all of the provisions of the Lease on the
part of the lessor thereunder to be performed;
(ii) promptly enforce all of the provisions of the Lease on the
part of the lessee thereunder to be performed;
(iii) appear in and defend any action or proceeding arising
under or in any manner connected with the Lease or the obligations of
Grantor as lessor or of the lessee thereunder;
(iv) exercise, within 5 Business Days after a request by
Beneficiary, any right to request from the lessee a certificate with
respect to the status thereof;
(v) simultaneously deliver to Beneficiary copies of any notices
of default which Grantor may at any time forward to or receive from
the lessee;
(vi) promptly deliver to Beneficiary a fully executed
counterpart of the Lease; and
(vii) promptly deliver to Beneficiary, upon Beneficiary's
request, an assignment of the Grantor's interest under such Lease.
(c) Grantor shall deliver to Beneficiary, within 10
Business Days after a request by Beneficiary, a written statement,
certified by Grantor as being true, correct and complete, containing
the names of all lessees and other occupants of the Trust Property,
the terms of all Leases and the spaces occupied and rentals payable
thereunder, and a list of all Leases which are then in default,
including the nature and magnitude of the default; such statement
shall be accompanied by credit information with respect to the
lessees and such other information as Beneficiary may request.
(d) All Leases entered into by Grantor after the date
hereof, if any, and all rights of any lessees thereunder shall be
subject and subordinate in all respects to the lien and provisions of
this Deed of Trust unless Beneficiary shall otherwise elect in
writing.
(e) As to any Lease now in existence or subsequently
consented to by Beneficiary, except as expressly permitted under the
Credit Agreement, Grantor shall not accept a surrender or terminate,
cancel, rescind, supplement, alter, revise, modify or amend such
Lease or permit any such action to be taken nor shall Grantor accept
the payment of rent more than thirty (30) days in advance of its due
date.
12. Further Assurances. To further assure Beneficiary's and
Trustee's rights under this Deed of Trust, Grantor agrees upon demand
of Beneficiary or Trustee to do any act or execute any additional
documents (including, but not limited to, security agreements on any
personalty included or to be included in the Trust Property and a
separate assignment of each Lease in recordable form) as may be
required by Beneficiary or Trustee to confirm the lien of this Deed
of Trust and all other rights or benefits conferred on Beneficiary or
Trustee by this Deed of Trust.
13. Beneficiary's Right to Perform. If Grantor fails to
perform any of the covenants or agreements of Grantor, Beneficiary or
Trustee, without waiving or releasing Grantor from any obligation or
default under this Deed of Trust, may, at any time (but shall be
under no obligation to) pay or perform the same, and the amount or
cost thereof, with interest at the Default Rate, shall immediately be
due from Grantor to Beneficiary or Trustee (as the case may be) and
the same shall be secured by this Deed of Trust and shall be an
encumbrance on the Trust Property prior to any right, title to,
interest in or claim upon the Trust Property attaching subsequent to
the date of this Deed of Trust. No payment or advance of money by
Beneficiary or Trustee under this Section shall be deemed or
construed to cure Grantor's default or waive any right or remedy of
Beneficiary or Trustee.
14. Hazardous Material. In the event Grantor fails to
comply with the terms of Sections 5.8(a) or 5.8(b) of the Bank Credit
Agreement (whether or not the Bank Credit Agreement is still in
effect), after notice to Grantor and the expiration of the earlier of
(i) any applicable cure period, or (ii) the cure period permitted
under the applicable legal requirement, Beneficiary may declare such
failure an Event of Default or arrange to have compliance with the
terms of Sections 5.8(a) or 5.8(b), as the case may be, of the Bank
Credit Agreement (whether or not the Bank Credit Agreement is still
in effect) implemented and the cost of such implementation with
interest at the Default Rate shall immediately be due from Grantor to
Beneficiary. Beneficiary shall have the right to conduct an
environmental assessment of the Premises at Grantor's sole cost and
expense, if any Event of Default has occurred or any event has
occurred that, if it continues would constitute an Event of Default
(such Event of Default, or event, a "Default"), or at any other time
at Beneficiary's sole cost and expense, provided: (i) Beneficiary
provides Grantor with at least five business days' notice of its
intent to conduct said environmental assessment, which notice shall
include Beneficiary's proposed scope of work for the environmental
assessment; (ii) Beneficiary allows Grantor to have Grantor's
personnel and outside representatives, including attorneys or
environmental professionals, be present during any inspection of the
Trust Property that may be a part of the environmental assessment;
(iii) with respect to any environmental sampling to be performed: (A)
it is recommended and supervised by a reputable independent
environmental consultant selected by the Beneficiary, subject to the
approval of the Grantor (such approval not to be unreasonably
withheld or delayed), (B) Beneficiary provides Grantor with the
opportunity to collect split samples, and (C) at Grantor's reasonable
request, Beneficiary restores the Premises in all material respects
to its presampling condition, the cost of such restoration with
interest at the Default Rate immediately due from Grantor to the
Beneficiary if there has been a Default; and (iv) Beneficiary
provides to Grantor copies of all final reports prepared in
connection with any environmental assessment conducted hereunder.
Grantor shall cooperate with Beneficiary with respect to the conduct
of said environmental audits consistent with the terms of this
Section.
15. Events of Default. The occurrence of an Event of
Default under the Indenture shall constitute an
Event of Default hereunder.
16. Remedies. (a) Upon the occurrence of any Event of
Default, in addition to any other rights and remedies Beneficiary may
have pursuant to the Indenture or the other Collateral Documents, or
as provided by law, and without limitation, (1) if such event is an
Event of Default specified in clause (9) or (10) of Section 501 of
the Indenture with respect to Grantor, automatically the Notes (with
accrued interest thereon) and all other amounts owing under the
Indenture and the other Collateral Documents shall immediately become
due and payable, and (2) if such event is any other Event of Default,
the Beneficiary may, or upon the request of the Holders of not less
than 25 percent in aggregate principal amount of the outstanding
Notes, Beneficiary shall, by notice to Grantor declare the Notes
(with accrued interest thereon) and all other amounts owing under the
Indenture to be due and payable forthwith, whereupon the same shall
immediately become due and payable unless such declaration shall have
been rescinded by the Holders of a majority in aggregate principal
amount of the outstanding Notes. Except as expressly provided above
in this Section or in the Indenture, presentment, demand, protest and
all other notices of any kind are hereby expressly waived. In
addition, upon the occurrence and during the continuance of any Event
of Default, Beneficiary may immediately take such action, without
notice or demand (except to the extent required by applicable law),
as it deems advisable to protect and enforce its rights against
Grantor and in and to the Trust Property, including, but not limited
to, the following actions, each of which may be pursued concurrently
or otherwise, at such time and in such manner as Beneficiary may
determine, in its sole discretion, without impairing or otherwise
affecting the other rights and remedies of Beneficiary:
(i) Beneficiary may elect to cause the Trust Property or
any part thereof to be sold as follows:
(A) Beneficiary may proceed as if all of the
Trust Property were real property in accordance with
subparagraph (C) below, or Beneficiary may elect to treat
any of the Trust Property which consists of a right in
action or which is property that can be severed from the
Real Estate without causing structural damage thereto as if
the same were personal property, and dispose of the same in
accordance with the provisions of this Deed of Trust which
relate to the exercise of remedies with respect to that
portion of the Trust Property which is personal property,
separate and apart from the sale of real property.
(B) Beneficiary may direct the Trustee to cause any such
sale or other disposition to be conducted immediately
following the expiration of any grace period, if any,
herein provided, and any advertisement required by law or
herein and the notice required by Section 55-59.1 of the
Code of Virginia (1950) (1995 Replacement Volume), as the
same may be amended from time to time (hereinafter, "CODE
OF VIRGINIA"), or Beneficiary and Trustee may delay any
such sale or other disposition for such period of time as
Trustee or Beneficiary deems to be appropriate. Should
Beneficiary desire that more than one (1) such sale or
other disposition be conducted, Beneficiary may, at its
option, cause the same to be conducted simultaneously, or
successively, on the same day, or at such different days or
times and in such order as Beneficiary and Trustee may deem
to be appropriate.
(C) Should Beneficiary elect to direct the Trustee to sell
the Trust Property or any part thereof which is real
property or which Beneficiary has elected to treat as real
property, upon such election, the Trustee shall give such
notice of default and election to sell as may then be
required by law. Thereafter, upon the expiration of such
time and the giving of the notice of sale required by
Section 55-59.1 of the Code of Virginia, and after having
advertised the sale once a week for four weeks in a
newspaper having general circulation in the jurisdiction
wherein the Real Estate lies, and without the necessity of
any demand on Grantor, Trustee, at the time and place
specified in the notice of sale, shall sell the 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. Trustee may, and upon request
of Beneficiary shall, from time to time, postpone the sale
by public announcement thereof at the time and place
noticed therefor. If the Trust Property consists of several
lots or parcels, Trustee may designate the order in which
such lots or parcels shall be offered for sale or sold. Any
person, including Grantor or Beneficiary, may purchase at
the sale. Upon any sale, Trustee 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.
(D) 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 facts, such as default, the giving of notice of
default and notice of sale, demand that such sale should be
made, postponement of sale, terms of sale, sale, purchase,
payment of purchase money and other facts affecting the
regularity or validity of such sale or disposition, shall
be conclusive proof of the truth of such facts; any such
deed or conveyance shall be conclusive against all persons
as to such facts recited therein.
(E) The acknowledgment of the receipt of the purchase
money, contained in any deed or conveyance executed as
aforesaid, shall be sufficient discharge to the grantee
thereof from all obligations to see to the proper
application of the consideration therefor as hereinafter
provided.
(ii) Beneficiary may, to the extent permitted by applicable law,
(A) institute and maintain an action of judicial foreclosure against
all or any part of the Trust Property, (B) institute and maintain an
action on the Indebtedness, or (C) take such other action at law or
in equity for the enforcement of this Deed of Trust or any of the
Loan Documents as the law may allow. Beneficiary may proceed in any
such action to final judgment and execution thereon for all sums due
hereunder, together with interest thereon at the Default Rate and all
costs of suit, including, without limitation, reasonable attorneys'
fees and disbursements. Interest at the Default Rate shall be due on
any judgment obtained by Beneficiary from the date of judgment until
actual payment is made of the full amount of the judgment.
(iii) Upon the completion of any sale or sales made by Trustee
or Beneficiary, as the case may be, under or by virtue of this
subsection (a), Trustee or any officer of any court empowered to do
so, shall execute and deliver as aforesaid, to the accepted purchaser
or purchasers a good and sufficient instrument, or good and
sufficient instruments, conveying, assigning and transferring all
estate, right, title and interest in and to the property and rights
sold. Trustee is hereby appointed irrevocably the true and lawful
attorney of Grantor in its name and stead to make all necessary
conveyances, assignments, transfers and deliveries of the Trust
Property or any part thereof and the rights so sold and for that
purpose, Trustee may execute all necessary instruments of conveyance,
assignment and transfer, Grantor hereby ratifying and confirming all
that its attorney shall lawfully do by virtue hereof. Nevertheless,
Grantor, if so requested by Trustee or Beneficiary, shall ratify and
confirm any such sale or sales by executing and delivering to Trustee
or to such purchaser or purchasers all such instruments as may be
advisable, in the judgment of Trustee or Beneficiary, for the purpose
as may be designated in such request. Any such sale or sales made
under or by virtue of this subsection (a), whether made under the
power of sale herein granted or under or by virtue of judicial
proceedings or of a judgment or decree of foreclosure and sale or
under or by virtue of Sections 55-59 and 55-59.1 through 55-59.4 of the
Code of Virginia, shall operate to divest all of the estate, right,
title, interest, claim and demand whatsoever, whether at law or in
equity, of Grantor in and to the properties and rights so sold, and
shall be a perpetual bar, both at law and in equity against Grantor
and any and all persons claiming or who may claim the same, or any
part thereof, from, through or under Grantor.
(iv) Grantor hereby expressly waives any right which it
may have to direct the order in which any of the Trust Property
shall be sold in the event of any sale or sales pursuant
hereto.
(v) The purchase money proceeds or avails of any sale made
pursuant to Sections 55-59 and 55-59.1 through 55- 59.4 of the Code
of Virginia and under or by virtue of this subsection (a), together
with all other sums which then may be held by Trustee or Beneficiary
under this Deed of Trust, whether under the provisions of this
subsection (a), or otherwise, shall be distributed pursuant to
applicable law as set forth in Sections 55-59.4 of the Code of Virginia.
(vi) Beneficiary may personally, or by its agents, attorneys and
employees and without regard to the adequacy or inadequacy of the
Trust Property or any other collateral as security for the
Indebtedness and Obligations enter into and upon the Trust Property
and each and every part thereof and exclude Grantor and its agents
and employees therefrom without liability for trespass, damage or
otherwise (Grantor hereby agreeing to surrender possession of the
Trust Property to Beneficiary upon demand at any such time) and use,
operate, manage, maintain and control the Trust Property and every
part thereof. Following such entry and taking of possession,
Beneficiary shall be entitled, without limitation, (x) to lease all
or any part or parts of the Trust Property for such periods of time
and upon such conditions as Beneficiary may, in its discretion, deem
proper, (y) to enforce, cancel or modify any Lease and (z) generally
to execute, do and perform any other act, deed, matter or thing
concerning the Trust Property as Beneficiary shall deem appropriate
as fully as Grantor might do.
(b) Beneficiary, in any action to foreclose this Deed of Trust
in a judicial procedure or in connection with the exercise of any
non-judicial power of sale by Trustee, shall be entitled to the
appointment of a receiver. In case of a trustee's sale or foreclosure
sale, the Real Estate may be sold, at Beneficiary's election, in one
parcel or in more than one parcel and Beneficiary is specifically
empowered (without being required to do so, and in its sole and
absolute discretion) to cause successive sales of portions of the
Trust Property to be held.
(c) In the event of any breach of any of the covenants,
agreements, terms or conditions contained in this Deed of Trust which
is not cured after the giving of any applicable notice and the
expiration of any applicable cure period, Beneficiary or Trustee
shall be entitled to enjoin such breach and obtain specific
performance of any covenant, agreement, term or condition and
Beneficiary and Trustee shall have the right to invoke any equitable
right or remedy as though other remedies were not provided for in
this Deed of Trust.
17. Right of Beneficiary to Credit Sale. Upon the
occurrence of any sale made under this Deed of Trust, whether
made under the power of sale or by virtue of judicial
proceedings or of a judgment or decree of foreclosure and sale
or under or by virtue of Sections 55-59 and 55-59.1 through 55-59.4
of the Code of Virginia, Beneficiary may bid for and acquire
the Trust Property or any part thereof. In lieu of paying cash
therefor, Beneficiary may make settlement for the purchase
price by crediting upon the Indebtedness or other sums secured
by this Deed of Trust the net sales price after deducting
therefrom the expenses of sale and the cost of the action and
any other sums which Beneficiary is authorized to deduct under
this Deed of Trust. In such event, this Deed of Trust, the
Indenture, the Notes, the other Collateral Documents and any
documents evidencing expenditures secured hereby may be
presented to the person or persons conducting the sale in order
that the amount so used or applied may be credited upon the
Indebtedness as having been paid.
18. Appointment of Receiver. If an Event of Default
shall have occurred and be continuing, Beneficiary as a matter
of right and without notice to Grantor, unless otherwise
required by applicable law, and without regard to the adequacy
or inadequacy of the Trust Property or any other collateral as
security for the Indebtedness and Obligations or the interest
of Grantor therein, shall have the right to apply to any court
having jurisdiction to appoint a receiver or receivers or other
manager of the Trust Property, and Grantor hereby irrevocably
consents to such appointment and waives notice of any
application therefor (except as may be required by law). Any
such receiver or receivers shall have all the usual powers and
duties of receivers in like or similar cases and all the powers
and duties of Beneficiary in case of entry as provided in this
Deed of Trust, including, without limitation and to the extent
permitted by law, the right to enter into leases of all or any
part of the Trust Property, and shall continue as such and
exercise all such powers until the date of confirmation of sale
of the Trust Property unless such receivership is sooner
terminated.
19. Extension, Release, etc. (a) Without
affecting the lien or charge of this Deed of Trust upon
any portion of the Trust Property not then or theretofore
released as security for the full amount of the
Indebtedness, Beneficiary may, from time to time and
without notice, agree to (i) release any person liable for the
Indebtedness, (ii) extend the maturity or alter any of the
terms of the Indebtedness or any guaranty thereof, (iii) grant
other indulgences, (iv) release or reconvey, or cause to be
released or reconveyed at any time at Beneficiary's option any
parcel, portion or all of the Trust Property, (v) take or
release any other or additional security for any obligation
herein mentioned, or (vi) make compositions or other
arrangements with debtors in relation thereto. If at any time
this Deed of Trust shall secure less than all of the principal
amount of the Indebtedness, it is expressly agreed that any
repayments of the principal amount of the Indebtedness shall
not reduce the amount of the lien created by this Deed of Trust
until the lien amount shall equal the principal amount of the
Indebtedness outstanding.
(b) No recovery of any judgment by Beneficiary and no
levy of an execution under any judgment upon the Trust Property
or upon any other property of Grantor shall affect the lien
created by this Deed of Trust or any liens, rights, powers or
remedies of Beneficiary or Trustee hereunder, and such liens,
rights, powers and remedies shall continue unimpaired.
(c) If Beneficiary shall have the right to foreclose
this Deed of Trust or to direct the Trustee to exercise its
power of sale, Grantor authorizes Beneficiary at its option to
foreclose the lien of this Deed of Trust (or direct the Trustee
to sell the Trust Property, as the case may be) subject to the
rights of any tenants of the Trust Property. The failure to
make any such tenants parties defendant to any such foreclosure
proceeding and to foreclose their rights, or to provide notice
to such tenants as required in any statutory procedure
governing a sale of the Trust Property by Trustee, or to
terminate such tenant's rights in such sale will not be
asserted by Grantor as a defense to any proceeding instituted
by Beneficiary to collect the Indebtedness or to foreclose the
lien created by this Deed of Trust.
(d) Unless expressly provided otherwise, in the event
that Beneficiary's interest in this Deed of Trust and title to
the Trust Property or any estate therein shall become vested in
the same person or entity, this Deed of Trust shall not merge
in such title but shall continue as a valid lien on the Trust
Property for the amount secured hereby.
20. Security Agreement under Uniform Commercial Code.
(a) It is the intention of the parties hereto that this Deed of
Trust shall constitute a Security Agreement within the meaning
of the Uniform Commercial Code of the Commonwealth of Virginia
(the "CODE"). If an Event of Default shall occur and be
continuing under this Deed of Trust, then in addition to having
any other right or remedy available at law or in equity,
Beneficiary shall have the option of either (i) proceeding
under the Code and exercising such rights and remedies as may
be provided to a secured party by the Code with respect to all
or any portion of the Trust Property which is personal property
(including, without limitation, taking possession of and selling
such property) or (ii) treating such property as real property and
proceeding with respect to both the real and personal property
constituting the Trust Property in accordance with
Beneficiary's rights, powers and remedies with respect to the
real property (in which event the default provisions of the
Code shall not apply). If Beneficiary shall elect to proceed
under the Code, then 10 days' notice of sale of the personal
property shall be deemed reasonable notice and the reasonable
expenses of retaking, holding, preparing for sale, selling and
the like incurred by Beneficiary shall include, but not be
limited to, reasonable attorneys' fees and legal expenses. At
Beneficiary's request, Grantor shall assemble the personal
property and make it available to Beneficiary at a place
designated by Beneficiary which is reasonably convenient to
both parties.
(b) Grantor and Beneficiary agree, to the extent
permitted by law, that: (i) all of the goods described within
the definition of the word "Equipment" and all Timber to be cut
are or are to become fixtures on the Real Estate; (ii) this
Deed of Trust upon recording or registration in the real estate
records of the proper office shall constitute a financing
statement filed as a "fixture filing" within the meaning of
Sections 8.9-313 and 8.9-402 of the Code; (iii) Grantor is the
record owner of the Real Estate; and (iv) the addresses of
Grantor and Beneficiary are as set forth on the first page of
this Deed of Trust. This Deed of Trust covers Timber to be cut
and Harvested Timber, as well as accounts resulting from the
sale thereof, and this Deed of Trust upon being recorded in the
real estate records shall operate also as a financing statement
upon such of the Trust Property as constitute or may constitute
Timber to be cut and Harvested Timber, as well as accounts
resulting from the sale thereof, in accordance with Sections
8.9-402 and 8.9-403 of the Code. Grantor has an interest of
record in the land upon which the Timber is being grown and was
grown, which land is more particularly described in Schedule A
to this Deed of Trust.
(c) Grantor, upon request by Beneficiary from time to
time, shall execute, acknowledge and deliver to Beneficiary one
or more separate security agreements, in form reasonably
satisfactory to Beneficiary, covering all or any part of the
Trust Property and will further execute, acknowledge and
deliver, or cause to be executed, acknowledged and delivered,
any financing statement, affidavit, continuation statement or
certificate or other document as Beneficiary may request in
order to perfect, preserve, maintain, continue or extend the
security interest under and the priority of this Deed of Trust
and such security instrument. Grantor further agrees to pay to
Beneficiary on demand all costs and expenses incurred by
Beneficiary in connection with the preparation, execution,
recording, filing and refiling of any such document and all
reasonable costs and expenses of any record searches for
financing statements Beneficiary shall reasonably require.
Grantor shall from time to time, on request of Beneficiary,
deliver to Beneficiary an inventory in reasonable detail of any
of the Trust Property which constitutes personal property.
If Grantor shall fail to furnish any financing or continuation
statement within 10 Business Days after request by Beneficiary,
then pursuant to the provisions of the Code, Grantor hereby
authorizes Beneficiary, without the signature of Grantor, to
execute and file any such financing and continuation
statements. The filing of any financing or continuation
statements in the records relating to personal property or
chattels shall not be construed as in any way impairing the
right of Beneficiary to proceed against any personal property
encumbered by this Deed of Trust as real property, as set forth
above.
21. Assignment of Rents. Grantor hereby assigns to
Trustee, for the benefit of Beneficiary, the Rents as further
security for the payment of the Indebtedness and performance of
the Obligations, and Grantor grants to Trustee and Beneficiary
the right to enter the Trust Property for the purpose of
collecting the same and to let the Trust Property or any part
thereof, and to apply the Rents on account of the Indebtedness.
The foregoing assignment and grant is present and absolute and
shall continue in effect until the Indebtedness is paid in
full, but Beneficiary and Trustee hereby waive the right to
enter the Trust Property for the purpose of collecting the
Rents and Grantor shall be entitled to collect, receive, use
and retain the Rents until the occurrence and during the
continuance of an Event of Default under this Deed of Trust;
such right of Grantor to collect, receive, use and retain the
Rents may be revoked by Beneficiary upon the occurrence and
during the continuance of any Event of Default under this Deed
of Trust by giving not less than five Business Days' written
notice of such revocation to Grantor; in the event such notice
is given, Grantor shall pay over to Beneficiary, or to any
receiver appointed to collect the Rents, any lease security
deposits. Grantor shall not accept prepayments of installments
of Rent to become due for a period of more than one month in
advance (except for security deposits and estimated payments of
percentage rent, if any).
22. Trust Funds. All lease security deposits of the
Real Estate shall be treated as trust funds not to be
commingled with any other funds of Grantor. Within 10 Business
Days after request by Beneficiary, Grantor shall furnish
Beneficiary satisfactory evidence of compliance with this
subsection, together with a statement of all lease security
deposits by lessees and copies of all Leases not previously
delivered to Beneficiary, which statement shall be certified by
Grantor.
23. Additional Rights. The holder of any subordinate
lien or subordinate deed of trust on the Trust Property shall
have no right to terminate any Lease whether or not such Lease
is subordinate to this Deed of Trust nor shall any holder of
any subordinate lien or subordinate deed of trust join any
tenant under any Lease in any trustee's sale or action to
foreclose the lien or modify, interfere with, disturb or
terminate the rights of any tenant under any Lease. By
recordation of this Deed of Trust all subordinate lienholders
and the trustees and beneficiaries under subordinate deeds of
trust are subject to and notified of this provision, and any
action taken by any such lienholder or trustee or beneficiary
contrary to this provision shall be null and void. Upon the
occurrence and during the continuance of any Event of Default,
Beneficiary may, in its sole discretion and without regard to
the adequacy of its security under this Deed of Trust, apply
all or any part of any amounts on deposit with Beneficiary
under this Deed of Trust against all or any part of the
Indebtedness. Any such application shall not be construed to
cure or waive any default or Event of Default or invalidate any
act taken by Beneficiary on account of such default or Event of
Default.
24. Any notice from Beneficiary or Trustee to Grantor
hereunder shall be deemed to have been given by Beneficiary or
Grantor and received by Grantor when mailed to Grantor by
certified mail, personally delivered to Grantor, deposited with
a bonded air courier service for express delivery to Grantor or
telecopied to Grantor at the address set forth on the first
page hereof (if by telecopy to (203) 661-3349) or at such other
address or telecopier number as Grantor may designate in
writing. Any notice from Grantor to Beneficiary or Trustee
hereunder shall be deemed to have been given by Grantor and
received by Beneficiary or Trustee, as the case may be, when
received by such person at its address stated on the first page
hereof or at such other address as such person may have
designated to Grantor.
25. No Oral Modification. This Deed of Trust may not
be amended, supplemented or otherwise modified except in
accordance with the provisions of the Indenture. Any agreement
made by Grantor and Beneficiary after the date of this Deed of
Trust relating to this Deed of Trust shall be superior to the
rights of the holder of any intervening or subordinate deed of
trust, lien or encumbrance. Trustee's execution of any written
agreement between Grantor and Beneficiary shall not be required
for the effectiveness thereof as between Grantor and
Beneficiary.
26. Partial Invalidity. In the event any one or more
of the provisions contained in this Deed of Trust shall for any
reason be held to be invalid, illegal or unenforceable in any
respect, such invalidity, illegality or unenforceability shall
not affect any other provision hereof, but each shall be
construed as if such invalid, illegal or unenforceable
provision had never been included. Notwithstanding to the
contrary anything contained in this Deed of Trust or in any
provisions of the Indebtedness or Loan Documents, the
obligations of Grantor and of any other obligor under the
Indebtedness or Loan Documents shall be subject to the
limitation that Beneficiary shall not charge, take or receive,
nor shall Grantor or any other obligor be obligated to pay to
Beneficiary, any amounts constituting interest in excess of the
maximum rate permitted by law to be charged by Beneficiary.
27. Grantor's Waiver of Rights. To the
fullest extent permitted by law, Grantor waives the
benefit of all laws now existing or that may subsequently
be enacted providing for (i) any appraisement before sale of
any portion of the Trust Property, (ii) any extension of the
time for the enforcement of the collection of the Indebtedness
or the creation or extension of a period of redemption from any
sale made in collecting such debt and (iii) exemption of the
Trust Property from attachment, levy or sale under execution or
exemption from civil process. To the full extent Grantor may do
so, Grantor agrees that Grantor will not at any time insist
upon, plead, claim or take the benefit or advantage of any law
now or hereafter in force providing for any appraisement,
valuation, stay, exemption, extension or redemption, or
requiring foreclosure of this Deed of Trust before exercising
any other remedy granted hereunder and Grantor, for Grantor and
its successors and assigns, and for any and all persons ever
claiming any interest in the Trust Property, to the extent
permitted by law, hereby waives and releases all rights of
redemption, valuation, appraisement, stay of execution, notice
of election to mature or declare due the whole of the secured
indebtedness and marshalling in the event of exercise by
Trustee or Beneficiary of the power of sale or other rights
hereby created.
28. Remedies Not Exclusive. Beneficiary and Trustee
shall be entitled to enforce payment of the Indebtedness and
performance of the Obligations and to exercise all rights and
powers under this Deed of Trust or under any of the other
Collateral Documents or other agreement or any laws now or
hereafter in force, notwithstanding some or all of the
Indebtedness and Obligations may now or hereafter be otherwise
secured, whether by deed of trust, mortgage, security
agreement, pledge, lien, assignment or otherwise. Neither the
acceptance of this Deed of Trust nor its enforcement, shall
prejudice or in any manner affect Beneficiary's or Trustee's
right to realize upon or enforce any other security now or
hereafter held by Beneficiary or Trustee, it being agreed that
Beneficiary and Trustee shall be entitled to enforce this Deed
of Trust and any other security now or hereafter held by
Beneficiary or Trustee in such order and manner as Beneficiary
may determine in its absolute discretion. No remedy herein
conferred upon or reserved to Trustee or Beneficiary is
intended to be exclusive of any other remedy herein or by law
provided or permitted, but each shall be cumulative and shall
be in addition to every other remedy given hereunder or now or
hereafter existing at law or in equity or by statute. Every
power or remedy given by any of the Collateral Documents to
Beneficiary or Trustee or to which either may otherwise be
entitled, may be exercised, concurrently or independently, from
time to time and as often as may be deemed expedient by
Beneficiary or Trustee, as the case may be. In no event shall
Beneficiary or Trustee, in the exercise of the remedies
provided in this Deed of Trust (including, without limitation,
in connection with the assignment of Rents, or the appointment
of a receiver and the entry of such receiver on to all or any
part of the Trust Property), be deemed a "mortgagee in
possession," and neither Beneficiary nor Trustee shall in any
way be made liable for any act, either of commission or
omission, in connection with the exercise of such remedies.
29. Multiple Security. If (a) the Premises shall
consist of one or more parcels, whether or not contiguous and
whether or not located in the same county, or (b) in addition
to this Deed of Trust, Beneficiary shall now or hereafter hold
or be the beneficiary of one or more additional mortgages,
liens, deeds of trust or other security (directly or
indirectly) for the Indebtedness upon other property in the
State in which the Premises are located (whether or not such
property is owned by Grantor or by others) or (c) both the
circumstances described in clauses (a) and (b) shall be true,
then to the fullest extent permitted by law, Beneficiary may,
at its election, commence or consolidate in a single trustee's
sale or foreclosure action all trustee's sale or foreclosure
proceedings against all such collateral securing the
Indebtedness (including the Trust Property), which action may
be brought or consolidated in the courts of, or sale conducted
in, any city or county in which any of such collateral is
located. Grantor acknowledges that the right to maintain a
consolidated trustee's sale or foreclosure action is a specific
inducement to Beneficiary to extend the Indebtedness, and
Grantor expressly and irrevocably waives any objections to the
commencement or consolidation of the foreclosure proceedings in
a single action and any objections to the laying of venue or
based on the grounds of forum non conveniens which it may now
or hereafter have. Grantor further agrees that if Trustee or
Beneficiary shall be prosecuting one or more foreclosure or
other proceedings against a portion of the Trust Property or
against any collateral other than the Trust Property, which
collateral directly or indirectly secures the Indebtedness, or
if Beneficiary shall have obtained a judgment of foreclosure
and sale or similar judgment against such collateral (or, in
the case of a trustee's sale, shall have met the statutory
requirements therefor with respect to such collateral), then,
whether or not such proceedings are being maintained or
judgments were obtained in or outside the State in which the
Premises are located, Beneficiary may commence or continue any
trustee's sale or foreclosure proceedings and exercise its
other remedies granted in this Deed of Trust against all or any
part of the Trust Property and Grantor waives any objections to
the commencement or continuation of a foreclosure of this Deed
of Trust or exercise of any other remedies hereunder based on
such other proceedings or judgments, and waives any right to
seek to dismiss, stay, remove, transfer or consolidate either
any action under this Deed of Trust or such other proceedings
on such basis. The commencement or continuation of proceedings
to sell the Trust Property in a trustee's sale, to foreclose
this Deed of Trust or the exercise of any other rights
hereunder or the recovery of any judgment by Beneficiary or the
occurrence of any sale by the Trustee in any such proceedings
shall not prejudice, limit or preclude Beneficiary's right to
commence or continue one or more trustee's sales, foreclosure
or other proceedings or obtain a judgment against (or, in the
case of a trustee's sale, to meet the statutory requirements
for, any such sale of) any other collateral (either in or outside
the State in which the Real Estate is located) which directly or
indirectly secures the Indebtedness, and Grantor expressly waives
any objections to the commencement of, continuation of, or entry of
a judgment in such other sales or proceedings or exercise of
any remedies in such sales or proceedings based upon any action
or judgment connected to this Deed of Trust, and Grantor also
waives any right to seek to dismiss, stay, remove, transfer or
consolidate either such other sales or proceedings or any sale
or action under this Deed of Trust on such basis. It is
expressly understood and agreed that to the fullest extent
permitted by law, Beneficiary may, at its election, cause the
sale of all collateral which is the subject of a single
trustee's sale or foreclosure action at either a single sale or
at multiple sales conducted simultaneously and take such other
measures as are appropriate in order to effect the agreement of
the parties to dispose of and administer all collateral
securing the Indebtedness (directly or indirectly) in the most
economical and least time-consuming manner.
30. Successors and Assigns. All covenants of Grantor
contained in this Deed of Trust are imposed solely and
exclusively for the benefit of Beneficiary and Trustee and
their respective successors and assigns, and no other person or
entity shall have standing to require compliance with such
covenants or be deemed, under any circumstances, to be a
beneficiary of such covenants, any or all of which may be
freely waived in whole or in part by Beneficiary or Trustee at
any time if in the sole discretion of either of them such
waiver is deemed advisable. All such covenants of Grantor shall
run with the land and bind Grantor, the successors and assigns
of Grantor (and each of them) and all subsequent owners,
encumbrancers and tenants of the Trust Property, and shall
inure to the benefit of Beneficiary, Trustee and their
respective successors and assigns. Without limiting the
generality of the foregoing, any successor to Trustee appointed
by Beneficiary shall succeed to all rights of Trustee as if
such successor had been originally named as Trustee hereunder.
The word "Grantor" shall be construed as if it read "Grantors"
whenever the sense of this Deed of Trust so requires and if
there shall be more than one Grantor, the obligations of the
Grantors shall be joint and several.
31. No Waivers, etc. Any failure by Beneficiary to
insist upon the strict performance by Grantor of any of the
terms and provisions of this Deed of Trust shall not be deemed
to be a waiver of any of the terms and provisions hereof, and
Beneficiary or Trustee, notwithstanding any such failure, shall
have the right thereafter to insist upon the strict performance
by Grantor of any and all of the terms and provisions of this
Deed of Trust to be performed by Grantor. Beneficiary may
release, regardless of consideration and without the necessity
for any notice to or consent by the beneficiary of any
subordinate deed of trust or the holder of any subordinate lien
on the Trust Property, any part of the security held for the
obligations secured by this Deed of Trust without, as to the
remainder of the security, in any way impairing or affecting
this Deed of Trust or the priority of this Deed of Trust over
any subordinate lien or deed of trust.
32. Governing Law, etc. This Deed of Trust
shall be governed by and construed in accordance with the
laws of the Commonwealth of Virginia.
33. WAIVER OF TRIAL BY JURY. GRANTOR, TRUSTEE AND
BENEFICIARY EACH HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE
TRIAL BY JURY IN ANY ACTION, CLAIM, SUIT OR PROCEEDING RELATING
TO THIS DEED OF TRUST AND FOR ANY COUNTERCLAIM BROUGHT THEREIN.
Grantor hereby waives all rights to interpose any counterclaim
in any suit brought by Beneficiary or Trustee hereunder and all
rights to have any such suit consolidated with any separate
suit, action or proceeding.
34. Incorporation by Reference. Grantor agrees that
in addition to all other remedies and rights provided for in
this Deed of Trust, this Deed of Trust shall be construed to
impose and confer upon the parties hereto, and the Beneficiary
hereunder, all duties, rights and obligations prescribed in
Section 55-59 and 55-59.1 through 55-59.4 of the Code of
Virginia, as amended and in effect as of the date of the
acknowledgement hereof, and further to incorporate herein the
following provisions, by the short-term references below, of
Sections 55-59 and 55-60 of the Code of Virginia:
(a) EXEMPTIONS WAIVED
(b) RENEWAL OR EXTENSIONS PERMITTED
(c) REINSTATEMENT PERMITTED
(d) SUBJECT TO ALL UPON DEFAULT
35. Certain Definitions. Unless the context clearly
indicates a contrary intent or unless otherwise specifically
provided herein, words used in this Deed of Trust shall be used
interchangeably in singular or plural form and the word
"Grantor" shall mean "each Grantor or any subsequent owner or
owners of the Trust Property or any part thereof or interest
therein," the word "Beneficiary" shall mean "Beneficiary or any
successor Indenture Trustee," the word "Trustee" shall mean
"Trustee and any successor trustee hereunder," the word "Notes"
shall mean "the Notes, the Indenture or any other evidence of
indebtedness secured by this Deed of Trust," the word "person"
shall include any individual, corporation, partnership, trust,
unincorporated association, government, governmental authority,
or other entity, and the words "Trust Property" shall include
any portion of the Trust Property or interest therein. Whenever
the context may require, any pronouns used herein shall include
the corresponding masculine, feminine or neuter forms, and the
singular form of nouns and pronouns shall include the plural
and vice versa. The captions in this Deed of Trust are for
convenience or reference only and in no way limit or amplify
the provisions hereof.
36. Reconveyance by Trustee. Upon written request of
Beneficiary stating that all sums secured hereby have been
paid, and upon payment by Grantor of a Trustee's fees, Trustee
shall reconvey to Grantor, or the person or persons legally
entitled thereto, without warranty, any portion of the Trust
Property then held hereunder. The recitals in such reconveyance
of any matters or facts shall be conclusive proof of the
truthfulness thereof. The grantee in any reconveyance may be
described as "the person or persons legally entitled thereto."
37. To the extent that (i) this Deed of Trust
creates a lien on, or contains covenants with respect to,
Equipment (other than fixtures), or Leases, Rents or
Contracts in respect of such Equipment, and (ii) the Company
Security and Pledge Agreement creates a security interest which
is perfected, in such Equipment, Leases, Rents or Contracts,
the provisions of the Company Security and Pledge Agreement
will control with respect to such Equipment, Leases, Rents or
Contracts.
38. Intercreditor Agreement. Anything to the contrary
set forth herein notwithstanding, this Deed of Trust shall be
subject to and governed by the terms and conditions of that
certain Intercreditor Agreement, dated of even date herewith,
by and among Beneficiary, Toronto- Dominion (Texas), Inc., as
Administrative Agent under the BIPCO Credit Agreement (as such
term is defined in the Intercreditor Agreement),
Toronto-Dominion (Texas), Inc., as Administrative Agent under
the BAI Credit Agreement (as such term is defined in the
Intercreditor Agreement), Grantor and Brant-Allen Industries,
Inc.
39. First Deed of Trust. The lien and all terms and
provisions of this Deed of Trust are subordinate and subject to
the lien and all terms and provisions of the First Deed of
Trust. To the extent the Grantor's performance of any
obligations under this Deed of Trust would result in a default
or breach by Grantor under the First Deed of Trust, then
Grantor shall have no duty to perform such obligation under the
Deed of Trust to the extent such performance would constitute a
default or breach under the First Deed of Trust. This Deed of
Trust has been duly executed by Grantor on December 1, 1997 and
is intended to be effective as of December 1, 1997.
BEAR ISLAND PAPER COMPANY, L.L.C.
By:/s/ Edward D. Sherrick
---------------------------------
Name: Edward D. Sherrick
Title: Vice President of Finance
STATE OF NEW YORK )
: ss.:
CITY/COUNTY OF NEW YORK )
The foregoing instrument was acknowledged before me
this 1st day of December, 1997, by Edward Sherrick, as Vice
President and Director of BEAR ISLAND PAPER COMPANY, L.L.C., a
Virginia limited liability company, on behalf of the company.
/s/ Andrea L. Delisi
---------------------------------
Andrea L. Delisi
Notary Public
[Notarial Stamp]
My Commission expires: September 29, 1999
Schedule A
Description of the Premises
[Virginia]
<PAGE>
EXHIBIT 4.7
EXECUTION COPY
TIMBERLANDS PLEDGE AGREEMENT
TIMBERLANDS PLEDGE AGREEMENT, dated as of December 1,
1997, made by BRANT-ALLEN INDUSTRIES, INC., a Delaware
corporation (the "Pledgor") in favor of CRESTAR BANK, a Virginia
banking corporation, as trustee (the "Trustee") for the benefit
of the holders of the Notes (as defined below).
W I T N E S S E T H :
WHEREAS, the Issuers (as defined below) have duly authorized
the creation and issuance of the Notes (as defined below), and
have authorized, executed and delivered the Indenture (as defined
below); and
WHEREAS, the obligations of the Issuers under the Notes and
the Indenture are secured by a pledge by the Pledgor of the
Timberlands Collateral (as defined below);
NOW, THEREFORE, in consideration of the premises, and to
induce (i) the Issuers to enter into the Indenture and (ii) to
enhance the creditworthiness of the Notes, the Pledgor hereby
agrees with the Trustee, for the benefit of Trustee and the
holders of the Notes, as follows:
I. Defined Terms. A. Capitalized terms used herein and not
otherwise defined herein shall have the meanings assigned thereto
in the Indenture.
B. The following terms shall have the following meanings:
"Agent": as defined in the definition of Intercreditor
Agreement.
"Agreement": this Timberlands Pledge Agreement, as the same
may be amended, modified or otherwise supplemented from time to
time.
"Bank Credit Agreement": the credit agreement, dated as of
December 1, 1997 (as amended, supplemented or otherwise modified
from time to time) among Bear Island Paper Company, LLC (the
"Paper Company"), Toronto-Dominion (Texas), Inc., as
administrative agent (in such capacity, the "Paper Company
Agent"), the arranger party thereto and the Lenders parties
thereto (the "Paper Company Lenders").
"Bear Island Timberlands Company L.L.C.": a limited
liability company duly formed and existing under the laws of the
Commonwealth of Virginia, which is the issuer of the Pledged LLC
Interests.
"Code": the Uniform Commercial Code from time to time in
effect in the State of New York.
"Collateral Documents": the pledge agreement, dated as of
December 1, 1997, made by the Pledgor in favor of the Trustee
(the "Soucy Pledge Agreement"), the pledge and security
agreement, dated as of December 1, 1997, made by the Paper
Company in favor of the Trustee (the "Pledge and Security
Agreement"), and this Agreement, in each case as the same may be
amended, modified or otherwise supplemented from time to time."
"Credit Agreements": the collective reference to the Bank
Credit Agreement and the Timberlands Loan.
"Indenture": the indenture, dated as of December 1, 1997,
among the Issuers, the Pledgor, F.F. Soucy Inc., Bear Island
Timberlands Company, L.L.C. and the Trustee, as amended,
supplemented or otherwise modified from time to time.
"Intercreditor Agreement": the intercreditor agreement,
dated as of December 1, 1997 among the Trustee, the Issuers and
Toronto Dominion (Texas), Inc., as agent for the Timberlands
Agent for the benefit of the Timberlands Lenders and as agent for
the Paper Company Agent for the benefit of the Paper Company
Lenders (the "Agent"), as amended, supplemented or otherwise
modified from time to time.
"Issuers": the collective reference to Bear Island Paper
Company, L.L.C. and Bear Island Finance Company II.
"Lenders": the collective reference to the Paper Company
Lenders and the Timberlands Lenders.
"Paper Company": means Bear Island Company LLC.
"Pledged LLC Interests": in each case, whether now existing
or hereafter acquired, all of the Pledgor's right, title and
interest in and to:
(a) equity interests of Bear Island Timberlands
Company, L.L.C., but not the Pledgor's obligations from time
to time as a holder of equity interests in Bear Island
Timberlands Company, L.L.C. (unless the Trustee or its
designee, on behalf of the Trustee, shall elect to become a
holder of interests in Bear Island Timberlands Company,
L.L.C. in connection with its exercise of remedies pursuant
to the terms hereof);
(b) any and all moneys due and to become due to the
Pledgor now or in the future by way of a distribution made
to the Pledgor in its capacity as a holder of equity
interests in the Bear Island Timberlands Company, L.L.C. or
otherwise in respect of the Pledgor's interest as a holder
of equity interests in the Bear Island Timberlands Company,
L.L.C.;
(c) any other property of the Bear Island Timberlands
Company, L.L.C. to which the Pledgor now or in the future
may be entitled in respect of its equity interests in the
Bear Island Timberlands Company, L.L.C. by way of
distribution, return of capital or otherwise;
(d) any other claim or right which the Pledgor now has
or may in the future acquire in respect of its equity
interests in the Bear Island Timberlands Company, L.L.C.;
(f) all certificates, options or rights of any nature
whatsoever that may be issued or granted by the Bear Island
Timberlands Company, L.L.C. with respect to the equity
interests of the Bear Island Timberlands Company, L.L.C. to
the Pledgor while this Agreement is in effect; and
(g) to the extent not otherwise included, all Proceeds
of any or all of the foregoing.
"Proceeds": all "proceeds" as such term is defined in
Section 9-306(1) of the Uniform Commercial Code in effect in the
State of New York on the date hereof and, in any event, shall
include, without limitation, all dividends or other income from
the Pledged LLC Interests, collections thereon or distributions
with respect thereto.
"Secured Obligations": the collective reference to (a) the
obligations of the Issuers under the Indenture, and (b) all
obligations and liabilities of the Pledgor that may arise under
or in connection with this Agreement or any other Collateral
Document to which the Pledgor is a party, whether on account of
fees, indemnities, costs, expenses or otherwise that are required
to be paid by the Pledgor pursuant to the terms thereof
(including without limitation all reasonable fees and
disbursements of counsel to the Trustee or to the Issuers that
are required to be paid to the Pledgor pursuant to the terms of
this Agreement or any other Collateral Document to which the
Pledgor is a party.
"Securities Act": the Securities Act of 1933, as amended.
"Senior Timberlands Pledge Agreement": Timberlands Pledge
Agreement, as defined in the Bank Credit Agreement and the
Timberlands Loan.
"Timberlands Collateral": the Pledged LLC Interests and all
Proceeds.
"Timberlands Collateral Account": any account established
to hold cash Proceeds, maintained under the dominion and control
of the Trustee, subject to withdrawal by the Trustee for the
account of the holders of the Notes only as provided in paragraph
VII(A) of this Agreement.
"Timberlands Loan": the credit agreement, dated as of
December 1, 1997 (as amended, supplemented or otherwise modified
from time to time) among the Pledgor, Toronto-Dominion (Texas),
Inc., as administrative agent (in such capacity, the "Timberlands
Agent") and the Lenders parties thereto (the "Timberlands
Lenders").
"Timberlands Lenders": as defined in the definition of the
Timberlands Credit Agreement.
C. The words "hereof," "herein" and "hereunder" and words
of similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this
Agreement, and section and paragraph references are to this
Agreement unless otherwise specified.
D. The meanings given to terms defined herein shall be
equally applicable to both the singular and plural forms of such
terms.
II. Pledge; Grant of Security Interest; Designation of
Trustee. (a) The Pledgor hereby grants to the Trustee, for the
benefit of the holders of the Notes, a security interest in the
Timberlands Collateral, subject only to the security interest in
the Timberlands Collateral pledged by the Pledgor pursuant to the
Senior Timberlands Pledge Agreement, as collateral security for
the prompt and complete payment and performance when due (whether
at the stated maturity, by acceleration or otherwise) of the
Secured Obligations of the Issuers.
III. Representations and Warranties. The Pledgor
represents and warrants that:
A. The Pledgor has the corporate power and authority and
the legal right to execute and deliver, to perform its
obligations under, and to grant the security interests in the
Timberlands Collateral pursuant to, this Agreement and has taken
all necessary corporate action to authorize its execution,
delivery and performance of, and grant of the security interests
in the Timberlands Collateral pursuant to, this Agreement.
B. This Agreement constitutes a legal, valid and binding
obligation of the Pledgor, enforceable in accordance with its
terms, and upon the filing of a UCC-1 financing statement in
appropriate form in the office of the Secretary of State of
Connecticut, the security interests created pursuant to this
Agreement will constitute a valid, perfected third priority
security interest in the Timberlands Collateral in favor of the
Trustee enforceable in accordance with its terms against all
creditors of the Pledgor and any Persons purporting to purchase
any Timberlands Collateral from the Pledgor, except in each case
as enforceability may be affected by bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other
similar laws relating to or affecting creditors' rights
generally, general equitable principles (whether considered in a
proceeding in equity or at law) and an implied covenant of good
faith and fair dealing.
C. The Pledged LLC Interests constitute all of the issued
and outstanding equity interests of the Timberland Issuer.
D. All of the Pledged LLC Interests have been duly and
validly issued.
E. The Pledgor is the owner of, and has title to, the
Pledged LLC Interests, free of any and all Liens or options in
favor of, or claims of, any other Person, except the security
interests and Liens created by the Senior Timberlands Pledge
Agreement.
IV. Covenants. The Pledgor covenants and agrees with the
Trustee that, from and after the date of this Agreement until
this Agreement is terminated and the security interests created
hereby are released in accordance with the terms hereof:
A. If the Pledgor shall, as a result of its ownership of
the Pledged LLC Interests, become entitled to receive or shall
receive any certificate (including, without limitation, any
certificate representing a stock dividend or a distribution in
connection with any reclassification, increase or reduction of
capital or any certificate issued in connection with any
reorganization), option or rights, whether in addition to, in
substitution of, as a conversion of, or in exchange for any
equity interests of the Pledged LLC Interests, or otherwise in
respect thereof, the Pledgor shall accept the same as the agent
of the Trustee, hold the same in trust for the Trustee and
deliver the same forthwith to the Trustee, in the exact form
received, duly indorsed by the Pledgor in blank, as applicable,
if required, together with an undated power covering such
certificate duly executed in blank by the Pledgor and with, if
the Trustee, so requests, signature guaranteed, to be held by the
Trustee, as applicable, subject to the terms hereof, the
Intercreditor Agreement and the Senior Timberlands Pledge
Agreement, as additional collateral security for the Secured
Obligations. Any sums paid upon or in respect of the Pledged LLC
Interests upon the liquidation or dissolution of the Bear Island
Timberlands Company, L.L.C. shall be paid over to the Trustee, as
applicable, to be held by it hereunder as additional collateral
security for the Secured Obligations, and in case any
distribution of capital shall be made on or in respect of the
Pledged LLC Interests or any property shall be distributed upon
or with respect to the Pledged LLC Interests, in each case
pursuant to the recapitalization or reclassification of the
capital of the Timberlands or pursuant to the reorganization
thereof, the property so distributed shall be delivered to the
Trustee to be held by it hereunder as additional collateral
security for the Secured Obligations. If any sums of money or
property so paid or distributed in respect of the Pledged LLC
Interests (other than distributions permitted to be made or
received pursuant to the Credit Agreements or the Indenture)
shall be received by the Pledgor, the Pledgor shall, until such
money or property is paid or delivered to the Trustee hold such
money or property in trust for the holders of the Notes,
segregated from other funds of the Pledgor, as additional
collateral security for the Secured Obligations.
B. Except as permitted by any Credit Agreement, so long as
such Credit Agreement is in effect, or the Indenture, without the
prior written consent of the Trustee, the Pledgor will not (1.)
vote to enable, or take any other action to permit, the Bear
Island Timberlands Company, L.L.C. to issue any stock or other
equity securities of any nature or to issue any other securities
convertible into or granting the right to purchase or exchange
for any stock or other equity securities of any nature of the
Bear Island Timberlands Company, L.L.C. except issuances of
equity interests to the Pledgor which constitute Timberlands
Collateral hereunder or under the Senior Timberlands Pledge
Agreement, (2.) sell, assign, transfer, exchange, or otherwise
dispose of, or grant any option with respect to, the Timberlands
Collateral, (3.) create, incur or permit to exist any Lien or
option in favor of, or any claim of any Person with respect to,
any of the Timberlands Collateral, or any interest therein,
except for the security interests created by this Agreement or
under the Senior Timberlands Pledge Agreement or (4.) enter into
any agreement or undertaking restricting the right or ability of
the Pledgor or the Trustee (after foreclosure) to sell, assign or
transfer any of the Timberlands Collateral other than such
restrictions under the Credit Agreements, the Senior Timberlands
Pledge Agreement, the Indenture, this Agreement or the other
Collateral Documents.
C. The Pledgor shall maintain the security interest created
by this Agreement as a perfected security interest, and shall
defend such security interests against claims and demands of all
Persons whomsoever except for permitted liens. At any time and
from time to time, upon the written request of the Trustee, and
at the sole expense of the Pledgor, the Pledgor will promptly and
duly execute and deliver such further instruments and documents
and take such further actions as the Trustee may reasonably
request for the purposes of obtaining or preserving the full
benefits of this Agreement and of the rights and powers herein
granted, including, without limitation, the filing of any
financing or continuation statements under the Uniform Commercial
Code (or similar laws) in effect in any jurisdiction with respect
to the security interests created hereby. If any amount payable
under or in connection with any of the Timberlands Collateral (to
the extent that such amounts are otherwise required by this
Agreement to be paid to the Trustee) shall be or become evidenced
by any promissory note, other instrument or chattel paper, such
note, instrument or chattel paper in excess of $500,000 shall
promptly upon receipt by the Pledgor be delivered to the Trustee,
duly endorsed in a manner satisfactory to the Trustee, to be held
as Timberlands Collateral pursuant to this Agreement.
D. With respect to the Pledged LLC Interests, the Pledgor
shall and shall cause the Bear Island Timberlands Company, L.L.C.
to, directly or indirectly, (i) perform and comply in all
material respects with all the terms and provisions of any
limited liability company agreement then in effect with respect
thereto and required to be performed or complied by it and
(ii) enforce any limited liability company agreement then in
effect in accordance with its terms.
E. The Pledgor shall pay, and save the Trustee harmless
from, any and all liabilities with respect to, or resulting from
any delay in paying, any and all stamp, excise, sales or other
similar taxes which may be payable or determined to be payable
with respect to any of the Timberlands Collateral or in
connection with any of the transactions contemplated by this
Agreement.
V. Voting Rights. No vote shall be cast or corporate right
exercised or other action taken which, in the Trustee's
reasonable judgment, would impair in any material respect the
Timberlands Collateral or which would be inconsistent with or
result in any violation of any provision of this Agreement, any
other Collateral Document or the Indenture.
VI. Rights of the Trustee. A. All money Proceeds received
by the Trustee hereunder shall be held by the Trustee in a
Timberlands Collateral Account. All Proceeds while held by the
Trustee in a Collateral Account (or by the Pledgor in trust for
the Trustee) shall continue to be held as collateral security for
all the Secured Obligations and shall not constitute payment
thereof until applied as provided in paragraph VII(A).
B. If an Event of Default shall occur and be continuing and
the Trustee gives notice of its intent to exercise such rights to
the Pledgor, to the extent permitted by the Intercreditor
Agreement, (1.) the Trustee shall have the right to receive any
and all cash dividends and distributions paid in respect of the
Pledged LLC Interests and make application thereof to the Secured
Obligations in such order as the Trustee may determine, and (2.)
all equity interest of the Pledged LLC Interests shall be
registered in the name of the Trustee or its nominee, and the
Trustee or its nominee may thereafter exercise (a.) all voting,
corporate and other rights pertaining to such Pledged LLC
Interests at any meeting of shareholders of the Bear Island
Timberlands Company, L.L.C. or otherwise and (b.) any and all
rights of conversion, exchange, subscription and any other
rights, privileges or options pertaining to such Pledged LLC
Interests as if it were the absolute owner thereof (including,
without limitation, the right to exchange at its discretion any
and all of the Pledged LLC Interests upon the merger,
consolidation, reorganization, recapitalization or other
fundamental change in the corporate structure of the Bear Island
Timberlands Company, L.L.C., or upon the exercise by the Pledgor
or the Trustee of any right, privilege or option pertaining to
such Pledged LLC Interests, and in connection therewith, the
right to deposit and deliver any and all of the Pledged LLC
Interests with any committee, depositary, transfer agent,
registrar or other designated agency upon such terms and
conditions as the Trustee may determine), all without liability
except to account for property actually received by it, but the
Trustee shall have no duty to the Pledgor to exercise any such
right, privilege or option and shall not be responsible for any
failure to do so or delay in so doing.
VII. Remedies. A. If an Event of Default shall have
occurred and be continuing, at any time at the Trustee's
election, the Trustee may apply all or any part of Proceeds held
in any Timberlands Collateral Account in payment of the Secured
Obligations in accordance with the Intercreditor Agreement and as
permitted by law.
B. If an Event of Default shall occur and be continuing,
the Trustee, on behalf of the holders of the Notes, may exercise,
in addition to all other rights and remedies granted in this
Agreement and in any other instrument or agreement securing,
evidencing or relating to the Secured Obligations, and as
permitted by the Intercreditor Agreement all rights and remedies
of a secured party under the Code. Without limiting the
generality of the foregoing, the Trustee, to the extent permitted
by law and the Intercreditor Agreement, without demand of
performance or other demand, presentment, protest, advertisement
or notice of any kind (except any notice required by law referred
to below) to or upon the Pledgor or any other Person (all and
each of which demands, defenses, advertisements and notices are
hereby waived), may in such circumstances forthwith collect,
receive, appropriate and realize upon the Timberlands Collateral,
or any part thereof, and/or may forthwith sell, assign, give
option or options to purchase or otherwise dispose of and deliver
the Timberlands Collateral or any part thereof (or contract to do
any of the foregoing), in one or more parcels at public or
private sale or sales, in the over-the-counter market, at any
exchange, broker's board or office of the Trustee or elsewhere
upon such terms and conditions as it may deem advisable and at
such prices as it may deem best, for cash or on credit or for
future delivery without assumption of any credit risk. The
Trustee shall have the right upon any such public sale or sales,
and, to the extent permitted by law and the Intercreditor
Agreement, upon any such private sale or sales, to purchase the
whole or any part of the Timberlands Collateral so sold, free of
any right or equity of redemption in the Pledgor, which right or
equity is waived or released upon the consummation of such sale.
The Trustee shall apply any Proceeds from time to time held by it
and the net proceeds of any such collection, recovery, receipt,
appropriation, realization or sale, after deducting all
reasonable costs and expenses of every kind incurred in respect
thereof or incidental to the care or safekeeping of any of the
Timberlands Collateral or in any way relating to the Timberlands
Collateral or the rights of the Trustee hereunder, including,
without limitation, reasonable attorneys' fees and reasonable
disbursements of counsel to the Trustee, to the payment in whole
or in part of the Secured Obligations, in accordance with the
Intercreditor Agreement and as permitted by law, and only after
such application and after the payment by the Trustee of any
other amount required by any provision of law, including, without
limitation, Section 9-504(1)(c) of the Code, need the Trustee
account for the surplus, if any, to the Pledgor. To the extent
permitted by applicable law, the Pledgor waives all claims,
damages and demands it may acquire against the Trustee arising
out of the exercise by the Trustee of any rights hereunder,
except to the extent arising out of negligence or bad faith of
the Trustee. If any notice of a proposed sale or other
disposition of Timberlands Collateral shall be required by law,
such notice shall be deemed reasonable and proper if given at
least 10 days before such sale or other disposition.
VIII. Registration Rights; Private Sales. A. If the
Trustee shall determine to exercise its right to sell any or all
of the Pledged LLC Interests pursuant to paragraph VII(B) hereof,
and if in the reasonable opinion of the Trustee it is necessary
or advisable to have the Pledged LLC Interests, or that portion
thereof to be sold, registered under the provisions of the
Securities Act, the Pledgor will cause the Timberland Issuer
thereof to (1.) execute and deliver, and cause the directors and
officers of the Timberland Issuer to execute and deliver, all
such instruments and documents, and do or cause to be done all
such other acts as may be, in the reasonable opinion of the
Trustee, necessary or advisable to register the Pledged LLC
Interests, or that portion thereof to be sold, under the
provisions of the Securities Act, (2.) to use its reasonable
efforts to cause the registration statement relating thereto to
become effective and to remain effective for a period of one year
from the date of the first public offering of the Pledged LLC
Interests, or that portion thereof to be sold, and (3.) to make
all amendments thereto and/or to the related prospectus which, in
the reasonable opinion of the Trustee, are necessary or
advisable, all in conformity with the requirements of the
Securities Act and the rules and regulations of the Securities
and Exchange Commission applicable thereto. The Pledgor agrees
to cause the Timberland Issuer to comply with the provisions of
the securities or "Blue Sky" laws of any and all jurisdictions of
the United States which the Trustee shall designate and to make
available to its security holders, as soon as practicable, an
earnings statement (which need not be audited) which will satisfy
the provisions of Section 11(a) of the Securities Act.
B. The Pledgor recognizes that the Trustee may be unable to
effect a public sale of any or all the Pledged LLC Interests, by
reason of certain prohibitions contained in the Securities Act
and applicable state securities laws or otherwise, and may be
compelled to resort to one or more private sales thereof to a
restricted group of purchasers which will be obliged to agree,
among other things, to acquire such securities for their own
account for investment and not with a view to the distribution or
resale thereof. The Pledgor acknowledges and agrees that any
such private sale may result in prices and other terms less
favorable than if such sale were a public sale and,
notwithstanding such circumstances, agrees that any such private
sale shall be deemed to have been made in a commercially
reasonable manner. The Trustee shall be under no obligation to
delay a sale of any of the Pledged LLC Interests for the period
of time necessary to permit the Bear Island Timberlands Company,
L.L.C. thereof to register such securities for public sale under
the Securities Act, or under applicable state securities laws of
the United States, even if the Bear Island Timberlands Company,
L.L.C. would agree to do so.
C. The Pledgor further agrees to use its reasonable efforts
to do or cause to be done all such other acts as may be necessary
to make such sale or sales of all or any portion of the Pledged
LLC Interests pursuant to this Section valid and binding and in
compliance with any and all other applicable Requirements of Law.
The Pledgor further agrees that a breach of any of the covenants
contained in this Section will cause irreparable injury to the
Trustee, that the Trustee have no adequate remedy at law in
respect of such breach and, as a consequence, that each and every
covenant contained in this Section shall be specifically
enforceable against the Pledgor, and the Pledgor hereby waives
and agrees not to assert any defenses against an action for
specific performance of such covenants except for a defense that
no Event of Default has occurred under the Indenture.
IX. Irrevocable Authorization and Instruction to Bear
Island Timberlands Company, L.L.C.. The Pledgor hereby
authorizes and instructs the Bear Island Timberlands Company,
L.L.C. to comply with any instruction received by it from the
Trustee in writing that (a) states that an Event of Default has
occurred and is continuing and (b) is otherwise in accordance
with the terms of this Agreement, without any other or further
instructions from the Pledgor, and the Pledgor agrees that the
Bear Island Timberlands Company, L.L.C. shall be fully protected
in so complying.
X. Trustee's Appointment as Attorney-in-Fact. A. The
Pledgor hereby irrevocably constitutes and appoints the Trustee
and any officer or agent of the Trustee, with full power of
substitution, as its true and lawful attorney-in-fact with full
irrevocable power and authority in the place and stead of the
Pledgor and in the name of the Pledgor or in the Trustee's own
name, from time to time in the Trustee's discretion, for the
purpose of carrying out the terms of this Agreement, to take any
and all appropriate action and to execute any and all documents
and instruments which may be necessary or desirable to accomplish
the purposes of this Agreement, including, without limitation,
any financing statements, endorsements, assignments or other
instruments of transfer, which power of attorney is only
exercisable if an Event of Default shall have occurred and be
continuing.
B. The Pledgor hereby ratifies all that said attorneys
shall lawfully do or cause to be done pursuant to the power of
attorney granted in paragraph X(A). 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 in
accordance with the terms hereof.
XI. Duty of Trustee. The Trustee's sole duty with respect
to the custody, safekeeping and physical preservation of the
Timberlands Collateral in its possession, under Section 9-207 of
the Code or otherwise, shall be to deal with it in the same
manner as the Trustee deals with similar securities and property
for its own account, except that after the occurrence and during
the continuance of an Event of Default the Trustee shall have no
obligation to invest funds held in any Collateral Account and may
hold the same as demand deposits. Neither the Trustee nor any of
its respective directors, officers, employees or agents shall be
liable for failure to demand, collect or realize upon any of the
Timberlands Collateral or for any delay in doing so (unless the
same shall result from the gross negligence or willful misconduct
of such Person) or shall be under any obligation to sell or
otherwise dispose of any Timberlands Collateral upon the request
of the Pledgor or any other Person or to take any other action
whatsoever with regard to the Timberlands Collateral or any part
thereof.
XII. Execution of Financing Statements. Pursuant to
Section 9-402 of the Code, the Pledgor authorizes the Trustee to
file financing statements with respect to the Timberlands
Collateral without the signature of the Pledgor in such form and
in such filing offices as the Trustee reasonably determines
appropriate to perfect the security interests of the Trustee
under this Agreement. A carbon, photographic or other
reproduction of this Agreement shall be sufficient as a financing
statement for filing in any jurisdiction.
XIII. Authority of Trustee. The Pledgor acknowledges that
the rights and responsibilities of the Trustee under this
Agreement with respect to any action taken by the Trustee or the
exercise or non-exercise by the Trustee of any option, voting
right, request, judgment or other right or remedy provided for
herein or resulting or arising out of this Agreement shall, as
between the Trustee and the noteholders, be governed by the
Indenture and the Intercreditor Agreement, but, as between the
Trustee and the Pledgor, the Trustee shall be conclusively
presumed to be acting as a fiduciary pursuant to the Indenture
with full and valid authority so to act or refrain from acting,
and neither the Pledgor nor the Bear Island Timberlands Company,
L.L.C. shall be under any obligation, or entitlement, to make any
inquiry respecting such authority.
XIV. Notices. All notices, requests and demands to or upon
the Trustee or the Pledgor to be effective shall be in writing
(including by telecopy) and, unless otherwise expressly provided
herein, shall be deemed to have been duly given or made when
delivered or three Business Days after being deposited in the
mails, postage prepaid, or in the case of telecopy notice, when
received, addressed as follows:
1. if to the Trustee, at its address or transmission number
for notices provided below:
Crestar Bank
Attention: Corporate Trust Department
919 Main Street, 10th Floor
Richmond, VA 23219
Phone: (804) 782-5726
Fax: (804) 782-7855
2. if to the Pledgor, at its address or transmission
number for notices set forth under its signature below.
The Trustee and the Pledgor may change their addresses and
transmission numbers for notices by notice in the manner provided
in this Section.
XV. Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions
hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such
provision in any other jurisdiction.
XVI. Amendments in Writing; No Waiver; Cumulative
Remedies. A. None of the terms or provisions of this Agreement
may be waived, amended, supplemented or otherwise modified except
by a written instrument executed by the Pledgor and the Trustee,
provided that any provision of this Agreement may be waived by
the Trustee in a letter or agreement executed by the Trustee or
by telex or facsimile transmission from the Trustee.
B. The Trustee shall not (except by a written instrument
pursuant to paragraph XVI(A) hereof), delay, indulgence, omission
or otherwise be deemed to have waived any right or remedy
hereunder or to have acquiesced in any Default or Event of
Default or in any breach of any of the terms and conditions
hereof. No failure to exercise, nor any delay in exercising, on
the part of the Trustee, any right, power or privilege hereunder
shall operate as a waiver thereof. No single or partial exercise
of any right, power or privilege hereunder shall preclude any
other or further exercise thereof or the exercise of any other
right, power or privilege. A waiver by the Trustee of any right
or remedy hereunder on any one occasion shall not be construed as
a bar to any right or remedy which the Trustee would otherwise
have on any future occasion.
C. The rights and remedies herein provided are cumulative,
may be exercised singly or concurrently and are not exclusive of
any other rights or remedies provided by law.
XVII. Senior Timberlands Pledge Agreement. The lien and
all terms and provisions on this Agreement are subordinate and
subject to the lien and all terms and provisions of the Senior
Timberlands Pledge Agreement. Subject to the provisions of the
Intercreditor Agreement, to the extent the Pledgor's performance
of any obligation under this Agreement would result in a default
or breach by the Pledgor under the Senior Timberlands Pledge
Agreement, then Pledgor shall have no duty to perform such
obligation under this Agreement to the extent such performance
would constitute a default under the Senior Timberlands Pledge
Agreement. Notwithstanding any other provision in this
Agreement, the Trustee will not accept possession of any
Timberlands Collateral or take any action with respect to the
Timberlands Collateral (including, without limitation, the
exercise of any remedies) except in accordance with and as
permitted by the Intercreditor Agreement
XVIII. Limitation on Recourse. Anything herein to contrary
notwithstanding, the Trustee shall have recourse in respect of
the Secured Obligations solely to the Timberlands Collateral and
not to the Pledgor personally or to assets of the Pledgor other
than the Timberlands Collateral.
XIX. Intercreditor Agreement. Anything to the contrary set
forth herein notwithstanding, this Agreement shall be subject to
and governed by the terms and conditions of the Intercreditor
Agreement.
XX. Controlling Agreement. In the case of any conflict,
inconsistency, or ambiguity between the terms of (i) the
Indenture and this Agreement, the Indenture shall control and
(ii) the Senior Soucy Pledge Agreement and this Agreement, the
Senior Soucy Pledge Agreement shall control.
XXI. Section Headings. The section headings used in this
Agreement are for convenience of reference only and are not to
affect the construction hereof or be taken into consideration in
the interpretation hereof.
XXII. Term of this Agreement. This Agreement shall
continue in full force and effect until the Obligations and the
obligations of the Pledgor hereunder shall be paid in full and
the Commitments shall have been terminated. Upon such payment
and termination, this Agreement shall automatically terminate and
the security interests, pledges and liens hereunder released and
the Trustee shall, upon the request of the Pledgor and at the
Pledgor's expense, execute and deliver to the Pledgor such
documents and instruments evidencing such termination and
release.
XXIII. Successors and Assigns. This Agreement shall be
binding upon the successors and assigns of the Pledgor and shall
inure to the benefit of the Trustee and their successors and
assigns.
XXIV. Governing Law. This Agreement shall be governed by,
and construed and interpreted in accordance with, the law of the
State of New York.
IN WITNESS WHEREOF, the undersigned has caused this
Agreement to be duly executed and delivered as of the date first
above written.
BRANT-ALLEN INDUSTRIES, INC.
By /s/ Edward D. Sherrick
Title Senior Vice President
Address for Notices:
Post Office Box 3443
80 Field Point Road
Greenwich, Connecticut 06830
Phone: 203-661-3344
Fax: 203-661-3349
ACKNOWLEDGEMENT AND CONSENT
The undersigned hereby acknowledges receipt of a copy of the
Pledge Agreement dated December 1, 1997, made by Brant-Allen
Industries, Inc. for the benefit of Crestar Bank, as Trustee (the
"Pledge Agreement"). The undersigned agrees for the benefit of
the Trustee as follows:
1. The undersigned will be bound by the terms of the Pledge
Agreement and will comply with such terms insofar as such terms
are applicable to the undersigned.
2. The undersigned will notify the Trustee promptly in
writing of the occurrence of any of the events described in
paragraph IV(A) of the Pledge Agreement.
3. The terms of paragraph IX of the Pledge Agreement shall
apply to it, mutatis mutandis, with respect to all actions that
may be required of it under or pursuant to or arising out of
Section 8 of the Pledge Agreement.
4. The undersigned agrees that it will not take any action,
or fail to take any action, that will permit the Pledged LLC
Interests to become "securities" within the meaning of Article 8
of the Uniform Commercial Code of the State of New York (the
"NYUCC") unless (i) the Bear Island Timberlands Company, L.L.C.
shall have provided 30 days prior written notice to the Trustee
and (ii) at the sole expense of the Bear Island Timberlands
Company, L.L.C., the Bear Island Timberlands Company, L.L.C.
shall promptly and duly execute and deliver such further
instruments and documents, and take such further action as the
Trustee shall reasonably request to ensure that the Trustee has
"control" of such securities within the meaning of Article 8 of
the NYUCC for the purposes of obtaining or preserving the full
benefits of the Timberlands Pledge Agreement and of the rights
and powers granted therein.
BEAR ISLAND TIMBERLANDS COMPANY,
L.L.C.
By ____________________________
Title ________________________
Address for Notices:
Telex: ________________________
Fax: __________________________
SCHEDULE 1
TO PLEDGE AGREEMENT
DESCRIPTION OF PLEDGED LLC INTERESTS
Percentage
Type of Interest Interest
Membership 100%
Interest
<PAGE>
EXHIBIT 4.9
DEED OF MOVABLE HYPOTHEC
WITHOUT DELIVERY
ON THIS FIRST (1ST) DAY OF DECEMBER IN THE YEAR ONE
THOUSAND NINE HUNDRED AND NINETY-SEVEN (1997);
BEFORE: MTRE. DAVID M. KLINEBERG, the undersigned Notary
for the Province of Quebec, practising in the City of
Montreal;
APPEARED: BRANT-ALLEN INDUSTRIES, INC., a corporation
duly formed under the laws of Delaware,
hereinacting and represented by Thomas R. M. Davis,
its authorized representative, duly authorized in
virtue of a resolution adopted by the unanimous
consent of its Directors dated November 21,
1997, a certified copy of which has been
annexed hereto after having been signed by the
said representative for identification with and
in the presence of the undersigned Notary.
(hereinafter called the "Grantor");
CRESTAR BANK, a Virginia Banking Corporation,
acting in its capacity of trustee and fonde de
pouvoir for the Holders under the Indenture (as
such terms are defined hereinafter),
hereinacting and represented by Dominique
Belisle, its authorized representative, duly
authorized as she so declares.
(hereinafter called the "Trustee");
WHEREAS a trust Indenture dated as of December 1,
1997 was executed among Bear Island Paper Company,
L.L.C., Bear Island Finance Company II (collectively, the
"Issuers"), Bear Island Timberlands Company, L.L.C.,
"Soucy Inc." (as hereinafter defined), the Grantor and
the Trustee, as trustee (such trust indenture, as
amended, supplemented or otherwise modified from time to
time being herein referred to as the "Indenture");
WHEREAS the Notes (as defined in the Indenture) are
secured under the Indenture by hypothec on the Soucy
Collateral (as defined hereinafter);
NOW, THEREFORE, in consideration of the
premises and to induce Issuers (as defined in the
Indenture) to enter into the Indenture and to enhance the
creditworthiness of the Notes, the Grantor hereby agrees
with the Trustee, for the benefit of the holders of the
Notes (the "Holders"), as follows:
1. Defined Terms. (a) Capitalized terms not
defined herein shall be as defined in the Indenture.
(b) The following terms shall have the following
meanings:
"Bank Credit Agreement": the collective reference
to the Paper Company Credit Agreement and the Timberlands
Credit Agreement.
"Bank Pledge Agreement": the Pledge Agreement
between the Grantor and the Toronto-Dominion (Texas),
Inc. as Timberlands Agent and as Paper Company Agent
governed by the laws of New York which, together with
the Bank Hypothec, is referred to as the Soucy Pledge
Agreement in the Bank Credit Agreement.
"Bank Hypothec": the Deed of Hypothec between the
Grantor and the Toronto-Dominion (Texas), Inc. as
Timberlands Agent and as Paper Company Agent governed by
the laws of Quebec which, together with the Bank Pledge
Agreement, is referred to as the Soucy Pledge Agreement
in the Bank Credit Agreement.
"Code": the Civil Code of Quebec.
"Collateral Documents": the Timberlands Pledge
Agreement, the Company Pledge and Security Agreement, the
Note Pledge Agreement and this Deed.
"Deed": this Deed of Movable Hypothec Without
Delivery, as the same may be amended, modified or
otherwise supplemented from time to time, which Deed is
referred to as the Hypothec Agreement in the Indenture.
"Governmental Authority": as defined in the Paper
Company Credit Agreement.
"Hypothecated Stock": the 271,479 common shares of
Capital Stock issued by Soucy Inc. represented by share
certificate C-5, together with all stock certificates,
options or rights of any nature whatsoever that may be
issued or granted by the Soucy Inc. to the Grantor while
this Deed is in effect.
"Intercreditor Agreement": the intercreditor
agreement, dated as of December 1, 1997, among the
Trustee, the Issuers, Toronto-Dominion (Texas), Inc. as
agent for the Timberlands Agent, for the benefit of the
Timberlands Lenders, and the Paper Company Agent, for the
benefit of the Paper Company Lenders (the "Agent"), as it
may be amended, supplemented or otherwise modified from
time to time.
"Soucy Inc.": F.F. Soucy, Inc., being the company
which is the issuer of the Hypothecated Stock.
"Lenders": the collective reference to the Paper
Company Lenders and the Timberlands Lenders.
"Lien": as defined in the Indenture.
"Note Pledge Agreement": the Pledge Agreement
between the Grantor and the Trustee governed by the laws
of New York and referred to as the Soucy Pledge Agreement
in the Indenture.
"Paper Company": as defined in the definition of
Paper Company Credit Agreement.
"Paper Company Agent": as defined in the definition
of Paper Company Credit Agreement.
"Paper Company Credit Agreement": the Credit
Agreement, dated as of December 1, 1997 (as amended,
supplemented or otherwise modified from time to time)
among Bear Island Paper Company, LLC (the "Paper
Company"), Toronto-Dominion (Texas), Inc., as
administrative agent and fonde de pouvoir (in such
capacity, the "Paper Company Agent"), the arranger party
thereto and the Lenders parties thereto (the "Paper
Company Lenders").
"Paper Company Lenders": as defined in the
definition of the Paper Company Credit Agreement.
"Proceeds": all proceeds, fruits and revenues from
the Hypothecated Shares and, in any event, shall include,
without limitation, all dividends or other income from
the Hypothecated Stock, collections thereon or
distributions with respect thereto and whatever is
received upon the sale, exchange, collection or other
disposition of collateral or proceeds.
"Requirement of Law": as defined in the Bank Credit
Agreement.
"Secured Obligations": the collective reference to
(a) the obligations of the Issuers under the Indenture
and (b) all obligations and liabilities of the Grantor
that may arise under or in connection with this Deed, or
any other Collateral Document to which the Grantor is a
party, whether on account of fees, indemnities, costs,
expenses or otherwise that are required to be paid by the
Grantor pursuant to the terms thereof (including, without
limitation, all reasonable fees and disbursements of
counsel to the Trustee or to the Issuers that are
required to be paid the Grantor pursuant to the terms of
this Deed or any other Collateral Document to which the
Grantor is a party).
"Securities Act": the Securities Act of the
Province of Quebec, as amended, together with the
securities laws of any other jurisdiction in which the
Hypothecated Stock may be sold.
"Soucy Collateral": the Hypothecated Stock and all
Proceeds.
"Soucy Collateral Account": any account established
to hold cash Proceeds, maintained under the sole dominion
and control of the Trustee, subject to withdrawal by the
Trustee for the account of the Holders only as provided
in paragraph 8(a).
"Timberlands Agent": as defined in the definition
of the Timberlands Credit Agreement.
"Timberlands Credit Agreement": the Credit
Agreement, dated as of December 1, 1997 (as amended,
supplemented or otherwise modified from time to time)
among the Grantor, Toronto-Dominion (Texas), Inc., as
administrative agent and fonde de pouvoir (in such
capacity, the "Timberlands Agent") and the Lenders
parties thereto (the "Timberlands Lenders").
"Timberlands Lenders": as defined in the definition
of the Timberlands Credit Agreement.
(c) The words "hereof," "herein" and "hereunder"
and words of similar import when used in this Deed shall
refer to this Deed as a whole and not to any particular
provision of this Deed, and section and paragraph
references are to this Deed unless otherwise specified.
(d) The meanings given to terms defined herein
shall be equally applicable to both the singular and
plural forms of such terms.
2. Grant of Hypothec. The Grantor hereby grants to
the Trustee, as fonde de pouvoir and as Trustee under the
Indenture, a hypothec and security interest in the amount
of TWO HUNDRED AND TWENTY FIVE MILLION CANADIAN DOLLARS
(CDN$ 225,000,000) bearing interest from the date hereof
at the rate of twenty-five percent per annum (25%) on the
Soucy Collateral, as collateral security for the prompt
and complete payment and performance when due (whether at
the stated maturity, by acceleration or otherwise) of the
Secured Obligations (for the benefit of the Holders).
Any future obligation secured hereby shall be deemed
to be one in respect of which the Grantor has once again
obligated itself in accordance with article 2797 of the
Code.
3. Appointment of Trustee as Fonde de Pouvoir. The
Grantor hereby acknowledges and agrees and accepts the
appointment of the Trustee and further irrevocably
appoints the Trustee, hereto accepting, to act as fonde
de pouvoir on behalf of the Holders in order to receive
and hold any right, hypothec and security interest
created hereby and hereafter created and constituted as
continuing security for the performance of the Secured
Obligations.
4. Representations and Warranties. The Grantor
represents and warrants that:
(a) The Grantor has the corporate power and
authority and the legal right to execute and deliver, to
perform its obligations under, and to grant the hypothecs
in the Soucy Collateral pursuant to, this Deed and has
taken all necessary corporate action to authorize its
execution, delivery and performance of, and grant of the
hypothecs in the Soucy Collateral pursuant to, this Deed.
(b) This Deed constitutes a legal, valid and
binding obligation of the Grantor, enforceable in
accordance with its terms and the hypothecs created
pursuant to this Deed will constitute valid, perfected
hypothecs in the Soucy Collateral in favor of the Trustee
as fonde de pouvoir, enforceable in accordance with its
terms against all creditors of the Grantor and any
Persons purporting to purchase any Soucy Collateral from
the Grantor, except as against the hypothecs and security
interests created pursuant to the Bank Pledge Agreement
and the Bank Hypothec, and as enforceability may be
affected by bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and other similar
laws relating to or affecting creditors' rights
generally, general equitable principles (whether
considered in a proceeding in equity or at law) and an
implied covenant of good faith and fair dealing.
(c) The shares of Hypothecated Stock constitute 65%
of all the issued and outstanding shares of all classes
of the capital stock of Soucy Inc.
(d) All the shares of the Hypothecated Stock have
been duly and validly issued and are fully paid and
nonassessable.
(e) The Grantor is the record and beneficial owner
of, and has title to, the Hypothecated Stock, free of any
and all Liens or options in favor of, or claims of, any
other Person, except the hypothecs created by this Deed
and the pledge and security interest granted in the Note
Pledge Agreement and Liens pursuant to the Bank Pledge
Agreement and the Bank Hypothec (collectively, the
"Permitted Liens").
(f) There is no shareholders agreement in
connection with the Hypothecated Stock and there is no
restriction in the constitution documents or articles of
association of Soucy Inc. regarding the assignment or
transfer the Hypothecated Stock other than the
restrictions pertaining to a closed company pursuant to
the Securities Act (Quebec).
(g) The head office of Soucy Inc. is located in the
Province of Quebec.
The Trustee represents and warrants that it has the
corporate power and authority to execute and perform its
rights and obligations hereunder, including to act as
Trustee and fonde de pouvoir for all purposes under this
Deed.
5. Covenants. The Grantor covenants and agrees
with the Trustee that, from and after the date of this
Deed until this Deed is terminated and the hypothecs
created hereby are released in accordance with the terms
hereof:
(a) If the Grantor shall, as a result of its
ownership of the Hypothecated Stock, become entitled to
receive or shall receive any stock certificate
(including, without limitation, any certificate
representing a stock dividend or a distribution in
connection with any reclassification, increase or
reduction of capital or any certificate issued in
connection with any reorganization), option or rights,
whether in addition to, in substitution of, as a
conversion of, or in exchange for any shares of the
Hypothecated Stock, or otherwise in respect thereof, the
Grantor shall accept the same as the agent of the
Trustee, hold the same in trust for the Trustee and
deliver the same forthwith to the Trustee in the exact
form received, duly endorsed by the Grantor to the
Trustee in blank, if required, together with an undated
stock power covering such certificate duly executed in
blank by the Grantor and with, if the Trustee so
requests, signature guaranteed, to be held by the
Trustee, subject to the terms hereof, the Intercreditor
Agreement, the Bank Pledge Agreement, the Note Pledge
Agreement and the Bank Hypothec as additional collateral
security for the Secured Obligations. Any sums paid upon
or in respect of the Hypothecated Stock upon the
liquidation or dissolution of Soucy Inc. shall be paid
over to the Trustee to be held by it hereunder as
additional collateral security for the Secured
Obligations, and in case any distribution of capital
shall be made on or in respect of the Hypothecated Stock
or any property shall be distributed upon or with respect
to the Hypothecated Stock, in each case pursuant to the
recapitalization or reclassification of the capital of
Soucy Inc. or pursuant to the reorganization thereof, the
property so distributed shall be delivered to the Trustee
to be held by it hereunder as additional collateral
security for the Secured Obligations. If any sums of
money or property so paid or distributed in respect of
the Hypothecated Stock (other than distributions
permitted to be made or received pursuant to the Bank
Credit Agreement or the Indenture) shall be received by
the Grantor, the Grantor shall, until such money or
property is paid or delivered to the Trustee, hold such
money or property as agent for the Trustee, segregated
from other funds of the Grantor, as additional collateral
security for the Secured Obligations.
(b) Except as permitted by either of the Bank
Credit Agreements, so long as such Bank Credit Agreement
is in effect, or the Indenture, without the prior written
consent of the Trustee, the Grantor will not (1) vote to
enable, or take any other action to permit, Soucy Inc. to
issue any stock or other equity securities of any nature
or to issue any other securities convertible into or
granting the right to purchase or exchange for any stock
or other equity securities of any nature of Soucy Inc.
except issuances of equity interests to the Grantor which
constitute Soucy Collateral hereunder or under the Note
Pledge Agreement, the Bank Pledge Agreement or the Bank
Hypothec, (2) sell, assign, transfer, exchange, or
otherwise dispose of, or grant any option with respect
to, the Soucy Collateral or any other shares of Capital
Stock of Soucy Inc. owned by the Grantor, (3) create,
incur or permit to exist any Lien or option in favor of,
or any claim of any Person with respect to, any of the
Soucy Collateral or any other shares of Capital Stock of
the Soucy Inc. owned by the Grantor, or any interest
therein, except for the hypothecs created by this Deed
and the Permitted Liens or (4) enter into any agreement
or undertaking restricting the right or ability of the
Grantor or the Trustee (after exercise of its hypothecary
recourses) to sell, assign or transfer any of the Soucy
Collateral other than such restrictions under the Bank
Credit Agreement, the Bank Pledge Agreement, the Bank
Hypothec, the Note Pledge Agreement and the Indenture.
(c) The Grantor shall maintain the hypothecs
created by this Deed as perfected hypothecs and shall
defend such hypothecs against claims and demands of all
Persons whomsoever except for Permitted Liens. At any
time and from time to time, upon the written request of
the Trustee, and at the sole expense of the Grantor, the
Grantor will promptly and duly execute and deliver such
further instruments and documents and take such further
actions as the Trustee may reasonably request for the
purposes of obtaining or preserving the full benefits of
this Deed and of the rights and powers herein granted.
If any amount payable under or in connection with any of
the Soucy Collateral (to the extent such amounts are
otherwise required by this Deed to be paid to the
Trustee) shall be or become evidenced by any promissory
note, other instrument or chattel paper, such note,
instrument or chattel paper in excess of US$ 500,000
shall form part of the Proceeds forming part of the Soucy
Collateral hypothecated pursuant to this Deed.
(d) The Grantor shall pay, and save the Trustee
harmless from, any and all liabilities with respect to,
or resulting from any delay in paying, any and all stamp,
excise, sales or other similar taxes which may be payable
or determined to be payable with respect to any of the
Soucy Collateral or in connection with any of the
transactions contemplated by this Deed, other than taxes
covered by Section 2.18 of the Paper Company Credit
Agreement or Section 2.15 of the Timberlands Credit
Agreement.
(e) The Grantor shall inform the Trustee promptly
of any change in its name.
6. Voting Rights. No vote shall be cast or
corporate right exercised or other action taken which, in
the Trustee's reasonable judgment, would impair in any
material respect the Soucy Collateral or which would be
inconsistent with or result in any violation of any
provision of this Deed, the Indenture or any other
Collateral Document.
7. Rights of the Trustee. (a) All money Proceeds
received by the Trustee hereunder shall be held by the
Trustee in a Soucy Collateral Account. All Proceeds
while held by the Trustee in a Soucy Collateral Account
(or by the Grantor as agent for the Trustee) shall
continue to be held as collateral security for all the
Secured Obligations and shall not constitute payment
thereof until applied as provided in paragraph 8(a).
(b) If an Event of Default shall occur and be
continuing and the Trustee shall give notice of its
intent to exercise such rights to the Grantor, to the
extent permitted by the Intercreditor Agreement and by
applicable law, (1) the Trustee shall have the right to
receive any and all cash dividends paid in respect of the
Hypothecated Stock and make application thereof to the
Secured Obligations in such order as the Trustee may
determine, and (2) all shares of the Hypothecated Stock
shall be registered in the name of the Trustee or its
nominee, and the Trustee or its nominee may thereafter
exercise (A) all voting, corporate and other rights
pertaining to such shares of the Hypothecated Stock at
any meeting of shareholders of Soucy Inc. or otherwise
and (B) any and all rights of conversion, exchange,
subscription and any other rights, privileges or options
pertaining to such shares of the Hypothecated Stock as if
it were the absolute owner thereof (including, without
limitation, the right to exchange at its discretion any
and all of the Hypothecated Stock upon the merger,
consolidation, reorganization, recapitalization or other
fundamental change in the corporate structure of Soucy
Inc., or upon the exercise by the Grantor or the Trustee
of any right, privilege or option pertaining to such
shares of the Hypothecated Stock, and in connection
therewith, the right to deposit and deliver any and all
of the Hypothecated Stock with any committee, depositary,
transfer agent, registrar or other designated agency upon
such terms and conditions as the Trustee may determine),
all without liability except to account for property
actually received by it, but the Trustee shall have no
duty to the Grantor to exercise any such right, privilege
or option and shall not be responsible for any failure to
do so or delay in so doing.
8. Remedies. (a) If an Event of Default shall
have occurred and be continuing, at any time at the
Trustee's election, the Trustee may, to the extent
permitted by applicable law, apply all or any part of
Proceeds held in any Soucy Collateral Account in payment
of the Secured Obligations ratably in accordance with the
Intercreditor Agreement and as permitted by law.
(b) If an Event of Default shall occur and be
continuing, the Trustee may exercise, in addition to all
other rights and remedies granted in this Deed and in any
other instrument or agreement securing, evidencing or
relating to the Secured Obligations, and as permitted in
the Intercreditor Agreement, all rights and remedies of a
hypothecary creditor under the Code. Without limiting
the generality of the foregoing, the Trustee, to the
extent permitted by applicable law and the Intercreditor
Agreememt, without demand of performance or other demand,
presentment, protest, advertisement or notice of any kind
(except any notice required by law referred to below) to
or upon the Grantor or any other Person (all and each of
which demands, defenses, advertisements and notices are
hereby waived), may in such circumstances forthwith
collect, receive, appropriate and realize upon the Soucy
Collateral, or any part thereof, and/or may forthwith
sell, assign, give option or options to purchase or
otherwise dispose of and deliver the Soucy Collateral or
any part thereof (or contract to do any of the
foregoing), in one or more parcels at public or private
sale or sales, in the over-the-counter market, at any
exchange, broker's board or office of the Trustee or
elsewhere upon such terms and conditions as it may deem
advisable and at such prices as it may deem best, for
cash or on credit or for future delivery without
assumption of any credit risk. The Trustee and any
Holder shall have the right upon any such public sale or
sales, and, to the extent permitted by law and the
Intercreditor Agreement, upon any such private sale or
sales, to purchase the whole or any part of the Soucy
Collateral so sold, free of any right or equity of
redemption in the Grantor, which right or equity is
waived or released upon the consummation of such sale.
The Trustee shall apply any Proceeds from time to time
held by it and the net proceeds of any such collection,
recovery, receipt, appropriation, realization or sale,
after deducting all reasonable costs and expenses of
every kind incurred in respect thereof or incidental to
the care or safekeeping of any of the Soucy Collateral or
in any way relating to the Soucy Collateral or the rights
of the Trustee hereunder, including, without limitation,
reasonable attorneys' fees and disbursements of counsel
to the Trustee, to the payment in whole or in part of the
Secured Obligations ratably in accordance with the
Intercreditor Agreement and as permitted by law, and only
after such application and after the payment by the
Trustee of any other amount required by any provision of
law need the Trustee account for the surplus, if any, to
the Grantor. To the extent permitted by applicable law,
the Grantor waives all claims, damages and demands it may
acquire against the Trustee arising out of the exercise
by it of any rights hereunder except to the extent
arising out of gross negligence or willful misconduct of
the Trustee. If any notice of a proposed sale or other
disposition of Soucy Collateral shall be required by law,
such notice shall, to the extent permitted by applicable
law, be deemed reasonable and proper if given at least 10
days before such sale or other disposition.
(c) Without limiting the foregoing provisions of
this Section 8, insofar as Quebec law is concerned, if an
Event of Default shall occur and be continuing, the
Grantor and the Trustee, on behalf of the Holders, agrees
that the following provisions shall apply to the
hypothecary rights of the Trustee, whichever hypothecary
rights the Trustee may decide to exercise, as permitted
by the Intercreditor Agreement:
(1) the Trustee may directly or indirectly purchase
or otherwise acquire the Hypothecated Stock at any public
or private sale of the Hypothecated Stock;
(2) if the Grantor exercises its right to remedy
the Event of Default mentioned in the prior notice of
default, the Grantor shall, as the law requires it, pay
all fees incurred by the Trustee by reason of the
default; those fees shall include without limitation the
administrative fees of the Trustee, the legal fees of its
legal advisers and fees paid to experts; and
(3) the Grantor shall be deemed to have surrendered
the Soucy Collateral held by the Trustee or on its behalf
if the Trustee has not, within the delay imposed by law
or by a tribunal to surrender the Soucy Collateral,
received written notice from the Grantor to the effect
that the Grantor is opposed to the exercise of the
hypothecary right set forth in the prior notice.
9. Registration Rights; Private Sales. (a) If the
Trustee shall determine to exercise its right to sell any
or all of the Hypothecated Stock pursuant to paragraph
8(b) hereof, and if in the reasonable opinion of the
Trustee it is necessary or advisable to have the
Hypothecated Stock, or that portion thereof to be sold,
registered under the provisions of the Securities Act,
the Grantor will cause Soucy Inc. thereof to (1) execute
and deliver, and cause the directors and officers of
Soucy Inc. to execute and deliver, all such instruments
and documents, and do or cause to be done all such other
acts as may be, in the reasonable opinion of the Trustee,
necessary or advisable to register the Hypothecated
Stock, or that portion thereof to be sold, under the
provisions of the Securities Act, (2) to use its
reasonable efforts to cause the registration statement
relating thereto to become effective and to remain
effective for a period of one year from the date of the
first public offering of the Hypothecated Stock, or that
portion thereof to be sold, and (3) to make all
amendments thereto and/or to the related prospectus
which, in the reasonable opinion of the Trustee, are
necessary or advisable, all in conformity with the
requirements of the Securities Act and the rules and
regulations of the Quebec Securities Commission
applicable thereto. The Grantor agrees to cause Soucy
Inc. to comply with the provisions of the securities or
"Blue Sky" laws of any and all jurisdictions of the
United States or Canada which the Trustee shall designate
and to make available to its security holders, as soon as
practicable, an earnings statement which will satisfy the
provisions of the Securities Act.
(b) The Grantor recognizes that the Trustee may be
unable to effect a public sale of any or all the
Hypothecated Stock, by reason of certain prohibitions
contained in the Securities Act and applicable state
securities laws or otherwise, and may be compelled to
resort to one or more private sales thereof to a
restricted group of purchasers which will be obliged to
agree, among other things, to acquire such securities for
their own account for investment and not with a view to
the distribution or resale thereof. The Grantor
acknowledges and agrees that any such private sale may
result in prices and other terms less favorable than if
such sale were a public sale and, notwithstanding such
circumstances, agrees that any such private sale shall be
deemed to have been made in a commercially reasonable
manner. The Trustee shall be under no obligation to
delay a sale of any of the Hypothecated Stock for the
period of time necessary to permit Soucy Inc. to register
such securities for public sale under the Securities Act,
or under applicable provincial or state securities laws
of the United States or Canada, even if Soucy Inc. would
agree to do so.
(c) The Grantor further agrees to use its
reasonable efforts to do or cause to be done all such
other acts as may be necessary to make such sale or sales
of all or any portion of the Hypothecated Stock pursuant
to this Section valid and binding and in compliance with
any and all other applicable Requirements of Law. The
Grantor further agrees that a breach of any of the
covenants contained in this Section will cause
irreparable injury to the Trustee and the Holders, that
the Trustee and the Holders have no adequate remedy at
law in respect of such breach and, as a consequence, that
each and every covenant contained in this Section shall
be specifically enforceable against the Grantor, and the
Grantor hereby waives and agrees not to assert any
defenses against an action for specific performance of
such covenants except for a defense that no Event of
Default has occurred under the Indenture.
10. Irrevocable Authorization and Instruction to
Soucy Inc.. The Grantor hereby authorizes and instructs
Soucy Inc. to comply with any instruction received by it
from the Trustee in writing that (a) states that an Event
of Default has occurred and is continuing and (b) is
otherwise in accordance with the terms of this Deed,
without any other or further instructions from the
Grantor, and the Grantor agrees that Soucy Inc. shall be
fully protected in so complying.
11. Trustee's Appointment as Attorney-in-Fact. (a)
The Grantor hereby irrevocably constitutes and appoints
the Trustee and any officer or agent of the Trustee, with
full power of substitution, as its true and lawful
attorney-in-fact with full irrevocable power and
authority in the place and stead of the Grantor and in
the name of the Grantor or in the Trustee's own name,
from time to time in the Trustee's discretion, for the
purpose of carrying out the terms of this Deed, to take
any and all appropriate action and to execute any and all
documents and instruments which may be necessary or
desirable to accomplish the purposes of this Deed,
including, without limitation, any registration,
financing statements, endorsements, assignments or other
instruments of transfer, which power of attorney is only
exercisable if an Event of Default shall have occurred
and be continuing.
(b) The Grantor hereby ratifies all that said
attorneys shall lawfully do or cause to be done pursuant
to the power of attorney granted in paragraph 11(a). All
powers, authorizations and agencies contained in this
Deed and are irrevocable until this Deed is terminated
and the hypothecs created hereby are released in
accordance with the terms hereof.
12. Duty of Trustee. Neither the Trustee nor any
of its directors, officers, employees or agents shall be
liable for failure to demand, collect or realize upon any
of the Soucy Collateral or for any delay in doing so
(unless the same shall result from the gross negligence
or willful misconduct of such Person) or shall be under
any obligation to sell or otherwise dispose of any Soucy
Collateral upon the request of the Grantor or any other
Person or to take any other action whatsoever with regard
to the Soucy Collateral or any part thereof.
13. Other Security The hypothecs created and the
rights conferred hereby are in addition to and not in
substitution of the rights and the pledges and security
interest constituted by the Note Pledge Agreement.
14. Authority of Trustee. The Grantor acknowledges
that the rights and responsibilities of the Trustee under
this Deed with respect to any action taken by the Trustee
or the exercise or non-exercise by the Trustee of any
option, voting right, request, judgment or other right or
remedy provided for herein or resulting or arising out of
this Deed shall, as between the Trustee and the Holders
be governed by the Indenture and the Intercreditor
Agreement, but, as between the Trustee and the Grantor,
the Trustee shall be conclusively presumed to be acting
as Trustee and fonde de pouvoir for the Holders pursuant
to the Indenture with full and valid authority so to act
or refrain from acting, and neither the Grantor nor Soucy
Inc. shall be under any obligation, or entitlement, to
make any inquiry respecting such authority.
15. Notices. All notices, requests and demands to
or upon the Trustee, the Grantor or the Intervenor to be
effective shall be in writing (including by telecopy)
and, unless otherwise expressly provided herein, shall be
deemed to have been duly given or made when delivered
three Business Days after being deposited in the mails,
postage prepaid, or in the case of telecopy notice, when
received, addressed as follows:
(1) if to the Trustee, at its address or
transmission number for notices provided below:
Crestar Bank
919 Main Street, 10th Floor
Richmond, VA 23219
Attention: Corporate Trust Department
Phone: (804) 782-5726
Telecopy: (804) 782-7855
(2) if to the Grantor, at its address or
transmission number for notices provided below:
Post Office Box 3443
80 Field Point Road
Greenwich, Connecticut 06830
Phone: 203-661-3344
Fax: 203-661-3349
(3) if to the Intervenor, at its address or
transmission number for notices provided below:
F.F. Soucy, Inc.
191 Delage Street
Riviere-du-Loup, Quebec G5R 3Z1
Attention: Edward Sherrick
Phone: (418) 862-6941
Telecopy: (418) 862-1134
The Trustee, the Grantor and the Intervenor (as
hereinafter defined) may change their addresses and
transmission numbers for notices by notice in the manner
provided in this Section.
16. Severability. Any provision of this Deed which
is prohibited or unenforceable in any jurisdiction shall,
as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating
the remaining provisions hereof, and any such prohibition
or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any
other jurisdiction.
17. Amendments in Writing; No Waiver; Cumulative
Remedies. (a) None of the terms or provisions of this
Deed may be waived, amended, supplemented or otherwise
modified except by a written instrument executed by the
Grantor and the Trustee, provided that any provision of
this Deed may be waived by the Trustee in a letter or
agreement executed by the Trustee or by telex or
facsimile transmission from the Trustee.
(b) The Trustee shall not, by any act (except by a
written instrument pursuant to paragraph 18(a) hereof),
delay, indulgence, omission or otherwise, be deemed to
have waived any right or remedy hereunder or to have
acquiesced in any Default or Event of Default or in any
breach of any of the terms and conditions hereof. No
failure to exercise, nor any delay in exercising, on the
part of the Trustee, any right, power or privilege
hereunder shall operate as a waiver thereof. No single
or partial exercise of any right, power or privilege
hereunder shall preclude any other or further exercise
thereof or the exercise of any other right, power or
privilege. A waiver by the Trustee of any right or
remedy hereunder on any one occasion shall not be
construed as a bar to any right or remedy which the
Trustee would otherwise have on any future occasion.
(c) The rights and remedies herein provided are
cumulative, may be exercised singly or concurrently and
are not exclusive of any other rights or remedies
provided by law.
18. Bank Pledge Agreement. The lien and all terms
and provisions of this Agreement are subordinate and
subject to the lien and all terms and provisions of the
Bank Pledge Agreement and the Bank Hypothec. Subject to
the provisions of the Intercreditor Agreement, to the
extent the Grantor's performance of any obligation under
this Deed would result in a default or breach by the
Grantor under the Bank Pledge Agreement or the Bank
Hypothec, then the Grantor shall have no duty to perform
such obligations under this Deed to the extent that such
performance would constitute a default or breach under
the Bank Pledge Agreement or the Bank Hypothec.
Notwithstanding any other provisions of this Deed, the
Trustee will not accept possession of any Soucy
Collateral, or take any action with respect to Soucy
Collateral (including, without limitation, the exercise
of any remedies) except in accordance with and as
permitted by the Intercreditor Agreement.
19. Release of Deed of Movable Hypothec Without
Delivery. The Grantor shall be automatically released
from its obligations under this Deed and this Deed shall
automatically terminate on the earlier of (a) the date on
which all the Secured Obligations are paid in full and
all the Commitments thereunder are terminated, (b) the
date on which the Notes are rated Investment Grade and
(c) the date on which the Total Committed Debt is not
greater than US$ 145,000,000; and at the time of such
release the Trustee shall deliver the Soucy Collateral to
the Grantor, and will execute and deliver such other
documents and instruments evidencing such termination and
release.
20. Limitation on Recourse. Anything herein to the
contrary notwithstanding, the Trustee shall have recourse
hereunder only against the Collateral in respect of the
Secured Obligations and not against the Grantor
personally or against the assets of the Grantor other
than the Collateral.
21. Controlling Agreement. In the case of any
conflict, inconsistency or ambiguity between the terms of
(i) the Indenture and this Deed, the Indenture shall
control and (ii) the Bank Hypothec and this Deed, the
Bank Hypothec shall control.
22. Section Headings. The section headings used in
this Deed are for convenience of reference only and are
not to affect the construction hereof or be taken into
consideration in the interpretation hereof.
23. Successors and Assigns. This Deed shall be
binding upon the successors and assigns of the Grantor
and shall inure to the benefit of the Trustee and its
permitted successors and assigns.
24. Governing Law. This Deed shall be governed by,
and construed and interpreted in accordance with, the law
of the Province of Quebec.
25. Notwithstanding any other provision of this
Deed, at no time shall the Grantor be required to
hypothecate more than 65% of all of the voting stock of
all classes of the capital stock of Soucy Inc.
26. Intervention. Hereto intervenes:
F.F. SOUCY, INC., a corporation duly formed
under the laws of Quebec, having its head
office in the Province of Quebec, hereinacting
and represented by Thomas R. M. Davis, its
authorized representative, duly authorized in
virtue of a resolution adopted by the unanimous
consent of its Directors dated November 21,
1997, a certified copy of which has been
annexed hereto after having been signed by the
said representative for identification with and
in the presence of the undersigned Notary.
(the "Intervenor")
Which Intervenor hereby acknowledges having taken
cognizance of the present Deed of Movable Hypothec
Without Delivery and agrees for the benefit of the
Trustee and the Holders as follows:
(a) The Intervenor will be bound by the terms of
this Deed and will comply with such terms insofar as
such terms are applicable to it.
(b) The Intervenor will notify the Trustee promptly
in writing of the occurrence of any of the events
described in paragraph 5(a) of this Deed.
(c) The terms of paragraph 9(c) of this Deed shall
apply to it, mutatis mutandis, with respect to all
actions that may be required of it under or pursuant to
or arising out of Section 9 of this Deed.
27. Language. The parties and the Intervenor
acknowledge having requested that this Deed be drafted in
English. Les parties et l'intervenante reconnaissent
avoir demande que le present acte soit redige en anglais.
WHEREOF ACTE:
THUS DONE AND PASSED at the City of Montreal, Province of
Quebec, and of record in the office of the undersigned
notary under the number thirteen thousand one hundred and
seventy-nine.
And after due reading hereof, the parties and the
Intervenor have signed with and in the presence of the
said notary.
BRANT-ALLEN INDUSTRIES, INC.
Per: /s/ Thomas R. M. Davis
______________________________
CRESTAR BANK
Per: /s/ Dominique Belisle
______________________________
Dominique Belisle
F.F. SOUCY, INC.
Per: /s/ Thomas R. M. Davis
_____________________________
/s/ David M. Klineberg
_____________________________
David M. Klineberg, Notary
<PAGE>
BEAR ISLAND PAPER COMPANY, L.L.C.
(a Virginia limited liability company)
BEAR ISLAND FINANCE COMPANY II
(a Delaware corporation)
$100,000,000
10% Senior Secured Notes due 2007
PURCHASE AGREEMENT
November 21, 1997
TD SECURITIES (USA) INC.
SALOMON BROTHERS INC
c/o TD Securities (USA) Inc.
31 West 52nd Street
New York, New York 10019-6101
Ladies and Gentlemen:
Bear Island Paper Company, L.L.C., a Virginia limited
liability company (the "Company"), and Bear Island Finance
Company II, a Delaware corporation ("FinCo" and, together with
the Company, the "Issuers"), propose to issue and sell to TD
Securities (USA) Inc. ("TD Securities") and Salomon Brothers Inc
("Salomon Brothers" and, together with TD Securities, the
"Initial Purchasers") $100,000,000 aggregate principal amount of
their 10% Senior Secured Notes due 2007 (the "Securities"). The
Securities are to be issued pursuant to an indenture to be dated
on or about December 1, 1997 (the "Indenture") between the
Issuers, as joint and several obligors, the Security Parties (as
defined herein), Brant-Allen Industries, Inc. ("Brant-Allen") and
Crestar Bank, a Virginia banking corporation, as trustee (the
"Trustee").
The Company is wholly owned by Brant-Allen. On October
15, 1997, Brant-Allen entered into an agreement (the "Acquisition
Agreement") to purchase all of the partnership interests of Bear
Island Paper Company, L.P. ("BIPCO") owned by certain
subsidiaries of Dow Jones & Company, Inc. ("Dow Jones") and The
Washington Post Company ("The Washington Post"). Before the
closing of this acquisition, BIPCO will be converted from a
limited partnership into Bear Island Mergerco, L.L.C.
("Mergerco"), a limited liability company organized under
Virginia law, and Brant-Allen will contribute its interests in
Mergerco and assign its rights under the Acquisition Agreement to
the Company, a second newly formed limited liability company,
also organized under Virginia law, of which the sole member will
be Brant-Allen. The Company and FinCo will then consummate the
offering and the Company will purchase the interests of the Dow
Jones and The Washington Post subsidiaries in Mergerco.
Immediately following the acquisition, Mergerco will be merged
with and into the Company, and the Company will continue to be
wholly owned by Brant-Allen. (The transactions described above
are referred to as the "Acquisition.") Financing for the
Acquisition is intended to be provided by (i) borrowings pursuant
to an agreement (the "Bank Credit Agreement") for $120 million
senior secured bank credit facilities and (ii) the net proceeds
received by the Company from the issuance of Securities to be
sold in this offering.
In addition, on October 15, 1997, Brant-Allen, Dow
Jones and The Washington Post entered into a separate agreement
(the "Timberlands Acquisition Agreement" and, together with the
Acquisition Agreement, the "Acquisition Agreements") for the
purchase by Brant-Allen of all the partnership interests in Bear
Island Timberlands Company, L.P., a Virginia limited partnership
("BITCO"), that are owned by subsidiaries of Dow Jones and The
Washington Post. Immediately before the closing of this
acquisition, BITCO will be converted from a limited partnership
into Bear Island Timberlands Company, L.L.C. ("Timberlands"), a
Virginia limited liability company. (Unless otherwise indicated,
all references herein to Timberlands shall refer, prior to such
conversion, to BITCO.) At the closing of this acquisition,
Brant-Allen will purchase the equity interests in Timberlands
owned by the subsidiaries of Dow Jones and The Washington Post
pursuant to the terms of the Timberlands Acquisition Agreement
(the foregoing transactions occurring before and at the closing
are referred to as the "Timberlands Acquisition"). After the
Timberlands Acquisition, Timberlands will be owned 100% by Brant-
Allen. Financing of the Timberlands Acquisition is intended to
be provided by borrowings pursuant an agreement (the "Timberlands
Credit Agreement") for a $35 million senior secured two-year term
loan to be borrowed by Brant-Allen and guaranteed by Timberlands.
Concurrently with the Timberlands Acquisition, Timberlands and
John Hancock Mutual Life Insurance Company will substantially
modify the terms of their existing loan agreement in order to
increase the indebtedness of Timberlands from the present $27
million balance outstanding to $30 million, to reduce the term to
two years and to provide for a related fee by Timberlands (such
loan agreement, as amended, the "Hancock Credit Agreement" and,
together with the Bank Credit Agreement and the Timberlands
Credit Agreement, the "Credit Agreements").
The obligations of the Issuers under the Indenture and
the Securities are to be secured by (i) a second priority
security interest in (x) all of the real property of the Company
(the "Company Real Property") pursuant to a deed of trust among
the Company, the Trustee and the collateral trustee thereunder
(the "Deed of Trust") and (y) all of the personal property of the
Company, except for a third priority security interest in certain
equipment and fixed assets of the Company, to the extent that
such equipment and fixed assets are assignable, and except for
certain other assets that are not assignable (the "Company
Personal Property" and, together with the Company Real Property,
the "Company Collateral"), pursuant to a pledge and security
agreement between the Company and the Trustee (the "Company
Pledge and Security Agreement"); (ii) a third priority security
interest in 100% of the membership interests in Timberlands (the
"Timberlands Collateral") pursuant to a pledge agreement between
Brant-Allen and the Trustee (the "Timberlands Pledge Agreement");
and (iii) a second priority security interest in 65% of the
issued and outstanding capital stock of F.F. Soucy, Inc. ("Soucy
Inc." and, together with Timberlands, the "Security Parties")
(the "Soucy Collateral" and, together with the Company Collateral
and the Timberlands Collateral, the "Collateral") pursuant to (1)
a pledge agreement between Brant-Allen and the Trustee governed
by the law of the State of New York (the "Soucy Pledge
Agreement") and (2) a hypothec agreement between Brant-Allen and
the Trustee governed by Quebec law further relating to the Soucy
Collateral (the "Hypothec Agreement" and, together with the Deed
of Trust, the Company Pledge and Security Agreement, the
Timberlands Pledge Agreement and the Soucy Pledge Agreement, the
"Collateral Documents").
Prior to the initial issuance of the Securities under
the Indenture, the Trustee, on behalf of holders of the
Securities, will enter into an intercreditor agreement (the
"Intercreditor Agreement") with the Company, Brant-Allen and
Toronto-Dominion (Texas), Inc., as administrative agent under the
Bank Credit Agreement (in such capacity, the "Bank Agent"), and
as administrative agent under the Timberlands Credit Agreement
(in such capacity, the "Timberlands Agent"). The Intercreditor
Agreement will provide, among other things, for the allocation of
rights between the Bank Agent, the Timberlands Agent and the
Trustee with respect to Collateral and for enforcement provisions
with respect thereto.
The Securities will be offered and sold to the Initial
Purchasers without being registered under the Securities Act of
1933, as amended (the "1933 Act"), in reliance on exemptions
therefrom. The Issuers have prepared a preliminary offering
memorandum, dated November 7, 1997 (such preliminary offering
memorandum being hereinafter referred to as the "Preliminary
Offering Memorandum"), and a final offering memorandum, dated
November 21, 1997 (such final offering memorandum, in the form
first furnished to the Initial Purchasers for use in connection
with the offering of the Securities, being hereinafter referred
to as the "Offering Memorandum"), each setting forth information
regarding the Issuers, the Acquisition and the Securities. In
addition, the Issuers have prepared a disclosure document
relating to the offering of the Securities in Canada (the
"Canadian Wrap"). The Preliminary Offering Memorandum and the
Offering Memorandum, when used in conjunction with the Canadian
Wrap, are hereinafter referred to as the "Preliminary Canadian
Offering Memorandum" and the "Canadian Offering Memorandum,"
respectively. The Issuers hereby confirm that they have
authorized the use of the Preliminary Offering Memorandum and the
Offering Memorandum for the offering and resale of the Securities
to the persons referred to in clauses (i) and (ii) of the next
paragraph, and the use of the Preliminary Canadian Offering
Memorandum and the Canadian Offering Memorandum for the offering
and resale of the securities to the persons referred to in
Sections 6(i)(B) and (vii).
The Issuers understand that the Initial Purchasers
propose to make an offering of the Securities on the terms set
forth in the Offering Memorandum and this Agreement, as soon as
the Initial Purchasers deem advisable after this Agreement has
been executed and delivered, (i) to persons in the United States
whom the Initial Purchasers reasonably believe to be qualified
institutional buyers ("Qualified Institutional Buyers") as
defined in Rule 144A under the 1933 Act, as such rule may be
amended from time to time ("Rule 144A"), in transactions
complying with Rule 144A and/or (ii) to non-U.S. persons in
offshore transactions (as defined in Regulation S ("Regulation
S") under the 1933 Act) in compliance with Regulation S.
The holders of Securities will be entitled to the
benefits of a registration rights agreement, in substantially the
form attached hereto as Exhibit A with such changes as shall be
agreed to by the parties hereto (the "Registration Rights
Agreement"), pursuant to which the Issuers will use their best
efforts to file a registration statement with the Securities and
Exchange Commission (the "Commission") registering the Securities
and/or the Exchange Securities (the "Exchange Securities")
referred to in the Registration Rights Agreement under the 1933
Act.
Section 1. Representations and Warranties. (a) Each
of the Issuers jointly and severally represents and warrants to
and agrees with the Initial Purchasers as of the date hereof and
as of the Closing Time (as defined in Section 2(b)) as follows:
(i) Similar Offerings. The Issuers and their
respective affiliates (as defined in Rule 501(b) under the
1933 Act) have not, directly or indirectly through any agent
(provided that no representation is made as to the Initial
Purchasers, their affiliates or any person acting on their
behalf), solicited any offer to buy, sold or offered to sell
(or otherwise negotiated in respect of), and will not,
directly or indirectly, solicit any offer to buy, sell or
offer to sell (or otherwise negotiated in respect of), in
the United States or to any United States citizen or
resident, any security (as defined in the 1933 Act) which is
or would be integrated with the sale of the Securities in a
manner that would require the Securities to be registered
under the 1933 Act.
(ii) Offering Memorandum. As of their respective
dates and as of the Closing Time, none of the Preliminary
Offering Memorandum, the Offering Memorandum or any
amendment or supplement thereto will include an untrue
statement of a material fact or omit to state a material
fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made,
not misleading; except that this representation and warranty
does not apply to untrue statements or omissions made in
reliance upon and in conformity with information furnished
in writing to the Issuers by the Initial Purchasers through
TD Securities expressly for use in the Preliminary Offering
Memorandum, the Offering Memorandum or any amendment or
supplement thereto.
(iii) No Listed Securities. There are no debt
securities of the Issuers registered under the Securities
Exchange Act of 1934, as amended (the "1934 Act"), or listed
on a national securities exchange or quoted in a U.S.
automated inter-dealer quotation system. The Issuers have
been advised by the National Association of Securities
Dealers, Inc. (the "NASD") PORTAL Market that the Securities
have been designated PORTAL eligible securities in
accordance with the rules and regulations of the NASD.
(iv) Independent Accountants. Coopers & Lybrand
L.L.P. and Coopers & Lybrand, Chartered Accountants, General
Partnership, each of which is reporting upon certain audited
financial statements and related schedules and notes
included in the Offering Memorandum, are each independent
public accountants in accordance with the provisions of the
1933 Act and the rules and regulations of the Commission
thereunder.
(v) Accounting Controls. Each of the Issuers, the
Security Parties, BIPCO, BITCO, Brant-Allen and their
respective subsidiaries maintains a system of internal
accounting controls sufficient to provide reasonable
assurances that (A) transactions are executed in accordance
with management's general or specific authorization,
(B) transactions are recorded as necessary to permit
preparation of financial statements in conformity with
generally accepted accounting principles and to maintain
accountability for assets, (C) access to assets is permitted
only in accordance with management's general or specific
authorization, and (D) the recorded accountability for
assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to
any differences.
(vi) Financial Statements. The financial statements
included in the Offering Memorandum, together with the
related notes, present fairly (a) the financial position of
BIPCO, BITCO, Soucy Inc. and their consolidated
subsidiaries, if any, as of the dates indicated and (b) the
results of operations and cash flows of BIPCO, BITCO, Soucy
Inc. and their consolidated subsidiaries, if any, in each
case for the periods specified. Such financial statements
have been prepared in conformity with, in the case of BIPCO
and BITCO, generally accepted accounting principles as
applied in the United States and, in the case of Soucy
Inc., generally accepted accounting principles as applied in
Canada, applied on a consistent basis throughout the periods
involved. The selected financial data included in the
Offering Memorandum present fairly the information shown
therein and have been compiled on a basis consistent with
that of the audited consolidated financial statements
included in the Offering Memorandum. The pro forma
financial statements and related notes thereto and other pro
forma financial information included in the Offering
Memorandum present fairly the information shown therein,
have been prepared in accordance with the Commission's rules
and guidelines with respect to pro forma financial
statements, and have been properly compiled on the pro forma
bases described therein and, in the opinion of the Issuers,
the assumptions used in the preparation thereof are made on
a reasonable basis and the adjustments used therein are
appropriate to give effect to the transactions or
circumstances referred to therein.
(vii) No Material Adverse Change in Business.
Since the respective dates as of which information is given
in the Offering Memorandum, except as otherwise stated
therein or contemplated thereby, there has not been (A) any
material adverse change in the condition, financial or
otherwise, or in the earnings, business affairs or business
prospects of the Issuers, the Security Parties, BIPCO, BITCO
and their respective subsidiaries considered as one
enterprise, whether or not arising in the ordinary course of
business (except that, as described in the Offering
Memorandum, BIPCO's successor will be merged into the
Company and BIPCO shall cease to exist, and BITCO will be
converted into Timberlands concurrently with the Closing
Time) (a "Material Adverse Effect"), (B) any transaction
entered into by either of the Issuers, the Security Parties,
BIPCO, BITCO, Brant-Allen or any of their respective
subsidiaries other than in the ordinary course of business,
or (C) except for the distributions paid or to be paid to
Brant-Allen by each of the Company, Timberlands and Soucy
Inc. of up to $2.0 million, $5.0 million and Cdn$6.0
million, respectively, any dividend or distribution of any
kind declared, paid or made by the Issuers, the Security
Parties, BIPCO, BITCO or any of their respective
subsidiaries on any class of their respective membership
interests, partnership interests or capital stock, as the
case may be.
(viii) Good Standing of the Issuers, the Security
Parties, Brant-Allen and Soucy Partners. Each of the
Issuers, Soucy Inc., Brant-Allen and F.F. Soucy, Inc. &
Partners, Limited Partnership ("Soucy Partners") has been
duly organized or formed, as the case may be, and is validly
existing and in good standing as a corporation, a limited
liability company or a limited partnership, as the case may
be, under the laws of the jurisdiction of its organization
or formation, as the case may be, and each such entity has
all requisite corporate, limited liability company or
partnership power and authority, as the case may be, under
such laws to own, lease and operate its properties and
conduct its business as described in the Offering Memorandum
or, in the case of the Security Parties, Brant-Allen and
Soucy Partners, as is now being conducted, and, in the case
of each of the Issuers, to enter into and perform its
obligations under this Agreement; each of such entities is
duly qualified to transact business and is in good standing
in each other jurisdiction in which such qualification is
required, whether by reason of the ownership or leasing of
property or the conduct of business, except to the extent
that the failure to so qualify or be in good standing would
not have a Material Adverse Effect; except as otherwise
disclosed in the Offering Memorandum, Soucy Inc. is the
owner of a 50.1% share in the common stock of Soucy
Partners, free and clear of any interest, mortgage, deed of
trust, pledge, lien, encumbrance or claim; none of the
shares in the common stock of Soucy Partners was acquired in
violation of any preemptive or similar right of any holder
of a share in the common stock of Soucy Partners.
(ix) Good Standing of Merging Entities. As of the
date of this Agreement and at all times prior to the Closing
Time, each of BIPCO and BITCO has been duly formed and is
validly existing and in good standing as a limited
partnership under the laws of the Commonwealth of Virginia,
and each has all requisite limited partnership power and
authority under such laws to own, lease and operate its
properties and conduct its business as described in the
Offering Memorandum and to enter into and perform its
obligations under this Agreement; and, as of the date of
this Agreement and at all times prior to the Closing Time,
each of BIPCO and BITCO is duly qualified to transact
business and is in good standing in each other jurisdiction
in which such qualification is required, whether by reason
of the ownership or leasing of property or the conduct of
business, except to the extent that the failure to so
qualify or be in good standing would not have a Material
Adverse Effect.
(x) Capitalization. The actual capitalization of
BIPCO at September 30, 1997 is as set forth in the Offering
Memorandum under the caption "Capitalization" in the
"Actual" column; all of the issued membership interests of
the Company have been duly and validly authorized and
issued.
(xi) Authorization of the Agreement. This Agreement
has been duly authorized, executed and delivered by the
Issuers.
(xii) Authorization of the Indenture. The
Indenture has been duly authorized by each of the Issuers,
Soucy Inc. and Brant-Allen (and, on or before the Closing
Time, by Timberlands) and, when duly executed and delivered
by each of the Issuers, the Security Parties, Brant-Allen
and the Trustee, will constitute a valid and binding
agreement of the Issuers, the Security Parties and Brant-
Allen, enforceable against each of such entities in
accordance with its terms, except as (x) enforcement thereof
may be limited by bankruptcy, insolvency (including, without
limitation, all laws relating to fraudulent transfers),
reorganization, moratorium or similar laws affecting
enforcement of creditors' rights generally and except as
enforcement thereof is subject to general principles of
equity (regardless of whether enforcement is considered in a
proceeding in equity or at law), (y) the enforceability of
any right to indemnification or waiver of usury provided
therein violates the public policy of any law, rule or
regulation and (z) enforcement thereof may be limited by the
laws of the Province of Quebec, as described under the
caption "Enforceability of Judgements" in the Canadian
Offering Memorandum.
(xiii) Authorization of the Securities. The
Securities have been duly authorized by the Issuers and, at
the Closing Time, will have been duly executed by each of
the Issuers and, when authenticated, issued and delivered in
the manner provided for in the Indenture and delivered
against payment of the purchase price therefor as provided
in this Agreement, will constitute valid and binding
obligations of the Issuers, enforceable against each of the
Issuers in accordance with their terms, except as
enforcement thereof may be limited by bankruptcy, insolvency
(including, without limitation, all laws relating to
fraudulent transfers), reorganization, moratorium or similar
laws affecting enforcement of creditors' rights generally
and except as enforcement thereof is subject to general
principles of equity (regardless of whether enforcement is
considered in a proceeding in equity or at law), and will be
in the form contemplated by, and entitled to the benefits
of, the Indenture.
(xiv) Authorization of the Other Agreements. Each
of the Registration Rights Agreement, the Intercreditor
Agreement, the Collateral Documents, the Acquisition
Agreements and the Credit Agreements has been duly
authorized by the Company, FinCo and/or Brant-Allen, as the
case may be, and, except for the Intercreditor Agreement,
when executed and delivered by the Company, FinCo and/or
Brant-Allen, as the case may be, and the other parties
thereto in accordance with the terms thereof, will
constitute a valid and binding agreement of the Company,
FinCo and/or Brant-Allen, as the case may be, enforceable
against such entity or entities in accordance with its terms
except as enforcement thereof may be limited by bankruptcy,
insolvency (including, without limitation, all laws relating
to fraudulent transfers), reorganization, moratorium or
similar laws affecting creditors' rights generally and
except as enforcement thereof is subject to general
principles of equity (regardless of whether enforcement is
considered in a proceeding in equity or at law).
(xv) Perfection of Security Interest in Soucy
Collateral and Timberlands Collateral. When executed and
delivered by Brant-Allen and the Trustee, each of the Soucy
Pledge Agreement, the Hypothec Agreement and the Timberlands
Pledge Agreement will be effective to create in favor of the
Trustee for the benefit of the holders of the Securities, a
legal, valid and enforceable security interest in the
Collateral described therein and in proceeds thereof. In
the case of the Collateral described in such Collateral
Documents, when (x) financing statements or applications for
registration in appropriate form are filed in the requisite
filing offices and (y) the Hypothec Agreement is registered
in the requisite Quebec registry, such Collateral Documents
shall constitute a fully perfected lien on, and security
interest in, all right, title and interest in favor of the
Trustee, for the benefit of the holders of the Securities,
in such Collateral and the proceeds thereof, as security for
the Obligations (as defined in such Collateral Documents),
in each case prior and superior in right to any other
person, other than the respective lenders under the Bank
Credit Agreement and the Timberlands Credit Agreement.
(xvi) Perfection of Security Interest in Company
Collateral. Each of the Company Pledge and Security
Agreement and the Deed of Trust will be effective to create
in favor of the Trustee, for the benefit of the Holders of
the Securities, a legal, valid and enforceable security
interest in the Collateral described therein and proceeds
thereof. When the Deed of Trust and financing statements in
appropriate form are filed in the requisite filing offices,
such agreements shall constitute a fully perfected lien
(except with respect to certain Collateral, such lien shall
be perfected only to the extent perfection is required by
the Company Pledge and Security Agreement) on, and security
interest in, all right, title and interest of the Trustee,
on behalf of the holders of the Securities, in such
Collateral and the proceeds thereof, as security for the
Obligations (as defined in such agreements), in each case
prior and superior in right to any other Person other than
the lenders under the Bank Credit Agreement.
(xvii) The Acquisition Agreements. The Acquisition
Agreements are in full force and effect, and Brant-Allen has
used its best efforts to obtain all regulatory and
contractual consents and approvals necessary to consummate
the Acquisition and the Timberlands Acquisition.
(xviii) Description of the Securities, the Indenture
and Other Agreements. The statements set forth in the
Offering Memorandum, insofar as such statements purport to
summarize certain provisions of the Securities, the
Indenture, the Registration Rights Agreement, the
Intercreditor Agreement, the Collateral Documents, the
Acquisition Agreements and the Credit Agreements, constitute
accurate summaries thereof in all material respects.
(xix) Absence of Defaults and Conflicts. None of
the Issuers, the Security Parties, BIPCO or Brant-Allen nor
any of their respective subsidiaries is in violation of its
respective organizational documents or in default in the
performance or observance of any obligation, agreement,
covenant or condition contained in any contract, indenture,
mortgage, deed of trust, loan or credit agreement, note,
lease or other agreement or instrument to which any such
entity or any of its respective subsidiaries is a party or
by which it or any of them may be bound, or to which any of
the property or assets of any such entity or any of its
respective subsidiaries is subject (collectively,
"Agreements and Instruments"), except for such violations or
defaults that would not result in a Material Adverse Effect;
and (A) the execution, delivery and performance of this
Agreement, the Securities, the Indenture, the Registration
Rights Agreement, the Collateral Documents, the Acquisition
Agreements, the Intercreditor Agreement and the Credit
Agreements by the Issuers, the Security Parties and Brant-
Allen, as the case may be, and the consummation by such
parties of the transactions contemplated herein and therein
(including the issuance and sale by the Issuers of the
Securities in accordance with the offering and sale
restrictions contained in this Agreement and the Offering
Memorandum and the use of the proceeds from the sale of the
Securities as described in the Offering Memorandum under the
caption "Use of Proceeds"), (B) compliance by the Issuers
with their obligations hereunder and under the Securities,
and (C) compliance by each of the Issuers, the Security
Parties and Brant-Allen of its obligations under the
Indenture and such other agreements to which it is a party
will not (after giving effect to (i) the redemption or
defeasance of BIPCO's 10.375% Senior Secured Notes due 2004,
and (ii) the related release and discharge of all liens,
encumbrances and security interests securing those notes),
(1) whether with or without the giving of notice or the
passage of time or both, constitute a breach of, or default
or Repayment Event (as defined below) under, or result in
the creation or imposition of any lien, charge or
encumbrance upon any property or assets of any such entity
or any of its subsidiaries pursuant to, the Agreements and
Instruments (except for such conflicts, breaches or defaults
or liens, charges or encumbrances that would not result in a
Material Adverse Effect or those liens, charges or
encumbrances created pursuant to the Collateral Documents)
or (2) result in any violation of (x) the provisions of the
respective organizational documents of any such entity or
any of its subsidiaries or (y) any applicable law, statute,
rule, regulation, judgment, order, writ or decree of any
government, government instrumentality or court, domestic or
foreign, having jurisdiction over any such entity or any of
its subsidiaries or any of their assets, properties or
operations (except for such violations that would not result
in a Material Adverse Effect). As used herein, a "Repayment
Event" means any event or condition which gives the holder
of any note, debenture or other evidence of indebtedness (or
any person acting on such holder's behalf) the right to
require the repurchase, redemption or repayment of all or a
portion of such indebtedness by any such entity or any of
its subsidiaries.
(xx) Absence of Labor Disputes. No labor dispute with
the employees of any of the Issuers, the Security Parties,
BIPCO or BITCO or any of their respective subsidiaries
exists or, to the knowledge of either of the Issuers, is
threatened that, if such dispute were to occur, in either
case may reasonably be expected to result in a Material
Adverse Effect, and the Issuers have no actual knowledge of
any existing or imminent labor disturbance by the employees
of any such entity's or its subsidiaries' principal
suppliers, contractors or customers that could be expected
to result in a Material Adverse Effect.
(xxi) Absence of Proceedings. Except as set forth
in the Offering Memorandum, there is no action, suit,
proceeding, inquiry or investigation before or brought by
any court or governmental agency or body, domestic or
foreign, now pending, or, to the knowledge of either of the
Issuers, threatened, to which any of the Issuers, the
Security Parties, BIPCO or BITCO is a party and which might
reasonably be expected to result in a Material Adverse
Effect, or which might reasonably be expected to materially
and adversely affect the validity or enforceability of any
material provision of this Agreement, the Indenture, the
Securities, the Collateral Documents or the rights and
remedies of the Initial Purchasers, the Trustee or the
holders of the Securities thereunder.
(xxii) Possession of Intellectual Property. The
Issuers, the Security Parties, BIPCO, BITCO, Brant-Allen and
their respective subsidiaries own or possess, or can acquire
on reasonable terms (or have the rights to sue at law or in
equity for any infringement of), adequate patents, patent
rights, licenses, inventions, copyrights, know-how
(including trade secrets and other unpatented and/or
unpatentable proprietary or confidential information,
systems or procedures), trademarks, service marks, trade
names or other intellectual property (collectively,
"Intellectual Property") necessary to carry on the business
now carried on by them, except where the failure to own,
possess or hold such rights to acquire or sue would not have
a Material Adverse Effect; and none of the Issuers, the
Security Parties, BIPCO, BITCO, Brant-Allen or any of their
respective subsidiaries has received any notice or is
otherwise aware of any infringement of or conflict with
asserted rights of others with respect to any Intellectual
Property or of any facts or circumstances which would render
any Intellectual Property invalid or inadequate to protect
the interest of the Issuers, the Security Parties, BIPCO,
BITCO, Brant-Allen or their respective subsidiaries therein,
and which infringement or conflict (if the subject of any
unfavorable decision, ruling or finding) or invalidity or
inadequacy, singly or in the aggregate, would result in a
Material Adverse Effect.
(xxiii) Absence of Further Requirements. No filing
with, or authorization, approval, consent, license, order,
registration, qualification or decree of, any court or
governmental authority or agency or quasi-governmental
agency (other than (i) under the 1933 Act and the rules and
regulations thereunder with respect to the Registration
Rights Agreement and the transactions contemplated
thereunder and the securities or "blue sky" laws of any
jurisdiction, (ii) those that have been obtained and are in
full force and effect and (iii) those filings that are
necessary or required to create or perfect the liens,
encumbrances and security interests under the Collateral
Documents) is necessary or required on behalf of the Issuers
for the issuance, sale and delivery of the Securities, or
for the execution, delivery or performance by the Issuers,
the Security Parties or Brant-Allen, as the case may be, of
this Agreement, the Indenture, the Registration Rights
Agreement, the Intercreditor Agreement, the Collateral
Documents, the Acquisition Agreements or the Credit
Agreements, or for the consummation by any of such entities,
as the case may be, of the transactions contemplated in such
agreements.
(xxiv) Possession of Licenses and Permits. Each of
the Issuers, the Security Parties, BIPCO, Brant-Allen and
their respective subsidiaries possesses, and, upon
consummation of the transactions contemplated under this
Agreement and the Acquisition Agreements, will possess, such
permits, licenses, approvals, consents and other
authorizations (collectively, "Governmental Licenses") of
the appropriate federal, state, local or foreign regulatory
and quasi-regulatory agencies or bodies necessary to conduct
any business now conducted by them and as contemplated to be
conducted by them upon consummation of the transactions
contemplated under this Agreement and the Acquisition
Agreements, except (x) where the failure to possess such
Governmental Licenses would not, singly or in the aggregate,
have a Material Adverse Effect and (y) BIPCO and BITCO will
cease to possess such Governmental Licenses when BIPCO or
its successor ceases to exist and BITCO is converted into
Timberlands, in each case, concurrently with the Closing
Time. Each of the Issuers, the Security Parties, BIPCO,
Brant-Allen and their respective subsidiaries is, and upon
consummation of the transactions contemplated under this
Agreement and the Acquisition Agreements will be, in
substantial compliance with the terms and conditions of all
such Governmental Licenses, except where the failure to
comply would not, singly or in the aggregate, have a
Material Adverse Effect; all of the Governmental Licenses
are, and upon consummation of the transactions contemplated
under this Agreement and the Acquisition Agreements will be,
valid and in full force and effect, except when the
invalidity of such Governmental Licenses or the failure of
such Governmental Licenses to be in full force and effect
would not have a Material Adverse Effect; and none of the
Issuers, the Security Parties, BIPCO, Brant-Allen or any of
their respective subsidiaries has received any notice of
proceedings relating to the revocation or modification of
any such Governmental Licenses which, singly or in the
aggregate, if the subject of an unfavorable decision, ruling
or finding, would result in a Material Adverse Effect.
(xxv) Title to Property. Each of the Issuers, the
Security Parties, BIPCO, Brant-Allen and their respective
subsidiaries has title in fee simple to, or a valid
leasehold interest in all its real property and good title
to or a valid leasehold interest (and, in the case of Soucy
Inc. and its subsidiaries, superficiary rights) in all its
other properties and assets, free and clear of all liens,
charges, encumbrances or restrictions, except such as
(A) are described in the Offering Memorandum (including,
without limitation, "Permitted Liens" as defined therein),
(B) do not, singly or in the aggregate, have a Material
Adverse Effect or (C) insofar as BIPCO ceases to exist and
BITCO is converted into Timberlands concurrently with the
Closing Time.
(xxvi) Tax Returns. Each of the Issuers, the
Security Parties, BIPCO, Brant-Allen and their respective
subsidiaries has filed any federal, state, local and foreign
income and other material tax returns that are required to
be filed by such entities or has duly requested extensions
thereof and has paid all taxes required to be paid by any of
them and any related assessments, fines or penalties, except
for any such tax, assessment, fine or penalty that is being
contested in good faith and by appropriate proceedings; and
adequate charges, accruals or reserves have been provided
for in the financial statements referred to in Section
1(a)(vi) above in respect of any federal, state, local and
foreign income and other material taxes for all periods as
to which the tax liability of any such entity or its
subsidiaries has not been finally determined or remains open
to examination by applicable taxing authorities.
(xxvii) Environmental Laws. Except as described in
the Offering Memorandum and except as would not, singly or
in the aggregate, result in a Material Adverse Effect, (A)
none of the Issuers, the Security Parties, BIPCO, BITCO,
Brant-Allen and their respective subsidiaries is in
violation of any federal, state, local or foreign statute,
law, rule, regulation, ordinance or code, or rule of common
law or any judicial or administrative interpretation
thereof, including any applicable judicial or administrative
order, consent, decree or judgment, regulating, or imposing
liability concerning, pollution, the protection of human
health or the environment (including, without limitation,
ambient air, surface water, groundwater, land surface or
subsurface strata) or wildlife, including, without
limitation, laws and regulations relating to the release or
threatened release of chemicals, pollutants, contaminants,
wastes, toxic substances, hazardous substances, petroleum or
petroleum products (collectively, "Hazardous Materials") or
to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of
Hazardous Materials (collectively, "Environmental Laws"),
and (B) none of the Issuers has any knowledge of any events
or circumstances that might reasonably be expected to form
the basis of an order for clean-up or remediation, or an
action, suit or proceeding by any private party or
governmental body or agency, against or affecting any of the
Issuers, the Security Parties, BIPCO, BITCO, Brant-Allen or
any of their respective subsidiaries relating to Hazardous
Materials or any Environmental Laws.
(xxviii) Registration Rights. Except as described in
the Offering Memorandum, there are no persons with
registration rights or other similar rights to have any
securities registered by either of the Issuers under the
1933 Act (other than those provided in the Credit Agreements
and related agreements).
(xxix) Solvency. At the date of this Agreement,
each of BIPCO and the Company is, and immediately after the
Closing Time, the Company will be, Solvent. As used herein,
the term "Solvent" means, with respect to each such entity,
on a particular date, that on such date (A) the fair value
of the assets of such entity is greater than the total
amount of liabilities (including contingent liabilities) of
such entity, (B) the present fair salable value of the
assets of such entity is greater than the amount that will
be required to pay the probable liabilities of such entity
on its debts as they become absolute and matured, (C) such
entity is able to pay its debts and other liabilities,
including contingent obligations, as they mature and
(D) such entity is not engaged in business or a transaction,
and is not about to engage in business or a transaction, for
which it has an unreasonably small capital.
(xxx) Investment Company Act. As of the date of
this Agreement, each of the Issuers, the Security Parties
and BIPCO is not, and upon (i) the issuance and sale of the
Securities as herein contemplated and the application of the
net proceeds as described in the Offering Memorandum and
(ii) the consummation of the transactions contemplated in
the Acquisition Agreements and the related financings, and
the Issuers and the Security Parties will not be, an
"investment company" or an entity "controlled" by an
"investment company," as such terms are defined in the
Investment Company Act of 1940, as amended.
(xxxi) Rule 144A Eligibility. The Securities are
eligible for resale pursuant to Rule 144A and will not be,
at the Closing Time, of the same class as securities of the
Issuers that are listed on a national securities exchange
registered under Section 6 of the 1934 Act, or quoted in a
U.S. automated interdealer quotation system.
(xxxii) No General Solicitation. None of the Issuers
or any person acting on their behalf through any agent
(provided that no representation is made as to the Initial
Purchasers, their affiliates or any person acting on their
behalf) has engaged or will engage in any form of general
solicitation or general advertising (within the meaning of
Rule 502(c) under the 1933 Act) in connection with the
offering of the Securities in the United States.
(xxxiii) No Registration Required. Assuming (A) that
the representations and warranties of the Initial Purchasers
set forth in Section 2 and Section 6 hereof are true and
(B) the compliance by the Initial Purchasers with the
covenants and agreements set forth in Section 2 and Section
6 hereof, it is not necessary in connection with the offer,
sale and delivery of the Securities to the Initial
Purchasers under, or in connection with the initial resale
of such Securities by the Initial Purchasers in accordance
with, this Agreement to register the Securities under the
1933 Act or to qualify any indenture in respect of the
Securities under the Trust Indenture Act of 1939, as
amended.
(xxxiv) No Directed Selling Efforts. With respect to
those Securities sold in reliance on Regulation S, (A) none
of the Issuers, any of their respective affiliates or any
person acting on its or their behalf (other than the Initial
Purchasers, their affiliates and any person acting on their
behalf, as to whom the Issuers make no representation) has
engaged or will engage in any directed selling efforts
(within the meaning of Regulation S) in the United States
and (B) each of the Issuers, their respective affiliates and
any person acting on its or their behalf (other than the
Initial Purchasers, their affiliates and any person acting
on their behalf, as to whom the Issuers make no
representation) has complied and will comply with the
offering restrictions requirement of Regulation S.
(b) Officers' Certificates. Any certificate signed by any
officer of either of the Issuers and delivered to the Initial
Purchasers or to counsel for the Initial Purchasers shall be
deemed a representation and warranty by such Issuer to the
Initial Purchasers as to the matters covered thereby.
Section 2. Purchase, Sale and Resale of the
Securities; Closing; Representations and Warranties of the
Initial Purchasers. (a) Securities. On the basis of the
representations and warranties contained in this Agreement, and
subject to the terms and conditions set forth in this Agreement,
the Issuers agree to sell to the Initial Purchasers, severally
and not jointly, and each Initial Purchaser, severally and not
jointly, agrees to purchase from the Issuers, at the price set
forth in Schedule B, the aggregate principal amount of Securities
set forth in Schedule A opposite the name of such Initial
Purchaser, plus any additional amount of Securities which such
Initial Purchaser may become obligated to purchase pursuant to
the provisions of Section 11 hereof.
(b) Payment. Payment of the purchase price for, and
delivery of, the Securities shall be made at the offices of
Skadden, Arps, Slate, Meagher & Flom LLP, 919 Third Avenue, New
York, New York 10022, or at such other place as shall be agreed
upon by the Issuers and the Initial Purchasers, at 9:00 A.M., New
York time, on the fifth business day after the date hereof
(unless postponed in accordance with the provisions of Section
11), or such other time not later than ten business days after
such date as shall be agreed upon by the Issuers and the Initial
Purchasers (such date and time of payment and delivery being
herein called the "Closing Time").
Payment shall be made to the Issuers by wire transfer
of immediately available funds to a bank account designated by
the Issuers, against delivery to TD Securities for the respective
accounts of the Initial Purchasers of certificates for the
Securities to be purchased by them. It is understood that each
Initial Purchaser has authorized TD Securities, for its account,
to accept delivery of, and receipt for, and make payment of the
purchase price for, the Securities which it has agreed to
purchase. TD Securities, individually and not as representative
of the Initial Purchasers, may (but shall not be obligated to)
make payment of the purchase price for the Securities to be
purchased by any Initial Purchaser whose funds have not been
received by the Closing Time, but such payment shall not relieve
such Initial Purchaser from its obligations hereunder.
(c) Qualified Institutional Buyer. Each Initial Purchaser
severally and not jointly represents and warrants to, and agrees
with, the Issuers that it is a Qualified Institutional Buyer
within the meaning of Rule 144A under the 1933 Act.
(d) Denominations; Registration. Certificates for the
Securities shall be in such denominations ($1,000 or integral
multiples thereof) and registered in such names as the
Representative(s) may request in writing at least one full
business day before the Closing Time. The certificates
representing the Securities shall be registered in the name of
Cede & Co. pursuant to an agreement among the Issuers, the
Trustee and The Depository Trust Company ("DTC"), and shall be
made available for examination and packaging by the Initial
Purchasers in The City of New York not later than 10:00 A.M. on
the last business day prior to the Closing Time.
Section 3. Certain Covenants of the Issuers. Each of
the Issuers jointly and severally covenants with the Initial
Purchasers as follows:
(a) Offering Memorandum. The Issuers will promptly
deliver to the Initial Purchasers (without charge, for the
period ending after the later of (i) the completion of the
distribution of the Securities as determined by TD
Securities and (ii) 45 days following the Closing Time, and
at the expense of the Initial Purchasers thereafter) such
number of copies of the Offering Memorandum, as it may then
be amended or supplemented, or the Preliminary Offering
Memorandum, as it may then be amended or supplemented, as
the Initial Purchasers may from time to time reasonably
request.
(b) Notice and Effect of Material Events. The
Issuers will as soon as is practicable notify each Initial
Purchaser, and confirm such notice in writing, of (x) any
filing made by the Issuers of information relating to the
offering of the Securities with any securities exchange or
any other regulatory body in the United States or any other
jurisdiction, and (y) prior to the completion of the
distribution of the Securities by the Initial Purchasers as
determined by TD Securities, any material changes in or
affecting the condition, financial or otherwise, the
earnings, business affairs or business prospects of the
Issuers, the Security Parties, Brant-Allen and their
respective subsidiaries which (i) make any statement of any
material fact made in the Offering Memorandum materially
false or misleading or (ii) are not disclosed in the
Offering Memorandum. If, during the period referred to in
paragraph (a) above, any event shall occur or condition
exist as a result of which it is necessary, in the opinion
of counsel for the Initial Purchasers or counsel for the
Issuers, to amend or supplement the Offering Memorandum in
order that the Offering Memorandum will not include an
untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements
therein, in the light of the circumstances under which they
were made, not misleading or if, in the opinion of counsel
for the Initial Purchasers or counsel for the Issuers, it is
necessary to amend or supplement the Offering Memorandum to
comply with applicable law, the Issuers, at their own
expense, will promptly prepare such amendment or supplement
as may be necessary so that the statements in the Offering
Memorandum as so amended or supplemented will not, in the
light of the circumstances then existing, be misleading or
so that such Offering Memorandum as so amended or
supplemented will comply with applicable law, as the case
may be, and furnish the Initial Purchasers such number of
copies as they may reasonably request (and the Initial
Purchasers will, upon receiving notice from the Issuers to
do so, suspend use of the Offering Memorandum, until such
time as they shall have received such copies of the amended
or supplemented Offering Memorandum).
(c) Amendment to Offering Memorandum and Supplements.
The Issuers will advise each Initial Purchaser promptly of
any proposal to amend or supplement the Offering Memorandum
and will not effect such amendment or supplement without the
consent of the Initial Purchasers (except to the extent that
any such amendment or supplement objected to is necessary,
in the judgment of counsel to the Issuers, to make the
statements made in the Offering Memorandum, in the light of
the circumstances under which they were made, not
misleading). Neither the consent of the Initial Purchasers,
nor the Initial Purchasers' delivery of any such amendment
or supplement, shall constitute a waiver of any of the
conditions set forth in Section 5 hereof.
(d) Qualification of Securities for Offer and Sale.
The Issuers will use their best efforts, in cooperation with
the Initial Purchasers, to qualify the Securities for
offering and sale under the applicable securities laws of
such states and other jurisdictions of the United States as
the Initial Purchasers may designate (and in the Provinces
of Quebec, Ontario and British Columbia on a private
placement basis) and maintain such qualifications in effect
as long as required for the sale of the Securities;
provided, however, that the Issuers shall not be obligated
to file any general consent to service of process or to
qualify as a foreign corporation or as a dealer in
securities in any jurisdiction in which they are not so
qualified or to subject themselves to taxation in respect of
doing business in any jurisdiction in which they are not
otherwise so subject.
(e) Rating of Securities. The Issuers shall take all
reasonable action necessary to enable Standard & Poor's
Ratings Services, a division of McGraw Hill, Inc. ("S&P"),
and Moody's Investors Service Inc. ("Moody's") to provide
their respective credit ratings of the Securities.
(f) DTC. The Issuers will use their reasonable
efforts in cooperation with the Initial Purchasers to permit
the Securities to be eligible for clearance and settlement
through DTC.
(g) PORTAL. The Issuers will use their reasonable
efforts in cooperation with the Initial Purchasers to permit
the Securities to be designated PORTAL securities in
accordance with the rules and regulations adopted by the
NASD relating to trading in the PORTAL market.
(h) Use of Proceeds. The Company will apply the net
proceeds that it receives from the offer and sale of the
Securities issued by the Issuers in the manner set forth in
the Offering Memorandum under the heading "Use of Proceeds."
(i) Restriction on Sale of Securities. For a period
of 90 days from the date of the Offering Memorandum, the
Issuers will not, without the prior written consent of TD
Securities, directly or indirectly, issue, sell, offer or
agree to sell, grant any option for the sale of, or
otherwise dispose of, any other debt securities of the
Issuers or securities of the Issuers that are convertible
into, or exchangeable for, the Securities or such other debt
securities, other than the Exchange Securities referred to
in the Registration Rights Agreement.
Section 4. Payment of Expenses. (a) Expenses.
Whether or not any sale of the Securities is consummated, the
Issuers will pay and bear all costs and expenses incident to the
performance of their and any of their respective subsidiaries'
obligations under this Agreement, the Securities, the Indenture,
the Registration Rights Agreement, the Intercreditor Agreement
and the Collateral Agreements, including (i) the preparation and
printing of the Preliminary Offering Memorandum, the Offering
Memorandum and any amendments or supplements thereto, and the
cost of furnishing copies thereof to the Initial Purchasers,
(ii) the delivery of the Securities to the Initial Purchasers,
(iii) the fees and disbursements of the Issuers' counsel and
accountants, (iv) the qualification of the Securities under the
applicable U.S. securities laws in accordance with Section 3(d)
hereof and any filing for review of the offering with NASD,
including filing fees and fees and disbursements of counsel for
the Initial Purchasers in connection therewith and in connection
with the preparation of any "blue sky" or legal investment
memoranda, (v) any fees charged by rating agencies for rating the
Securities, (vi) the fees and expenses of the Trustee and the
collateral trustee under the Deed of Trust, including the fees
and disbursements of counsel for the Trustee and the collateral
trustee under the Deed of Trust, in connection with the
Indenture, the Deed of Trust and the Securities, (vii) all fees
and expenses in connection with the pledge of the Collateral,
including any transfer or stamp taxes, (viii) the cost of
preparing certificates representing the Securities, (ix) the cost
of obtaining approval for the trading of the Securities through
PORTAL and (x) all other costs and expenses incident to the
performance of the Issuers' obligations hereunder that are not
otherwise specifically provided for in this Section; provided
that, except as specifically provided herein, the Issuers will
not be obligated to pay the costs and expenses of counsel for the
Initial Purchasers.
(b) Termination of Agreement. If this Agreement is
terminated by the Initial Purchasers in accordance with the
provisions of Section 5 or 10(a)(i), the Issuers shall reimburse
the Initial Purchasers for all of their documented out-of-pocket
expenses, including the reasonable fees and disbursements of
counsel for the Initial Purchasers (reasonably incurred by the
Initial Purchasers in connection with this Agreement or the
offering contemplated hereunder).
Section 5. Conditions of Initial Purchasers'
Obligations. The obligations of the Initial Purchasers to
purchase and pay for the Securities that they have agreed to
purchase hereunder are subject to the accuracy of the
representations and warranties of the Issuers contained herein
and in certificates of any officer of the Issuers and any
subsidiary delivered pursuant to the provisions hereof, to the
performance by the Issuers of their obligations hereunder, and to
the following further conditions:
(a) Opinion of Counsel for the Issuers. At the
Closing Time, the Initial Purchasers shall have received a
favorable opinion, dated as of the Closing Time, of the
following counsel for the Issuers, in form and substance
satisfactory to counsel for the Initial Purchasers: (i)
Skadden, Arps, Slate, Meagher & Flom, special New York
counsel for the Issuers, to the effect set forth in Exhibit
B-1 hereto and to such further effect as counsel for the
Initial Purchasers may reasonably request, (ii) Mays &
Valentine, counsel for the Issuers, to the effect set forth
in Exhibit B-2 hereto and to such further effect as counsel
for the Initial Purchasers may reasonably request and (iii)
McCarthy Tetrault, special Quebec counsel for the Issuers,
to the effect set forth in Exhibit B-3 hereto and to such
further effect as counsel for the Initial Purchasers may
reasonably request. Each such counsel may also state that,
insofar as such opinion involves factual matters, they have
relied, to the extent they deem proper, upon certificates of
officers of the Issuers and their respective subsidiaries
(and other affiliates) and certificates of public officials.
(b) Opinion of Counsel for the Initial Purchasers.
At the Closing Time, the Initial Purchasers shall have
received the favorable opinion, dated as of the Closing
Time, of Shearman & Sterling, counsel for the Initial
Purchasers. In giving such opinion such counsel may rely,
as to all matters governed by the laws of jurisdictions
other than the law of the State of New York, the federal law
of the United States and the General Corporation Law of the
State of Delaware, upon the opinions of counsel satisfactory
to the Initial Purchasers. Such counsel may also state
that, insofar as such opinion involves factual matters, they
have relied, to the extent they deem proper, upon
certificates of officers of the Issuers and their respective
subsidiaries (and other affiliates) and certificates of
public officials.
(c) Officers' Certificates. At the Closing Time,
there shall not have been, since the date hereof or since
the respective dates as of which information is given in the
Offering Memorandum, any material adverse change in the
condition, financial or otherwise, or in the earnings,
business affairs or business prospects of the Issuers and
its subsidiaries considered as one enterprise, whether or
not arising in the ordinary course of business, and the
Initial Purchasers shall have received a certificate of the
President or a Vice President of each of the Issuers and of
the chief financial or chief accounting officer of each of
the Issuers, dated as of the Closing Time, to the effect
that (i) there has been no such material adverse change,
(ii) the representations and warranties in Section 1 hereof
are true and correct in all material respects with the same
force and effect as though expressly made at and as of the
Closing Time (except for those representations and
warranties that are expressly made as of a certain date),
and (iii) the Issuers have complied in all material respects
with all agreements and satisfied in all material respects
all conditions on their part to be performed or satisfied at
or prior to the Closing Time.
(d) Accountants' Comfort Letters. At the time of the
execution of this Agreement, the Initial Purchasers shall
have received from each of Coopers & Lybrand, L.L.P.,
independent auditors for the Issuers, BIPCO and BITCO, and
Coopers & Lybrand, Chartered Accountants, General
Partnership, independent auditors for Soucy Inc., a letter
dated such date, in form and substance satisfactory to the
Initial Purchasers, together with signed or reproduced
copies of such letter for each of the other Initial
Purchasers containing statements and information of the type
ordinarily included in accountants' "comfort letters" to
Initial Purchasers with respect to the financial statements
and certain financial information contained in the Offering
Memorandum.
(e) Bring-Down Comfort Letters. At the Closing Time,
the Initial Purchasers shall have received from each of
Coopers & Lybrand, L.L.P., independent auditors for the
Issuers, BIPCO and BITCO, and Coopers & Lybrand, Chartered
Accountants, General Partnership, independent auditors for
Soucy Inc., a letter, dated as of the Closing Time, to the
effect that they reaffirm the statements made in the letter
furnished pursuant to subsection (d) of this Section, except
that the specified date referred to shall be a date not more
than three business days prior to the Closing Time.
(f) Maintenance of Rating. At the Closing Time, the
Securities shall be rated at least B2 by Moody's and B by
S&P, and the Issuers shall have delivered to the Initial
Purchasers a letter dated the Closing Time from each such
rating agency, or other evidence satisfactory to the Initial
Purchasers, confirming that the Securities have such
ratings; and since the date of this Agreement, there shall
not have occurred a downgrading in the rating assigned to
the Securities or any of the Issuers' other debt securities
by any "nationally recognized statistical rating
organization," as that term is defined by the Commission in
Rule 436(g)(2) under the 1933 Act, and no such securities
rating agency shall have publicly announced that it has
under surveillance or review, with possible negative
implications, its rating of the Securities or any of the
Issuers' other debt securities.
(g) PORTAL. At the Closing Time, the Securities
shall have been designated for trading on PORTAL.
(h) Additional Documents. At the Closing Time,
counsel for the Initial Purchasers shall have been furnished
with all such documents, certificates and opinions as they
may require for the purpose of enabling them to pass upon
the matters referred to in Section 5(b) and in order to
evidence the accuracy and completeness of any of the
representations, warranties or statements of the Issuers,
the performance of any of the covenants of the Issuers or
the fulfillment of any of the conditions herein contained;
and all proceedings taken by the Issuers at or prior to the
Closing Time in connection with the authorization, issuance
and sale of the Securities as contemplated in this Agreement
shall be satisfactory in form and substance to the Initial
Purchasers and to counsel for the Initial Purchasers
(i) Execution and Delivery of Agreements. At or
prior to the Closing Time, the Indenture, the Registration
Rights Agreement, the Intercreditor Agreement, the
Acquisition Agreements, the Credit Agreements and all of the
Collateral Documents, in form and substance reasonably
satisfactory to the Initial Purchasers, shall have been duly
executed and delivered and be in full force and effect.
(j) Consummation of Transactions. At the Closing
Time, the transactions contemplated by the Acquisition
Agreements and the Credit Agreements and the transfer by
Messrs. Peter M. Brant and Joseph Allen of all their
interests in the capital stock of Soucy Inc. to Brant-Allen
(as described in the Offering Memorandum) shall have been
consummated.
(k) Filings, Registrations and Recordings. Each
document (including, without limitation, any Uniform
Commercial Code financing statement) required by the
Collateral Documents or under law or reasonably requested by
the Trustee to be filed, registered or recorded in order to
create in favor of the Trustee, for the benefit of holders
of the Securities, a perfected security interest in the
Collateral, as contemplated by the Collateral Documents,
shall be in proper form for filing, registration or
recordation.
(l) Solvency Opinion. At the Closing Time, the
Initial Purchasers shall have received a solvency opinion of
Valuation Research Corporation, in form and substance
reasonably satisfactory to the Initial Purchasers and dated
as of the Closing Time.
(m) Termination of Agreement. If any condition
specified in this Section shall not have been fulfilled when
and as required to be fulfilled, this Agreement may be
terminated by the Initial Purchasers by notice to the
Issuers at any time at or prior to the Closing Time, and
such termination shall be without liability of any party to
any other party except as provided in Section 4 and except
that Sections 1, 7 and 8 shall survive any such termination
and remain in full force and effect.
Section 6. Subsequent Offers and Resales of the
Securities. (a) Representations, Warranties and Covenants of
the Initial Purchasers. Each of the Initial Purchasers
represents, warrants and covenants to observe the following
procedures in connection with the offer and sale of the
Securities:
(i) Offers and Sales Only to Qualified Institutional
Buyers. Each Initial Purchaser understands that no action
has been taken in any jurisdiction by the Issuers that would
permit a public offering of the Securities in any
jurisdiction where action would be required for such
purpose. Each Initial Purchaser represents and agrees that
it has not offered, sold or delivered and it will not offer,
sell or deliver any of the Securities in any jurisdiction
except under circumstances that will result in compliance
with the applicable laws thereof, and that it will take at
its own expense whatever action is required to permit its
purchase and resale of the Securities in any such
jurisdiction (other than in the United States). Each such
offer or sale shall only be made (A) to persons whom the
offeror or seller reasonably believes to be Qualified
Institutional Buyers (as defined in Rule 144A under the 1933
Act) or (B) to non-U.S. persons outside the United States
(which shall include dealers or other professional
fiduciaries in the United States acting on a discretionary
basis for beneficial owners (other than an estate or trust)
that are non-U.S. persons) to whom the offeror or seller
reasonably believes offers and sales of the Securities may
be made in reliance upon Regulation S under the 1933 Act and
applicable securities legislation of the relevant
jurisdiction.
(ii) No General Solicitation. Neither it nor any
person acting on its behalf has engaged or will engage in
any form of general solicitation or general advertising
(within the meaning of Rule 502(c) under the 1933 Act) in
connection with the offering or sale of the Securities in
the United States.
(iii) Subsequent Purchaser Notification. Each
Initial Purchaser will take reasonable steps to inform, and
cause each of its affiliates to take reasonable steps to
inform, persons acquiring Securities from such Initial
Purchaser or affiliate, as the case may be, in the United
States (the "Subsequent Purchasers") that the Securities (A)
have not been and will not be registered under the 1933 Act,
(B) are being sold to them without registration under the
1933 Act in reliance on Rule 144A or in accordance with
another exemption from registration under the 1933 Act, as
the case may be, and (C) may not be offered, sold or
otherwise transferred except (1) to the Issuers, (2) outside
the United States in accordance with Rule 904 of Regulation
S or (3) inside the United States in accordance with (x)
Rule 144A to a person whom the seller reasonably believes is
a Qualified Institutional Buyer that is purchasing such
Securities for its own account or for the account of a
Qualified Institutional Buyer to whom notice is given that
the offer, sale or transfer is being made in reliance on
Rule 144A or (y) pursuant to another available exemption
from registration under the 1933 Act.
(iv) Restrictions on Transfer. The transfer
restrictions set forth under "Notice to Investors" in the
Offering Memorandum, including the legend required thereby,
shall apply to the Securities except as otherwise agreed by
the Issuers and the Initial Purchasers.
(v) Resale Pursuant to Rule 903 of Regulation S or
Rule 144A. Each Initial Purchaser understands that the
Securities have not been and will not be registered under
the 1933 Act and may not be offered or sold within the
United States or to, or for the account or benefit of, U.S.
persons except in accordance with Regulation S under the
1933 Act or pursuant to an exemption from the registration
requirements of the 1933 Act. Each Initial Purchaser
severally represents, warrants and agrees that it has
offered and sold Securities and will offer and sell
Securities (i) as part of their distribution at any time and
(ii) otherwise until forty days after the later of the date
upon which the offering of the Securities commences and the
Closing Time, only (x) outside the United States in
accordance with Rule 903 of Regulation S or (y) to a
Qualified Institutional Buyer in transactions that meet the
requirements of Rule 144A under the 1933 Act. Accordingly,
neither the Initial Purchasers, their affiliates nor any
persons acting on their behalf have engaged or will engage
in any directed selling efforts with respect to Securities,
and the Initial Purchasers, their affiliates and any person
acting on their behalf have complied and will comply with
the offering restriction requirements of Regulation S. Each
Initial Purchaser agrees that, at or prior to confirmation
of a sale of Securities (other than a sale of Securities
pursuant to Rule 144A), it will have sent to each
distributor, dealer or person receiving a selling
concession, fee or other remuneration that purchases
Securities from it or through it during the restricted
period a confirmation or notice to substantially the
following effect:
The Securities covered hereby have not been
registered under the United States Securities Act
of 1933 (the "Securities Act") and may not be
offered or sold within the United States or to or
for the account or benefit of U.S. persons (i) as
part of their distribution at any time and (ii)
otherwise until forty days after the later of the
date upon which the offering of the Securities
commenced and the date of closing, except in
either case in accordance with Regulation S or
another exemption from the registration
requirements of the Securities Act. Terms used
above have the meaning given to them by Regulation S.
Terms used in the above paragraph have the meaning given to
them by Regulation S.
(vi) Contractual Arrangements With Respect to
Distribution. Each Initial Purchaser severally represents
and agrees that it has not entered and will not enter into
any contractual arrangements with respect to the
distribution of the Securities, except with its affiliates
or with the prior written consent of the Issuers.
(vii) Distribution in Canada. Each of the Initial
Purchasers acknowledges that the distribution of the
Securities in Canada is being made without the filing of a
prospectus only on a private placement basis and only to
exempt purchasers in the provinces of Quebec, Ontario and
British Columbia. Accordingly, each Initial Purchaser
severally represents, warrants and agrees that: (a) any
offer and resale of the Securities in Canada will be
restricted and must be made by prospectus and through an
appropriately registered dealer or in accordance with an
exemption from prospectus and registration requirements
under provincial securities laws; (b) it and any person
acting on its behalf has offered or sold and will offer or
sell the Securities in Canada solely by use of the
Preliminary Canadian Offering Memorandum and the Canadian
Offering Memorandum; (c) it and any person acting on its
behalf will send a confirmation of the acceptance of offers
to purchase Securities to purchasers in Canada who have not
withdrawn their offers to purchase prior to the issuance of
such confirmation; and (d) it will give written notice to
the Issuers of the full name and address of each purchaser
to whom it sells Securities in Canada, together with the
amount of Securities sold to each such purchaser, the trade
date and such other information regarding such purchase,
offer or sale as may be required by the Issuers to make the
filings required by the applicable Canadian laws and to pay
all fees in connection with such filings.
(b) Covenants of the Issuers. Each of the Issuers jointly
and severally covenants with each Initial Purchaser as follows:
(i) Due Diligence. In connection with the original
distribution of the Securities in accordance with the terms
of this Agreement, each of the Issuers agrees that, prior to
any offer or resale of the Securities by the Initial
Purchasers, the Initial Purchasers and counsel for the
Initial Purchasers shall have the right to make reasonable
inquiries into the businesses of the Issuers, the Security
Parties, BIPCO, BITCO, Brant-Allen and their respective
subsidiaries.
(ii) Integration. The Issuers agree that they will
not and will cause their respective affiliates not to
solicit any offer to buy or make any offer or sale of, or
otherwise negotiate in respect of, securities of the Issuers
of any class if, as a result of the doctrine of
"integration" referred to in Rule 502 under the 1933 Act,
such offer or sale would render invalid (for the purpose of
(i) the sale of the Securities by the Issuers to the Initial
Purchasers, (ii) the resale of the Securities by the Initial
Purchasers to Subsequent Purchasers or (iii) the resale of
the Securities by such Subsequent Purchasers to others) the
exemption from the registration requirements of the 1933 Act
provided by Section 4(2) thereof or by Rule 144A or by
Regulation S thereunder or otherwise.
(iii) Rule 144A Information. The Issuers agree
that, in order to render the Securities eligible for resale
pursuant to Rule 144A under the 1933 Act, while any of the
Securities remain outstanding, they will make available,
upon request, to any holder of Securities or prospective
purchasers of Securities the information specified in Rule
144A(d)(4), unless the Issuers furnish information to the
Commission pursuant to Section 13 or 15(d) of the 1934 Act.
(iv) Restriction on Resales. After the Closing Time
and until the Issuers shall have filed, and the Commission
shall have declared effective, a Registration Statement (as
defined in the Registration Rights Agreement) covering the
Securities, the Issuers shall not, and shall not permit any
of their affiliates to, sell any Securities that are
"restricted securities" (as such term is defined in Rule
144(a)(3) under the 1933 Act).
Section 7. Indemnification. (a) Indemnification of
Initial Purchasers. Each of the Issuers jointly and severally
agrees to indemnify and hold harmless each Initial Purchaser and
each person, if any, who controls any Initial Purchaser within
the meaning of Section 15 of the 1933 Act or Section 20 of the
1934 Act as follows:
(i) against any and all loss, liability, claim,
damage and expense whatsoever, as incurred, arising out of
an untrue statement or alleged untrue statement of a
material fact contained in the Preliminary Offering
Memorandum or the Offering Memorandum (or any amendment or
supplement thereto) or the omission or alleged omission
therefrom of a material fact necessary in order to make the
statements therein, in the light of the circumstances under
which they were made, not misleading;
(ii) against any and all loss, liability, claim,
damage and expense whatsoever, as incurred, to the extent of
the aggregate amount paid in settlement of any litigation,
or any investigation or proceeding by any governmental
agency or body, commenced or threatened, or of any claim
whatsoever based upon any such untrue statement or omission,
or any such alleged untrue statement or omission; provided
that (subject to Section 7(d) below) any such settlement is
effected with the written consent of the Issuers; and
(iii) against any and all expense whatsoever, as
incurred (including reasonable fees and disbursements of
counsel chosen by TD Securities), reasonably incurred in
investigating, preparing or defending against any
litigation, or investigation or proceeding by any
governmental agency or body, commenced or threatened, or any
claim whatsoever based upon any such untrue statement or
omission, or any such alleged untrue statement or omission,
to the extent that any such expense is not paid under
subparagraph (i) or (ii) above;
provided, however, that this indemnity agreement does not apply
to any loss, liability, claim, damage or expense to the extent
arising out of an untrue statement or omission or alleged untrue
statement or omission made in reliance upon and in conformity
with written information furnished to the Issuers by any Initial
Purchaser through TD Securities expressly for use in the
Preliminary Offering Memorandum or the Offering Memorandum (or
any amendment or supplement thereto); provided further that, with
respect to any untrue statement contained in or omission from any
Preliminary Offering Memorandum, this indemnity agreement shall
not inure to the benefit of any Initial Purchaser on account of
any loss, claim, damage, liability or action arising from the
sale of any Securities to any person in the initial resale by
that Initial Purchaser if that Initial Purchaser failed to send
or give a copy of the Offering Memorandum, as the same may be
amended or supplemented, to that person within the time required
by the 1933 Act, and the untrue statement or alleged untrue
statement of a material fact or omission or alleged omission to
state a material fact in such Preliminary Offering Memorandum was
corrected in the Offering Memorandum and the Offering Memorandum
was made available to that Initial Purchaser prior to the sale of
the Securities.
(b) Indemnification of Issuers and Directors. Each Initial
Purchaser severally agrees to indemnify and hold harmless the
Issuers, their directors, and each person, if any, who controls
either of the Issuers within the meaning of Section 15 of the
1933 Act or Section 20 of the 1934 Act, against any and all loss,
liability, claim, damage and expense described in the indemnity
contained in subsection (a) of this Section, as incurred, but
only with respect to untrue statements or omissions, or alleged
untrue statements or omissions, made in the Preliminary Offering
Memorandum or the Offering Memorandum (or any amendment or
supplement thereto) in reliance upon and in conformity with
written information furnished to the Issuers by such Initial
Purchaser through TD Securities expressly for use in the
Preliminary Offering Memorandum or the Offering Memorandum (or
any amendment or supplement thereto).
(c) Actions Against Parties; Notification. Each
indemnified party shall give notice as promptly as reasonably
practicable to each indemnifying party of any action commenced
against it in respect of which indemnity may be sought hereunder,
but failure to so notify an indemnifying party shall not relieve
such indemnifying party from any liability hereunder to the
extent it is not materially prejudiced as a result thereof and in
any event shall not relieve it from any liability which it may
have otherwise than on account of this indemnity agreement. In
the case of parties indemnified pursuant to Section 7(a) above,
counsel to the indemnified parties shall be selected by TD
Securities, and, in the case of parties indemnified pursuant to
Section 7(b) above, counsel to the indemnified parties shall be
selected by the Issuers. An indemnifying party may participate
at its own expense in the defense of any such action; provided,
however, that counsel to the indemnifying party shall not (except
with the consent of the indemnified party) also be counsel to the
indemnified party. In no event shall the indemnifying parties be
liable for the fees and expenses of more than one counsel (in
addition to any local counsel) separate from their own counsel
for all indemnified parties in connection with any one action or
separate but similar or related actions in the same jurisdiction
arising out of the same general allegations or circumstances. No
indemnifying party shall, without the prior written consent of
the indemnified parties, settle or compromise or consent to the
entry of any judgment with respect to any litigation, or any
investigation or proceeding by any governmental agency or body,
commenced or threatened, or any claim whatsoever in respect of
which indemnification or contribution could be sought under this
Section 7 or Section 8 hereof (whether or not the indemnified
parties are actual or potential parties thereto), unless such
settlement, compromise or consent (i) includes an unconditional
release of each indemnified party from all liability arising out
of such litigation, investigation, proceeding or claim and (ii)
does not include a statement as to or an admission of fault,
culpability or a failure to act by or on behalf of any
indemnified party.
(d) Settlement Without Consent If Failure to Reimburse. If
at any time an indemnified party shall have requested an
indemnifying party to reimburse the indemnified party for fees
and expenses of counsel and the indemnifying party is obligated
to reimburse the indemnified party under the foregoing provisions
of this Section 7, such indemnifying party agrees that it shall
be liable for any settlement of the nature contemplated by
Section 7(a)(ii) effected without its written consent if (i) such
settlement is entered into more than 60 days after receipt by
such indemnifying party of the aforesaid request, (ii) such
indemnifying party shall have received notice of the terms of
such settlement at least 30 days prior to such settlement being
entered into and (iii) such indemnifying party shall not have
reimbursed such indemnified party in accordance with such request
prior to the date of such settlement.
Section 8. Contribution. If the indemnification
provided for in Section 7 hereof is for any reason unavailable to
or insufficient to hold harmless an indemnified party in respect
of any losses, liabilities, claims, damages or expenses referred
to therein, then each indemnifying party shall contribute to the
aggregate amount of such losses, liabilities, claims, damages and
expenses incurred by such indemnified party, as incurred, (i) in
such proportion as is appropriate to reflect the relative
benefits received by the Issuers on the one hand and the Initial
Purchasers on the other hand from the offering of the Securities
pursuant to this Agreement or (ii) if the allocation provided by
clause (i) is not permitted by applicable law, in such proportion
as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of
the Issuers on the one hand and of the Initial Purchasers on the
other hand in connection with the statements or omissions which
resulted in such losses, liabilities, claims, damages or
expenses, as well as any other relevant equitable considerations.
The relative benefits received by the Issuers on the
one hand and the Initial Purchasers on the other hand in
connection with the offering of the Securities pursuant to this
Agreement shall be deemed to be in the same respective
proportions as the total net proceeds from the offering of the
Securities pursuant to this Agreement (before deducting expenses)
received by the Issuers and the total discount received by the
Initial Purchasers, in each case as set forth on the cover of the
Offering Memorandum, bear to the aggregate initial price to
investors of the Securities as set forth on such cover.
The relative fault of the Issuers on the one hand and
the Initial Purchasers on the other hand shall be determined by
reference to, among other things, whether any such untrue or
alleged untrue statement of a material fact or omission or
alleged omission to state a material fact relates to information
supplied by the Issuers or by the Initial Purchasers and the
parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.
The Issuers and the Initial Purchasers agree that it
would not be just and equitable if contribution pursuant to this
Section 8 were determined by pro rata allocation (even if the
Initial Purchasers were treated as one entity for such purpose)
or by any other method of allocation which does not take account
of the equitable considerations referred to above in this Section
8. The aggregate amount of losses, liabilities, claims, damages
and expenses incurred by an indemnified party and referred to
above in this Section 8 shall be deemed to include any legal or
other expenses reasonably incurred by such indemnified party in
investigating, preparing or defending against any litigation, or
any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever based upon
any such untrue or alleged untrue statement or omission or
alleged omission.
Notwithstanding the provisions of this Section 8, no
Initial Purchaser shall be required to contribute any amount in
excess of the amount by which the total price at which the
Securities purchased by it and sold pursuant to the terms of this
Agreement exceeds the amount of any damages which such Initial
Purchaser has otherwise been required to pay by reason of any
such untrue or alleged untrue statement or omission or alleged
omission.
No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the 1933 Act) shall be
entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation.
For purposes of this Section 8, each person, if any,
who controls an Initial Purchaser within the meaning of Section
15 of the 1933 Act or Section 20 of the 1934 Act shall have the
same rights to contribution as such Initial Purchaser, and each
director of the Issuers, and each person, if any, who controls
the Issuers within the meaning of Section 15 of the 1933 Act or
Section 20 of the 1934 Act, shall have the same rights to
contribution as the Issuers. The Initial Purchasers' respective
obligations to contribute pursuant to this Section 8 are several
in proportion to the principal amount of Securities set forth
opposite their respective names in Schedule A hereto and not
joint.
Section 9. Representations, Warranties and Agreements
to Survive Delivery. All representations, warranties,
indemnities, agreements and other statements of the Issuers or
their respective officers set forth in or made pursuant to this
Agreement will remain operative and in full force and effect,
regardless of any investigation made by or on behalf of any
Initial Purchaser or controlling person, or by or on behalf of
the Issuers, and will survive delivery of the Securities to the
Initial Purchasers.
Section 10. Termination of Agreement. (a)
Termination; General. The Initial Purchasers may terminate this
Agreement, by notice to the Issuers, at any time at or prior to
the Closing Time (i) if there has been, since the time of the
execution of this Agreement or the respective dates as of which
information is given in the Offering Memorandum, any event or
condition which would result in a Material Adverse Effect, or
(ii) if there has occurred any material adverse change in the
financial markets in the United States or the international
financial markets, or any outbreak of hostilities or escalation
thereof or other calamity or crisis or any change or development
involving a prospective change in national or international
political, financial or economic conditions, in each case, the
effect of which is such as to make it, in the judgment of TD
Securities, impracticable to market the Securities or to enforce
contracts for the sale of the Securities, or (iii) if trading in
any securities of the Issuers has been suspended or materially
limited by the Commission, or if trading generally on the
American Stock Exchange or the New York Stock Exchange or in the
Nasdaq National Market has been suspended or materially limited,
or minimum or maximum prices for trading have been fixed, or
maximum ranges for prices have been required, by any of such
exchanges or by such system or by order of the Commission, NASD
or any other governmental authority, in each case, the effect of
which is such as to make it, in the judgment of TD Securities,
impracticable to market the Securities or to enforce contracts
for the sale of the Securities, or (iv) if a banking moratorium
has been declared by either Federal, New York, Delaware,
Connecticut, Virginia or Quebec authorities.
(b) Liabilities. If this Agreement is terminated
pursuant to this Section, such termination shall be without
liability of any party to any other party, except as to the
extent provided in Section 4; provided that the provisions of
Sections 1, 7, 8 and 9 shall remain in full force and effect.
Section 11. Default by One or More of the Initial
Purchasers. If one or more of the Initial Purchasers shall fail
at the Closing Time to purchase the Securities which it or they
are obligated to purchase under this Agreement (the "Defaulted
Securities"), TD Securities shall have the right, but not the
obligation, within 24 hours thereafter, to make arrangements for
one or more non-defaulting Initial Purchasers, or any other
Initial Purchasers, to purchase, each severally and not jointly,
all, but not less than all, of the Defaulted Securities in such
amounts as may be agreed upon and upon the terms herein set
forth; if, however, TD Securities shall not have completed such
arrangements within such 24-hour period, then this Agreement
shall terminate without liability on the part of any non-
defaulting Initial Purchaser.
No action pursuant to this Section shall relieve any
defaulting Initial Purchaser from liability in respect of its
default.
In the event of any such default that does not result
in a termination of this Agreement, either TD Securities or the
Issuers shall have the right to postpone the Closing Time for a
period not exceeding seven days in order to effect any required
changes in the Offering Memorandum or in any other documents or
arrangements.
Section 12. Notices. All notices and other
communications hereunder shall be in writing and shall be deemed
to have been duly given if mailed or transmitted by any standard
form of telecommunication. Notices to the Initial Purchasers
shall be directed to TD Securities at 31 West 52nd Street, New
York, New York 10019-6101, Attention: Rod Ashtaryeh, and notices
to the Issuers shall be directed to them in care of Brant-Allen
at Post Office Box 3443, 80 Field Point Road, Greenwich,
Connecticut 06830, Attention: President, with copies to
Skadden, Arps, Slate, Meagher & Flom LLP, 919 Third Avenue, New
York, New York 10022, Attention: David Goldschmidt.
Section 13. Parties. This Agreement shall inure to
the benefit of and be binding upon the Initial Purchasers and the
Issuers and their respective successors. Nothing expressed or
mentioned in this Agreement is intended or shall be construed to
give any person, firm or corporation, other than the Initial
Purchasers and the Issuers and their respective successors and
the controlling persons and officers and directors referred to in
Section 7 and 8 and their heirs and legal representatives, any
legal or equitable right, remedy or claim under or in respect of
this Agreement or any provision herein contained. This Agreement
and all conditions and provisions hereof are intended to be for
the sole and exclusive benefit of the Initial Purchasers and the
Issuers and their respective successors, and said controlling
persons and officers and directors and their heirs and legal
representatives, and for the benefit of no other person, firm or
corporation. No purchaser of Securities from any Initial
Purchaser shall be deemed to be a successor by reason merely of
such purchase.
Section 14. Governing Law and Time. THIS AGREEMENT
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF NEW YORK. SPECIFIED TIMES OF THE DAY REFER TO NEW
YORK CITY TIME.
Section 15. Effect of Headings. The Section headings
herein are for convenience only and shall not affect the
construction hereof.
Section 16. Counterparts. This Agreement may be
executed in one or more counterparts and, when a counterpart has
been executed by each party, all such counterparts taken together
shall constitute one and the same agreement.
_________________________
If the foregoing is in accordance with the Initial
Purchasers' understanding of our agreement, please sign and
return to us a counterpart hereof, whereupon this instrument will
become a binding agreement between the Issuers and the Initial
Purchasers in accordance with its terms.
Very truly yours,
BEAR ISLAND PAPER COMPANY, L.L.C.
By: /s/ Edward D. Sherrick
Name: Edward D. Sherrick
Title: Vice President of
Finance
BEAR ISLAND FINANCE COMPANY II
By: /s/ Edward D. Sherrick
Name: Edward D. Sherrick
Title: Vice President of
Finance
Confirmed and accepted as of
the date first above written:
TD SECURITIES (USA) INC.
SALOMON BROTHERS INC
By: TD Securities (USA) Inc.
By: /s/ Rod Ashtaryeh
Name: Rod Ashtaryeh
Title: Managing Director
SCHEDULE A
Principal
Amount of
Name of Initial Purchaser Securities
TD Securities (USA) Inc. . . . . . . . . . . . $51,000,000
Salomon Brothers Inc . . . . . . . . . . . . . $49,000,000
------------
Total . . . . . . . . . . . . . . . . . . . . . $100,000,000
============
SCHEDULE B
BEAR ISLAND PAPER COMPANY, L.L.C.
BEAR ISLAND FINANCE COMPANY II
$100,000,000 Senior Notes Due 2007
1. The initial price of the Securities shall be 100% of the
principal amount thereof, plus accrued interest, if any, from the
date of issuance.
2. The purchase price to be paid by the Initial Purchasers
for the Securities shall be 97% of the principal amount thereof.
3. The interest rate on the Securities shall be 10% per
annum.
4. The redemption prices to be supplied in the Final
Offering Memorandum under the caption "Description of the
Notes Optional Redemption" (and correspondingly in the Indenture)
shall be on or after December 1 of the years appearing below:
YEAR REDEMPTION PRICE
2002 105.000%
2003 103.333%
2004 101.667%
2005 and 100.000%
thereafter
Exhibit A
FORM OF REGISTRATION RIGHTS AGREEMENT
Registration Rights Agreement
Dated as of December 1, 1997
among
Bear Island Paper Company, L.L.C. and
Bear Island Finance Company II
and
TD Securities (USA) Inc. and
Salomon Brothers Inc
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made
and entered into on December 1, 1997 among BEAR ISLAND PAPER
COMPANY, L.L.C., a Virginia limited liability company (the
"Company"), and BEAR ISLAND FINANCE COMPANY II, a Delaware
corporation ("FinCo" and, together with the Company, the
"Issuers"), and TD SECURITIES (USA) INC. ("TD Securities") and
SALOMON BROTHERS INC ("Salomon Brothers" and, together with TD
Securities, the "Initial Purchasers").
This Agreement is made pursuant to the Purchase
Agreement dated November 21, 1997 between the Issuers and the
Initial Purchasers (the "Purchase Agreement"), which provides for
the sale by the Issuers to the Initial Purchasers of an aggregate
of $100,000,000 principal amount of the Issuers' 10% Senior
Secured Notes due 2007 (the "Initial Notes"). In order to induce
the Initial Purchasers to enter into the Purchase Agreement, the
Issuers have agreed to provide to the Initial Purchasers and
their direct and indirect transferees the registration rights set
forth in this Agreement. The execution of this Agreement is a
condition to the closing under the Purchase Agreement.
In consideration of the foregoing, the parties hereto
agree as follows:
1. Definitions. As used in this Agreement, the
following capitalized defined terms shall have the following
meanings:
"1933 Act" shall mean the Securities Act of 1933, as
amended from time to time, and the rules and regulations of
the Securities and Exchange Commission promulgated
thereunder.
"1934 Act" shall mean the Securities Exchange Act of
1934, as amended from time to time, and the rules and
regulations of the Securities and Exchange Commission
promulgated thereunder.
"Closing Time" shall mean the Closing Time as defined
in the Purchase Agreement.
"Company" shall have the meaning set forth in the
preamble of this Agreement and also includes the Company's
successors.
"Depositary" shall mean The Depository Trust Company,
or any other depositary appointed by the Issuers; provided,
however, that any such depositary must have an address in
the Borough of Manhattan, in The City of New York.
"Exchange Notes" shall mean the 10% Senior Secured
Notes due 2007 issued by the Issuers under the Indenture
containing terms identical to the Initial Notes (except that
(i) interest thereon shall accrue from the last interest
payment date on which interest was paid on the Initial Notes
or, if no such interest has been paid, from the Original
Issue Date, (ii) the transfer restrictions thereon shall be
eliminated and (iii) certain provisions relating to an
increase in the stated rate of interest thereon shall be
eliminated), to be offered to Holders of Initial Notes in
exchange for Initial Notes pursuant to the Exchange Offer.
"Exchange Offer" shall mean the exchange offer by the
Issuers of Exchange Notes for Registrable Notes pursuant to
Section 2(a) hereof.
"Exchange Offer Registration" shall mean a registration
under the 1933 Act effected pursuant to Section 2(a) hereof.
"Exchange Offer Registration Statement" shall mean an
exchange offer registration statement on Form S-4 (or, if
applicable, on another appropriate form), and all amendments
and supplements to such registration statement, in each case
including the Prospectus contained therein, all exhibits
thereto and all material incorporated by reference therein.
"FinCo" shall have the meaning set forth in the
preamble of this Agreement and also includes FinCo's
successors.
"GAAP" shall have the meaning set forth in the
Indenture.
"Holders" shall mean the Initial Purchasers, for so
long as they own any Registrable Notes, and each of their
successors, assigns and direct and indirect transferees who
become registered holders of Registrable Notes under the
Indenture.
"Indenture" shall mean the Indenture relating to the
Initial Notes and Exchange Notes dated as of December 1,
1997 between the Issuers and Crestar Bank, as Trustee, as
the same may be amended from time to time in accordance with
the terms thereof.
"Initial Notes" shall have the meaning set forth in the
preamble of this Agreement.
"Issuers" shall have the meaning set forth in the
preamble of this Agreement and also includes each of the
Issuers' successors.
"Initial Purchasers" shall have the meaning set forth
in the preamble of this Agreement.
"Majority Holders" shall mean the Holders of a majority
of the aggregate principal amount of outstanding Registrable
Notes; provided that whenever the consent or approval of
Holders of a specified percentage of Registrable Notes is
required hereunder, Registrable Notes held by the Issuers or
any of their affiliates (as such term is defined in Rule 405
under the 1933 Act) shall be disregarded in determining
whether such consent or approval was given by the Holders of
such required percentage or amount.
"Managing Underwriters" means the investment banker or
investment bankers and manager or managers that shall
administer an underwritten offering determined in accordance
with Section 4.
"Original Issue Date" shall mean the date on which the
Initial Notes are issued under the Indenture.
"Participating Broker-Dealer" shall have the meaning
set forth in Section 3(f) of this Agreement.
"Person" shall mean an individual, partnership,
corporation, limited liability company, trust or
unincorporated organization, or a government or agency or
political subdivision thereof.
"Prospectus" shall mean the prospectus included in a
Registration Statement, including any preliminary
prospectus, and any such prospectus as amended or
supplemented by any prospectus supplement, including a
prospectus supplement with respect to the terms of the
offering of any portion of the Registrable Notes covered by
a Shelf Registration Statement, and by all other amendments
and supplements to a prospectus, including post-effective
amendments, and in each case including all material
incorporated by reference therein.
"Purchase Agreement" shall have the meaning set forth
in the preamble of this Agreement.
"Registrable Notes" shall mean the Initial Notes;
provided, however, that certain Initial Notes shall cease to
be Registrable Notes when (i) a Registration Statement with
respect to such Initial Notes shall have been declared
effective under the 1933 Act and such Initial Notes shall
have been disposed of pursuant to such Registration
Statement, (ii) such Initial Notes may be distributed to the
public pursuant to Rule 144(k) (or any similar provision
then in force, but not Rule 144A) under the 1933 Act, (iii)
such Initial Notes shall have ceased to be outstanding, (iv)
such Initial Notes have been exchanged by a person other
than a Broker-Dealer for Exchange Notes upon consummation of
the Exchange Offer or (v) following the exchange by a
Participating Broker-Dealer in the Exchange Offer of an
Initial Note for an Exchange Note, the date on which that
Exchange Note is sold to a purchaser who receives from that
Participating Broker-Dealer on or before the date of that
sale a copy of the Prospectus.
"Registration Expenses" shall mean any and all expenses
incident to performance of or compliance by the Issuers with
this Agreement, including without limitation: (i) all SEC,
stock exchange or National Association of Securities
Dealers, Inc. (the "NASD") registration and filing fees,
(ii) all fees and expenses incurred in connection with
compliance with state or other securities or blue sky laws
and compliance with the rules of the NASD (including
reasonable fees and disbursements of counsel for any
underwriters or Holders in connection with state or other
securities or blue sky qualification, if any, of any of the
Exchange Notes or Registrable Notes in any United States
jurisdiction referred to in Section 3(d)), (iii) all
expenses of any Persons in preparing or assisting in
preparing, word processing, printing and distributing any
Registration Statement, any Prospectus, any amendments or
supplements thereto, any underwriting agreements, securities
sales agreements, certificates representing the Registrable
Notes or Exchange Notes and other documents relating to the
performance of and compliance with this Agreement, (iv) all
rating agency fees, (v) all fees and expenses incurred in
connection with the listing, if any, of any of the
Registrable Notes or Exchange Notes on any securities
exchange or exchanges, (vi) all fees and disbursements
relating to the qualification of the Indenture under
applicable securities laws, (vii) the fees and disbursements
of counsel for the Issuers and of the independent public
accountants of the Issuers, including the expenses of any
special audits or "cold comfort" letters required by or
incident to such performance and compliance, (viii) in the
case of a Shelf Registration Statement, subject to Section
2(c), the reasonable fees and disbursements of one counsel
for the Holders of Registrable Notes (which counsel shall be
selected by the Majority Holders), (ix) the fees and
expenses of a "qualified independent underwriter" as defined
by Conduct Rule 2720 of the NASD (if required by the NASD
rules) in connection with the offering of the Registrable
Notes or Exchange Notes, (x) the fees and expenses of the
Trustee, including its counsel, and any exchange agent or
custodian, and (xi) any fees and disbursements of the
underwriters customarily required to be paid by issuers or
sellers of securities and the reasonable fees and expenses
of any special experts retained by the Issuers in connection
with any Registration Statement, but excluding fees of
counsel to the underwriters or the Holders and underwriting
discounts and commissions and transfer taxes, if any,
relating to the sale or disposition of Registrable Notes by
a Holder.
"Registration Statement" shall mean any registration
statement of the Issuers which covers any of the Exchange
Notes or Registrable Notes pursuant to the provisions of
this Agreement, and all amendments and supplements to any
such Registration Statement, including post-effective
amendments, in each case including the Prospectus contained
therein, all exhibits thereto and all material incorporated
by reference therein.
"Rule 144" shall mean Rule 144 promulgated under the
1933 Act, or any successor rule to similar effect.
"Salomon Brothers" shall have the meaning set forth in
the preamble of this Agreement and also includes each of
Salomon Brothers' successors.
"SEC" shall mean the Securities and Exchange
Commission.
"Shelf Registration" shall mean a registration effected
pursuant to Section 2(b) hereof.
"Shelf Registration Statement" shall mean a "shelf"
registration statement of the Issuers pursuant to the
provisions of Section 2(b) of this Agreement which covers
all of the Registrable Notes on an appropriate form under
Rule 415 under the 1933 Act, or any similar rule that may be
adopted by the SEC, and all amendments and supplements to
such registration statement, including post-effective
amendments, in each case including the Prospectus contained
therein, all exhibits thereto and all material incorporated
by reference therein.
"TD Securities" shall have the meaning set forth in the
preamble of this Agreement and also includes each of TD
Securities' successors.
"Trustee" shall mean the trustee with respect to the
Initial Notes and Exchange Notes under the Indenture.
2. Registration Under the 1933 Act. (a) Exchange
Offer Registration. To the extent not prohibited by any
applicable law or applicable interpretation of the Staff of the
SEC, the Issuers at their cost, shall use their best efforts
(A) to file within 90 days after the Original Issue Date with the
SEC an Exchange Offer Registration Statement covering the offer
by the Issuers to the Holders to exchange all of the Registrable
Notes for Exchange Notes, (B) to cause such Exchange Offer
Registration Statement to be declared effective by the SEC within
180 days after the Original Issue Date, (C) to cause such
Exchange Offer Registration Statement to remain effective until
the closing of the Exchange Offer and (D) to consummate the
Exchange Offer within 210 days after the Original Issue Date.
The Exchange Notes will be issued under the Indenture. Upon the
effectiveness of the Exchange Offer Registration Statement, the
Issuers shall promptly commence the Exchange Offer, it being the
objective of such Exchange Offer to enable each Holder (other
than Participating Broker-Dealers (as defined in Section 3(f)))
eligible and electing to exchange Registrable Notes for Exchange
Notes (assuming that such Holder is not an affiliate of the
Issuers within the meaning of Rule 405 under the 1933 Act,
acquires the Exchange Notes in the ordinary course of such
Holder's business and has no arrangements or understandings with
any person to participate in the Exchange Offer for the purpose
of distributing the Exchange Notes) to trade such Exchange Notes
from and after their receipt without any limitations or
restrictions under the 1933 Act and without material restrictions
under the securities laws of a substantial proportion of the
several states of the United States.
In connection with the Exchange Offer, the Issuers shall:
(i) mail to each Holder a copy of the Prospectus
forming part of the Exchange Offer Registration Statement,
together with an appropriate letter of transmittal and
related documents;
(ii) keep the Exchange Offer open for not less than 30
days after the date notice thereof is mailed to the Holders
(or longer if required by applicable law);
(iii) use the services of the Depositary for the
Exchange Offer with respect to Initial Notes evidenced by
global certificates;
(iv) permit Holders to withdraw tendered Registrable
Notes at any time prior to the close of business, New York
City time, on the last business day on which the Exchange
Offer shall remain open, by sending to the institution
specified in the notice, a telegram, telex, facsimile
transmission or letter setting forth the name of such
Holder, the principal amount of Registrable Notes delivered
for exchange, and a statement that such Holder is
withdrawing his election to have such Registrable Notes
exchanged; and
(v) otherwise comply in all material respects with all
applicable laws relating to the Exchange Offer.
As soon as practicable after the close of the Exchange
Offer, the Issuers shall:
(i) accept for exchange Registrable Notes duly
tendered and not validly withdrawn pursuant to the Exchange
Offer in accordance with the terms of the Exchange Offer
Registration Statement and the letter of transmittal which
is an exhibit thereto;
(ii) deliver, or cause to be delivered, to the Trustee
for cancellation all Registrable Notes so accepted for
exchange by the Issuers; and
(iii) cause the Trustee promptly to authenticate
and deliver Exchange Notes to each Holder of Registrable
Notes equal in amount to the Registrable Notes of such
Holder so accepted for exchange.
Interest on each Exchange Note will accrue from the
last payment date on which interest was paid on the Registrable
Notes surrendered in exchange therefor or, if no interest has
been paid on the Registrable Notes, from the Original Issue Date.
The Exchange Offer shall not be subject to any conditions, other
than that the Exchange Offer, or the making of any exchange by a
Holder, does not violate applicable law or any applicable
interpretation of the Staff of the SEC. Each Holder of
Registrable Notes (other than Participating Broker-Dealers) who
wishes to exchange such Registrable Notes for Exchange Notes in
the Exchange Offer will be required to represent that (i) it is
not an affiliate of the Issuers, (ii) any Exchange Notes to be
received by it were acquired in the ordinary course of business
and (iii) at the time of the commencement of the Exchange Offer
it has no arrangement with any person to participate in the
distribution (within the meaning of the 1933 Act) of the Exchange
Notes. The Issuers shall inform the Initial Purchasers of the
names and addresses of the Holders to whom the Exchange Offer is
made, and the Initial Purchasers shall have the right to contact
such Holders and otherwise facilitate the tender of Registrable
Notes in the Exchange Offer.
(b) Shelf Registration. (i) If, because of any change
in law or applicable interpretations thereof by the Staff of the
SEC, the Issuers are not permitted to effect the Exchange Offer
as contemplated by Section 2(a) hereof, or (ii) if for any other
reason the Exchange Offer is not consummated within 210 days
following the Original Issue Date, or (iii) if, within 120 days
after the Closing Time (as defined in the Purchase Agreement) any
Holder (other than the Initial Purchasers) gives the Issuers
written notice that it is not eligible to participate in the
Exchange Offer or (iv) upon the request of any Initial Purchaser
(with respect to any Registrable Notes which it acquired directly
from the Issuers), within 120 days after the Closing Time (as
defined in the Purchase Agreement), that such Initial Purchaser
shall hold Registrable Notes which it acquired directly from the
Issuers and if such Initial Purchaser is not permitted, in the
opinion of counsel to such Initial Purchaser, pursuant to
applicable law or applicable interpretation of the Staff of the
SEC, to participate in the Exchange Offer, the Issuers shall, at
their cost,
(A) as promptly as practicable, file with the SEC a
Shelf Registration Statement relating to the offer and sale
of the Registrable Notes by the Holders from time to time in
accordance with the methods of distribution elected by the
Majority Holders of such Registrable Notes and set forth in
such Shelf Registration Statement, and use their best
efforts to cause such Shelf Registration Statement to be
declared effective by the SEC within 210 days after the
Original Issue Date. In the event that the Issuers are
required to file a Shelf Registration Statement upon the
request of any Holder (other than an Initial Purchaser) not
eligible to participate in the Exchange Offer pursuant to
clause (iii) above or upon the request of any Initial
Purchaser pursuant to clause (iv) above, the Issuers shall
file and have declared effective by the SEC both an Exchange
Offer Registration Statement pursuant to Section 2(a) with
respect to all Registrable Notes and a Shelf Registration
Statement (which may be a combined Registration Statement
with the Exchange Offer Registration Statement) with respect
to offers and sales of Registrable Notes held by such Holder
or such Initial Purchaser after completion of the Exchange
Offer; provided that, with respect to Exchange Notes
received by an Initial Purchaser in exchange for any portion
of an unsold allotment of Initial Notes, the Issuers may, if
permitted by current interpretations by the Commissions's
staff, file a post-effective amendment to the Exchange Offer
Registration Statement containing the information required
by Regulation S-K Items 507 and/or 508, as applicable, in
satisfaction of its obligations under this Section 2(b) with
respect thereto, and any such Exchange Offer Registration
Statement, as so amended, shall be referred to herein as,
and governed by (for so long as such interpretation of the
Commission shall continue to be effective) the provisions
herein applicable to, a Shelf Registration Statement.
(B) use their best efforts to keep the Shelf
Registration Statement continuously effective (subject to
the provisions of this Agreement that permit the Issuers to
suspend the use of any Prospectus contained in a Shelf
Registration Statement) in order to permit the Prospectus
forming part thereof to be usable by Holders for a period of
two years from the date the Shelf Registration Statement is
declared effective by the SEC (or one year from the date the
Shelf Registration Statement is declared effective if such
Shelf Registration Statement is filed upon the request of
any Initial Purchaser pursuant to clause (iv) above) or such
shorter period which will terminate when (i) all of the
Registrable Notes covered by the Shelf Registration
Statement have been sold pursuant to the Shelf Registration
Statement, (ii) the date on which, in the written opinion of
counsel to the Issuers, all of the Registrable Notes then
held by the Holders (which are not affiliates of Issuers)
may be sold by such Holders in the public United States
securities markets without registration under the 1933 Act
pursuant to Rule 144(k) under the 1933 Act or any successor
provision thereto or (iii) the date on which there ceases to
be outstanding any Registrable Notes; and
(C) notwithstanding any other provisions hereof, use
their best efforts to ensure that (1) any Shelf Registration
Statement and any amendment thereto and any Prospectus
forming part thereof and any supplement thereto complies in
all material respects with the 1933 Act and the rules and
regulations thereunder, (2) any Shelf Registration Statement
and any amendment thereto does not, when it becomes
effective, contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein
or necessary to make the statements therein not misleading
and (3) any Prospectus forming part of any Shelf
Registration Statement, and any supplement to such
Prospectus (as amended or supplemented from time to time),
does not include an untrue statement of a material fact or
omit to state a material fact necessary in order to make the
statements, in light of the circumstances under which they
were made, not misleading.
The Issuers further agree, if necessary, to supplement
or amend the Shelf Registration Statement if reasonably requested
by the Majority Holders with respect to information relating to
the Holders and otherwise as required by Section 3(b) below, to
use reasonable efforts to cause any such amendment to become
effective and such Shelf Registration to become usable as soon as
thereafter practicable and to furnish to the Holders of
Registrable Notes copies of any such supplement or amendment
promptly after its being used or filed with the SEC.
(c) Expenses. The Issuers shall be liable for and pay
all Registration Expenses in connection with the registration
pursuant to Section 2(a) or 2(b) and (x) in the case of any Shelf
Registration Statement, will reimburse the Holders and the
Initial Purchasers for the reasonable fees and disbursements of
one firm or counsel to act as counsel for the Holders of the
Registrable Notes in connection therewith and (y) in the case of
an Exchange Offer Registration Statement, will reimburse the
Initial Purchasers, as applicable, for the reasonable fees and
disbursements of one firm or counsel in connection therewith;
provided that, in the case of clauses (x) and (y): (A) such firm
shall be Shearman & Sterling, New York, New York (or, in the case
of clause (x), such other firm or counsel designated in writing
by the Majority Holders within 15 days of the initial filing of
the Shelf Registration Statement and approved by the Issuers) and
(B) the reasonable fees and expenses of such firm shall not
exceed $20,000. Each Holder shall pay all expenses of its
counsel other than as set forth in the preceding sentence,
underwriting discounts and commissions and transfer taxes, if
any, relating to the sale or disposition of such Holder's
Registrable Notes pursuant to the Shelf Registration Statement.
(d) Effective Registration Statement. (i) The
Issuers will be deemed not to have used their best efforts to
cause the Exchange Offer Registration Statement or the Shelf
Registration Statement, as the case may be, to become, or to
remain, effective during the requisite period if it voluntarily
takes any action that would result in any such Registration
Statement not being declared effective or in the Holders of
Registrable Notes covered thereby not being able to exchange or
offer and sell such Registrable Notes during that period unless
(A) such action is required by applicable law or (B) such action
is taken by the Issuers in good faith and for valid business
reasons (not including avoidance of the Issuers' obligations
hereunder), including the acquisition or divestiture of assets,
so long as the Issuers promptly comply with the requirements of
Section 3(k) hereof, if applicable.
(ii) An Exchange Offer Registration Statement pursuant
to Section 2(a) hereof or a Shelf Registration Statement pursuant
to Section 2(b) hereof will not be deemed to have become
effective unless it has been declared effective by the SEC;
provided, however, that if, after it has been declared effective,
the offering of Registrable Notes pursuant to a Registration
Statement is interfered with by any stop order, injunction or
other order or requirement of the SEC or any other governmental
agency or court, such Registration Statement will be deemed not
to have been effective during the period of such interference,
until the offering of Registrable Notes pursuant to such
Registration Statement may legally resume.
(e) Increase in Interest Rate. In the event that
(i) the Exchange Offer Registration Statement is not filed with
the SEC on or prior to the 90th calendar day following the
Original Issue Date, (ii) the Exchange Offer Registration
Statement is not declared effective on or prior to the 180th
calendar day following the Original Issue Date, (iii) the
Exchange Offer is not consummated or, if required, a Shelf
Registration Statement with respect to the Registrable Notes is
not declared effective on or prior to the 210th calendar day
following the Original Issue Date, or (iv) the Exchange Offer
Registration Statement is declared effective but thereafter
ceases to be effective or usable (each such event referred to in
clauses (i)-(iv) above, a "Registration Default"), the per annum
interest rate borne by the Initial Notes shall be increased by
one-half of one percent (0.5%) with respect to the first 90-day
period following such Registration Default, payable in cash on
each interest payment date, such interest rate to increase by an
additional one-half of one percent (0.5%) for each subsequent 90-
day period until such Registration Default has been cured, up to
a maximum increase of one and one-half percent (1.5%) per annum.
Upon (w) the filing of the Exchange Offer Registration Statement
after the 90-day period described in clause (i) above, (x) the
effectiveness of the Exchange Offer Registration Statement after
the 180-day period described in clause (ii) above, (y) the
consummation of the Exchange Offer or the effectiveness of a
Shelf Registration Statement, as the case may be, after the 210-
day period described in clause (iii) above or (z) the cure of any
Registration Default described in clause (iv) above, the interest
rate borne by the Initial Notes from the date of such filing,
effectiveness, consummation or cure, as the case may be, will be
reduced to the original interest rate if the Issuers are
otherwise in compliance with such requirements; provided,
however, that if, after any such reduction in interest rate, a
different event specified in clause (i), (ii), (iii) or (iv)
above occurs, the interest rate will again be increased pursuant
to the foregoing provisions. A Holder of Registrable Notes who
has failed to provide the information requested of that Holder by
the Issuers pursuant to the penultimate paragraph Section 3
within the time period specified in that paragraph, and such
failure has prejudiced the ability of the Issuers to comply with
their obligations under this Agreement to file any Registration
Statement within the required period of time, will not receive
the benefit of any increase in the interest rate on the Initial
Notes pursuant to this Section 2(e).
(f) Specific Enforcement. Without limiting the
remedies available to the Initial Purchasers and the Holders, the
Issuers acknowledge that any failure by the Issuers to comply
with their obligations under Section 2(a) and Section 2(b) hereof
may result in material irreparable injury to the Initial
Purchasers or the Holders for which there is no adequate remedy
at law, that it will not be possible to measure damages for such
injuries precisely and that, in the event of any such failure,
the Initial Purchasers or any Holder may obtain such relief as
may be required to specifically enforce the Issuers' obligations
under Section 2(a) and Section 2(b) hereof.
3. Registration Procedures. In connection with the
registration obligations of the Issuers with respect to the
Registration Statements pursuant to Sections 2(a) and 2(b)
hereof, the Issuers shall:
(a) prepare and file with the SEC a Registration
Statement, within the time period specified in Section 2, on
the appropriate form under the 1933 Act, which form (i)
shall be selected by the Issuers, (ii) shall, in the case of
a Shelf Registration, be available for the sale of the
Registrable Notes by the selling Holders thereof and (iii)
shall comply as to form in all material respects with the
requirements of the applicable form and include or
incorporate by reference all financial statements required
by the SEC to be filed therewith, and use their best efforts
to cause such Registration Statement to become effective and
remain effective in accordance with Section 2 hereof;
(b) prepare and file with the SEC such amendments and
post-effective amendments to each Registration Statement as
may be necessary under applicable law to keep such
Registration Statement effective for the applicable period;
cause each Prospectus to be supplemented by any required
prospectus supplement, and as so supplemented to be filed
pursuant to Rule 424 under the 1933 Act; and comply with the
provisions of the 1933 Act with respect to the disposition
of all securities covered by each Registration Statement
during the applicable period in accordance with the intended
method or methods of distribution by the selling Holders
thereof;
(c) in the case of a Shelf Registration, (i) notify
each Holder of Registrable Notes, at least five days prior
to filing, that a Shelf Registration Statement with respect
to the Registrable Notes is being filed and advising such
Holders that the distribution of Registrable Notes (or an
amendment thereto) will be made in accordance with the
method elected by the Majority Holders and designated by the
Majority Holders in a notice given by them to the Company;
and (ii) furnish to each Holder of Registrable Notes, to
counsel for the Initial Purchasers, and/or the Holders and
to each underwriter of an underwritten offering of
Registrable Notes, if any, without charge, as many copies of
each Prospectus, including each preliminary Prospectus, and
any amendment or supplement thereto and such other documents
as such Holder, counsel or underwriter may reasonably
request, including, if such Holder, counsel or underwriter
so requests, financial statements and schedules and all
exhibits (including those incorporated by reference) in
order to facilitate the public sale or other disposition of
the Registrable Notes pursuant to the Shelf Registration
Statement; and (iii) subject to the last paragraph of this
Section 3, hereby consent to the use of the Prospectus or
any amendment or supplement thereto by each of the selling
Holders of Registrable Notes covered by the Shelf
Registration Statement in connection with the offering and
sale of the Registrable Notes covered by the Prospectus or
any amendment or supplement thereto;
(d) use their best efforts to register or qualify the
Registrable Notes under all applicable state securities or
"blue sky" laws of such United States jurisdictions as the
Majority Holders of Registrable Notes covered by a
Registration Statement or, in the case of an underwritten
offering of Registrable Notes, the Managing Underwriter of
such underwritten offering, if any, shall reasonably request
by the time the applicable Registration Statement is
declared effective by the SEC, cooperate with the Holders in
connection with any filings required to be made with the
NASD, keep each such registration or qualification effective
during the period such Registration Statement is required to
be effective and do any and all other acts and things
requested in writing by such Majority Holders or Managing
Underwriters which may be reasonably necessary or advisable
to enable such Holder to consummate the disposition in each
such jurisdiction of such Registrable Notes owned by such
Holder; provided, however, that neither of the Issuers shall
be required to (i) qualify as a foreign corporation or as a
dealer in securities in any jurisdiction where it would not
otherwise be required to qualify but for this Section 3(d)
or (ii) take any action which would subject it to general
service of process or taxation in any such jurisdiction if
it is not then so subject;
(e) in the case of a Shelf Registration, notify each
Holder of Registrable Notes and counsel for the Initial
Purchasers promptly and, if requested by such Holder or
counsel, confirm such advice in writing promptly (i) when a
Registration Statement has become effective and when any
post-effective amendments and supplements thereto become
effective, (ii) of any request by the SEC or any state
securities authority for post-effective amendments and
supplements to a Registration Statement and Prospectus or
for additional information after the Registration Statement
has become effective, (iii) of the issuance by the SEC or
any state securities authority of any stop order suspending
the effectiveness of a Registration Statement or the
initiation of any proceedings for that purpose, (iv) if,
between the effective date of a Registration Statement and
the closing of any sale of Registrable Notes covered
thereby, the representations and warranties of the Issuers
contained in any underwriting agreement, securities sales
agreement or other similar agreement, if any, relating to
such offering cease to be true and correct in all material
respects, (v) of the receipt by the Issuers of any
notification with respect to the suspension of the
qualification of the Registrable Notes for sale in any
jurisdiction or the initiation or threatening of any
proceeding for such purpose, (vi) of the happening of any
event or the discovery of any facts during the period a
Shelf Registration Statement is effective which makes any
statement made in such Registration Statement or the related
Prospectus untrue in any material respect or which requires
the making of any changes in such Registration Statement or
Prospectus in order to make the statements therein not
misleading and (vii) of any determination by the Issuers
that a post-effective amendment to a Registration Statement
would be appropriate;
(f) (A) in the case of an Exchange Offer, (i) include
in the Exchange Offer Registration Statement a "Plan of
Distribution" section covering the use of the Prospectus
included in the Exchange Offer Registration Statement by
broker-dealers who have exchanged their Registrable Notes
for Exchange Notes for the resale of such Exchange Notes,
(ii) furnish to each broker-dealer who desires to
participate in the Exchange Offer, without charge, as many
copies of each Prospectus included in the Exchange Offer
Registration Statement, including any preliminary
prospectus, and any amendment or supplement thereto, as such
broker-dealer may reasonably request, (iii) include in the
Exchange Offer Registration Statement a statement to the
effect that any broker-dealer who holds Registrable Notes
acquired for its own account as a result of market-making
activities or other trading activities (a "Participating
Broker-Dealer"), and who receives Exchange Notes for
Registrable Notes pursuant to the Exchange Offer, may be a
statutory underwriter and must deliver a prospectus meeting
the requirements of the 1933 Act in connection with any
resale of such Exchange Notes, (iv) subject to the last
paragraph of this Section 3, consent to the use of the
Prospectus forming part of the Exchange Offer Registration
Statement or any amendment or supplement thereto, by any
broker-dealer in connection with the sale or transfer of the
Exchange Notes covered by the Prospectus or any amendment or
supplement thereto in accordance with the 1933 Act, and (v)
include in the transmittal letter or similar documentation
to be executed by an exchange offeree in order to
participate in the Exchange Offer (x) the following
provision:
If the undersigned is not a broker-dealer, the
undersigned represents that it is not engaged in, and
does not intend to engage in, a distribution of
Exchange Notes. If the undersigned is a broker-dealer,
the undersigned represents that it will receive
Exchange Notes for its own account in exchange for
Registrable Notes and that the Registrable Notes to be
exchanged for Exchange Notes were acquired by it as a
result of market-making activities or other trading
activities and acknowledges that it will deliver a
prospectus meeting the requirements of the 1933 Act in
connection with any resale of such Exchange Notes
pursuant to the Exchange Offer; however, by so
acknowledging and by delivering a prospectus, the
undersigned will not be deemed to admit that it is an
"underwriter" within the meaning of the 1933 Act;
and (y) a statement to the effect that by making the
acknowledgment described in subclause (x) and by delivering
a Prospectus in connection with the exchange of Registrable
Notes, the broker-dealer will not be deemed to admit that it
is an underwriter within the meaning of the 1933 Act;
(B) to the extent any Participating Broker-Dealer
notifies the Issuers in writing that it is participating in
the Exchange Offer, use their best efforts to cause to be
delivered at the request of an entity stating that it
represents the Participating Broker-Dealers (which entity
shall be TD Securities, unless it elects not to act as such
representative) only one, if any, "cold comfort" letter with
respect to the Prospectus in the form existing on the last
date for which exchanges are accepted pursuant to the
Exchange Offer and with respect to each subsequent amendment
or supplement, if any, effected during the period specified
in clause (C) below;
(C) to the extent any Participating Broker-Dealer
notifies the Issuers in writing that it is participating in
the Exchange Offer, use their best efforts to maintain the
effectiveness of the Exchange Offer Registration Statement
for a period of 30 days following the closing of the
Exchange Offer; and
(D) the Issuers shall not be required to amend or
supplement the Prospectus contained in the Exchange Offer
Registration Statement as would otherwise be contemplated by
Section 3(b), or take any other action as a result of this
Section 3(f), for a period exceeding 180 days after the last
date for which exchanges are accepted pursuant to the
Exchange Offer (as such period may be extended by the
Issuers) and Participating Broker-Dealers shall not be
authorized by the Issuers to, and shall not, deliver such
Prospectus after such period in connection with resales
contemplated by this Section 3;
(g) (i) in the case of an Exchange Offer, furnish
counsel for the Initial Purchasers and, (ii) in the case of
a Shelf Registration, furnish counsel for the Holders of
Registrable Notes with copies of any request by the SEC or
any state securities authority for amendments or supplements
to a Registration Statement and Prospectus or for additional
information;
(h) make best efforts to obtain the withdrawal of any
order suspending the effectiveness of a Registration
Statement as soon as practicable and provide immediate
notice to each Holder of the withdrawal of any such order;
(i) in the case of a Shelf Registration, furnish to
each Holder of Registrable Notes included within the
coverage of such Shelf Registration, without charge, at
least one conformed copy of each Registration Statement and
any post-effective amendment thereto (without documents
incorporated therein by reference or exhibits thereto);
(j) in the case of a Shelf Registration, cooperate
with the selling Holders of Registrable Notes to facilitate
the timely preparation and delivery of certificates
representing Registrable Notes to be sold and not bearing
any restrictive legends; and cause such Registrable Notes to
be in such denominations (consistent with the provisions of
the Indenture) and registered in such names as the selling
Holders or the underwriters, if any, covered in the Shelf
Registration may reasonably request at least two business
days prior to the closing of any sale of such Registrable
Notes pursuant to such Shelf Registration Statement;
(k) in the case of a Shelf Registration, upon the
occurrence of any event or the discovery of any facts, each
as contemplated by Section 3(e)(vi) hereof, use their best
efforts to prepare a post-effective amendment or supplement
to a Registration Statement or the related Prospectus or any
document incorporated therein by reference or file any other
required document so that, as thereafter delivered to the
purchasers of the Registrable Notes, such Prospectus will
not contain at the time of such delivery any untrue
statement of a material fact or omit to state a material
fact necessary to make the statements therein, in light of
the circumstances under which they were made, not
misleading. The Issuers agree to notify each Holder to
suspend use of the Prospectus as promptly as practicable
after the occurrence of such an event, and each Holder
hereby agrees to suspend use of the Prospectus until the
Issuers have amended or supplemented the Prospectus to
correct such misstatement or omission. At such time as such
public disclosure is otherwise made or the Issuers determine
that such disclosure is not necessary, in each case to
correct any misstatement of a material fact or to include
any omitted material fact, the Issuers agree promptly to
notify each Holder of such determination and to furnish each
Holder such numbers of copies of the Prospectus, as amended
or supplemented, as such Holder may reasonably request;
(l) obtain a CUSIP number for all Exchange Notes, or
Registrable Notes, as the case may be, not later than the
effective date of a Registration Statement, and provide the
Trustee with printed certificates for the Exchange Notes or
the Registrable Notes, as the case may be, in a form
eligible for deposit with the Depositary;
(m) (i) cause the Indenture to be qualified under the
Trust Indenture Act of 1939, as amended (the "TIA"), in
connection with the registration of the Exchange Notes, or
Registrable Notes, as the case may be, (ii) cooperate with
the Trustee and the Holders to effect such changes to the
Indenture as may be required for the Indenture to be so
qualified in accordance with the terms of the TIA and
(iii) execute, and use their best efforts to cause the
Trustee to execute, all documents as may be required to
effect such changes, and all other forms and documents
required to be filed with the SEC to enable the Indenture to
be so qualified in a timely manner;
(n) in the case of a Shelf Registration, enter into
agreements (including underwriting agreements) and take all
other customary and reasonably appropriate actions
(including those reasonably requested by the Majority
Holders) in order to expedite or facilitate the disposition
of such Registrable Notes and, in such connection, whether
or not an underwriting agreement is entered into and whether
or not the registration is an underwritten registration:
(i) make such representations and warranties to
the Holders of such Registrable Notes and the
underwriters, if any, in form, substance and scope as
are customarily made by issuers to underwriters in
similar underwritten offerings as may be reasonably
requested by them;
(ii) obtain opinions of counsel to the Issuers and
updates thereof (which counsel and opinions (in form,
scope and substance) shall be reasonably satisfactory
to the Managing Underwriters, if any, and the holders
of a majority in principal amount of the Registrable
Notes being sold) addressed to each selling Holder and
the underwriters, if any, covering the matters
customarily covered in opinions requested in sales of
securities or underwritten offerings and such other
matters as may be reasonably requested by such Holders
and underwriters;
(iii) obtain "cold comfort" letters and
updates thereof from the Issuers' independent certified
public accountants addressed to the underwriters, if
any, and use reasonable best efforts to have such
letters addressed to the selling Holders of Registrable
Notes, such letters to be in customary form and
covering matters of the type customarily covered in
"cold comfort" letters to underwriters in connection
with similar underwritten offerings;
(iv) enter into a securities sales agreement with
the Holders and an agent of the Holders providing for,
among other things, the appointment of such agent for
the selling Holders for the purpose of soliciting
purchases of Registrable Notes, which agreement shall
be in form, substance and scope customary for similar
offerings;
(v) if an underwriting agreement is entered into,
cause the same to set forth indemnification provisions
and procedures substantially equivalent to the
indemnification provisions and procedures set forth in
Section 5 hereof with respect to the underwriters and
all other parties to be indemnified pursuant to said
Section; and
(vi) deliver such documents and certificates as
may be reasonably requested in writing and as are
customarily delivered in similar offerings.
The actions referred to in clauses (i) through (vi) above
shall be done at (i) the effectiveness of such Registration
Statement (and, if appropriate, each post-effective
amendment thereto) and (ii) each closing under any
underwriting or similar agreement as and to the extent
required thereunder. In the case of any underwritten
offering, the Issuers shall provide written notice to the
Holders of all Registrable Notes of such underwritten
offering at least 15 days prior to the filing of a
prospectus supplement for such underwritten offering. Such
notice shall (x) offer each such Holder the right to
participate in such underwritten offering, (y) specify a
date, which shall be no earlier than 10 days following the
date of such notice, by which such Holder must inform the
Issuers of its intent to participate in such underwritten
offering and (z) include the instructions such Holder must
follow in order to participate in such underwritten
offering;
(o) in the case of a Shelf Registration, make
available for inspection during business hours (at the
offices where normally kept) by representatives of the
Majority Holders of the Registrable Notes and any Managing
Underwriters participating in any disposition pursuant to a
Shelf Registration Statement and any counsel or accountant
retained by such Majority Holders or Managing Underwriters,
all financial and other records, pertinent corporate
documents and properties of the Issuers reasonably requested
by any such persons, and cause the respective officers,
directors, employees, and any other agents of the Issuers to
supply all information reasonably requested by any such
representative, underwriter, special counsel or accountant
in connection with a Registration Statement as is customary
for similar due diligence examinations; provided, that such
persons shall first agree in writing with the Issuers that
any information that is designated in writing by the
Issuers, in good faith, as confidential at the time of
delivery of such information shall be kept confidential by
such person, unless such disclosure is made in connection
with a court proceeding or required by law, or such
information becomes available to the public generally or
through a third party without an accompanying obligation of
confidentiality;
(p) (i) in the case of an Exchange Offer, a reasonable
time prior to the filing of any Exchange Offer Registration
Statement, any Prospectus forming a part thereof, any
amendment to an Exchange Offer Registration Statement or
amendment or supplement to a Prospectus, provide copies of
such document to the Initial Purchasers, and make such
changes in any such document prior to the filing thereof as
any of the Initial Purchasers or their counsel may
reasonably request; (ii) in the case of a Shelf
Registration, a reasonable time prior to filing any Shelf
Registration Statement, any Prospectus forming a part
thereof, any amendment to such Shelf Registration Statement
or amendment or supplement to such Prospectus, provide
copies of such document to the Holders of Registrable Notes,
to the Initial Purchasers, to counsel on behalf of the
Majority Holders or to the Managing Underwriter or
Underwriters of an underwritten offering of Registrable
Notes, if any, and make such changes in any such document
prior to the filing thereof as the Holders of Registrable
Notes, TD Securities on behalf of such Holders, their
counsel and any Managing Underwriter may reasonably request
in writing unless the Issuers or their counsel reasonably
object to such changes; and (iii) cause the representatives
of the Issuers to be available for discussion of such
document as shall be reasonably requested in writing by the
Holders of Registrable Notes, TD Securities on behalf of
such Holders or any Managing Underwriter and shall not at
any time make any filing of any such document of which such
Holders, TD Securities on behalf of such Holders, their
counsel or any Managing Underwriter shall not have
previously been advised and furnished a copy or to which
such Holders, TD Securities on behalf of such Holders, their
counsel or any underwriter shall reasonably object;
(q) in the case of a Shelf Registration, use their
best efforts to cause all Registrable Notes to be listed on
any securities exchange on which similar debt securities
issued by the Issuers are then listed if requested in
writing by the Majority Holders or by the Managing
Underwriters of an underwritten offering of Registrable
Notes, if any;
(r) in the case of a Shelf Registration, use their
best efforts to cause the Registrable Notes to be rated with
the appropriate rating agencies, if so requested by the
Majority Holders or by the underwriter or underwriters of an
underwritten offering of Registrable Notes, if any, unless
the Registrable Notes are already so rated;
(s) otherwise use their best efforts to comply with
all applicable rules and regulations of the SEC and make
available to their security holders, as soon as reasonably
practicable, an earnings statement covering at least
12 months which shall satisfy the provisions of
Section 11(a) of the 1933 Act and Rule 158 thereunder; and
(t) cooperate and assist in any filings required to be
made with the NASD and in the performance of any due
diligence investigation by any underwriter and its counsel.
In the case of a Shelf Registration Statement, the
Issuers may (as a condition to such Holder's participation in the
Shelf Registration and subject to Section 2(e)) require each
Holder of Registrable Notes to furnish to the Issuers, within 20
days after the Issuers have requested such information, such
information regarding such Holder and the proposed distribution
by such Holder of such Registrable Notes as the Issuers may from
time to time reasonably request in writing.
In the case of a Shelf Registration Statement, each
Holder agrees (a) to furnish the information requested to be
furnished pursuant to the immediately preceding sentence within
the time period specified therein and (b) that, upon receipt of
any notice from the Issuers of the happening of any event or the
discovery of any facts, each of the kind described in clauses
(ii) through (vii) of Section 3(e) hereof, such Holder will
forthwith discontinue disposition of Registrable Notes pursuant
to a Registration Statement, and will not deliver any Prospectus
forming a part thereof, until such Holder's receipt of the copies
of the supplemented or amended Prospectus contemplated by Section
3(k) hereof or written notice from the Issuer that the use of the
Prospectus may be resumed, and, if so directed by the Issuers,
such Holder will deliver to the Issuers (at the Issuers' expense)
all copies in its possession, other than permanent file copies
then in such Holder's possession, of the Prospectus covering such
Registrable Notes current at the time of receipt of such notice.
If the Issuers shall give any such notice to suspend the
disposition of Registrable Notes pursuant to a Shelf Registration
Statement as a result of the happening of any event or the
discovery of any facts, each of the kind described in Section
3(e)(vi) hereof, the Issuers shall be deemed to have used their
best efforts to keep the Shelf Registration Statement effective
during such period of suspension provided that the Issuers shall
use their best efforts to file and have declared effective (if an
amendment) as soon as practicable an amendment or supplement to
the Shelf Registration Statement. The period during which the
Registration Statement shall be maintained effective pursuant to
this Agreement shall be extended by the number of days during the
period from and including the date of the giving of such notice
to and including the date when the Holders shall have received
copies of the supplemented or amended Prospectus necessary to
resume such dispositions or written notice from the Issuer that
the use of the Prospectus may be resumed.
4. Underwritten Registrations. If any of the
Registrable Notes covered by any Shelf Registration are to be
sold in an underwritten offering, the investment banker or
investment bankers and manager or managers that will manage the
offering will be such investment bankers of national standing in
the United States as are selected by the Majority Holders of such
Registrable Notes included in such offering and shall be
reasonably acceptable to the Issuers.
No Holder of Registrable Notes may participate in any
underwritten registration hereunder unless such Holder (a) agrees
to sell such Holder's Registrable Notes on the basis provided in
any underwriting arrangements approved by the persons entitled
hereunder to approve such arrangements and (b) completes and
executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents required under the
terms of such underwriting arrangements.
5. Indemnification and Contribution. (a) The
Issuers shall indemnify and hold harmless each Holder, including
the Initial Purchasers and Participating Broker-Dealers, each
underwriter who participates in an offering of Registrable Notes,
their respective affiliates, and their respective directors,
officers, employees and agents, and each Person, if any, who
controls any of such parties within the meaning of Section 15 of
the 1933 Act or Section 20 of the 1934 Act as follows:
(i) against any and all losses, liabilities, claims,
damages and expenses whatsoever, as incurred, arising out of
any untrue statement or alleged untrue statement of a
material fact contained in any Registration Statement (or
any amendment thereto) pursuant to which Exchange Notes or
Registrable Notes were registered under the 1933 Act,
including all documents incorporated therein by reference,
or the omission or alleged omission therefrom of a material
fact required to be stated therein or necessary to make the
statements therein not misleading or arising out of any
untrue statement or alleged untrue statement of a material
fact contained in any Prospectus (or any amendment or
supplement thereto) or the omission or alleged omission
therefrom of a material fact necessary in order to make the
statements therein, in the light of the circumstances under
which they were made, not misleading;
(ii) against any and all losses, liabilities, claims,
damages and expenses whatsoever, as incurred, to the extent
of the aggregate amount paid in settlement of any
litigation, or investigation or proceeding by any
governmental agency or body, commenced or threatened, or of
any claim whatsoever based upon any such untrue statement or
omission, or any such alleged untrue statement or omission;
provided that (subject to Section 5(c) below) any such
settlement is effected with the written consent of the
Issuers; and
(iii) against any and all expenses whatsoever, as
incurred (including reasonable fees and disbursements of
counsel chosen by an indemnified party), reasonably incurred
in investigating, preparing or defending against any
litigation, or investigation or proceeding by any court or
governmental agency or body, commenced or threatened, or any
claim whatsoever based upon any such untrue statement or
omission, or any such alleged untrue statement or omission,
to the extent that any such expense is not paid under
subparagraph (i) or (ii) of this Section 5(a);
provided, however, that (i) this indemnity shall not apply to any
loss, liability, claim, damage or expense to the extent arising
out of an untrue statement or omission or alleged untrue
statement or omission made in reliance upon and in conformity
with written information furnished to the Issuers by the Initial
Purchasers, any Holder, including Participating Broker-Dealers,
or any underwriter expressly for use in the Registration
Statement (or any amendment thereto) or any preliminary
prospectus or the Prospectus (or any amendment or supplement
thereto) and (ii) the Issuers shall not be liable to any
indemnified party under this indemnity agreement with respect to
the Registration Statement or Prospectus to the extent that any
such loss, claim, damage or liability of such indemnified party
results solely from an untrue statement of a material fact
contained in, or the omission of a material fact from, the
Registration Statement or Prospectus which untrue statement or
omission was corrected in an amended or supplemented Registration
Statement or Prospectus, if the person alleging such loss, claim,
damage or liability was not sent or given, at or prior to the
written confirmation of such sale, a copy of the amended or
supplemented Registration Statement or Prospectus if the Issuers
had previously furnished copies thereof to such indemnified party
and if delivery of a prospectus is required by the Act and was
not so made. This indemnity agreement will be in addition to any
liability which the Issuers may otherwise have.
(b) In the case of a Shelf Registration, each Holder
agrees, severally and not jointly, to indemnify and hold harmless
the Issuers, the Initial Purchasers, each underwriter who
participates in an offering of Registrable Notes and the other
selling Holders and each of their respective directors and
officers (including each officer of each of the Issuers who
signed the Registration Statement) and each Person, if any, who
controls the Issuers, each Initial Purchaser, any underwriter or
any other selling Holder within the meaning of Section 15 of the
1933 Act or Section 20 of the 1934 Act, against any and all
losses, liabilities, claims, damages and expenses described in
the indemnity contained in Section 5(a) hereof, as incurred, but
only with respect to untrue statements or omissions, or alleged
untrue statements or omissions, made in the Registration
Statement (or any amendment thereto) or the Prospectus (or any
amendment or supplement thereto) in reliance upon and in
conformity with written information furnished to the Issuers by
such Holder, as the case may be, expressly for use in the
Registration Statement (or any amendment thereto), or the
Prospectus (or any amendment or supplement thereto); provided,
however, that no such Holder shall be liable for any claims
hereunder in excess of the amount of net proceeds received by
such Holder from the sale of Registrable Notes pursuant to such
Shelf Registration Statement.
(c) Each indemnified party shall give notice in
writing as promptly as reasonably practicable to each
indemnifying party of any action commenced against it in respect
of which indemnity may be sought hereunder, but failure to so
notify an indemnifying party shall not relieve such indemnifying
party from any liability hereunder to the extent it is not
materially prejudiced as a result thereof and in any event shall
not relieve it from any liability which it may have otherwise
than on account of this indemnity agreement. An indemnifying
party may participate at its own expense in the defense of any
such action; provided, however, that counsel to the indemnifying
party shall not (except with the consent of the indemnified
party) also be counsel to the indemnified party. In no event
shall the indemnifying parties be liable for fees and expenses of
more than one counsel, in addition to any local counsel, for all
indemnified parties in connection with any one action or separate
but similar or related actions in the same jurisdiction arising
out of the same general allegations or circumstances. No
indemnifying party shall, without the prior written consent of
the indemnified parties, settle or compromise or consent to the
entry of any judgment with respect to any litigation, or any
investigation or proceeding by any governmental agency or body,
commenced or threatened, or any claim whatsoever in respect of
which indemnification or contribution could be sought under this
Section 5 (whether or not the indemnified parties are actual or
potential parties thereof), unless such settlement, compromise or
consent (i) includes an unconditional release of each indemnified
party from all liability arising out of such litigation,
investigation, proceeding or claim and (ii) does not include a
statement as to or an admission of fault, culpability or a
failure to act by or on behalf of any indemnified party.
(d) If at any time an indemnified party shall have
requested an indemnifying party to reimburse the indemnified
party for fees and expenses of counsel, such indemnifying party
agrees that it shall be liable for any settlement of the nature
contemplated by Section 5(a)(ii) hereof effected without its
written consent if (i) such settlement is entered into more than
45 days after receipt by such indemnifying party of the aforesaid
request, (ii) such indemnifying party shall have received notice
of the terms of such settlement at least 30 days prior to such
settlement being entered into and (iii) such indemnifying party
shall not have reimbursed such indemnified party in accordance
with such request prior to the date of such settlement.
(e) If the indemnification provided for in any of the
indemnity provisions set forth in this Section 5 is for any
reason unavailable to or insufficient to hold harmless an
indemnified party in respect of any losses, liabilities, claims,
damages or expenses referred to therein, then each indemnifying
party shall contribute to the aggregate amount of such losses,
liabilities, claims, damages and expenses incurred by such
indemnified party, as incurred, (i) in such proportion as is
appropriate to reflect the relative benefits received by the
Issuers, the Initial Purchaser and the Holders, from the offering
of the Exchange Notes or Registrable Notes included in such
offering or (ii) if the allocation provided by clause (i) is not
permitted by applicable law, in such proportion as is appropriate
to reflect not only the relative benefits referred to in clause
(i) above but also the relative fault of the Issuers, the Initial
Purchasers, and the Holders, in connection with the statements or
omissions which resulted in such losses, liabilities, claims,
damages or expenses, as well as any other relevant equitable
considerations. The relative fault of the Issuers, the Initial
Purchasers, and the Holders shall be determined by reference to,
among other things, whether any such untrue or alleged untrue
statement of a material fact or omission or alleged omission to
state a material fact relates to information supplied by the
Issuers, the Initial Purchasers or the Holders and the parties'
relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission. The Issuers,
the Initial Purchasers and the Holders of the Registrable Notes
agree that it would not be just and equitable if contribution
pursuant to this Section 5 were determined by pro rata allocation
(even if the Initial Purchasers were treated as one entity, and
the Holders were treated as one entity, for such purpose) or by
another method of allocation which does not take account of the
equitable considerations referred to above in this Section 5.
The aggregate amount of losses, liabilities, claims, damages and
expenses incurred by an indemnified party and referred to above
in this Section 5 shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified party in
investigating, preparing or defending against any litigation, or
any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever based upon
any such untrue or alleged untrue statement or omission or
alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the
1933 Act) shall be entitled to contribution from any person who
was not guilty of such fraudulent misrepresentation. For
purposes of this Section 5, each person, if any, who controls an
Initial Purchaser or Holder within the meaning of Section 15 of
the 1933 Act or Section 20 of the 1934 Act shall have the same
rights to contribution as such Initial Purchaser or Holder, and
each director of the Issuers and each officer of the Issuers who
signed the Registration Statement, and each person, if any, who
controls the Issuers within the meaning of Section 15 of the 1933
Act or Section 20 of the 1934 Act shall have the same rights to
contribution as the Issuers. The parties hereto agree that any
underwriting discount or commission or reimbursement of fees paid
to any Initial Purchaser pursuant to the Purchase Agreement shall
not be deemed to be a benefit received by any Initial Purchaser
in connection with the offering of the Exchange Notes or
Registrable Notes in such offering.
6. Miscellaneous. (a) Rule 144 and Rule 144A. For
so long as the Issuers are subject to the reporting requirements
of Section 13 or 15 of the 1934 Act, the Issuers covenant that
they will file the reports required to be filed by them under the
1933 Act and Section 13(a) or 15(d) of the 1934 Act and the rules
and regulations adopted by the SEC thereunder, that if they cease
to be so required to file such reports, they will upon the
request of any Holder of Registrable Notes (i) make publicly
available such information as is necessary to permit sales
pursuant to Rule 144 under the 1933 Act, (ii) deliver such
information to a prospective purchaser as is necessary to permit
sales pursuant to Rule 144A under the 1933 Act and (iii) take
such further action that is reasonable in the circumstances, in
each case, to the extent required from time to time to enable
such Holder to sell its Registrable Notes without registration
under the 1933 Act within the limitation of the exemptions
provided by (x) Rule 144 under the 1933 Act, as such Rule may be
amended from time to time, (y) Rule 144A under the 1933 Act, as
such Rule may be amended from time to time, or (z) any similar
rules or regulations hereafter adopted by the SEC. Upon the
request of any Holder of Registrable Notes, the Issuers will
deliver to such Holder a written statement as to whether they
have complied with such requirements.
(b) No Inconsistent Agreements. The Issuers have not,
as of the date hereof, entered into nor will the Issuers on or
after the date of this Agreement enter into any agreement which
is inconsistent with the rights granted to the Holders of
Registrable Notes in this Agreement or otherwise conflicts with
the provisions hereof. The rights granted to the Holders
hereunder do not in any way conflict with and are not
inconsistent with the rights granted to the holders of the
Issuers' other issued and outstanding securities under any such
agreements.
(c) Amendments and Waivers. The provisions of this
Agreement, including the provisions of this sentence, may not be
amended, modified or supplemented, and waivers or consents to
departures from the provisions hereof may not be given unless the
Issuers have obtained the written consent of Holders of at least
a majority in aggregate principal amount of the outstanding
Registrable Notes affected by such amendment, modification,
supplement, waiver or departure; provided, however, that no
amendment, modification, supplement or waiver or consent to any
departure from the provisions of Section 5 hereof shall be
effective as against any Holder of Registrable Notes unless
consented to in writing by such Holder.
(d) Notices. All notices and other communications
provided for or permitted hereunder shall be made in writing by
hand-delivery, registered first-class mail, telex, telecopier, or
any courier guaranteeing overnight delivery (i) if to a Holder,
at the most current address given by such Holder to the Issuers
by means of a notice given in accordance with the provisions of
this Section 6(d), which address initially is, with respect to an
Initial Purchaser, the address set forth in the Purchase
Agreement; and (ii) if to the Issuers, initially at the Issuers'
address set forth in the Purchase Agreement and thereafter at
such other address, notice of which is given in accordance with
the provisions of this Section 6(d).
All such notices and communications shall be deemed to
have been duly given: at the time delivered by hand, if
personally delivered; five business days after being deposited in
the mail, postage prepaid, if mailed; when receipt is
acknowledged, if telecopied; and on the next business day, if
timely delivered to an air courier guaranteeing overnight
delivery.
Copies of all such notices, demands, or other
communications shall be concurrently delivered by the person
giving the same to the Trustee, at the address specified in the
Indenture.
(e) Successors and Assigns. This Agreement shall
inure to the benefit of and be binding upon the successors,
assigns and transferees of each of the parties, including,
without limitation and without the need for an express
assignment, subsequent Holders; provided that nothing herein
shall be deemed to permit any assignment, transfer or other
disposition of Registrable Notes in violation of the terms hereof
or of the Purchase Agreement or the Indenture. If any transferee
of any Holder shall acquire Registrable Notes, in any manner,
whether by operation of law or otherwise, such Registrable Notes
shall be held subject to all of the terms of this Agreement, and
by taking and holding such Registrable Notes, such Person shall
be conclusively deemed to have agreed to be bound by and to
perform all of the terms and provisions of this Agreement,
including the restrictions on resale set forth in this Agreement
and, if applicable, the Purchase Agreement, and such Person shall
be entitled to receive the benefits hereof.
(f) Third Party Beneficiary. The Holders shall be
third party beneficiaries to the agreements made hereunder
between the Issuers, on the one hand, and the Initial Purchasers,
on the other hand, and the Initial Purchasers shall have the
right to enforce such agreements directly to the extent they deem
such enforcement necessary or advisable to protect their rights
hereunder.
(g) Counterparts. This Agreement may be executed in
any number of counterparts and by the 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.
(h) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise
affect the meaning hereof.
(i) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK.
(j) Severability. In the event that any one or more
of the provisions contained herein, or the application thereof in
any circumstance, is held invalid, illegal or unenforceable, the
validity, legality and enforceability of any such provision in
every other respect and of the remaining provisions contained
herein shall not be affected or impaired thereby.
IN WITNESS WHEREOF, the parties have executed this
Agreement as of the date first written above.
BEAR ISLAND PAPER COMPANY,
L.L.C.
By: /s/ Edward D. Sherrick
____________________________
Name: Edward D. Sherrick
Title: Vice President
of Finance
BEAR ISLAND FINANCE COMPANY II
By: /s/ Edward D. Sherrick
____________________________
Name: Edward D. Sherrick
Title: Vice President
of Finance
Confirmed and accepted as of
the date first above
written:
TD SECURITIES (USA) INC.
SALOMON BROTHERS INC
By: TD SECURITIES (USA) INC.
By: /s/ Rod Ashtaryeh
________________________
Name: Rod Ashtaryeh
Title: Managing Director
Exhibit B
FORMS OF OPINIONS OF ISSUERS' COUNSEL
TO BE DELIVERED PURSUANT TO
SECTION 5(a)
Based upon the foregoing and subject to the
limitations, qualifications, exceptions and assumptions
set forth herein, we are of the opinion that, as of the
date hereof:
1. FinCo has been duly incorporated and is
validly existing as a corporation and is in good standing
under the laws of the State of Delaware.
2. FinCo has the corporate power and authority
to execute and deliver the Purchase Agreement, the
Indenture, the Notes and the Registration Rights
Agreement and to perform its obligations thereunder, and
the execution and delivery by FinCo of the Purchase
Agreement, the Indenture, the Notes and the Registration
Rights Agreement has been duly authorized by it.
3. The Purchase Agreement has been duly
executed and delivered by Finco.
4. The Indenture has been duly executed and
delivered by Finco and, when duly executed and delivered
by each of the other Opinion Parties, will constitute a
valid and binding obligation of each of the Opinion
Parties, enforceable against each Opinion Party in
accordance with its terms.
5. The Notes are in the form contemplated by
the Indenture and, when the Notes are executed by the
Issuers and authenticated by the Trustee in the manner
provided in the Indenture and delivered to and paid for
by the Initial Purchasers in accordance with the terms of
the Purchase Agreement, the Notes will constitute valid
and binding obligations of the Issuers, enforceable
against the Issuers in accordance with their terms and
the Notes will be entitled to the benefits of the
Indenture.
6. The Registration Rights Agreement has been
duly executed and delivered by Finco and, when duly
executed and delivered by the Company, will constitute a
valid and binding obligation of the Issuers, enforceable
against the Issuers in accordance with its terms.
7. Each of the Collateral Documents, when duly
executed and delivered by each Opinion Party that is a
party to such Collateral Document, will constitute a
valid and binding obligation of such Opinion Party,
enforceable against such Opinion Party in accordance with
its terms.
8. The execution and delivery by FinCo of each
of the Purchase Agreement, the Indenture, the Notes and
the Registration Rights Agreement and the performance by
FinCo of its obligations under each of the Purchase
Agreement, the Indenture, the Notes and the Registration
Rights Agreement, each in accordance with its terms, do
not (i) conflict with the Certificate of Incorporation or
By-laws of FinCo, (ii) constitute a violation of or a
default under any Applicable Contracts (as hereinafter
defined) or (iii) cause the creation of any security
interest or lien (other than the security interests and
liens granted or created by or pursuant to the Opinion
Documents) upon any property of FinCo pursuant to any
Applicable Contracts. "Applicable Contracts" mean those
agreements or instruments set forth on Schedule 1 to the
Opinion Certificate.
9. Based on our review of Applicable Laws, no
Governmental Approval that has not been obtained is
required in connection with the execution and delivery of
the Purchase Agreement, the Indenture, the Notes, the
Registration Rights Agreement and the Collateral
Documents by any Opinion Party that is a party thereto
and the performance by any such Opinion Party of its
obligations thereunder (except for the filing of UCC-1
financing statements in the filing offices required by
applicable law and filings and registrations with the
U.S. Patent and Trademark Office and the U.S. Copyright
Office with respect to the registrations and applications
set forth on the schedules to the Company Pledge and
Security Agreement (and any after-acquired U.S.
trademark, U.S. patent and U.S. copyright registrations
and applications) and other similar filings required
under the Company Pledge and Security Agreement).
10. The Notes and the Indenture conform in all
material respects to the descriptions thereof contained
in the Offering Memorandum.
11. To our knowledge (but without any
independent investigation), except as disclosed in the
Offering Memorandum, there is no action, suit,
proceeding, inquiry or investigation pending or
threatened before, or brought by, any Governmental
Authority to which any Opinion Party is a party or to
which any property of any Opinion Party is subject, that
(a) seeks to restrain, enjoin or prevent the execution
and delivery of the Opinion Documents, the performance by
the Opinion Parties of their obligations thereunder or
the consummation of the transactions contemplated by the
Opinion Documents or (b) would be required to be
disclosed in the Offering Memorandum if the Offering
Memorandum were a registration statement filed with the
Commission under the Securities Act of 1933, as amended.
Our opinion in this paragraph 11 is based solely on our
discussions with the officers of the Opinion Parties
responsible for the matters discussed in this paragraph,
and our review of documents furnished to us by the
Opinion Parties, and we have made no search of the public
docket records of any Governmental Authority.
12. The statements set forth in the Offering
Memorandum under the captions "Description of the Notes,"
"Exchange Offer; Registration Rights" and "Description of
Certain Other Indebtedness The Bank Credit Facilities"
and " The Timberlands Loan," insofar as such statements
purport to summarize certain provisions of the Indenture,
the Notes, the Registration Rights Agreement, the
Collateral Documents and the Credit Agreements,
constitute accurate summaries of those provisions in all
material respects.
13. The statements in the Offering Memorandum
that purport to summarize certain provisions of the
documents specified in Schedule 1 to this letter
constitute accurate summaries of those provisions in all
material respects.
14. The statements made in the Offering
Memorandum under the caption "Certain Federal Income Tax
Considerations" insofar as they purport to constitute
statements of law or legal conclusions, have been
reviewed by us and fairly present the information
disclosed therein in all material respects.
15. Assuming (a) the accuracy of the
representations and warranties of the Issuers set forth
in Sections 1(a) (i), (ii), (xxx), (xxxi), (xxii) and
(xxiv) of the Purchase Agreement and of the Initial
Purchasers in Section 6 of the Purchase Agreement, (b)
the due performance by the Issuers of the covenants and
agreements set forth in Section 3 of the Purchase
Agreement and the due performance by the Initial
Purchasers of the covenants and agreements set forth in
Section 6 of the Purchase Agreement, (c) the Initial
Purchasers' compliance with the offering and transfer
procedures and restrictions described in the Offering
Memorandum, (d) the accuracy of the representations and
warranties made in accordance with the Purchase Agreement
and the Offering Memorandum by purchasers to whom the
Initial Purchasers initially resell Notes and (e) that
purchasers to whom the Initial Purchasers initially
resell Notes receive a copy of the Offering Memorandum
prior to such sale, the offer, sale and delivery of the
Notes to the Initial Purchasers in the manner
contemplated by the Purchase Agreement and the Offering
Memorandum and the initial resale of the Notes by the
Initial Purchasers in the manner contemplated in the
Offering Memorandum do not require registration under the
Securities Act of 1933, as amended, and the Indenture
does not require qualification under the Trust Indenture
Act of 1939, as amended, it being understood that we do
not express any opinion as to any subsequent resale of
any Notes.
16. None of the Opinion Parties is, after the
consummation of the transactions contemplated by the
Opinion Documents and the application of the net proceeds
from the issuance and sale of the Notes as described in
the Offering Memorandum under the caption "Use of
Proceeds," an "investment company" required to be
registered as such under the Investment Company Act of
1940, as amended.
17. The provisions of the Company Pledge and
Security Agreement are effective to create, in favor of
the Trustee, a valid security interest in the Company's
rights in that portion of the Collateral (as defined in
the Company Pledge and Security Agreement) described
therein which is subject to Article 9 of the New York UCC
(the "Article 9 Collateral") which security interest will
secure the Obligations (as defined in the Company Pledge
and Security Agreement).
18. The provisions of the Timberlands Pledge
Agreement are effective to create in favor of the Trustee
a valid security interest in Brant-Allen's rights in the
Pledged LLC Interests (as defined in the Timberlands
Pledge Agreement) to secure the Secured Obligations (as
defined in the Timberlands Pledge Agreement).
19. The provisions of the Soucy Pledge
Agreement are effective to create in favor of the Trustee
a valid security interest in Brant-Allen's rights in the
certificate identified on Schedule 2 to this letter (the
"Soucy Pledged Securities," and, together with the
Pledged LLC Interests, the "Pledged Collateral) to secure
the Secured Obligations (as defined in the Soucy Pledge
Agreement). Assuming the Agent (as defined in the Soucy
Senior Pledge Agreement) is in possession of the Soucy
Pledged Securities in the State of New York, upon the
acknowledgment by the Agent (as defined in the Soucy
Senior Pledge Agreement) that it holds the Soucy Pledged
Securities for the Trustee, the Trustee will have a
perfected security interest in the Soucy Pledged
Securities. Upon such acknowledgement, no interest of
any other creditor, other than the Agent for the benefit
of the Company Agent and the Timberlands Agent, will be
equal or prior to the security interest of the Trustee in
the Soucy Pledged Securities.
<PAGE>
EXHIBIT 10.2
EXECUTION COPY
$120,000,000
CREDIT AGREEMENT
AMONG
BEAR ISLAND PAPER COMPANY, LLC
AS BORROWER,
THE SEVERAL LENDERS
FROM TIME TO TIME PARTIES HERETO,
TD SECURITIES (USA) INC.,
AS ARRANGER
AND
TORONTO-DOMINION (TEXAS), INC.,
AS ADMINISTRATIVE AGENT
DATED AS OF DECEMBER 1, 1997
TABLE OF CONTENTS
Page
SECTION 1. DEFINITIONS................................................ 2
1.1 Defined Terms............................................ 2
1.2 Other Definitional Provisions............................ 25
SECTION 2. AMOUNT AND TERMS OF COMMITMENTS............................ 25
2.1 Term Loan Commitments.................................... 25
2.2 Procedure for Term Loan Borrowing........................ 25
2.3 Repayment of Term Loans.................................. 26
2.4 Revolving Credit Commitments............................. 26
2.5 Procedure for Revolving Credit Borrowing................. 26
2.6 Repayment of Loans; Evidence of Debt..................... 27
2.7 Commitment Fees, etc. ................................... 28
2.8 Optional Termination or Reduction of Revolving Credit
Commitments; Mandatory Scheduled Reductions of
Revolving Credit Commitments........................... 28
2.9 Optional Prepayments..................................... 28
2.10 Mandatory Prepayments and Commitment Reductions.......... 29
2.11 Conversion and Continuation Options...................... 32
2.12 Minimum Amounts and Maximum Number of Eurodollar
Tranches............................................... 32
2.13 Interest Rates and Payment Dates......................... 33
2.14 Computation of Interest and Fees......................... 33
2.15 Inability to Determine Interest Rate..................... 33
2.16 Pro Rata Treatment and Payments.......................... 34
2.17 Requirements of Law...................................... 36
2.18 Taxes.................................................... 37
2.19 Indemnity................................................ 39
2.20 Illegality............................................... 40
2.21 Change of Lending Office................................. 40
SECTION 3. REPRESENTATIONS AND WARRANTIES............................. 40
3.1 Financial Condition...................................... 40
3.2 No Change................................................ 41
3.3 Corporate Existence; Compliance with Law................. 41
3.4 Corporate Power; Authorization; Enforceable
Obligations............................................ 42
3.5 No Legal Bar............................................. 42
3.6 No Material Litigation................................... 42
3.7 No Default............................................... 42
3.8 Ownership of Property; Liens............................. 43
3.9 Intellectual Property.................................... 43
3.10 Taxes.................................................... 43
3.11 Federal Regulations...................................... 43
3.12 Labor Matters............................................ 43
3.13 ERISA.................................................... 44
3.14 Investment Company Act; Other Regulations................ 44
3.15 Subsidiaries............................................. 44
3.16 Use of Proceeds.......................................... 44
3.17 Environmental Matters.................................... 44
3.18 Accuracy of Information, etc............................. 46
3.19 Security Documents....................................... 46
3.20 Solvency................................................. 47
3.21 Regulation H............................................. 47
SECTION 4. CONDITIONS PRECEDENT....................................... 47
4.1 Conditions to Initial Extension of Credit................ 47
4.2 Conditions to Each Loan.................................. 52
SECTION 5. AFFIRMATIVE COVENANTS...................................... 53
5.1 Financial Statements..................................... 53
5.2 Certificates; Other Information.......................... 54
5.3 Payment of Obligations................................... 55
5.4 Conduct of Business and Maintenance of Existence, etc. .. 55
5.5 Maintenance of Property; Insurance....................... 55
5.6 Inspection of Property; Books and Records; Discussions... 55
5.7 Notices.................................................. 56
5.8 Environmental Laws....................................... 57
5.9 Additional Collateral, etc............................... 57
5.10 Sales of Products by Agents.............................. 59
SECTION 6. NEGATIVE COVENANTS......................................... 59
6.1 Financial Condition Covenants............................ 59
6.2 Limitation on Indebtedness............................... 60
6.3 Limitation on Liens...................................... 61
6.4 Limitation on Fundamental Changes........................ 63
6.5 Limitation on Sale of Assets............................. 63
6.6 Limitation on Dividends.................................. 64
6.7 Limitation on Capital Expenditures....................... 65
6.8 Limitation on Investments, Loans and Advances............ 65
6.9 Limitation on Optional Payments and Modifications
of Debt Instruments, etc. ............................. 66
6.10 Limitation on Transactions with Affiliates............... 66
6.11 Limitation on Sales and Leasebacks....................... 67
6.12 Limitation on Changes in Fiscal Periods.................. 67
6.13 Limitation on Negative Pledge Clauses.................... 67
6.14 Limitation on Restrictions on Subsidiary Distributions... 67
6.15 Limitation on Lines of Business.......................... 68
6.16 Limitation on Amendments to Acquisition Documents........ 68
6.17 Limitation on Amendments to Management Contracts......... 68
6.18 Limitation on Finance Subsidiary......................... 68
SECTION 7. EVENTS OF DEFAULT.......................................... 69
SECTION 8. THE AGENTS................................................. 72
8.1 Appointment.............................................. 72
8.2 Delegation of Duties..................................... 72
8.3 Exculpatory Provisions................................... 72
8.4 Reliance by Administrative Agent......................... 73
8.5 Notice of Default........................................ 73
8.6 Non-Reliance on Agents and Other Lenders................. 73
8.7 Indemnification.......................................... 74
8.8 Agent in Its Individual Capacity......................... 74
8.9 Successor Administrative Agent........................... 75
8.10 Authorization to Execute Intercreditor Agreement
and Security Documents and Release Liens............... 75
8.11 The Arranger............................................. 75
SECTION 9. MISCELLANEOUS.............................................. 75
9.1 Amendments and Waivers................................... 75
9.2 Notices.................................................. 76
9.3 No Waiver; Cumulative Remedies........................... 77
9.4 Survival of Representations and Warranties............... 77
9.5 Payment of Expenses...................................... 78
9.6 Successors and Assigns; Participations and Assignments... 78
9.7 Adjustments; Set-off..................................... 81
9.8 Counterparts............................................. 82
9.9 Severability............................................. 82
9.10 Integration.............................................. 82
9.11 GOVERNING LAW............................................ 82
9.12 Submission To Jurisdiction; Waivers...................... 82
9.13 Acknowledgements......................................... 83
9.14 WAIVERS OF JURY TRIAL.................................... 83
9.15 Confidentiality.......................................... 83
ANNEXES:
A Pricing Grid
SCHEDULES:
1.1A Commitments
1.1B Mortgaged Property
3.1(b) Dividend and Distribution
3.4 Consents, Authorizations, Filings and Notices
3.8 Location of Property
3.15 Subsidiaries
3.19(a) UCC Filing Jurisdictions
3.19(b) Mortgage Filing Jurisdictions
6.2 Existing Indebtedness
6.3 Existing Liens
6.8(f) Existing Investments
EXHIBITS:
A Form of Subsidiary Guarantee
B Form of Brant-Allen Guarantee
C Form of Security and Pledge Agreement
D-1 Form of Soucy Pledge Agreement
D-2 Form of Paper Company Pledge Agreement
D-3 Form of Timberlands Pledge Agreement
E Form of Mortgage
F Form of Intercreditor Agreement
G Form of Compliance Certificate
H Form of Closing Certificate
I Form of Assignment and Acceptance
J Form of Legal Opinion of Skadden, Arps, Slate, Meagher & Flom
K-1 Form of Term Note
K-2 Form of Revolving Credit Note
L Form of Prepayment Option Notice
M Form of Exemption Certificate
N Executive Summary of Environmental Audit
CREDIT AGREEMENT, dated as of December 1, 1997, among BEAR
ISLAND PAPER COMPANY, LLC, a Virginia limited liability company (the
"Borrower"), the several banks and other financial institutions or
entities from time to time parties to this Agreement (the "Lenders"), TD
SECURITIES (USA) INC., as advisor and arranger (in such capacity, the
"Arranger"), and TORONTO-DOMINION (TEXAS), INC., as administrative agent
(in such capacity, the "Administrative Agent").
W I T N E S S E T H:
WHEREAS, the Borrower is a Wholly Owned Subsidiary (as
hereinafter defined) of Brant-Allen Industries, Inc., a Delaware
corporation ("Brant-Allen");
WHEREAS, Brant-Allen owns a partnership interest as general
partner in Bear Island Paper Company, L.P., a Virginia limited
partnership ("LP Paper Company"), and the remaining partnership interests
in LP Paper Company are held by Dow Jones Virginia Company, Inc. and
Newsprint, Inc. (collectively, the "Retiring Partners") as limited
partners;
WHEREAS, Brant-Allen is a party to the Partnership Interest
Sale Agreement, dated as of October 15, 1997 (the "Acquisition
Agreement"), with the Retiring Partners pursuant to which LP Paper
Company will be converted into Mergerco, L.L.C., a Virginia limited
liability company ("LLC Paper Company") and the Borrower, as assignee of
Brant-Allen's rights under the Acquisition Agreement, will then purchase
from the Retiring Partners all their interests in LLC Paper Company;
immediately thereafter LLC Paper Company will merge into the Borrower
(such transactions, the "Acquisition"); and after the completion of the
Acquisition the Borrower will be a Wholly Owned Subsidiary of Brant-
Allen;
WHEREAS, in connection with the Acquisition, (i) cash in the
aggregate amount of approximately $150,000,000 will be received by the
Retiring Partners on the Closing Date and (ii) approximately $42,000,000
plus prepayment penalties and accrued interest in connection with
existing debt of the LP Paper Company will be repaid (such transactions,
collectively with the Acquisition, the "Transaction");
WHEREAS, in connection with the Transaction, the Borrower
will issue and sell and cause a Subsidiary to issue and sell, as
co-obligors, $100,000,000 original principal amount of senior second
priority secured notes (the "Second Priority Notes");
WHEREAS, in connection with the Transaction, the Borrower has
requested the Lenders to establish (i) the Revolving Credit Facility in
the aggregate amount of $50,000,000 and (ii) the Term Loan Facility in
the aggregate amount of $70,000,000;
WHEREAS, the proceeds of such credit facilities and the
Second Priority Notes will be used to finance the Transaction, to pay
fees and expenses in connection therewith and to provide for working
capital and general corporate purposes of the Borrower and its
Subsidiaries; and
WHEREAS, the Lenders are willing to make such credit
facilities available upon and subject to the terms and conditions
hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the
agreements hereinafter set forth, the parties hereto hereby agree as
follows:
SECTION 1. DEFINITIONS
1.1 Defined Terms. As used in this Agreement, the terms
listed in this Section 1.1 shall have the respective meanings set forth
in this Section 1.1.
"Acquired Indebtedness": Indebtedness of a Person (a)
existing at the time such Person becomes a Subsidiary or
(b) assumed in connection with the acquisition of assets
from such Person.
"Acquisition": as defined in the recitals hereto.
"Acquisition Agreement": as defined in the recitals hereto.
"Adjustment Date": as defined in the Pricing Grid.
"Affiliate": as to any Person, any other Person that,
directly or indirectly, is in control of, is controlled
by, or is under common control with, such Person. For
purposes of this definition, "control" of a Person means
the power, directly or indirectly, either to (a) vote 10%
or more of the securities having ordinary voting power
for the election of directors (or persons performing
similar functions) of such Person or (b) direct or cause
the direction of the management and policies of such
Person, whether by contract or otherwise.
"Agents": the collective reference to the Arranger and
the Administrative Agent.
"Aggregate Exposure": with respect to any Lender, an
amount equal to (a) until the Closing Date, the aggregate
amount of such Lender's Commitments and (b) thereafter,
the sum of (i) the aggregate unpaid principal amount of
such Lender's Term Loans and (ii) the amount of such
Lender's Revolving Credit Commitment or, if the Revolving
Credit Commitments have been terminated, the amount of
such Lender's Revolving Credit Loans.
"Aggregate Exposure Percentage" with respect to any
Lender, the ratio (expressed as a percentage) of such
Lender's Aggregate Exposure to the Aggregate Exposure of
all Lenders.
"Agreement": this Credit Agreement, as amended,
supplemented or otherwise modified from time to time.
"Applicable Margin": for each Type of Loan and each
Facility, the Applicable Margin determined pursuant to
the Pricing Grid.
"Approved Fund": any fund under common management and
control with a fund that is a Lender.
"Asset Sale": (a) in respect of the Borrower and its
Subsidiaries, any Disposition of Property or series of
related Dispositions of Property (excluding any such
Disposition permitted by clause (a), (b), (c), (d) or (f)
of Section 6.5) which yields gross proceeds to the
Borrower or any of its Subsidiaries (valued at the
initial principal amount thereof in the case of non-cash
proceeds consisting of notes or other debt securities and
valued at fair market value in the case of other non-cash
proceeds) in excess of $1,000,000 in the aggregate in any
fiscal year and (b) in respect of Soucy and its
Subsidiaries or Timberlands and its Subsidiaries, any
Disposition of Property or series of related Dispositions
of Property (excluding any such Disposition which
consists of (i) sales of property in the ordinary course
of business, the sale or issuance of Capital Stock of
Soucy or its Subsidiaries to Soucy or Brant-Allen, or any
Wholly Owned Subsidiary of Soucy, or any Disposition of
any or all of the assets of any Subsidiary of Soucy to a
Wholly Owned Subsidiary of Soucy or to Soucy) which
yields gross proceeds to Soucy or any of its Subsidiaries
(valued at the initial principal amount thereof in the
case of non-cash proceeds consisting of notes or other
debt securities and valued at fair market value in the
case of other non-cash proceeds) in excess of (i) in the
case of Soucy and its Subsidiaries, $1,000,000 in the
aggregate in any fiscal year and (ii) in the case of
Timberlands and its Subsidiaries, $300,000 in the
aggregate in any fiscal year.
"Assignee": as defined in Section 9.6(c).
"Assignor": as defined in Section 9.6(c).
"Available Revolving Credit Commitment": as to any
Revolving Credit Lender at any time, an amount equal to
the excess, if any, of (a) the amount of such Lender's
Revolving Credit Commitment over (b) the aggregate
outstanding principal amount of such Lender's Revolving
Credit Loans.
"Base Rate": for any day, a rate per annum (rounded
upwards, if necessary, to the next 1/16 of 1%) equal to
the greatest of (a) the Prime Rate in effect on such day,
and (b) the Federal Funds Effective Rate in effect on
such day plus 1/2 of 1%. For purposes hereof: "Prime
Rate" shall mean the rate of interest per annum publicly
announced from time to time by The Toronto-Dominion Bank
as its prime or base rate in effect at its principal
office in New York City (the Prime Rate not being
intended to be the lowest rate of interest charged by The
Toronto-Dominion Bank in connection with extensions of
credit to debtors). Any change in the Base Rate due to a
change in the Prime Rate or the Federal Funds Effective
Rate shall be effective as of the opening of business on
the effective day of such change in the Prime Rate or the
Federal Funds Effective Rate, respectively.
"Base Rate Loans": Loans the rate of interest
applicable to which is based upon the Base Rate.
"Board": the Board of Governors of the Federal Reserve
System of the United States (or any successor).
"Borrower Management Contract": the Management Services
Agreement, dated as of November 26, 1997, between
Brant-Allen and the Borrower, as amended, supplemented or
otherwise modified in accordance with the terms of this
Agreement.
"Borrowing Date": any Business Day specified by the
Borrower as a date on which the Borrower requests the
relevant Lenders to make Loans hereunder.
"Brant-Allen": as defined in the recitals hereto.
"Brant-Allen Guarantee": the Brant-Allen Guarantee to
be executed and delivered by Brant-Allen, substantially
in the form of Exhibit B, as the same may be amended,
supplemented or otherwise modified from time to time.
"Business": as defined in Section 3.17.
"Business Day": (i) for all purposes other than as
covered by clause (ii) below, a day other than a
Saturday, Sunday or other day on which commercial banks
in New York City are authorized or required by law to
close and (ii) with respect to all notices and
determinations in connection with, and payments of
principal and interest on, Eurodollar Loans, any day
which is a Business Day described in clause (i) and which
is also a day for trading by and between banks in Dollar
deposits in the interbank eurodollar market.
"Capital Expenditures": for any period, with respect to
any Person, the aggregate of all expenditures by such
Person and its Subsidiaries for the acquisition or
leasing (pursuant to a capital lease) of fixed or capital
operating assets or additions to equipment (including
replacements of, capitalized repairs of and improvements
to, operating assets during such period) which should be
capitalized under GAAP on a consolidated balance sheet of
such Person and its Subsidiaries.
"Capital Lease Obligations": as to any Person, the
obligations of such Person to pay rent or other amounts
under any lease of (or other arrangement conveying the
right to use) real or personal property, or a combination
thereof, which obligations are required to be classified
and accounted for as capital leases on a balance sheet of
such Person under GAAP, and, for the purposes of this
Agreement, the amount of such obligations at any time
shall be the capitalized amount thereof at such time
determined in accordance with GAAP.
"Capital Stock": any and all shares, interests,
participations or other equivalents (however designated)
of capital stock of a corporation, any and all equivalent
ownership interests in a Person (other than a
corporation) and any and all warrants, rights or options
to purchase any of the foregoing.
"Cash Equivalents": (a) marketable direct obligations
issued by, or unconditionally guaranteed by, the United
States Government or issued by any agency thereof and
backed by the full faith and credit of the United States,
in each case maturing within one year from the date of
acquisition; (b) certificates of deposit, time deposits,
eurodollar time deposits or overnight bank deposits
having maturities of six months or less from the date of
acquisition issued by any Lender or by any commercial
bank organized under the laws of the United States of
America or any state thereof having combined capital and
surplus of not less than $500,000,000; (c) commercial
paper of an issuer rated at least A-2 by Standard &
Poor's Ratings Services ("S&P") or P-2 by Moody's
Investors Service, Inc. ("Moody's"), or carrying an
equivalent rating by a nationally recognized rating
agency, if both of the two named rating agencies cease
publishing ratings of commercial paper issuers generally,
and maturing within six months from the date of
acquisition; (d) repurchase obligations of any Lender or
of any commercial bank satisfying the requirements of
clause (b) of this definition, having a term of not more
than 30 days with respect to securities issued or fully
guaranteed or insured by the United States government;
(e) securities with maturities of one year or less from
the date of acquisition issued or fully guaranteed by any
state, commonwealth or territory of the United States, by
any political subdivision or taxing authority of any such
state, commonwealth or territory or by any foreign
government, the securities of which state, commonwealth,
territory, political subdivision, taxing authority or
foreign government (as the case may be) are rated at
least A by S&P or A by Moody's; (f) securities with
maturities of six months or less from the date of
acquisition backed by standby letters of credit issued by
any Lender or any commercial bank satisfying the
requirements of clause (b) of this definition; or (g)
shares of money market mutual or similar funds which
invest exclusively in assets satisfying the requirements
of clauses (a) through (f) of this definition.
"Change of Control": as defined in the Second Priority
Note Indenture.
"Closing Date": the date on which the conditions
precedent set forth in Section 4.1 shall have been
satisfied.
"Code": the Internal Revenue Code of 1986, as amended
from time to time.
"Collateral": all Property of the Loan Parties, now
owned or hereafter acquired, upon which a Lien is
purported to be created by any Security Document.
"Commitment": as to any Lender, the sum of the Term
Loan Commitment and the Revolving Credit Commitment of
such Lender.
"Commitment Fee Rate": the Commitment Fee Rate
determined pursuant to the Pricing Grid.
"Commonly Controlled Entity": an entity, whether or not
incorporated, which is under common control with the
Borrower within the meaning of Section 4001 of ERISA or
is part of a group which includes the Borrower and which
is treated as a single employer under Section 414 of the
Code.
"Compliance Certificate": a certificate duly executed
by a Responsible Officer substantially in the form of
Exhibit G.
"Confidential Information Memorandum": the Confidential
Information Memorandum dated October 1997 and furnished
to the Lenders in respect of the Facilities.
"Consolidated Current Assets": at any date, all amounts
(other than cash and Cash Equivalents) which would, in
conformity with GAAP, be set forth opposite the caption
"total current assets" (or any like caption) on a
consolidated balance sheet of the Borrower and its
Subsidiaries at such date.
"Consolidated Current Liabilities": at any date, all
amounts which would, in conformity with GAAP, be set
forth opposite the caption "total current liabilities"
(or any like caption) on a consolidated balance sheet of
the Borrower and its Subsidiaries at such date, but
excluding (a) the current portion of any Funded Debt of
the Borrower and its Subsidiaries and (b) without
duplication of clause (a) above, all Indebtedness
consisting of Revolving Credit Loans to the extent
otherwise included therein.
"Consolidated EBITDA": for any period, Consolidated Net
Income of the Borrower and its Subsidiaries for such
period plus, without duplication and to the extent
reflected as a charge in the statement of such
Consolidated Net Income for such period, the sum of (a)
income tax expense (but only to the extent, if any,
deducted in determining such Consolidated Net Income),
(b) interest expense, amortization or writeoff of debt
discount and debt issuance costs and commissions,
discounts and other fees and charges associated with
Indebtedness (including the Loans), (c) depreciation and
amortization expense, (d) amortization of intangibles
(including, but not limited to, goodwill) and
organization costs, (e) any extraordinary, unusual or
non-recurring expenses or losses (including, whether or
not otherwise includable as a separate item in the
statement of such Consolidated Net Income for such
period, losses on sales of assets outside of the ordinary
course of business) and (f) any other non-cash charges
(including non-cash management fees), and minus, to the
extent included in the statement of such Consolidated Net
Income for such period, the sum of (a) interest income,
(b) any extraordinary, unusual or non-recurring income or
gains (including, whether or not otherwise includable as
a separate item in the statement of such Consolidated Net
Income for such period, gains on the sales of assets
outside of the ordinary course of business) and (c) any
other non-cash income, all as determined on a
consolidated basis; provided that for purposes of
calculating Consolidated EBITDA of the Borrower and its
Subsidiaries for any period, (i) the Consolidated EBITDA
of any Person acquired by the Borrower or its
Subsidiaries during such period shall be included on a
pro forma basis for such period (assuming the
consummation of each such acquisition and the incurrence
or assumption of any Indebtedness in connection therewith
occurred on the first day of such period) if the
consolidated balance sheet of such acquired Person and
its consolidated Subsidiaries as at the end of the period
preceding the acquisition of such acquired Person and the
related consolidated statements of income and
stockholders' equity and of cash flows for the period in
respect of which Consolidated EBITDA is to be calculated
(A) have been previously provided to the Administrative
Agent and the Lenders and (B) either (x) have been
reported on without a qualification arising out of the
scope of the audit by independent certified public
accountants of nationally recognized standing or (y) have
been found acceptable by the Administrative Agent and
(ii) the Consolidated EBITDA of any Person Disposed of by
the Borrower or its Subsidiaries during such period shall
be deducted on a pro forma basis for such period
(assuming the consummation of each such Disposition and
the repayment of any Indebtedness in connection therewith
occurred on the first day of such period).
"Consolidated Fixed Charge Coverage Ratio": for any Test
Period, the ratio of (a) the sum of (i) Consolidated EBITDA
for such Test Period, (ii) the net amount of cash
contributions to the Borrower's equity during the last two
fiscal quarters of such Test Period, (iii) the amount of cash
and Cash Equivalents held by the Borrower on the first day of
such Test Period and (iv) the daily average amount during such
Test Period of the aggregate Available Revolving Credit
Commitments, not exceeding $10,000,000, less (x) cash Capital
Expenditures of the Borrower and its Subsidiaries during such
Test Period and (y) the amount of Restricted Payments (other
than Restricted Payments under Section 6.6(b), (d) and (e))
made by the Borrower during such Test Period to (b)
Consolidated Fixed Charges for such Test Period.
"Consolidated Fixed Charges": for any Test Period, the sum
(without duplication) of (a) Consolidated Interest Expense for
such Test Period, (b) Consolidated Lease Expense for such Test
Period, (c) the amount of dividends and other distributions
paid in respect of such Test Period pursuant to Section 6.6(b)
and (d) scheduled payments made during such Test Period on
account of principal of Indebtedness of the Borrower or any of
its Subsidiaries (including scheduled principal payments in
respect of the Term Loans and scheduled reductions of the
Revolving Credit Commitments).
"Consolidated Free Cash Flow": for any Test Period,
Consolidated EBITDA for such Test Period, plus (i) the net
amount of cash contributions to the Borrower's equity during
the last two fiscal quarters of such Test Period and (ii) the
daily average amount during such Test Period of the aggregate
Available Revolving Credit Commitments, but in any event not
in excess of $10,000,000.
"Consolidated Interest Coverage Ratio": for any Test
Period, the ratio of (a) Consolidated Free Cash Flow for
such Test Period to (b) Consolidated Interest Expense for
such Test Period.
"Consolidated Interest Expense": for any period, total
cash interest expense (including that attributable to
Capital Lease Obligations) of the Borrower and its
Subsidiaries for such period with respect to all
outstanding Indebtedness of the Borrower and its
Subsidiaries (including, without limitation, all
commissions, discounts and other fees and charges owed
with respect to letters of credit and bankers' acceptance
financing and net costs under Interest Rate Protection
Agreements to the extent such net costs are allocable to
such period in accordance with GAAP).
"Consolidated Lease Expense": for any period, the aggregate
amount of fixed and contingent rentals payable by the Borrower
and its Subsidiaries, determined on a consolidated basis in
accordance with GAAP, for such period with respect to leases
of real and personal property; provided, that Capital Lease
Obligations shall not constitute Consolidated Lease Expense.
"Consolidated Leverage Ratio": as at the last day of
any period of four consecutive fiscal quarters, the ratio
of (a) Consolidated Total Debt on such day to (b)
Consolidated EBITDA for such period.
"Consolidated Net Income": for any period, the consolidated
net income (or loss) of the Borrower (or, prior to the
Acquisition, the LP Paper Company) and its Subsidiaries, or
Soucy and its Subsidiaries, as the case may be, determined on
a consolidated basis in accordance with GAAP; provided that
there shall be excluded (a) the income (or deficit) of any
Person accrued prior to the date it becomes a Subsidiary of
the Borrower or is merged into or consolidated with the
Borrower or any of its Subsidiaries, (b) the income (or
deficit) of any Person (other than a Subsidiary of the
Borrower) in which the Borrower or any of its Subsidiaries has
an ownership interest, except to the extent that any such
income is actually received by the Borrower or such Subsidiary
in the form of dividends or similar distributions and (c) the
undistributed earnings of any Subsidiary of the Borrower to
the extent that the declaration or payment of dividends or
similar distributions by such Subsidiary is not at the time
permitted by the terms of any Contractual Obligation (other
than under any Loan Document) or Requirement of Law applicable
to such Subsidiary.
"Consolidated Net Worth": at any date, all amounts
which would, in conformity with GAAP, be included on a
consolidated balance sheet of the Borrower and its
Subsidiaries under stockholders' equity at such date.
"Consolidated Total Capitalization": at any date, the
sum of Consolidated Net Worth plus Consolidated Total
Debt at such date.
"Consolidated Total Debt": at any date, the aggregate
principal amount of all Indebtedness of the Borrower and
its Subsidiaries at such date, determined on a
consolidated basis in accordance with GAAP.
"Consolidated Working Capital": at any date, the excess
of Consolidated Current Assets on such date over
Consolidated Current Liabilities at such date.
"Contractual Obligation": as to any Person, any
provision of any security issued by such Person or of any
agreement, instrument or other undertaking to which such
Person is a party or by which it or any of its Property
is bound.
"Currency Swap Agreements": with respect to any Person, any
spot or forward foreign exchange agreements and currency swap,
currency option or other similar financial agreements or
arrangements entered into by such Person or any of its
Subsidiaries in the ordinary course of business and designed
to protect against or manage exposure to fluctuations in
foreign currency exchange rates.
"Default": any of the events specified in Section 7,
whether or not any requirement for the giving of notice,
the lapse of time, or both, has been satisfied.
"Disposition": with respect to any Property, any sale,
lease, sale and leaseback, assignment (other than the granting
of a Lien or other encumbrance permitted in accordance with
the terms of this Agreement), conveyance, transfer or other
disposition thereof; and the terms "Dispose" and "Disposed of"
shall have correlative meanings.
"Dollars" and "$": dollars in lawful currency of the
United States of America.
"Domestic Subsidiary": any Subsidiary of the Borrower
organized under the laws of any jurisdiction within and
including the United States of America.
"ECF Percentage": 75%; provided, that, with respect to
each fiscal year of the Borrower ending on or after
December 31, 1998, the ECF Percentage shall be reduced to
50% if Total Committed Debt at the end of such fiscal
year is less than $145,000,000.
"Environmental Laws": any and all foreign, Federal, state,
local or municipal laws, rules, orders, regulations, statutes,
ordinances, codes, decrees, or other Requirements of Law
(including common law) regulating, relating to or imposing
liability or standards of conduct concerning protection of
human health or the environment, as now or may at any time
hereafter be in effect.
"Environmental Permits": any and all permits, licenses,
registrations, notifications, exemptions and any other
authorizations required under any Environmental Law.
"ERISA": the Employee Retirement Income Security Act of
1974, as amended from time to time.
"Eurocurrency Reserve Requirements": for any day as applied
to a Eurodollar Loan, the aggregate (without duplication) of
the maximum rates (expressed as a decimal fraction) of reserve
requirements in effect on such day (including, without
limitation, basic, supplemental, marginal and emergency
reserves under any regulations of the Board or other
Governmental Authority having jurisdiction with respect
thereto) dealing with reserve requirements prescribed for
eurocurrency funding (currently referred to as "Eurocurrency
Liabilities" in Regulation D of the Board) maintained by a
member bank of the Federal Reserve System.
"Eurodollar Base Rate": with respect to each day during
each Interest Period pertaining to a Eurodollar Loan, the
rate per annum determined on the basis of the rate for
deposits in Dollars for a period equal to such Interest
Period commencing on the first day of such Interest
Period appearing on Page 3750 of the Telerate screen as
of 11:00 A.M., London time, two Business Days prior to
the beginning of such Interest Period. In the event that
such rate does not appear on Page 3750 of the Telerate
Service (or otherwise on such service), the "Eurodollar
Base Rate" for purposes of this definition shall be
determined by reference to such other comparable publicly
available service for displaying eurodollar rates as may
be selected by the Administrative Agent or, in the
absence of such availability, by reference to the rate at
which the Administrative Agent is offered Dollar deposits
at or about 11:00 A.M., New York City time, two Business
Days prior to the beginning of such Interest Period in
the interbank eurodollar market where its eurodollar and
foreign currency and exchange operations are then being
conducted for delivery on the first day of such Interest
Period for the number of days comprised therein.
"Eurodollar Loans": Loans the rate of interest
applicable to which is based upon the Eurodollar Rate.
"Eurodollar Rate": with respect to each day during each
Interest Period pertaining to a Eurodollar Loan, a rate
per annum determined for such day in accordance with the
following formula (rounded upward to the nearest 1/100th
of 1%):
Eurodollar Base Rate
----------------------------------------
1.00 - Eurocurrency Reserve Requirements
"Eurodollar Tranche": the collective reference to
Eurodollar Loans the then current Interest Periods with
respect to all of which begin on the same date and end on
the same later date (whether or not such Loans shall
originally have been made on the same day).
"Event of Default": any of the events specified in
Section 7, provided that any requirement for the giving
of notice, the lapse of time, or both, has been
satisfied.
"Excess Cash Flow": for any fiscal year of the
Borrower, the excess, if any, of (a) the sum, without
duplication, of (i) Consolidated Net Income for such
fiscal year, (ii) an amount equal to the amount of all
non-cash charges (including depreciation and
amortization) deducted in arriving at such Consolidated
Net Income, (iii) decreases in Consolidated Working
Capital for such fiscal year, (iv) an amount equal to the
aggregate net non-cash loss on the Disposition of
Property by the Borrower and its Subsidiaries during such
fiscal year (other than sales of inventory in the
ordinary course of business), to the extent deducted in
arriving at such Consolidated Net Income and (v) the net
increase during such fiscal year (if any) in deferred tax
accounts of the Borrower over (b) the sum, without
duplication, of (i) an amount equal to the amount of all
non-cash credits included in arriving at such
Consolidated Net Income, (ii) the aggregate amount
actually paid by the Borrower and its Subsidiaries in
cash during such fiscal year on account of Capital
Expenditures (excluding the principal amount of
Indebtedness incurred in connection with such
expenditures and any such expenditures financed with the
proceeds of any Reinvestment Deferred Amount), (iii) the
aggregate amount of all optional prepayments of Revolving
Credit Loans during such fiscal year to the extent
accompanying permanent optional reductions of the
Revolving Credit Commitments and all optional prepayments
of the Term Loans during such fiscal year, (iv) the
aggregate amount of all regularly scheduled principal
payments of Funded Debt (including, without limitation,
the Term Loans and principal payments as a result of
permanent reductions of the Revolving Credit Commitments)
of the Borrower and its Subsidiaries made during such
fiscal year (other than in respect of any revolving
credit facility to the extent there is not an equivalent
permanent reduction in commitments thereunder), (v)
increases in Consolidated Working Capital for such fiscal
year, (vi) an amount equal to the aggregate net non-cash
gain on the Disposition of Property by the Borrower and
its Subsidiaries during such fiscal year (other than
sales of inventory in the ordinary course of business),
to the extent included in arriving at such Consolidated
Net Income, (vii) the net decrease during such fiscal
year (if any) in deferred tax accounts of the Borrower,
(viii) the amount of any dividends and other
distributions paid in respect of such fiscal year
pursuant to Section 6.6(b) and (ix) the amount of any
prepayment made during such period with Net Cash Proceeds
of Asset Sales to the extent such Net Cash Proceeds are
included in the calculation of Consolidated Net Income
for such period.
"Excess Cash Flow Application Date": as defined in
Section 2.10(c).
"Facility": each of (a) the Term Loan Commitments and
the Term Loans made thereunder (the "Term Loan Facility")
and (b) the Revolving Credit Commitments and the
Revolving Credit Loans made thereunder (the "Revolving
Credit Facility").
"Federal Funds Effective Rate": for any day, the weighted
average of the rates on overnight federal funds transactions
with members of the Federal Reserve System arranged by federal
funds brokers, as published on the next succeeding Business
Day by the Federal Reserve Bank of New York, or, if such rate
is not so published for any day which is a Business Day, the
average of the quotations for the day of such transactions
received by the Administrative Agent from three federal funds
brokers of recognized standing selected by it.
"Finance Subsidiary": a Wholly Owned Subsidiary of the
Borrower functioning solely as co-obligor in respect of
the Second Priority Notes.
"Foreign Subsidiary": any Subsidiary of the Borrower
that is not a Domestic Subsidiary.
"Funded Debt": as to any Person, all Indebtedness of
such Person that matures more than one year from the date
of its creation or matures within one year from such date
but is renewable or extendible, at the option of such
Person, to a date more than one year from such date or
arises under a revolving credit or similar agreement that
obligates the lender or lenders to extend credit during a
period of more than one year from such date, including,
without limitation, all current maturities and current
sinking fund payments in respect of such Indebtedness
whether or not required to be paid within one year from
the date of its creation and, in the case of the
Borrower, Indebtedness in respect of the Loans.
"Funding Office": the office of the Administrative
Agent set forth in Section 9.2.
"GAAP": generally accepted accounting principles in the
United States of America as in effect from time to time,
except that for purposes of Section 6.1, GAAP shall be
determined on the basis of such principles in effect on the
date hereof and consistent with those used in the preparation
of the most recent audited financial statements delivered
pursuant to Section 3.1(b). In the event that any "Accounting
Change" (as defined below) shall occur and such change results
in a change in the method of calculation of financial
covenants, standards or terms in this Agreement, then the
Borrower and the Administrative Agent agree to enter into
negotiations in order to amend such provisions of this
Agreement so as to equitably reflect such Accounting Changes
with the desired result that the criteria for evaluating the
Borrower's financial condition shall be the same after such
Accounting Changes as if such Accounting Changes had not been
made. Until such time as such an amendment shall have been
executed and delivered by the Borrower, the Administrative
Agent and the Required Lenders, all financial covenants,
standards and terms in this Agreement shall continue to be
calculated or construed as if such Accounting Changes had not
occurred. "Accounting Changes" refers to changes in accounting
principles required by the promulgation of any rule,
regulation, pronouncement or opinion by the Financial
Accounting Standards Board of the American Institute of
Certified Public Accountants or, if applicable, the Securities
and Exchange Commission (or successors thereto or agencies
with similar functions).
"Governmental Authority": any nation or government, any
state or other political subdivision thereof and any
entity exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining
to government (including, without limitation, the
National Association of Insurance Commissioners).
"Guarantee Obligation": as to any Person (the
"guaranteeing person"), any obligation of (a) the
guaranteeing person or (b) another Person (including,
without limitation, any bank under any letter of credit)
to induce the creation of which the guaranteeing person
has issued a reimbursement, counterindemnity or similar
obligation, in either case guaranteeing or in effect
guaranteeing any Indebtedness, leases, dividends or other
obligations (the "primary obligations") of any other
third Person (the "primary obligor") in any manner,
whether directly or indirectly, including, without
limitation, any obligation of the guaranteeing person,
whether or not contingent, (i) to purchase any such
primary obligation or any Property constituting direct or
indirect security therefor, (ii) to advance or supply
funds (1) for the purchase or payment of any such primary
obligation or (2) to maintain working capital or equity
capital of the primary obligor or otherwise to maintain
the net worth or solvency of the primary obligor, (iii)
to purchase Property, securities or services primarily
for the purpose of assuring the owner of any such primary
obligation of the ability of the primary obligor to make
payment of such primary obligation or (iv) otherwise to
assure or hold harmless the owner of any such primary
obligation against loss in respect thereof; provided,
however, that the term Guarantee Obligation shall not
include endorsements of instruments for deposit or
collection in the ordinary course of business. The amount
of any Guarantee Obligation of any guaranteeing person
shall be deemed to be the lower of (a) an amount equal to
the stated or determinable amount of the primary
obligation in respect of which such Guarantee Obligation
is made and (b) the maximum amount for which such
guaranteeing person may be liable pursuant to the terms
of the instrument embodying such Guarantee Obligation,
unless such primary obligation and the maximum amount for
which such guaranteeing person may be liable are not
stated or determinable, in which case the amount of such
Guarantee Obligation shall be such guaranteeing person's
maximum reasonably anticipated liability in respect
thereof as determined by the Borrower in good faith.
"Guarantees": the collective reference to the
Brant-Allen Guarantee and the Subsidiary Guarantee.
"Guarantors": the collective reference to Brant-Allen
and the Subsidiary Guarantors.
"Indebtedness": of any Person at any date, 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 current trade payables incurred in the
ordinary course of such Person's business), (c) all
obligations of such Person evidenced by notes, bonds,
debentures or other similar instruments, (d) all
indebtedness 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 Capital Lease Obligations
of such Person, (f) all obligations of such Person,
contingent or otherwise, as an account party under
acceptance, letter of credit or similar facilities, (g)
all obligations of such Person, contingent or otherwise,
to purchase, redeem, retire or otherwise acquire for
value any Capital Stock (other than common stock) of such
Person, (h) all Guarantee Obligations of such Person in
respect of obligations of the kind referred to in clauses
(a) through (g) above; (i) all obligations of the kind
referred to in clauses (a) through (h) above secured by
(or for which the holder of such obligation 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,
whether or not such Person has assumed or become liable
for the payment of such obligation, (j) for the purposes
of Section 7(e) only, all obligations of such Person in
respect of Interest Rate Protection Agreements and (k)
the liquidation value of any preferred Capital Stock of
such Person or its Subsidiaries held by any Person other
than such Person and its Wholly Owned Subsidiaries.
"Insolvency": with respect to any Multiemployer Plan,
the condition that such Plan is insolvent within the
meaning of Section 4245 of ERISA.
"Insolvent": pertaining to a condition of Insolvency.
"Intellectual Property": the collective reference to all
rights, priorities and privileges of the Borrower and its
Subsidiaries relating to intellectual property, whether
arising under United States, multinational or foreign laws or
otherwise, including, without limitation, copyrights,
copyright licenses, patents, patent licenses, trademarks (and
the goodwill of the business symbolized thereby), trademark
licenses, technology, know-how and processes, and all rights
to sue at law or in equity for any infringement, dilution or
misappropriation thereof, including the right to receive all
proceeds and damages therefrom.
"Intercreditor Agreement": the Intercreditor Agreement,
substantially in the form of Exhibit F, to be entered
into by the Administrative Agent, the Trustee and
Toronto-Dominion (Texas), Inc., as administrative agent
under the Timberlands Loan Agreement.
"Interest Payment Date": (a) as to any Base Rate Loan,
the last day of each March, June, September and December
to occur while such Loan is outstanding and the final
maturity date of such Loan, (b) as to any Eurodollar
Loan having an Interest Period of three months or less, the
last day of such Interest Period, (c) as to any Eurodollar
Loan having an Interest Period longer than three months, each
day which is three months, or a whole multiple thereof, after
the first day of such Interest Period and the last day of such
Interest Period and (d) as to any Loan (other than any
Revolving Credit Loan that is a Base Rate Loan), the date of
any repayment or prepayment made in respect thereof.
"Interest Period": as to any Eurodollar Loan, (a) initially,
the period commencing on the borrowing or conversion date, as
the case may be, with respect to such Eurodollar Loan and
ending one, two, three or six months thereafter, as selected
by the Borrower in its notice of borrowing or notice of
conversion, as the case may be, given with respect thereto;
and (b) thereafter, each period commencing on the last day of
the next preceding Interest Period applicable to such
Eurodollar Loan and ending one, two, three or six, as selected
by the Borrower by irrevocable notice to the Administrative
Agent not less than three Business Days prior to the last day
of the then current Interest Period with respect thereto;
provided that, all of the foregoing provisions relating to
Interest Periods are subject to the following:
(i) if any Interest Period would otherwise end on a day
that is not a Business Day, such Interest Period shall
be extended to the next succeeding Business Day unless
the result of such extension would be to carry such
Interest Period into another calendar month in which
event such Interest Period shall end on the immediately
preceding Business Day;
(ii) any Interest Period that would otherwise extend beyond
the Scheduled Revolving Credit Termination Date or
beyond the date final payment is due on the Term Loans,
as the case may be, shall end on the Revolving Credit
Termination Date or such due date, as applicable;
(iii) any Interest Period that begins on the last Business
Day of a calendar month (or on a day for which there is
no numerically corresponding day in the calendar month
at the end of such Interest Period) shall end on the
last Business Day of a calendar month; and
(iv) the Borrower shall select Interest Periods so as
not to require a payment or prepayment of any Eurodollar
Loan during an Interest Period for such Loan.
"Interest Rate Protection Agreement": any interest rate
protection agreement, interest rate futures contract,
interest rate option, interest rate cap or other interest
rate hedge arrangement, to or under which the Borrower or
any of its Subsidiaries is a party or a beneficiary on
the date hereof or becomes a party or a beneficiary after
the date hereof.
"John Hancock Credit Agreement": the Amended and Restated
Timberlands Loan and Maintenance Agreement, dated as of
November 24, 1997 between Timberlands and John Hancock Mutual
Life Insurance Company, as in effect on the Closing Date, and
as further amended or otherwise modified in accordance with
the terms of this Agreement and the Timberlands Loan
Agreement.
"Lien": any mortgage, pledge, hypothecation, assignment,
deposit arrangement, encumbrance, lien (statutory or other),
charge or other security interest or any preference, priority
or other security agreement or preferential arrangement of any
kind or nature whatsoever (including, without limitation, any
conditional sale or other title retention agreement and any
capital lease having substantially the same economic effect as
any of the foregoing).
"Loan": any loan made by any Lender pursuant to this
Agreement.
"Loan Documents": this Agreement, the Guarantees, the
Security Documents, the Intercreditor Agreement and the
Notes.
"Loan Parties": Brant-Allen, the Borrower and each
Subsidiary of the Borrower and Brant-Allen which is a party to
a Loan Document (other than any such Person which is only a
party to an Acknowledgement and Consent executed pursuant to a
Security Document).
"LP Paper Company": as defined in the recitals hereto.
"Management Contracts": the collective reference to (i)
the Borrower Management Contract and (ii) the Soucy
Management Contract.
"Material Adverse Effect": a material adverse effect on (a)
the Transaction, (b) the business, assets, property, condition
(financial or otherwise) or prospects of Brant-Allen and its
Subsidiaries taken as a whole, or the Borrower and its
Subsidiaries taken as a whole or (c) the validity or
enforceability of any material provision of this Agreement or
any of the other Loan Documents or the rights or remedies of
the Agents or the Lenders hereunder or thereunder.
"Material Environmental Amount": an amount or amounts
payable by the Borrower and/or its Subsidiaries in excess of
$1,000,000 in the aggregate during any fiscal quarter,
$3,500,000 in the aggregate during any four consecutive fiscal
quarters or $10,000,000 in the aggregate after the Closing
Date for remedial costs, compliance costs, compensatory
damages, punitive damages, fines, penalties or any combination
thereof.
"Materials of Environmental Concern": any gasoline or
petroleum (including crude oil or any fraction thereof) or
petroleum products or any hazardous or toxic substances,
materials or wastes, defined or regulated as such in or under
any Environmental Law, including, without limitation,
asbestos, polychlorinated biphenyls and urea-formaldehyde
insulation, or that could result in liability under any
Environmental Law.
"Mortgaged Properties": the real properties listed on
Schedule 1.1B, as to which the Administrative Agent for
the benefit of the Lenders shall be granted a Lien
pursuant to the Mortgages.
"Mortgages": each of the mortgages and deeds of trust
made by any Loan Party in favor of, or for the benefit
of, the Administrative Agent for the benefit of the
Lenders, substantially in the form of Exhibit E (with
such changes thereto as shall be advisable under the law
of the jurisdiction in which such mortgage or deed of
trust is to be recorded), as the same may be amended,
supplemented or otherwise modified from time to time.
"Multiemployer Plan": a Plan which is a multiemployer
plan as defined in Section 4001(a)(3) of ERISA.
"Net Cash Proceeds": (a) in connection with any Asset
Sale or any Recovery Event, the proceeds thereof in the
form of cash and Cash Equivalents (including any such
proceeds received by way of deferred payment of principal
pursuant to a note or installment receivable or purchase
price adjustment receivable or otherwise, but only as and
when received) of such Asset Sale or Recovery Event, net
of attorneys' fees, accountants' fees, investment banking
fees, amounts required to be applied to the repayment of
Indebtedness secured by a Lien expressly permitted
hereunder on any asset which is the subject of such Asset
Sale or Recovery Event (other than any Lien pursuant to a
Security Document) and other customary fees and expenses
actually incurred in connection therewith and net of any
taxes of the entity in respect of the Asset Sale or
Recovery Event and any Partner Taxes paid or reasonably
estimated to be payable as a result thereof and (b) in
connection with any issuance or sale of equity securities
in a primary offering or debt securities or instruments
or the incurrence of loans, the cash proceeds received
from such issuance or incurrence, net of attorneys' fees,
investment banking fees, accountants' fees, underwriting
discounts and commissions and other customary fees and
expenses actually incurred in connection therewith.
"Non-Excluded Taxes": as defined in Section 2.18(a).
"Non-U.S. Lender": as defined in Section 2.18(d).
"Notes": the collective reference to any promissory
note evidencing Loans.
"Obligations": the unpaid principal of and interest on
(including, without limitation, interest accruing after the
maturity of the Loans and interest accruing after the filing
of any petition in bankruptcy, or the commencement of any
insolvency, reorganization or like proceeding, relating to the
Borrower, whether or not a claim for post-filing or
post-petition interest is allowed in such proceeding) the
Loans and all other obligations and liabilities of the
Borrower to the Administrative Agent or to any Lender (or, in
the case of Interest Rate Protection Agreements and Currency
Swap Agreements, any affiliate of any Lender), whether direct
or indirect, absolute or contingent, due or to become due, or
now existing or hereafter incurred, which may arise under, out
of, or in connection with, this Agreement, any other Loan
Document, any Interest Rate Protection Agreement or Currency
Swap Agreement entered into with any Lender or any affiliate
of any Lender or any other document made, delivered or given
in connection herewith or therewith, whether on account of
principal, interest, reimbursement obligations, fees,
indemnities, costs, expenses (including, without limitation,
all fees, charges and disbursements of counsel to the
Administrative Agent or to any Lender that are required to be
paid by the Borrower pursuant hereto) or otherwise.
"Other Taxes": any and all present or future stamp or
documentary taxes or any other excise or property taxes,
charges or similar levies arising from any payment made
hereunder or from the execution, delivery or enforcement
of, or otherwise with respect to, this Agreement.
"Paper Company Percentage": on any date, the ratio
(expressed as a percentage) of (i) the Aggregate Exposure
of all Lenders on such date to (ii) the sum of (A) the
Aggregate Exposure of all Lenders on such date plus (B)
the aggregate outstanding principal amount of the
Timberlands Loan on such date.
"Paper Company Pledge Agreement": the Paper Company
Pledge Agreement to be executed and delivered by
Brant-Allen, substantially in the form of Exhibit D-2, as
the same may be amended, supplemented or otherwise
modified from time to time.
"Participant": as defined in Section 9.6(b).
"Partner Taxes": with respect to Brant-Allen, the
Borrower or Timberlands or any of their Subsidiaries, the
amount (without duplication) sufficient to permit the
direct and indirect owners of equity interests of such
entity to pay the federal, state and local income taxes
and any foreign taxes imposed on them as a result of
their ownership of interests in such entity.
"Payment Office": the office of the Administrative
Agent set forth in Section 9.2.
"PBGC": the Pension Benefit Guaranty Corporation
established pursuant to Subtitle A of Title IV of ERISA
(or any successor).
"Person": an individual, partnership, corporation,
limited liability company, business trust, joint stock
company, trust, unincorporated association, joint
venture, Governmental Authority or other entity of
whatever nature.
"Plan": at a particular time, any employee benefit plan
which is covered by ERISA and in respect of which the Borrower
or a Commonly Controlled Entity is (or, if such plan were
terminated at such time, would under Section 4069 of ERISA be
deemed to be) an "employer" as defined in Section 3(5) of
ERISA.
"Pricing Grid": the pricing grid attached hereto as Annex A.
"Pro Forma Balance Sheet": as defined in Section 3.1(a).
"Projections": as defined in Section 5.2(c).
"Properties": as defined in Section 3.17.
"Property": any right or interest in or to property of
any kind whatsoever, whether real, personal or mixed and
whether tangible or intangible, including, without
limitation, Capital Stock.
"Recovery Event": any settlement of or payment in
excess of $250,000 in respect of any property or casualty
insurance claim or any condemnation proceeding relating
to any asset of the Borrower, Soucy or Timberlands, or
any of their Subsidiaries, as the case may be.
"Register": as defined in Section 9.6(d).
"Regulation G": Regulation G of the Board as in effect
from time to time.
"Regulation U": Regulation U of the Board as in effect
from time to time.
"Reinvestment Deferred Amount": with respect to any
Reinvestment Event, the aggregate Net Cash Proceeds received
in connection therewith which are not applied to prepay the
Term Loans or reduce the Revolving Credit Commitments pursuant
to Section 2.10(b), (e) or (f) as a result of the delivery of
a Reinvestment Notice.
"Reinvestment Event": any Recovery Event or Disposition
of land, equipment or obsolete or worn out property in
the ordinary course of business in respect of which the
Borrower has delivered a Reinvestment Notice.
"Reinvestment Notice": a written notice executed by a
Responsible Officer stating that no Event of Default has
occurred and is continuing and that the Borrower, Timberlands
or Soucy or their Subsidiaries, as the case may be (directly
or indirectly through a Subsidiary), intends and expects to
use all or a specified portion of the Net Cash Proceeds of a
Recovery Event or Disposition of land, equipment or obsolete
or worn out property in the ordinary course of business to
acquire assets useful in its business, excluding the purchase
of farm land.
"Reinvestment Prepayment Amount": with respect to any
Reinvestment Event, the Reinvestment Deferred Amount relating
thereto less any amount expended prior to the relevant
Reinvestment Prepayment Date to acquire assets useful in the
business of the Borrower, Timberlands or Soucy, or their
Subsidiaries, as the case may be, excluding the purchase of
farm land.
"Reinvestment Prepayment Date": with respect to any
Reinvestment Event, the earlier of (a) the date occurring
90 days after such Reinvestment Event and (b) the date on
which the Borrower shall have determined not to, or shall
have otherwise ceased to, acquire assets useful in the
business of the Borrower, Timberlands or Soucy or their
Subsidiaries, as the case may be, with all or any portion
of the relevant Reinvestment Deferred Amount.
"Reorganization": with respect to any Multiemployer
Plan, the condition that such plan is in reorganization
within the meaning of Section 4241 of ERISA.
"Reportable Event": any of the events set forth in
Section 4043(c) of ERISA, other than those events as to
which the thirty day notice period is waived under
applicable regulations.
"Required Facility Lenders": with respect to any Facility,
the holders of more than 66-2/3% of the aggregate unpaid
principal amount of the Term Loans or the Total Revolving
Extensions of Credit, as the case may be, outstanding under
such Facility (or, in the case of the Revolving Credit
Facility, prior to any termination of the Revolving Credit
Commitments, the holders of more than 66-2/3% of the Total
Revolving Credit Commitments).
"Required Lenders": the holders of more than 66-2/3% of (a)
until the Closing Date, the Commitments and (b) thereafter,
the sum of (i) the aggregate unpaid principal amount of the
Term Loans and (ii) the Total Revolving Credit Commitments or,
if the Revolving Credit Commitments have been terminated, the
Total Revolving Extensions of Credit.
"Required Prepayment Lenders": the Required Revolving
Credit Lenders and the Required Term Loan Lenders.
"Required Revolving Credit Lenders": the Required
Facility Lenders in respect of the Revolving Credit
Facility.
"Required Term Loan Lenders": the Required Facility
Lenders in respect of the Term Loan Facility.
"Requirement of Law": as to any Person, the Certificate
of Incorporation and By-Laws or other organizational or
governing documents of such Person, and any law, treaty,
rule or regulation or determination of an arbitrator or a
court or other Governmental Authority, in each case
applicable to or binding upon such Person or any of its
Property or to which such Person or any of its Property
is subject.
"Responsible Officer": with respect to any party, its
chief executive officer, president, any vice president or
chief financial officer of the Borrower or of any
Subsidiary, as appropriate, but with respect to financial
matters, the chief financial officer of the Borrower or
of any Subsidiary, as appropriate.
"Retiring Partners": as defined in the recitals hereto.
"Revolving Credit Commitment": as to any Lender, the
obligation of such Lender, if any, to make Revolving Credit
Loans in an aggregate principal amount not to exceed the
amount set forth under the heading "Revolving Credit
Commitment" opposite such Lender's name on Schedule 1.1A, as
the same may be changed from time to time pursuant to the
terms hereof. The original amount of the Total Revolving
Credit Commitments is $50,000,000.
"Revolving Credit Commitment Period": the period from
and including the Closing Date to the Revolving Credit
Termination Date.
"Revolving Credit Lender": each Lender which has a
Revolving Credit Commitment or which has made Revolving
Credit Loans.
"Revolving Credit Loans": as defined in Section 2.4.
"Revolving Credit Percentage": as to any Revolving Credit
Lender at any time, the percentage which such Lender's
Revolving Credit Commitment then constitutes of the Total
Revolving Credit Commitments (or, at any time after the
Revolving Credit Commitments shall have expired or terminated,
the percentage which the aggregate principal amount of such
Lender's Revolving Credit Loans then outstanding constitutes
of the aggregate principal amount of the Revolving Credit
Loans then outstanding).
"Revolving Credit Termination Date": December 31, 2003.
"Second Priority Note Indenture": the Indenture entered
into by the Borrower, the Finance Subsidiary and the
Trustee in connection with the issuance of the Second
Priority Notes, as the same may be amended, supplemented
or otherwise modified from time to time in accordance
with Section 6.9.
"Second Priority Notes": as defined in the recitals
hereto , which term shall include the notes issued in
exchange therefor as contemplated by the Indenture.
"Second Priority Note Security Documents": the
collective reference to any and all documents providing
for collateral security, guarantees or negative pledges
in connection with the Second Priority Security Notes, as
the same may be amended, supplemented or otherwise
modified from time to time in accordance with Section
6.9.
"Security and Pledge Agreement": the Security and
Pledge Agreement to be executed by the Borrower and each
of its Subsidiaries, substantially in the form of Exhibit
C, as the same may be amended, supplemented or otherwise
modified from time to time.
"Security Documents": the collective reference to the
Security and Pledge Agreement, the Soucy Pledge
Agreement, the Paper Company Pledge Agreement, the
Timberlands Pledge Agreement, the Mortgages and all other
security documents hereafter delivered to the
Administrative Agent granting a Lien on any Property of
any Person to secure the obligations and liabilities of
any Loan Party under any Loan Document.
"Single Employer Plan": any Plan which is covered by
Title IV of ERISA, but which is not a Multiemployer Plan.
"Solvent": when used with respect to any Person, means that,
as of any date of determination, (a) the amount of the
"present fair saleable value" of the assets of such Person
will, as of such date, exceed the amount of all "liabilities
of such Person, contingent or otherwise", as of such date, as
such quoted terms are determined in accordance with applicable
federal and state laws governing determinations of the
insolvency of debtors, (b) the present fair saleable value of
the assets of such Person will, as of such date, be greater
than the amount that will be required to pay the liability of
such Person on its debts as such debts become absolute and
matured, (c) such Person will not have, as of such date, an
unreasonably small amount of capital with which to conduct its
business, and (d) such Person will be able to pay its debts as
they mature. For purposes of this definition, (i) "debt" means
liability on a "claim", and (ii) "claim" means any (x) right
to payment, whether or not such a right is reduced to
judgment, liquidated, unliquidated, fixed, contingent,
matured, unmatured, disputed, undisputed, legal, equitable,
secured or unsecured or (y) right to an equitable remedy for
breach of performance if such breach gives rise to a right to
payment, whether or not such right to an equitable remedy is
reduced to judgment, fixed, contingent, matured or unmatured,
disputed, undisputed, secured or unsecured.
"Soucy": F.F. Soucy, Inc., a Quebec corporation.
"Soucy Management Contract": the collective reference
to the Management and Administrative Services Agreement
dated January 1, 1990, and the Manufacturer's
Representative Agreement, dated January 1, 1990, in each
case between Brant-Allen and Soucy, as in effect on the
Closing Date, as amended, supplemented or otherwise
modified in accordance with the terms of this Agreement
and the Timberlands Loan Agreement.
"Soucy Pledge Agreement": collectively, the Soucy Pledge
Agreement to be executed and delivered by Brant-Allen under
New York law and the Soucy Hypothec Agreement to be executed
and delivered by Brant-Allen under Quebec law, substantially
in the form of Exhibit D-1, as the same may be amended,
supplemented or otherwise modified from time to time.
"Soucy Consolidated Net Worth": at any date, all
amounts which would, in conformity with GAAP, be included
on a consolidated balance sheet of Soucy and its
Subsidiaries under stockholders' equity at such date.
"Subsidiary": as to any Person, a corporation, partnership,
limited liability company or other entity of which shares of
stock or other ownership interests having ordinary voting
power (other than stock or such other ownership interests
having such power only by reason of the happening of a
contingency) to elect a majority of the board of directors or
other managers of such corporation, partnership or other
entity are at the time owned, or the management of which is
otherwise controlled, directly or indirectly through one or
more intermediaries, or both, by such Person. Unless otherwise
qualified, all references to a "Subsidiary" or to
"Subsidiaries" in this Agreement shall refer to a Subsidiary
or Subsidiaries of the Borrower; provided, in any event the
Finance Subsidiary shall not be a Subsidiary of the Borrower.
"Subsidiary Guarantee": the Subsidiary Guarantee to be
executed and delivered by each Subsidiary Guarantor,
substantially in the form of Exhibit A, as the same may
be amended, supplemented or otherwise modified from time
to time.
"Subsidiary Guarantor": each Subsidiary of the Borrower
other than a Foreign Subsidiary.
"Term Loan": as defined in Section 2.1.
"Term Loan Commitment": as to any Lender, the
obligation of such Lender, if any, to make a Term Loan to
the Borrower hereunder in a principal amount not to
exceed the amount set forth under the heading "Term Loan
Commitment" opposite such Lender's name on Schedule 1.1A.
The original aggregate amount of the Term Loan
Commitments is $70,000,000.
"Term Loan Lender": each Lender which has a Term Loan
Commitment or which has made a Term Loan.
"Term Loan Percentage": as to any Term Loan Lender at any
time, the percentage which such Lender's Term Loan Commitment
then constitutes of the aggregate Term Loan Commitments (or,
at any time after the Closing Date, the percentage which the
aggregate principal amount of such Lender's Term Loans then
outstanding constitutes of the aggregate principal amount of
the Term Loans then outstanding).
"Test Period": the fiscal quarter ended March 31, 1998, the
two consecutive fiscal quarters ended June 30, 1998, the three
consecutive fiscal quarters ended September 30, 1998, and the
four consecutive fiscal quarters ended December 31, 1998 and
any four consecutive fiscal quarters ending thereafter.
"Timberlands": Bear Island Timberlands Company, L.L.C,
a Virginia limited liability company.
"Timberlands Loan": the $35,000,000 loan made to
Brant-Allen pursuant to the Timberlands Loan Agreement.
"Timberlands Loan Agreement": the Credit Agreement,
dated as of the date hereof, among Brant-Allen, the
lenders from time to time parties thereto, and
Toronto-Dominion (Texas), Inc., as Administrative Agent,
as amended, supplemented or otherwise modified from time
to time.
"Timberlands Pledge Agreement": the Timberlands Pledge
Agreement to be executed and delivered by Brant-Allen,
substantially in the form of Exhibit D-3, as amended,
supplemented or otherwise modified from time to time in
accordance with this Agreement and the Timberlands Loan
Agreement.
"Timberlands Wood Supply Contract": the Wood Supply
Agreement between the Borrower and Timberlands dated as of
December 1, 1997 as amended prior to the Closing Date and
provided to the Administrative Agent, as amended or otherwise
modified in the ordinary course of business and on arms'
length terms (notice of which amendments will be given by the
Borrower to the Administrative Agent within 30 days after the
execution thereof).
"Total Committed Debt": at any date, the total Funded
Debt of the Borrower (and its Subsidiaries), including,
without limitation, the Second Priority Notes and unused
Revolving Credit Commitments.
"Total Revolving Credit Commitments": at any time, the
aggregate amount of the Revolving Credit Commitments at
such time.
"Total Revolving Extensions of Credit": at any time,
the aggregate outstanding principal amount of the
Revolving Credit Loans of the Revolving Credit Lenders at
such time.
"Transaction": as defined in the recitals hereto.
"Transferee": as defined in Section 9.15.
"Trustee": Crestar Bank, a Virginia banking
corporation, as trustee under the Second Priority Note
Indenture.
"Type": as to any Loan, its nature as a Base Rate Loan
or a Eurodollar Loan.
"Wholly Owned Subsidiary": as to any Person, any other
Person all of the Capital Stock of which (other than
directors' qualifying shares required by law) is owned by
such Person directly and/or through other Wholly Owned
Subsidiaries.
"Wholly Owned Subsidiary Guarantor": any Subsidiary
Guarantor that is a Wholly Owned Subsidiary of the
Borrower.
1.2 Other Definitional Provisions. (a) Unless otherwise
specified therein, all terms defined in this Agreement shall have the
defined meanings when used in the other Loan Documents or any certificate
or other document made or delivered pursuant hereto or thereto.
(b) As used herein and in the other Loan Documents, and any
certificate or other document made or delivered pursuant hereto or
thereto, accounting terms relating to Brant-Allen, the Borrower and its
Subsidiaries not defined in Section 1.1 and accounting terms partly
defined in Section 1.1, to the extent not defined, shall have the
respective meanings given to them under GAAP.
(c) The words "hereof", "herein" and "hereunder" and words
of similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this
Agreement, and Section, Schedule and Exhibit references are to this
Agreement unless otherwise specified.
(d) The meanings given to terms defined herein shall be
equally applicable to both the singular and plural forms of such terms.
SECTION 2. AMOUNT AND TERMS OF COMMITMENTS
2.1 Term Loan Commitments. Subject to the terms and
conditions hereof, (a) each Term Loan Lender severally agrees to make a
term loan (a "Term Loan") to the Borrower on the Closing Date in an
amount not to exceed the amount of the Term Loan Commitment of such
Lender. The Term Loans may from time to time be Eurodollar Loans or Base
Rate Loans, as determined by the Borrower and notified to the
Administrative Agent in accordance with Sections 2.2 and 2.11.
2.2 Procedure for Term Loan Borrowing. The Borrower shall
give the Administrative Agent irrevocable notice (which notice must be
received by the Administrative Agent prior to 10:00 A.M., New York City
time, one Business Day prior to the anticipated Closing Date) requesting
that the Term Loan Lenders make the Term Loans on the Closing Date and
specifying the amount to be borrowed. The Term Loans made on the Closing
Date shall initially be Base Rate Loans, but thereafter may be converted
in accordance with Section 2.11. Upon receipt of such notice the
Administrative Agent shall promptly notify each Term Loan Lender thereof.
Not later than 12:00 Noon, New York City time, on the Closing Date each
Term Loan Lender shall make available to the Administrative Agent at the
Funding Office an amount in immediately available funds equal to the Term
Loan or Term Loans to be made by such Lender. The Administrative Agent
shall make available to the Borrower the aggregate of the amounts made
available to the Administrative Agent by the Term Loan Lenders in
immediately available funds.
2.3 Repayment of Term Loans. (a) The Term Loan of each Term
Loan Lender shall mature in 32 consecutive quarterly installments,
payable on the last day of each March, June, September and December,
commencing on March 31, 1998, each of which shall be in an amount equal
to such Term Loan Lender's Term Loan Percentage multiplied by the amount
set forth below opposite such installment:
Installment Payment Date Principal Amount
------------------------ ----------------
3/31/98 thru 9/30/05 $175,000
12/31/05 $64,575,000
2.4 Revolving Credit Commitments. (a) Subject to the terms
and conditions hereof, each Revolving Credit Lender severally agrees to
make revolving credit loans ("Revolving Credit Loans") to the Borrower
from time to time during the Revolving Credit Commitment Period in an
aggregate principal amount at any one time outstanding which does not
exceed the amount of such Lender's Revolving Credit Commitment. During
the Revolving Credit Commitment Period the Borrower may use the Revolving
Credit Commitments by borrowing, prepaying the Revolving Credit Loans in
whole or in part, and reborrowing, all in accordance with the terms and
conditions hereof. The Revolving Credit Loans may from time to time be
Eurodollar Loans or Base Rate Loans, as determined by the Borrower and
notified to the Administrative Agent in accordance with Sections 2.5 and
2.11, provided that no Revolving Credit Loan shall be made as a
Eurodollar Loan after the day that is one month prior to the Revolving
Credit Termination Date.
(b) The Borrower shall repay all outstanding Revolving
Credit Loans on the Revolving Credit Termination Date.
2.5 Procedure for Revolving Credit Borrowing. The Borrower
may borrow under the Revolving Credit Commitments during the Revolving
Credit Commitment Period on any Business Day, provided that the Borrower
shall give the Administrative Agent irrevocable notice (which notice must
be received by the Administrative Agent prior to 12:00 Noon, New York
City time, (a) three Business Days prior to the requested Borrowing Date,
in the case of Eurodollar Loans, or (b) one Business Day prior to the
requested Borrowing Date, in the case of Base Rate Loans), specifying (i)
the amount and Type of Revolving Credit Loans to be borrowed, (ii) the
requested Borrowing Date and (iii) in the case of Eurodollar Loans, the
respective amounts of each such Type of Loan and the respective lengths
of the initial Interest Period therefor. Any Revolving Credit Loans made
on the Closing Date shall initially be Base Rate Loans but thereafter may
be converted in accordance with Section 2.11. Each borrowing under the
Revolving Credit Commitments shall be in an amount equal to (x) in the
case of Base Rate Loans, $1,000,000 or a whole multiple of $250,000 in
excess thereof (or, if the then aggregate Available Revolving Credit
Commitments are less than $1,000,000, such lesser amount) and (y) in the
case of Eurodollar Loans, $1,000,000 or a whole multiple of $250,000 in
excess thereof. Upon receipt of any such notice from the Borrower, the
Administrative Agent shall promptly notify each Revolving Credit Lender
thereof. Each Revolving Credit Lender will make the amount of its pro
rata share of each borrowing available to the Administrative Agent for
the account of the Borrower at the Funding Office prior to 12:00 Noon,
New York City time, on the Borrowing Date requested by the Borrower in
funds immediately available to the Administrative Agent. Such borrowing
will then be made available to the Borrower by the Administrative Agent
in like funds as received by the Administrative Agent.
2.6 Repayment of Loans; Evidence of Debt. (a) The Borrower
hereby unconditionally promises to pay to the Administrative Agent for
the account of the appropriate Revolving Credit Lender or Term Loan
Lender, as the case may be, (i) the then unpaid principal amount of each
Revolving Credit Loan of such Revolving Credit Lender on the Revolving
Credit Termination Date (or such earlier date on which the Loans become
due and payable pursuant to Section 7) and (ii) the principal amount of
each Term Loan of such Term Loan Lender in installments according to the
amortization schedule set forth in Section 2.3 (or on such earlier date
on which the Loans become due and payable pursuant to Section 7). The
Borrower hereby further agrees to pay interest on the unpaid principal
amount of the Loans from time to time outstanding from the date hereof
until payment in full thereof at the rates per annum, and on the dates,
set forth in Section 2.13.
(b) Each Lender shall maintain in accordance with its
usual practice an account or accounts evidencing indebtedness of the
Borrower to such Lender resulting from each Loan of such Lender from time
to time, including the amounts of principal and interest payable and paid
to such Lender from time to time under this Agreement.
(c) The Administrative Agent, on behalf of the Borrower,
shall maintain the Register pursuant to Section 9.6(e), and a subaccount
therein for each Lender, in which shall be recorded (i) the amount of
each Loan made hereunder and any Note evidencing such Loan, the Type
thereof and each Interest Period applicable thereto, (ii) the amount of
any principal or interest due and payable or to become due and payable
from the Borrower to each Lender hereunder and (iii) both the amount of
any sum received by the Administrative Agent hereunder from the Borrower
and each Lender's share thereof.
(d) The entries made in the Register and the accounts of
each Lender maintained pursuant to Section 2.6(b) shall, to the extent
permitted by applicable law and absent manifest error, be prima facie
evidence of the existence and amounts of the obligations of the Borrower
therein recorded; provided, however, that the failure of any Lender or
the Administrative Agent to maintain the Register or any such account, or
any error therein, shall not in any manner affect the obligation of the
Borrower to repay (with applicable interest) the Loans made to such
Borrower by such Lender in accordance with the terms of this Agreement.
(e) The Borrower agrees that, upon the request to the
Administrative Agent by any Lender, the Borrower will execute and deliver
to such Lender a promissory note of the Borrower evidencing any Term
Loans or Revolving Credit Loans, as the case may be, of such Lender,
substantially in the forms of Exhibit K-1 or K-2, respectively, with
appropriate insertions as to date and principal amount.
2.7 Commitment Fees, etc. (a) The Borrower agrees to pay
to the Administrative Agent for the account of each Revolving Credit
Lender a commitment fee for the period from and including the Closing
Date to the last day of the Revolving Credit Commitment Period, computed
at the Commitment Fee Rate on the average daily amount of the Available
Revolving Credit Commitment of such Lender during the period for which
payment is made, payable quarterly in arrears on the last day of each
March, June, September and December and on the Revolving Credit
Termination Date, commencing on the first of such dates to occur after
the date hereof.
(b) The Borrower agrees to pay to the Administrative Agent
the fees in the amounts and on the dates from time to time agreed to in
writing by the Borrower and the Administrative Agent.
2.8 Optional Termination or Reduction of Revolving Credit
Commitments; Mandatory Scheduled Reductions of Revolving Credit
Commitments. (a) The Borrower shall have the right, upon not less than
three Business Days' notice to the Administrative Agent, to terminate the
Revolving Credit Commitments or, from time to time, to reduce the amount
of the Revolving Credit Commitments; provided that no such termination or
reduction of Revolving Credit Commitments shall be permitted if, after
giving effect thereto and to any prepayments of the Revolving Credit
Loans made on the effective date thereof, the Total Revolving Extensions
of Credit would exceed the Total Revolving Credit Commitments. Any such
reduction shall be in an amount equal to $5,000,000, or in increments of
$1,000,000 thereof, and shall reduce permanently the Revolving Credit
Commitments then in effect.
(b) The Total Revolving Credit Commitments shall reduce in
20 equal consecutive quarterly installments, on the last day of each
March, June, September and December, commencing on March 31, 1998, each
of which shall be in an amount equal to $1,250,000, until the Total
Revolving Credit Commitments have been reduced to $25,000,000.
2.9 Optional Prepayments. The Borrower may at any time and
from time to time prepay the Loans, in whole or in part, without premium
or penalty upon irrevocable written or telephonic notice (promptly
confirmed in writing) delivered to the Administrative Agent at least
three Business Days (or five Business Days if required by Section
2.16(a)) prior thereto in the case of Eurodollar Loans and at least one
Business Day prior thereto in the case of Base Rate Loans, which notice
shall specify the date and amount of prepayment and whether the
prepayment is of Eurodollar Loans or Base Rate Loans; provided, that if a
Eurodollar Loan is prepaid on any day other than the last day of the
Interest Period applicable thereto, the Borrower shall also pay any
amounts owing pursuant to Section 2.19. Upon receipt of any such notice
the Administrative Agent shall promptly notify each relevant Lender
thereof. If any such notice is given, the amount specified in such notice
shall be due and payable on the date specified therein, together with
(except in the case of Revolving Credit Loans which are Base Rate Loans)
accrued interest to such date on the amount prepaid. Partial prepayments
of Term Loans and Revolving Credit Loans shall be in an aggregate
principal amount of $5,000,000 or a whole multiple thereof.
2.10 Mandatory Prepayments and Commitment Reductions. (a)
If on any date (i) any Capital Stock shall be issued by the Borrower or
any of its Subsidiaries, except Capital Stock issued by a Subsidiary to
the Borrower or to a Wholly Owned Subsidiary Guarantor or by the Borrower
to Brant-Allen, or (ii) any Indebtedness shall be incurred by the
Borrower or any of its Subsidiaries, excluding any Indebtedness incurred
in accordance with Section 6.2 (a)-(e), (g)-(k), as in effect on the date
of this Agreement), an amount equal to 100% of the Net Cash Proceeds
thereof shall be applied on the date of such issuance or incurrence
toward the prepayment of the Term Loans and the reduction of the
Revolving Credit Commitments as set forth in Section 2.10(g).
(b) If on any date the Borrower or any of its Subsidiaries
shall receive Net Cash Proceeds from any Asset Sale or Recovery Event
then, unless a Reinvestment Notice shall have been delivered in respect
thereof, such Net Cash Proceeds shall be applied within 30 days after
such date toward the prepayment of the Term Loans and the reduction of
the Revolving Credit Commitments to the extent set forth in Section
2.10(g) net of any federal, state, local and foreign taxes required to be
paid by the Borrower, a Subsidiary of the Borrower, or any direct or
indirect owner of the Borrower as a result of any actual or deemed
distribution made by such entity in order to enable such application. In
addition, on each Reinvestment Prepayment Date with respect to the
Borrower, an amount equal to the Reinvestment Prepayment Amount with
respect to the relevant Reinvestment Event shall be applied toward the
prepayment of the Term Loans and the reduction of the Revolving Credit
Commitments as set forth in Section 2.10(g) net of any federal, state,
local and foreign taxes required to be paid by the Borrower, a Subsidiary
of the Borrower, or any direct or indirect owner of the Borrower as a
result of any actual or deemed distribution made by such entity in order
to enable such application.
(c) If for any fiscal year of the Borrower commencing with
the fiscal year ending December 31, 1998 there shall be Excess Cash Flow,
the Borrower shall, on the relevant Excess Cash Flow Application Date,
apply the ECF Percentage of such Excess Cash Flow toward the prepayment
of the Term Loans and the reduction of the Revolving Credit Commitments
as set forth in Section 2.10(g). Each such prepayment and commitment
reduction shall be made on a date (an "Excess Cash Flow Application
Date") no later than five days after the earlier of (i) the date on which
the financial statements of the Borrower referred to in Section 5.1(a),
for the fiscal year with respect to which such prepayment is made, are
required to be delivered to the Lenders and (ii) the date such financial
statements are actually delivered.
(d) If on any date after the repayment in full of the
Timberlands Loan any dividends or distributions shall be made by
Timberlands to Brant-Allen (excluding dividends or distributions in an
amount equal to Partner Taxes in respect of the income of Timberlands),
an amount equal to 100% of such dividends or distributions net of any
federal, state, local or foreign taxes required to be paid by Brant-Allen
or any direct or indirect owner of Brant-Allen as a result of such
dividend or distribution shall be applied by Brant-Allen on the date of
such dividend or distribution toward the prepayment of the Term Loans and
the reduction of the Revolving Credit Commitments as set forth in Section
2.10(g).
(e) If on any date after the repayment in full of the
Timberlands Loan, any Capital Stock of Timberlands shall be issued (other
than to Brant-Allen), an amount shall be applied on the date of such
issuance toward the repayment of the Term Loans and the reduction of the
Revolving Credit Commitments as set forth in Section 2.10(g) equal to
100% of the Net Cash Proceeds thereof net of any federal, state, local
and foreign taxes required to be paid by Brant-Allen or any direct or
indirect owner of Brant-Allen as a result of any actual or deemed
distribution made to such application. If on any date after the date of
repayment in full of the Timberlands Loan, Timberlands or any of its
Subsidiaries shall receive Net Cash Proceeds from any Asset Sale or
Recovery Event then, unless a Reinvestment Notice shall have been
delivered in respect thereof, an amount shall be applied within 30 days
after such date toward the prepayment of the Term Loans and the reduction
of the Revolving Credit Commitments as set forth in Section 2.10(g) equal
to such Net Cash Proceeds net of any federal, state, local and foreign
taxes required to be paid by Brant-Allen or any direct or indirect owner
of Brant-Allen as a result of any actual or deemed distribution made to
enable such application. In addition, on each Reinvestment Prepayment
Date with respect to Timberlands, an amount shall be applied toward the
prepayment of the Term Loans and the reduction of the Revolving Credit
Commitments as set forth in Section 2.10(g) equal to the Reinvestment
Prepayment Amount with respect to the relevant Reinvestment Event net of
any federal, state, local and foreign taxes required to be paid by
Brant-Allen or any direct or indirect owner of Brant-Allen as a result of
any actual or deemed distribution made to enable such application.
Notwithstanding the foregoing, any required prepayment pursuant to this
paragraph shall be reduced by an amount equal to the Paper Company
Percentage of any amounts required to be deposited in escrow, or
otherwise required to be paid, under the John Hancock Credit Agreement.
(f) If on any date prior to the date on which the Soucy
Pledge Agreement shall have terminated in accordance with the terms
thereof any Capital Stock of Soucy shall be issued (other than to
Brant-Allen), an amount shall be applied on the date of such issuance
toward the prepayment of the Term Loans and the reduction of the
Revolving Credit Commitments as set forth in Section 2.10(g) equal to the
Paper Company Percentage of the Net Cash Proceeds thereof net of any
federal, state, local and foreign taxes required to be paid by
Brant-Allen or any direct or indirect owner of Brant-Allen as a result of
any actual or deemed distribution made by Soucy in order to enable such
application. If on any date prior to the date on which the Soucy Pledge
Agreement shall have terminated in accordance with the terms thereof
Soucy or any of its Subsidiaries shall receive Net Cash Proceeds from any
Asset Sale or Recovery Event then, unless a Reinvestment Notice shall be
delivered in respect thereof, an amount shall be applied within 30 days
after such date toward the prepayment of the Term Loans and the reduction
of the Revolving Credit Commitments as set forth in Section 2.10(g) equal
to the Paper Company Percentage of such Net Cash Proceeds net of any
federal, state, local and foreign taxes required to be paid by
Brant-Allen or any direct or indirect owner of Brant-Allen as a result of
any actual or deemed distribution made by Soucy in order to enable such
application; provided, that with respect to any Asset Sale by Soucy
Partners, the Net Cash Proceeds required to be applied toward prepayment
pursuant to this paragraph (d) shall also be net of any portion thereof
attributable to equity interests in Soucy Partners held by Persons other
than Soucy. In addition, on each Reinvestment Prepayment Date with
respect to Soucy, an amount shall be applied toward the prepayment of the
Term Loans and the reduction of the Revolving Credit Commitments as set
forth in Section 2.10(g) equal to the Paper Company Percentage of the
Reinvestment Prepayment Amount with respect to the relevant Reinvestment
Event net of any federal, state, local and foreign taxes required to be
paid by Brant-Allen or any direct or indirect owner of Brant-allen as a
result of any actual or deemed distribution made by Soucy in order to
enable such application; provided, that with respect to any Asset Sale by
Soucy Partners, the Net Cash Proceeds required to be applied toward
prepayment pursuant to this paragraph (d) shall also be net of any
portion thereof attributable to equity interests in Soucy Partners held
by Persons other than Soucy.
(g) Amounts to be applied in connection with prepayments
and Revolving Credit Commitment reductions made pursuant to Section 2.10
shall be applied as follows:
(i until the date on which the Total Revolving Credit
Commitments have been reduced to $25,000,000, such prepayments
and Revolving Credit Commitment reductions shall be applied pro
rata, to the prepayment of the Term Loans and the permanent
reduction of the Revolving Credit Commitments;
(ii from and after the date on which the Total
Revolving Credit Commitments have been reduced to $25,000,000,
such prepayments shall be applied to prepay the Term Loans until
the Term Loans have been repaid in full;
(iii from and after the date on which there are no Term
Loans outstanding, such prepayments shall be applied to reduce
permanently the Revolving Credit Commitments until such time as
the Total Revolving Credit Commitments have been reduced to
$25,000,000; and
(iv from and after the date on which the Revolving
Credit Commitments have been reduced to $25,000,000 (and the Term
Loans have been repaid in full), no further mandatory prepayments
and Revolving Credit Commitment reductions will be required
pursuant to this Section.
Any such reductions of the Revolving Credit Commitments
above shall be accompanied by prepayment of the Revolving Credit Loans to
the extent, if any, that the Total Revolving Extensions of Credit exceed
the amount of the Total Revolving Credit Commitments as so reduced, and
shall be applied to scheduled reductions in the Total Revolving Credit
Commitments in the direct order of the remaining scheduled reductions
pursuant to Section 2.8(b). The application of any prepayment pursuant to
Section 2.10 shall be made first to Base Rate Loans and second to
Eurodollar Loans. Each prepayment of the Loans under Section 2.10 (i)
shall be accompanied by accrued interest to the date of such prepayment
on the amount prepaid (except in the case of Revolving Credit Loans that
are Base Rate Loans) and (ii) in the case of prepayments of Term Loans,
shall be applied in the direct order of the remaining maturities of Term
Loans, pursuant to Section 2.3.
2.11 Conversion and Continuation Options. (a) The Borrower
may elect from time to time to convert Eurodollar Loans to Base Rate
Loans by giving the Administrative Agent at least one Business Day's
prior irrevocable telephonic notice (promptly confirmed in writing) of
such election, provided that any such conversion of Eurodollar Loans may
only be made on the last day of an Interest Period with respect thereto.
The Borrower may elect from time to time to convert Base Rate Loans to
Eurodollar Loans by giving the Administrative Agent at least three
Business Days' prior irrevocable notice of such election (which notice
shall specify the length of the initial Interest Period therefor),
provided that no Base Rate Loan under a particular Facility may be
converted into a Eurodollar Loan (i) when any Event of Default has
occurred and is continuing or (ii) after the date that is one month prior
to the final scheduled termination or maturity date of such Facility.
Upon receipt of any such notice the Administrative Agent shall promptly
notify each relevant Lender thereof.
(b) Any Eurodollar Loan may be continued as such upon the
expiration of the then current Interest Period with respect thereto by
the Borrower giving irrevocable notice to the Administrative Agent, in
accordance with the applicable provisions of the term "Interest Period"
set forth in Section 1.1, of the length of the next Interest Period to be
applicable to such Loans, provided that no Eurodollar Loan under a
particular Facility may be continued as such (i) when any Event of
Default has occurred and is continuing and the Administrative Agent has
or the Required Facility Lenders in respect of such Facility have
determined in its or their sole discretion not to permit such
continuations or (ii) after the date that is one month prior to the final
scheduled termination or maturity date of such Facility, and provided,
further, that if the Borrower shall fail to give any required notice as
described above in this paragraph or if such continuation is not
permitted pursuant to the preceding proviso such Loans shall be
automatically converted to Base Rate Loans on the last day of such then
expiring Interest Period. Upon receipt of any such notice the
Administrative Agent shall promptly notify each relevant Lender thereof.
2.12 Minimum Amounts and Maximum Number of Eurodollar
Tranches. Notwithstanding anything to the contrary in this Agreement, all
borrowings, conversions, continuations and optional prepayments of
Eurodollar Loans hereunder and all selections of Interest Periods
hereunder shall be in such amounts and be made pursuant to such elections
so that, (a) after giving effect thereto, the aggregate principal amount
of the Eurodollar Loans comprising each Eurodollar Tranche shall be equal
to $1,000,000 or a whole multiple of $250,000 in excess thereof and (b)
no more than ten Eurodollar Tranches shall be outstanding at any one
time.
2.13 Interest Rates and Payment Dates. (a) Each Eurodollar
Loan shall bear interest for each day during each Interest Period with
respect thereto at a rate per annum equal to the Eurodollar Rate
determined for such day plus the Applicable Margin.
(b) Each Base Rate Loan shall bear interest at a rate per
annum equal to the Base Rate plus the Applicable Margin.
(c) (i) If all or a portion of the principal amount of any
Loan shall not be paid when due (whether at the stated maturity, by
acceleration or otherwise), all outstanding Loans (whether or not
overdue) shall bear interest at a rate per annum which is equal to the
rate that would otherwise be applicable thereto pursuant to the foregoing
provisions of this Section 2.13 plus 2%, and (ii) if all or a portion of
any interest payable on any Loan or any commitment fee or other amount
payable hereunder shall not be paid when due (whether at the stated
maturity, by acceleration or otherwise), such overdue amount shall bear
interest at a rate per annum equal to the rate applicable to Base Rate
Loans under the relevant Facility plus 2% (or, in the case of any such
other amounts that do not relate to a particular Facility, the Base Rate
plus 2%), in each case, with respect to clauses (i) and (ii) above, from
the date of such non-payment until such amount is paid in full (as well
after as before judgment).
(d) Interest shall be payable in arrears on each Interest
Payment Date, provided that interest accruing pursuant to paragraph (c)
of this Section 2.13 shall be payable from time to time on demand.
2.14 Computation of Interest and Fees. (a) Interest, fees
and commissions payable pursuant hereto shall be calculated on the basis
of a 360-day year for the actual days elapsed, except that, with respect
to Base Rate Loans the rate of interest on which is calculated on the
basis of the Prime Rate, the interest thereon shall be calculated on the
basis of a 365- (or 366-, as the case may be) day year for the actual
days elapsed. The Administrative Agent shall as soon as practicable
notify the Borrower and the relevant Lenders of each determination of a
Eurodollar Rate. Any change in the interest rate on a Loan resulting from
a change in the Base Rate or the Eurocurrency Reserve Requirements shall
become effective as of the opening of business on the day on which such
change becomes effective. The Administrative Agent shall as soon as
practicable notify the Borrower and the relevant Lenders of the effective
date and the amount of each such change in interest rate.
(b) Each determination of an interest rate by the
Administrative Agent pursuant to any provision of this Agreement shall be
conclusive and binding on the Borrower and the Lenders in the absence of
manifest error. The Administrative Agent shall, at the request of the
Borrower, deliver to the Borrower a statement showing the quotations used
by the Administrative Agent in determining any interest rate pursuant to
Section 2.13(a).
2.15 Inability to Determine Interest Rate. If prior to the
first day of any Interest Period:
(a) the Administrative Agent shall have determined (which
determination shall be conclusive and binding upon the Borrower)
that, by reason of circumstances affecting the relevant market,
adequate and reasonable means do not exist for ascertaining the
Eurodollar Rate for such Interest Period, or
(b) the Administrative Agent shall have received notice
from the Required Facility Lenders in respect of the relevant
Facility that the Eurodollar Rate determined or to be determined
for such Interest Period will not adequately and fairly reflect
the cost to such Lenders (as conclusively certified by such
Lenders) of making or maintaining their affected Loans during
such Interest Period,
the Administrative Agent shall give telecopy or telephonic notice thereof
to the Borrower and the relevant Lenders as soon as practicable
thereafter. If such notice is given (x) any Eurodollar Loans under the
relevant Facility requested to be made on the first day of such Interest
Period shall be made as Base Rate Loans, (y) any Loans under the relevant
Facility that were to have been converted on the first day of such
Interest Period to Eurodollar Loans shall be continued as Base Rate Loans
and (z) any outstanding Eurodollar Loans under the relevant Facility
shall be converted, on the first day of such Interest Period, to Base
Rate Loans. Until such notice has been withdrawn by the Administrative
Agent, no further Eurodollar Loans under the relevant Facility shall be
made or continued as such, nor shall the Borrower have the right to
convert Loans under the relevant Facility to Eurodollar Loans.
2.16 Pro Rata Treatment and Payments. (a) Each borrowing
by the Borrower from the Lenders hereunder, each payment by the Borrower
on account of any commitment fee and any reduction of the Commitments of
the Lenders shall be made pro rata according to the respective Term Loan
Percentages, or Revolving Credit Percentages, as the case may be, of the
relevant Lenders. Unless otherwise expressly provided herein, all
payments by the Borrower pursuant to this Agreement or any other Loan
Document that are not on account of any particular Facility shall be made
by the Borrower to the Administrative Agent for the pro rata account of
the Lenders entitled to receive such payment.
(b) Each payment (including each prepayment) by the
Borrower on account of principal of and interest on the Term Loans shall
be made pro rata according to the respective outstanding principal
amounts of the Term Loans then held by the Term Loan Lenders. Amounts
prepaid on account of the Term Loans may not be reborrowed.
(c) Each payment (including each prepayment) by the
Borrower on account of principal of and interest on the Revolving Credit
Loans shall be made pro rata according to the respective outstanding
principal amounts of the Revolving Credit Loans then held by the
Revolving Credit Lenders.
(d) Notwithstanding anything to the contrary in Sections
2.9, 2.10 or 2.16, so long as the Total Revolving Credit Commitments
exceed $25,000,000, each Term Loan Lender may, at its option, decline up
to 100% of the portion of any optional prepayment or mandatory payment
applicable to the Term Loans of such Term Loan Lender; accordingly, with
respect to the amount of any optional prepayment described in Section 2.9
or mandatory prepayment described in Section 2.10 that is allocated to
Term Loans (such amount, the "Term Loan Prepayment Amount"), at any time
when the Total Revolving Credit Commitments exceeds $25,000,000, the
Borrower will, (i) in the case of any optional prepayment which the
Borrower wishes to make, not later than five Business Days prior to the
date on which the Borrower wishes to make such optional prepayment, and
(ii) in the case of any mandatory prepayment required to be made pursuant
to Section 2.10, in lieu of applying such amount to the prepayment of
Term Loans, as provided in Section 2.10(g), on the date specified in
Section 2.10 for such prepayment, give the Administrative Agent
telephonic notice (promptly confirmed in writing) requesting that the
Administrative Agent prepare and provide to each Term Loan Lender a
notice (each, a "Prepayment Option Notice") as described below. As
promptly as practicable, and in any case, within two Business Days after
receiving such notice from the Borrower, the Administrative Agent will
send to each Term Loan Lender a Prepayment Option Notice, which shall be
in the form of Exhibit L, and shall include an offer by the Borrower to
prepay on the date (each a "Prepayment Date") that is three Business Days
after the date of the Prepayment Option Notice, the Term Loans of such
Lender by an amount equal to the portion of the Prepayment Amount
indicated in such Lender's Prepayment Option Notice as being applicable
to such Lender's Term Loans. On the Prepayment Date, (i) the Borrower
shall pay to the Administrative Agent the aggregate amount necessary to
prepay that portion of the outstanding Term Loans in respect of which
Term Loan Lenders have accepted prepayment as described above (such
Lenders, the "Accepting Lenders"), and such amount shall be applied to
reduce the Term Loan Prepayment Amount, with respect to each Accepting
Lender and (ii) the Borrower shall pay to the Administrative Agent an
amount equal to the portion of the Term Loan Prepayment Amount not
accepted by the Accepting Lenders, and such amount shall be applied to
the prepayment of the Revolving Credit Loans and permanent reduction of
the Revolving Credit Commitments. Notwithstanding the foregoing, the
Total Revolving Credit Commitments shall not be reduced to less than
$25,000,000 by operation of this paragraph (d); accordingly, if
application in accordance with the preceding sentence of the aggregate
amount of the Term Loan Prepayment Amount not accepted by the Accepting
Lenders would reduce the Total Revolving Credit Commitments to less than
$25,000,000, such excess amount will be applied to prepay the Term Loans
of such non-Accepting Lenders, pro rata according to amounts of the Term
Loan Prepayment Amount initially refused by such non-Accepting Lenders.
(e) All payments (including prepayments) to be made by the
Borrower hereunder, whether on account of principal, interest, fees or
otherwise, shall be made without setoff or counterclaim and shall be made
prior to 12:00 Noon, New York City time, on the due date thereof to the
Administrative Agent, for the account of the Lenders, at the Payment
Office, in Dollars and in immediately available funds. The Administrative
Agent shall distribute such payments to the Lenders promptly upon receipt
in like funds as received. If any payment hereunder (other than payments
on the Eurodollar Loans) becomes due and payable on a day other than a
Business Day, such payment shall be extended to the next succeeding
Business Day. If any payment on a Eurodollar Loan becomes due and payable
on a day other than a Business Day, the maturity thereof shall be
extended to the next succeeding Business Day unless the result of such
extension would be to extend such payment into another calendar month, in
which event such payment shall be made on the immediately preceding
Business Day. In the case of any extension of any payment of principal
pursuant to the preceding two sentences, interest thereon shall be
payable at the then applicable rate during such extension.
(f) Unless the Administrative Agent shall have been
notified in writing by any Lender prior to a borrowing that such Lender
will not make the amount that would constitute its share of such
borrowing available to the Administrative Agent, the Administrative Agent
may assume that such Lender is making such amount available to the
Administrative Agent, and the Administrative Agent may, in reliance upon
such assumption, make available to the Borrower a corresponding amount.
If such amount is not made available to the Administrative Agent by the
required time on the Borrowing Date therefor, such Lender shall pay to
the Administrative Agent, on demand, such amount with interest thereon at
a rate equal to the daily average Federal Funds Effective Rate for the
period until such Lender makes such amount immediately available to the
Administrative Agent. A certificate of the Administrative Agent submitted
to any Lender with respect to any amounts owing under this Section
2.16(f) shall be conclusive in the absence of manifest error. If the
Administrative Agent makes the amount of such Lender's share of such
borrowing available to the Borrower and such Lender fails to make such
amount available to the Administrative Agent within three Business Days
of such Borrowing Date, the Administrative Agent shall also be entitled
to recover such amount with interest thereon at the rate per annum
applicable to Base Rate Loans under the relevant Facility, on demand,
from the Borrower.
(g) Unless the Administrative Agent shall have been
notified in writing by the Borrower prior to the date of any payment
being made hereunder that the Borrower will not make such payment to the
Administrative Agent, the Administrative Agent may assume that the
Borrower is making such payment, and the Administrative Agent may, but
shall not be required to, in reliance upon such assumption, make
available to the Lenders their respective pro rata shares of a
corresponding amount. If such payment is not made to the Administrative
Agent by the Borrower within three Business Days of such required date,
the Administrative Agent shall be entitled to recover, on demand, from
each Lender to which any amount which was made available pursuant to the
preceding sentence, such amount with interest thereon at the rate per
annum equal to the daily average Federal Funds Effective Rate. Nothing
herein shall be deemed to limit the rights of the Administrative Agent or
any Lender against the Borrower.
2.17 Requirements of Law. (a) If the adoption of or any
change in any Requirement of Law or in the interpretation or application
thereof or compliance by any Lender with any request or directive
(whether or not having the force of law) from any central bank or other
Governmental Authority made subsequent to the date hereof:
(i shall subject any Lender to any tax of any kind
whatsoever with respect to this Agreement or any Eurodollar Loan
made by it, or change the basis of taxation of payments to such
Lender in respect thereof (except for Non-Excluded Taxes and
Other Taxes covered by Section 2.18 and changes in the rate of
tax on the overall net income of such Lender);
(ii shall impose, modify or hold applicable any
reserve, special deposit, compulsory loan or similar requirement
against assets held by, deposits or other liabilities in or for
the account of, advances, loans or other extensions of credit by,
or any other acquisition of funds by, any office of such Lender
which is not otherwise included in the determination of the
Eurodollar Rate hereunder; or
(iii shall impose on such Lender any other condition;
and the result of any of the foregoing is to increase the cost to such
Lender, by an amount which such Lender deems to be material, of making,
converting into, continuing or maintaining Eurodollar Loans or to reduce
any amount receivable hereunder in respect thereof, then, in any such
case, upon receipt of a request certifying in reasonable detail the basis
therefor, the Borrower shall promptly pay such Lender, any additional
amounts necessary to compensate such Lender for such increased cost or
reduced amount receivable. The Lender shall deliver a copy of any such
certificate to the Administrative Agent.
(b) If any Lender shall have determined that the adoption
of or any change in any Requirement of Law regarding capital adequacy or
in the interpretation or application thereof or compliance by such Lender
or any corporation controlling such Lender with any request or directive
regarding capital adequacy (whether or not having the force of law) from
any Governmental Authority made subsequent to the date hereof shall have
the effect of reducing the rate of return on such Lender's or such
corporation's capital as a consequence of its obligations hereunder or
under to a level below that which such Lender or such corporation could
have achieved but for such adoption, change or compliance (taking into
consideration such Lender's or such corporation's policies with respect
to capital adequacy) by an amount deemed by such Lender to be material,
then from time to time, after submission by such Lender to the Borrower
(with a copy to the Administrative Agent) of a written request certifying
in reasonable detail the basis therefor, the Borrower shall pay to such
Lender such additional amount or amounts as will compensate such Lender
for such reduction.
(c) A certificate as to any additional amounts payable
pursuant to this Section 2.17 submitted by any Lender to the Borrower
(with a copy to the Administrative Agent) shall be conclusive in the
absence of manifest error. The obligations of the Borrower pursuant to
this Section 2.17 shall survive the termination of this Agreement and the
payment of the Loans and all other amounts payable hereunder.
2.18 Taxes. (a) All payments made by the Borrower under
this Agreement shall be made free and clear of, and without deduction or
withholding for or on account of, any present or future income, stamp or
other taxes, levies, imposts, duties, charges, fees, deductions or
withholdings, now or hereafter imposed, levied, collected, withheld or
assessed by any Governmental Authority, excluding net income taxes,
branch profit taxes and franchise taxes (imposed in lieu of net income
taxes) imposed on any Agent or any Lender as a result of a present or
former connection between such Agent or such Lender and the jurisdiction
of the Governmental Authority imposing such tax or any political
subdivision or taxing authority thereof or therein (other than any such
connection arising solely from such Agent or such Lender having executed,
delivered or performed its obligations or received a payment under, or
enforced, this Agreement or any other Loan Document). If any such
non-excluded taxes, levies, imposts, duties, charges, fees, deductions or
withholdings ("Non-Excluded Taxes") or Other Taxes are required to be
withheld from any amounts payable to any Agent or any Lender hereunder,
the amounts so payable to such Agent or such Lender shall be increased to
the extent necessary to yield to such Agent or such Lender (after payment
of all Non-Excluded Taxes and Other Taxes) interest or any such other
amounts payable hereunder at the rates or in the amounts specified in
this Agreement, provided, however, that the Borrower shall not be
required to increase any such amounts payable to any Lender with respect
to any Non- Excluded Taxes (i) that are attributable to such Lender's
failure to comply with the requirements of paragraph (d) or (e) of this
Section or (ii) that are United States withholding taxes imposed with
respect to amounts payable to such Lender at the time the Lender becomes
a party to this Agreement (except to the extent that such Lender's
assignor (if any) was entitled, at the time of assignment, to receive
additional amounts from the Borrower with respect to such Non-Excluded
Taxes pursuant to Section 2.18(a)) or are imposed as a result of action
taken by the Lender.
(b) In addition, the Borrower shall pay any Other Taxes to
the relevant Governmental Authority in accordance with applicable law.
(c) Whenever any Non-Excluded Taxes or Other Taxes are
payable by the Borrower, as promptly as possible thereafter the Borrower
shall send to the Administrative Agent for the account of the relevant
Agent or Lender, as the case may be, a certified copy of an original
official receipt received by the Borrower showing payment thereof. If the
Borrower fails to pay any Non-Excluded Taxes or Other Taxes when due to
the appropriate taxing authority or fails to remit to the Agents the
required receipts or other required documentary evidence, the Borrower
shall indemnify the Administrative Agent and the Lenders for any
incremental taxes, interest or penalties that may become payable by any
Agent or any Lender as a result of any such failure. The agreements in
this Section 2.18 shall survive the termination of this Agreement and the
payment of the Loans and all other amounts payable hereunder.
(d) Each Lender (or Participant) that is not a "United
States person" as defined in Section 7701(a)(30) of the Code or any
successor provision thereto (a "Non-U.S. Lender") shall deliver to the
Borrower and the Administrative Agent (or, in the case of a Participant,
to the Lender from which the related participation shall have been
purchased or to the Borrower as required by law or regulation in order to
be eligible for an exemption from, or a reduced rate of, withholding) two
copies of either U.S. Internal Revenue Service Form 1001 or Form 4224,
or, in the case of a Non-U.S. Lender claiming exemption from U.S. federal
withholding tax under Section 871(h) or 881(c) of the Code with respect
to payments of "portfolio interest" a statement substantially in the form
of Exhibit M and a Form W-8, or any subsequent versions thereof or
successors thereto properly completed and duly executed by such Non-U.S.
Lender claiming complete exemption from, or a reduced rate of, U.S.
federal withholding tax on all payments by the Borrower under this
Agreement and the other Loan Documents. Such forms shall be delivered by
each Non-U.S. Lender on or before the date it becomes a party to this
Agreement (or, in the case of any Participant, on or before the date such
Participant purchases the related participation). In addition, each
Non-U.S. Lender shall deliver such forms promptly upon the obsolescence
or invalidity of any form previously delivered by such Non-U.S. Lender.
Each Non-U.S. Lender shall promptly notify the Borrower at any time it
determines that it is no longer in a position to provide any previously
delivered certificate to the Borrower (or any other form of certification
adopted by the U.S. taxing authorities for such purpose). Notwithstanding
any other provision of this Section 2.18, a Non-U.S. Lender shall not be
required to deliver any form pursuant to this Section 2.18(d) that such
Non-U.S. Lender is not legally able to deliver.
(e) A Lender that is entitled to an exemption from or
reduction of non-U.S. withholding tax under the law of the jurisdiction
in which the Borrower is located, or any treaty to which such
jurisdiction is a party, with respect to payments under this Agreement
shall deliver to the Borrower (with a copy to the Administrative Agent),
at the time or times prescribed by applicable law or reasonably requested
by the Borrower, such properly completed and executed documentation
prescribed by applicable law as will permit such payments to be made
without withholding or at a reduced rate, provided that such Lender is
legally entitled to complete, execute and deliver such documentation and
in such Lender's reasonable judgment such completion, execution or
submission would not materially prejudice the legal position of such
Lender.
2.19 Indemnity. The Borrower agrees to indemnify each
Lender and to hold each Lender harmless from any loss or expense which
such Lender may sustain or incur as a consequence of (a) default by the
Borrower in making a borrowing of, conversion into or continuation of
Eurodollar Loans after the Borrower has given a notice requesting the
same in accordance with the provisions of this Agreement, (b) default by
the Borrower in making any prepayment after the Borrower has given a
notice thereof in accordance with the provisions of this Agreement or (c)
the making of a prepayment of Eurodollar Loans on a day which is not the
last day of an Interest Period with respect thereto. Such indemnification
may include an amount equal to the excess, if any, of (i) the amount of
interest which would have accrued on the amount so prepaid, or not so
borrowed, converted or continued, for the period from the date of such
prepayment or of such failure to borrow, convert or continue to the last
day of such Interest Period (or, in the case of a failure to borrow,
convert or continue, the Interest Period that would have commenced on the
date of such failure) in each case at the applicable rate of interest for
such Loans provided for herein (excluding, however, the Applicable Margin
included therein, if any) over (ii) the amount of interest (as reasonably
determined by such Lender) which would have accrued to such Lender on
such amount by placing such amount on deposit for a comparable period
with leading banks in the interbank eurodollar market. A certificate as
to any amounts payable pursuant to this Section 2.19 submitted to the
Borrower by any Lender shall be conclusive in the absence of manifest
error. This covenant shall survive the termination of this Agreement and
the payment of the Loans and all other amounts payable hereunder.
2.20 Illegality. Notwithstanding any other provision
herein, if the adoption of or any change in any Requirement of Law or in
the interpretation or application thereof shall make it unlawful for any
Lender to make or maintain Eurodollar Loans as contemplated by this
Agreement, (a) the commitment of such Lender hereunder to make Eurodollar
Loans, continue Eurodollar Loans as such and convert Base Rate Loans to
Eurodollar Loans shall forthwith be cancelled and (b) such Lender's Loans
then outstanding as Eurodollar Loans, if any, shall be converted
automatically to Base Rate Loans on the respective last days of the then
current Interest Periods with respect to such Loans or within such
earlier period as required by law. If any such conversion of a Eurodollar
Loan occurs on a day which is not the last day of the then current
Interest Period with respect thereto, the Borrower shall pay to such
Lender such amounts, if any, as may be required pursuant to Section 2.19.
2.21 Change of Lending Office. Each Lender agrees that,
upon the occurrence of any event giving rise to the operation of Section
2.17, 2.18(a) or 2.20 with respect to such Lender, such Lender will, if
requested by the Borrower, use reasonable efforts (subject to overall
policy considerations of such Lender) to designate another lending office
for any Loans affected by such event with the object of avoiding the
consequences of such event; provided, that such designation is made on
terms that, in the sole judgment of such Lender, cause such Lender and
its lending office(s) to suffer no economic, legal or regulatory
disadvantage. Each Lender further agrees that (i) after the occurrence of
any such event or if such Lender defaults in its obligation to make a
Loan hereunder and (ii) upon the request of the Borrower such Lender
will, at the expense of the Borrower, assign its Commitments and Loans
hereunder to a new financial institution designated by the Borrower and
if not already a Lender, consented to by the Administrative Agent (which
consent shall not be unreasonably withheld) upon receipt by such Lender
of all amounts owing to it hereunder, including all amounts payable
pursuant to Section 2.19 if such assignment were deemed to be a
prepayment. Nothing in this Section 2.21 shall in any event affect or
postpone any of the obligations of any Borrower or the rights of any
Lender pursuant to Section 2.17, 2.18(a) or 2.20.
SECTION 3. REPRESENTATIONS AND WARRANTIES
To induce the Agents and the Lenders to enter into this
Agreement and to make the Loans, the Borrower hereby represents and
warrants to each Agent and each Lender that:
3.1 Financial Condition. (a) The unaudited pro forma
condensed consolidated balance sheet of the Borrower and its consolidated
Subsidiaries as at September 30, 1997 (including the notes thereto) (the
"Pro Forma Balance Sheet"), copies of which have heretofore been
furnished to each Lender, has been prepared giving effect (as if such
events had occurred on such date) to (i) the consummation of the
Transaction, (ii) the Loans to be made and the Second Priority Notes to
be issued on the Closing Date and the use of proceeds thereof and (iii)
the payment of fees and expenses in connection with the foregoing. The
Pro Forma Balance Sheet has been prepared based on the best information
available to the Borrower as of the date of delivery thereof, and
presents fairly in all material respects on a pro forma basis the
estimated financial position of Borrower and its consolidated
Subsidiaries as at September 30, 1997, assuming that the events specified
in the preceding sentence had actually occurred at such date.
(b) The audited consolidated balance sheets of the LP
Paper Company and Brant-Allen and its Subsidiaries as at December 31,
1995 and December 31, 1996 and the related consolidated statements of
income and of cash flows for the fiscal years ended on such dates,
reported on by and accompanied by an unqualified report from Coopers &
Lybrand L.L.P., present fairly in all material respects the consolidated
financial condition of the LP Paper Company and Brant-Allen and their
respective Subsidiaries as at such date, and the consolidated results of
its operations and its consolidated cash flows for the respective fiscal
years then ended. The unaudited consolidated balance sheet of each of the
LP Paper Company and Brant-Allen and their respective Subsidiaries as at
October 31, 1997, and the related unaudited consolidated statements of
income and cash flows for the ten-month period ended on such date,
certified by a Responsible Officer, present fairly in all material
respects the consolidated financial condition of the LP Paper Company and
Brant-Allen and their respective Subsidiaries as at such date, and the
consolidated results of its operations and its consolidated cash flows
for the ten-month period then ended (subject to normal year-end audit
adjustments). All such financial statements, including the related
schedules and notes thereto, have been prepared in accordance with GAAP
applied consistently throughout the periods involved (except as approved
by the aforementioned firm of accountants and disclosed therein). Except
for the Loan Documents, the Timberlands Loan Documents and the Second
Priority Note Security Documents, neither Brant-Allen nor the LP Paper
Company nor any of their respective Subsidiaries individually or in the
aggregate, has any material Guarantee Obligations, contingent liabilities
and liabilities for taxes, or any long-term leases or unusual forward or
long-term commitments, including, without limitation, any interest rate
or foreign currency swap or exchange transaction or other obligation in
respect of derivatives, which are not reflected in the most recent
financial statements referred to in this paragraph (b). Except as set
forth on Schedule 3.1(b), during the period from December 31, 1996 to and
including the date hereof there has been no Disposition by either the LP
Paper Company or Brant-Allen and its Subsidiaries of any material part of
its business or Property.
3.2 No Change. Except as set forth on Schedule 3.1(b),
since December 31, 1996 there has been no development, circumstance or
event which has had or could reasonably be expected to have a Material
Adverse Effect.
3.3 Corporate Existence; Compliance with Law. Each of the
Borrower and its Subsidiaries (a) is duly organized, validly existing and
in good standing under the laws of the jurisdiction of its organization,
(b) has the corporate or other power and authority, and the legal right,
to own and operate its Property, to lease the Property it operates as
lessee and to conduct the business in which it is currently engaged, (c)
is duly qualified as a foreign corporation and in good standing under the
laws of each jurisdiction where the failure so to qualify, individually
or in the aggregate, could reasonably be expected to have a Material
Adverse Effect and (d) is in compliance with all Requirements of Law
except to the extent that the failure to comply therewith could not, in
the aggregate, reasonably be expected to have a Material Adverse Effect.
3.4 Corporate Power; Authorization; Enforceable
Obligations. Each Loan Party has the corporate or other power and
authority, and the legal right, to make, deliver and perform the Loan
Documents to which it is a party and, in the case of the Borrower, to
borrow hereunder. Each Loan Party has taken all necessary corporate (or
other) action to authorize the execution, delivery and performance of the
Loan Documents to which it is a party and, in the case of the Borrower,
to authorize the borrowings on the terms and conditions of this
Agreement. No consent or authorization of, filing with, notice to or
other act by or in respect of, any Governmental Authority or any other
Person is required in connection with the Transaction and the borrowings
hereunder or with the execution, delivery, performance, validity or
enforceability of this Agreement or any of the Loan Documents, except (i)
consents, authorizations, filings and notices which have been obtained or
made and are in full force and effect unless otherwise noted on Schedule
3.4 and (ii) the filings referred to in Section 3.19. Each Loan Document
has been duly executed and delivered on behalf of each Loan Party party
thereto. This Agreement constitutes, and each other Loan Document upon
execution will constitute, a legal, valid and binding obligation of each
Loan Party party thereto, enforceable against each such Loan Party in
accordance with its terms, except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar
laws affecting the enforcement of creditors' rights generally and by
general equitable principles (whether enforcement is sought by
proceedings in equity or at law).
3.5 No Legal Bar. The execution, delivery and performance
of this Agreement and the other Loan Documents, the borrowings hereunder
and the use of the proceeds thereof will not violate any Requirement of
Law or any material Contractual Obligation of the Borrower or any of its
Subsidiaries and will not result in, or require, the creation or
imposition of any Lien on any of their respective properties or revenues
pursuant to any Requirement of Law or any such Contractual Obligation
(other than the Liens created by the Security Documents). No Requirement
of Law or Contractual Obligation applicable to the Borrower or any of its
Subsidiaries could reasonably be expected to have a Material Adverse
Effect.
3.6 No Material Litigation. No litigation, investigation
or proceeding of or before any arbitrator or Governmental Authority is
pending or, to the knowledge of the Borrower, threatened by or against
the Borrower or any of its Subsidiaries or against any of their
respective properties or revenues (a) with respect to any of the Loan
Documents or any of the transactions contemplated hereby or thereby, or
(b) which could reasonably be expected to have a Material Adverse Effect.
3.7 No Default. Neither the Borrower nor any of its
Subsidiaries is in default under or with respect to any of its
Contractual Obligations in any respect which could reasonably be expected
to have a Material Adverse Effect. No Default or Event of Default has
occurred and is continuing.
3.8 Ownership of Property; Liens. Each of the Borrower and
its Subsidiaries has title in fee simple to, or a valid leasehold
interest in, all its real property, and good title to, or a valid
leasehold interest in, all its other Property, and none of such Property
is subject to any Lien except as permitted by Section 6.3. Schedule 3.8
sets forth each county where any Property of the Borrower is located.
3.9 Intellectual Property. The Borrower and each of its
Subsidiaries owns, or is licensed to use, all Intellectual Property used
in the conduct of its business as currently conducted. No material claim
has been asserted and is pending by any Person against the Borrower or
any of its Subsidiaries challenging or questioning the use of any such
Intellectual Property of the Borrower or any of its Subsidiaries or the
validity or effectiveness of any such Intellectual Property, nor does the
Borrower know of any valid basis for any such claim. To the best of the
Borrower's knowledge, the use of Intellectual Property by the Borrower
and its Subsidiaries does not infringe on the rights of any Person in any
material respect.
3.10 Taxes. Each of the Borrower and each of its
Subsidiaries has filed or caused to be filed all Federal, state and other
material tax returns which are required to be filed and has paid all
taxes shown to be due and payable on said returns or on any assessments
made against it or any of its Property and all other taxes, fees or other
charges imposed on it or any of its Property by any Governmental
Authority (other than, in each case, any the amount or validity of which
are currently being contested in good faith by appropriate proceedings
and with respect to which reserves in conformity with GAAP have been
provided on the books of the Borrower or its Subsidiaries, as the case
may be). Except to the extent permitted by Section 6.3(a), no tax Lien
has been filed. To the knowledge of the Borrower, no claim is being
asserted, with respect to any such tax, fee or other charge (other than
in each case, any the amount or validity of which are currently being
contested in good faith by appropriate proceedings and with respect to
which reserves in conformity with GAAP have been provided on the books of
the Borrower or its Subsidiaries, as the case may be).
3.11 Federal Regulations. No part of the proceeds of any
Loans will be used for "purchasing" or "carrying" any "margin stock"
within the respective meanings of each of the quoted terms under
Regulation G or Regulation U as now and from time to time hereafter in
effect or for any purpose which violates the provisions of the
Regulations of the Board. If requested by any Lender or the
Administrative Agent, the Borrower will furnish to the Administrative
Agent and each Lender a statement to the foregoing effect in conformity
with the requirements of FR Form G-3 or FR Form U-1 referred to in
Regulation G or Regulation U, as the case may be. Neither the Borrower
nor any of its Subsidiaries owns any "margin stock" as of the date
hereof.
3.12 Labor Matters. There are no strikes or other labor
disputes against the Borrower or any of its Subsidiaries pending or, to
the knowledge of the Borrower, threatened that (individually or in the
aggregate) could reasonably be expected to have a Material Adverse
Effect.
3.13 ERISA. Neither a Reportable Event nor an "accumulated
funding deficiency" (within the meaning of Section 412 of the Code or
Section 302 of ERISA) has occurred during the five-year period prior to
the date on which this representation is made or deemed made with respect
to any Plan, and each Plan has complied in all material respects with the
applicable provisions of ERISA and the Code. No termination of a Single
Employer Plan has occurred except pursuant to the provisions for standard
terminations under Section 404(b) of ERISA, and no Lien in favor of the
PBGC or a Plan has arisen, during such five-year period. The present
value of all accrued benefits under each Single Employer Plan (based on
those assumptions used to fund such Plans) did not, as of the last annual
valuation date prior to the date on which this representation is made or
deemed made, exceed the value of the assets of such Plan allocable to
such accrued benefits by a material amount. Neither the Borrower nor any
Commonly Controlled Entity has had a complete or partial withdrawal from
any Multiemployer Plan which has resulted or could reasonably be expected
to result in a material liability under ERISA, and neither the Borrower
nor any Commonly Controlled Entity would become subject to any material
liability under ERISA if the Borrower or any such Commonly Controlled
Entity were to withdraw completely from all Multiemployer Plans as of the
valuation date most closely preceding the date on which this
representation is made or deemed made. To the Borrower's knowledge as of
the Closing Date, no such Multiemployer Plan is in Reorganization or
Insolvent.
3.14 Investment Company Act; Other Regulations. No Loan
Party is an "investment company", or a company "controlled" by an
"investment company", within the meaning of the Investment Company Act of
1940, as amended. No Loan Party is subject to regulation under any
Requirement of Law (other than Regulation X of the Board) which limits
its ability to incur Indebtedness.
3.15 Subsidiaries. The Subsidiaries listed on Schedule
3.15 constitute all the Subsidiaries of Brant-Allen and the Borrower at
the date hereof.
3.16 Use of Proceeds. The proceeds of the Loans shall be
used to finance a portion of the Transaction, to pay related fees and
expenses and to provide for working capital and general corporate
purposes of the Borrower.
3.17 Environmental Matters. Other than exceptions to any
of the following that could not, individually or in the aggregate,
reasonably be expected to give rise to a Material Adverse Effect:
(a) the Borrower and its Subsidiaries: (i) are, and
within the period of all applicable statutes of limitation have
been, in compliance with all applicable Environmental Laws; (ii)
hold all Environmental Permits (each of which is in full force
and effect) required for any of their current operations or for
any property owned, leased, or otherwise operated by any of them
(the "Properties"); (iii) are, and within the period of all
applicable statutes of limitation have been, in compliance with
all of their Environmental Permits; and (iv) reasonably believe
that: each of their Environmental Permits will be timely renewed
and complied with, without material expense; any additional
Environmental Permits that may be required of any of them will be
timely obtained and complied with, without material expense; and
compliance with any Environmental Law that is or is expected to
become applicable to any of them will be timely attained and
maintained, without material expense.
(b) Materials of Environmental Concern are not
present at, on, under, in, or about any real property now or
formerly owned, leased or operated by the Borrower or any of its
Subsidiaries or at any other location (including, without
limitation, any location to which Materials of Environmental
Concern have been sent for re-use or recycling or for treatment,
storage, or disposal) in concentrations or conditions which could
reasonably be expected to (i) give rise to liability of the
Borrower or any of its Subsidiaries under any applicable
Environmental Law or otherwise result in any of them having to
incur costs, or (ii) interfere with the Borrower's or any of its
Subsidiaries' continued operations, or (iii) impair the fair
saleable value of any real property owned or leased by the
Borrower or any of its Subsidiaries in light of its current use
and condition to the extent the same is reflected in the
assessment referred to in Section 4.1(l).
(c) There is no judicial, administrative, or
arbitral proceeding (including any notice of violation or alleged
violation) under or relating to any Environmental Law to which
the Borrower or any of its Subsidiaries is, or to the knowledge
of the Borrower will be, named as a party that is pending or, to
the knowledge of the Borrower, threatened.
(d) Neither the Borrower nor any of its
Subsidiaries has received any written request for information, or
been notified that it is a potentially responsible party under or
relating to the federal Comprehensive Environmental Response,
Compensation, and Liability Act or any similar Environmental Law,
or with respect to any Materials of Environmental Concern.
(e) Neither the Borrower or any of its Subsidiaries
has entered into or agreed to any consent decree, order, nor
settlement or other agreement, nor is subject to any judgment,
decree, or order or other agreement, in any judicial,
administrative, arbitral, or other forum, relating to compliance
with or liability under any Environmental Law.
(f) Neither the Borrower nor any of its
Subsidiaries has assumed or retained, by contract, any
liabilities of any kind, fixed or contingent, known or unknown,
of any other person under any Environmental Law or with respect
to any Material of Environmental Concern.
3.18 Accuracy of Information, etc. No statement or
information contained in this Agreement, any other Loan Document, the
Confidential Information Memorandum or any other document, certificate or
statement furnished in writing to the Administrative Agent or the Lenders
or any of them, by or on behalf of any Loan Party for use in connection
with the transactions contemplated by this Agreement or the other Loan
Documents, taken as a whole, contained as of the date such statement,
information, document or certificate was so furnished (or, in the case of
the Confidential Information Memorandum, as of the date of this
Agreement), any untrue statement of a material fact or omitted to state a
material fact necessary in order to make the statements contained herein
or therein not misleading. The projections and pro forma financial
information contained in the materials referenced above are based upon
good faith estimates and assumptions believed by management of the
Borrower to be reasonable at the time made, it being recognized by the
Lenders that such financial information as it relates to future events is
not to be viewed as fact and that actual results during the period or
periods covered by such financial information may differ from the
projected results set forth therein by a material amount and such results
are not warranted to be obtained and no representation is made as to
disclosure of matters of a general economic nature or matters of public
knowledge that generally affect the industry in which Brant-Allen or any
of its Subsidiaries is involved. As of the date hereof, the
representations and warranties of the Borrower, and, to the Borrower's
knowledge, of each other party to the Acquisition Agreement contained in
the Acquisition Agreement are true and correct in all material respects.
There is no fact known to any Loan Party that could reasonably be
expected to have a Material Adverse Effect that has not been expressly
disclosed herein, in the other Loan Documents, in the Confidential
Information Memorandum or in any other documents, certificates and
statements furnished to the Administrative Agent and the Lenders for use
in connection with the transactions contemplated hereby and by the other
Loan Documents.
3.19 Security Documents. (a) The Security and Pledge
Agreement is effective to create in favor of the Administrative Agent,
for the benefit of the Lenders, a legal, valid and enforceable security
interest in the Collateral described therein and the proceeds thereof.
In the case of the Pledged Stock described in the Security and Pledge
Agreement, when stock certificates representing such Pledged Stock are
delivered to the Administrative Agent, and in the case of the other
Collateral described in the Security and Pledge Agreement (other than
unregistered copyrights and the proceeds thereof), when financing
statements in appropriate form, and forms required by the U.S. Patent and
Trademark Office and the U.S. Copyright Office, are filed in the offices
specified on Schedule 3.19(a), the Liens granted pursuant to the Security
and Pledge Agreement shall constitute a fully perfected Lien (except with
respect to such other Collateral, such Lien shall be perfected only to
the extent perfection is required by the Security and Pledge Agreement)
on, and security interest in, all right, title and interest of the Loan
Parties in such Collateral and the proceeds thereof under U.S. law, as
security for the Obligations (as defined in the Security and Pledge
Agreement), in each case prior and superior in right to any other Person
except to the extent contemplated by Section 6.3(a)-(g), (i), (j) and
(k)-(n).
(b) Each of the Mortgages is effective to create in favor
of the Administrative Agent, for the benefit of the Lenders, a legal,
valid and enforceable Lien on the Mortgaged Properties described therein
and proceeds thereof, and with respect to the Mortgages dated the date
hereof, when the Mortgages are filed in the offices specified on Schedule
3.19(b), each such Mortgage shall constitute a fully perfected Lien on,
and security interest in, all right, title and interest of the Loan
Parties in the Mortgaged Properties and the proceeds thereof, as security
for the Obligations (as defined in the relevant Mortgage), in each case
prior and superior in right to any other Person except to the extent
contemplated by Section 6.3(e) and (k).
(c) Each of the Soucy Pledge Agreement, the Paper Company
Pledge Agreement and the Timberlands Pledge Agreement is effective to
create in favor of the Administrative Agent, for the benefit of the
Lenders, a legal, valid and enforceable security interest in the
Collateral described therein and proceeds thereof. In the case of the
Pledged Stock described in such Pledge Agreements which constitutes
certificated securities, when stock certificates representing such
Pledged Stock are delivered to the Administrative Agent, and in the case
of the other Collateral described in such Pledge Agreements, when
financing statements in appropriate form are filed in the offices
specified on Schedule 3.19(a), such Pledge Agreements shall constitute a
fully perfected Lien on, and security interest in, all right, title and
interest of Brant-Allen in such Collateral and the proceeds thereof, as
security for the Obligations (as defined in such Pledge Agreements), in
the case of the Soucy Pledge Agreement and the Paper Company Pledge
Agreement, prior and superior in right to any other Person, and in the
case of the Timberlands Pledge Agreement, prior and superior in right to
any Person other than the Administrative Agent and the Lenders under the
Timberlands Loan Agreement.
3.20 Solvency. Each Loan Party is, and after giving effect
to the Transaction and the incurrence of all Indebtedness and obligations
being incurred in connection herewith and therewith will be and will
continue to be, Solvent; provided, that such representation and warranty
shall not be required to be made in respect of Brant-Allen after the
release of the Brant-Allen Guarantee.
3.21 Regulation H. No Mortgage encumbers improved real
property which is located in an area that has been identified by the
Secretary of Housing and Urban Development on or prior to the Closing
Date as an area having special flood hazards and in which flood insurance
has been made available under the National Flood Insurance Act of 1968.
SECTION 4. CONDITIONS PRECEDENT
4.1 Conditions to Initial Extension of Credit. The
agreement of each Lender to make the initial Loan requested to be made by
it is subject to the satisfaction, prior to or concurrently with the
making of such Loan on the Closing Date, of the following conditions
precedent:
(a) Loan Documents. The Administrative Agent shall have
received (i) this Agreement, executed and delivered by a duly
authorized officer of the Borrower, (ii) the Subsidiary
Guarantee, executed and delivered by a duly authorized officer of
each Subsidiary of the Borrower except the Finance Subsidiary,
(iii) the Brant-Allen Guarantee, executed and delivered by a duly
authorized officer of Brant-Allen, (iv) the Security and Pledge
Agreement, executed and delivered by a duly authorized officer of
the Borrower and each of its Subsidiaries, (v) the Soucy Pledge
Agreement, the Paper Company Pledge Agreement and the Timberlands
Pledge Agreement, in each case executed and delivered by a duly
authorized officer of Brant-Allen, (vi) a Mortgage covering each
of the Mortgaged Properties, executed and delivered by a duly
authorized officer of each party thereto, and (vii) for the
account of any Lender requesting Notes in accordance with Section
2.6(e), Notes conforming to the requirements hereof and executed
and delivered by a duly authorized officer of the Borrower.
(b) Intercreditor Agreement. The Administrative Agent
shall have received the Intercreditor Agreement, executed and
delivered by the Trustee, the Administrative Agent and
Toronto-Dominion (Texas), Inc., as administrative agent under the
Timberlands Loan Agreement.
(c) Acquisition, etc. The following transactions shall
have been consummated, in each case on terms and conditions
reasonably satisfactory to the Lenders:
(i) the Transaction shall have been
consummated, with the amount of cash paid to the Retiring
Partners on the Closing Date not exceeding an aggregate
total of $150,000,000; and
(ii) the Borrower shall have received at least
$100,000,000 in gross cash proceeds from the issuance of
the Second Priority Notes.
(d) Pro Forma Balance Sheet; Financial Statements. The
Lenders shall have received (i) the Pro Forma Balance Sheet, (ii)
audited consolidated financial statements of the LP Paper Company
and its Subsidiaries for the 1995 and 1996 fiscal years, (iii)
unaudited interim consolidated financial statements of the LP
Paper Company and its Subsidiaries, certified by a Responsible
Officer for the month of October 1997 and for the ten-month
period ended October 31, 1997, and such financial statements
shall not, in the reasonable judgment of the Lenders, reflect any
material adverse change in the consolidated financial condition
of the Borrower and its Subsidiaries, as reflected in the
financial statements or projections contained in the Confidential
Information Memorandum, (iv) audited consolidated financial
statements of Soucy and its Subsidiaries for the 1995 and 1996
fiscal years and (v) unaudited interim financial statements of
Soucy and of F.F. Soucy, Inc. & Partners, Limited Partnership
("Soucy Partners"), certified by a Responsible Officer, for the
month of October 1997 and for the ten-month period ended October
31, 1997, and such financial statements shall not, in the
reasonable judgment of the Lenders, reflect any material adverse
change in the financial condition of Soucy or Soucy Partners, as
reflected in the financial statements or projections contained in
the Confidential Information Memorandum.
(e) Approvals. Except as disclosed on Schedule 3.4, all
governmental and third party approvals (including landlords' and
other consents) necessary in connection with the Transaction, the
continuing operations of Brant-Allen, the Borrower and its
Subsidiaries and the transactions contemplated hereby shall have
been obtained and 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 which would restrain,
prevent or otherwise impose adverse conditions on the Transaction
or the financing contemplated hereby.
(f) Related Agreements. The Administrative Agent shall
have received (in a form reasonably satisfactory to the
Administrative Agent), with a copy for each Lender, true and
correct copies, certified as to authenticity by the Borrower, of
the Acquisition Agreement, the Second Priority Note Indenture,
the John Hancock Credit Agreement, the Timberlands Loan
Agreement, the Timberlands Wood Supply Contract and such other
documents or instruments as may be reasonably requested by the
Administrative Agent, including, without limitation, a copy of
any material debt instrument, security agreement or other
material contract to which the Loan Parties may be a party.
(g) Timberlands Loan. All conditions precedent to the
making of the Timberlands Loan under the Timberlands Loan
Agreement shall have been satisfied, and the Timberlands Loan
shall be made concurrently with the Term Loans on the Closing Date.
(h) Fees. The Lenders, the Administrative Agent shall have
received all fees required to be paid, and all expenses for which
invoices have been presented, on or before the Closing Date.
(i) Business Plan. The Lenders shall have received a
satisfactory business plan for fiscal year 1997 and satisfactory
projections for the Borrower and its Subsidiaries for the period
from the Closing Date through December 31, 2005.
(j) Solvency Opinion. The Lenders shall have received a
satisfactory solvency opinion from Valuation Research Corporation
which shall document the solvency of the Borrower and its
Subsidiaries after giving effect to the Transaction and the
transactions contemplated hereby.
(k) Lien Searches. The Administrative Agent shall have
received the results of a recent lien search in each of the
jurisdictions where assets of the Loan Parties are located, and
such search shall reveal no liens on any of the assets of the
Borrower or its Subsidiaries except for liens permitted by
Section 6.3 or liens to be discharged on or prior to the Closing
Date.
(l) Environmental Audit. The Administrative Agent shall
have received a satisfactory assessment, from Aware
Environmental, Inc., of compliance and liability issues that may
affect the Borrower or their Subsidiaries with respect to
environmental laws, the executive summary of which is attached
hereto as Exhibit N.
(m) Closing Certificate. The Administrative Agent shall
have received, with a counterpart for each Lender, a certificate
of each Loan Party, dated the Closing Date, substantially in the
form of Exhibit H, with appropriate insertions and attachments.
(n) Corporate and Other Proceedings and Corporate and
Other Documents. The Administrative Agent shall have received,
with a counterpart for each Lender, (i) true and complete copies
of the certificate of incorporation and by-laws (or equivalents
thereof) of each Loan Party, together with a good standing
certificate from the Secretary of State (or similar official) of
its jurisdiction of incorporation, (ii) a certificate of each
Loan Party, dated the Closing Date, as to the incumbency and
signature of the officers of each Loan Party executing any Loan
Document, satisfactory in form and substance to the
Administrative Agent, (iii) a copy of the resolutions, in form
and substance reasonably satisfactory to the Administrative
Agent, of the Board of Directors (or an equivalent thereof) of
each Loan Party authorizing the execution, delivery and
performance of the Loan Documents to which it is a party
(including, but not limited to, the granting of any liens
provided for therein) and in the case of the Borrower, the
borrowings contemplated hereunder, certified by a
Secretary of such Loan Party as of the Closing Date, which
certificate shall be in form and substance reasonably
satisfactory to the Administrative Agent, and shall state that
the resolutions thereby certified have not been amended,
modified, revoked or rescinded.
(o) Legal Opinions. The Lenders shall have received the
following executed legal opinions, each reasonably satisfactory
in form and substance to the Lenders:
(i) the legal opinion of Skadden, Arps, Slate,
Meagher & Flom LLP, counsel to the Loan Parties,
substantially in the form of Exhibit J; and
(ii) the legal opinion of local counsel in each
of the State of Virginia, Connecticut and Canada and of
such other special and local counsel as may be required by
the Administrative Agent.
Each such legal opinion shall cover such other matters incident
to the transactions contemplated by this Agreement as the
Administrative Agent may reasonably require.
(p) Pledged Stock; Stock Power. The Administrative Agent
shall have received the certificates representing the shares of
Capital Stock pledged pursuant to the Security Documents,
together with an undated stock power for each such certificate
executed in blank by a duly authorized officer of the pledgor
thereof.
(q) Filings, Registrations and Recordings. Each document
(including, without limitation, any Uniform Commercial Code
financing statement) required by the Security Documents or under
law or reasonably requested by the Administrative Agent to be
filed, registered or recorded in order to create in favor of the
Administrative Agent, for the benefit of the Lenders, a perfected
Lien on the Collateral described therein, prior and superior in
right to any other Person (other than with respect to Liens
expressly permitted by Section 6.3 and pursuant to the
Intercreditor Agreement), shall be in proper form for filing,
registration or recordation.
(r) Title Insurance; Flood Insurance. (i) If requested by
the Administrative Agent, the Administrative Agent shall have
received, and the title insurance company issuing the policy
referred to in clause (ii) below (the "Title Insurance Company")
shall have received, maps or plats of an as-built survey of the
sites of the Mortgaged Properties certified to the Administrative
Agent and the Title Insurance Company in a manner satisfactory to
them, dated a date satisfactory to the Administrative Agent and
the Title Insurance Company by an independent professional
licensed land surveyor satisfactory to the Administrative Agent
and the Title Insurance Company, which maps or plats and the
surveys on which they are based shall be made in accordance with
the Minimum Standard Detail Requirements for Land Title Surveys
jointly established and adopted by the American Land Title
Association and the American Congress on Surveying and Mapping in
1992, and, without limiting the generality of the foregoing, there
shall be surveyed and shown on such maps, plats or surveys the
following: (A) the locations on such sites of all the buildings,
structures and other improvements and the established building
setback lines; (B) the lines of streets abutting the sites and width
thereof; (C) all access and other easements appurtenant to the sites;
(D) all roadways, paths, driveways, easements, encroachments and
overhanging projections and similar encumbrances affecting the
site, whether recorded, apparent from a physical inspection of
the sites or otherwise known to the surveyor; (E) any
encroachments on any adjoining property by the building
structures and improvements on the sites; (F) if the site is
described as being on a filed map, a legend relating the survey
to said map; and (G) the flood zone designations, if any, in
which the Mortgaged Properties are located.
(ii) The Administrative Agent shall have received
in respect of each Mortgaged Property a mortgagee's title
insurance policy (or policies) or marked up unconditional binder
for such insurance. Each such policy shall (A) be in an amount
satisfactory to the Administrative Agent; (B) be issued at
ordinary rates; (C) insure that the Mortgage insured thereby
creates a valid first Lien on such Mortgaged Property free and
clear of all defects and encumbrances, except as disclosed
therein; (D) name the Administrative Agent for the benefit of the
Lenders as the insured thereunder; (E) be in the form of ALTA
Loan Policy - 1970 (Amended 10/17/70 and 10/17/84) (or equivalent
policies); (F) contain such endorsements and affirmative coverage
as the Administrative Agent may reasonably request and (G) be
issued by title companies satisfactory to the Administrative
Agent (including any such title companies acting as co-insurers
or reinsurers, at the option of the Administrative Agent). The
Administrative Agent shall have received evidence satisfactory to
it that all premiums in respect of each such policy, all charges
for mortgage recording tax, and all related expenses, if any,
have been paid.
(iii) If requested by the Administrative Agent, and
if located within a "special flood hazard" area as designated by
the director of Federal Emergency Management Agency, the
Administrative Agent shall have received (A) a policy of flood
insurance which (1) covers any parcel of improved real property
which is encumbered by any Mortgage (2) is written in an amount
not less than the outstanding principal amount of the
indebtedness secured by such Mortgage which is reasonably
allocable to such real property or the maximum limit of coverage
made available with respect to the particular type of property
under the National Flood Insurance Act of 1968, whichever is
less, and (3) has a term ending not later than the maturity of
the Indebtedness secured by such Mortgage and (B) confirmation
that the Borrower has received the notice required pursuant to
Section 208(e)(3) of Regulation H of the Board.
(iv) The Administrative Agent shall have received a
copy of all recorded documents referred to, or listed as
exceptions to title in, the title policy or policies referred to
in clause (ii) above and a copy of all other material documents
affecting the Mortgaged Properties.
(s) Insurance. The Administrative Agent shall have
received insurance certificates satisfying the requirements of
Section 4.3 of the Security and Pledge Agreement and Section 5 of
the Mortgage.
(t) Appraisal. The Administrative Agent shall have
received a satisfactory appraisal from F & W Forestry Services,
Inc. of the assets of Timberlands.
(u) Management Contracts. The Lenders shall have received
copies of the Borrower Management Contract, which shall be in
form and substance satisfactory to the Lenders, and the Soucy
Management Contract (which shall be in the form reviewed by the
Administrative Agent prior to October 1, 1997).
4.2 Conditions to Each Loan. The agreement of each Lender
to make any Loan requested to be made by it on any date (including,
without limitation, its initial Loan) is subject to the satisfaction of
the following conditions precedent:
(a) Representations and Warranties. Each of the
representations and warranties made by any Loan Party in or
pursuant to the Loan Documents shall be true and correct in all
material respects on and as of such date as if made on and as of
such date.
(b) No Default. No Default or Event of Default shall have
occurred and be continuing on such date or after giving effect to
the Loans requested to be made on such date.
Each borrowing by the Borrower hereunder shall constitute a
representation and warranty by the Borrower as of the date of such Loan
that the conditions contained in this Section 4.2 have been satisfied.
SECTION 5. AFFIRMATIVE COVENANTS
The Borrower hereby agrees that, so long as the
Commitments remain in effect or any Loan or other amount is owing to any
Lender or any Agent hereunder, the Borrower shall and shall cause each of
its Subsidiaries to:
5.1 Financial Statements. Furnish to the Administrative
Agent, with sufficient copies for each Lender:
(a) as soon as available, but in any event within 90 days
after the end of each fiscal year of the Borrower, Soucy and
Brant-Allen, a copy of the audited consolidated balance sheet of
such party and its consolidated Subsidiaries as at the end of
such year and the related audited consolidated statements of
income and of cash flows for such year, setting forth in each
case in comparative form the figures for the previous year,
reported on without a "going concern" or like qualification or
exception, or qualification arising out of the scope of the
audit, by Coopers & Lybrand L.L.P. or other independent certified
public accountants of nationally recognized standing;
(b) as soon as available, but in any event not later than
45 days after the end of each of the first three quarterly
periods of each fiscal year of the Borrower, the unaudited
consolidated balance sheet of such party and its consolidated
Subsidiaries as at the end of such quarter and the related
unaudited consolidated statements of income and of cash flows for
such quarter and the portion of the fiscal year through the end
of such quarter, reported on with or without footnotes, setting
forth in each case in comparative form the figures for the
previous year, certified by a Responsible Officer as being fairly
stated in all material respects (subject to normal year-end audit
adjustments); and
(c) as soon as available, but in any event not later than
45 days after the end of each month occurring during each fiscal
year of the Borrower, Soucy and Brant-Allen (other than the
third, sixth, ninth and twelfth such month with respect to the
Borrower), the unaudited balance sheets of such party and its
Subsidiaries as at the end of such month and the related
unaudited statements of income and of cash flows for such month
and the portion of the fiscal year through the end of such month,
reported on with or without footnotes setting forth in each case
in comparative form the figures for the previous year, certified
by a Responsible Officer as being fairly stated in all material
respects (subject to normal year-end audit adjustments).
All such financial statements shall present fairly in all material
respects the financial condition of such parties and shall be prepared in
reasonable detail and in accordance with GAAP applied consistently
throughout the periods reflected therein and with prior periods (except
as approved by such accountants or officer, as the case may be, and
disclosed therein).
5.2 Certificates; Other Information. Furnish to the
Administrative Agent, with sufficient copies for each Lender, or, in the
case of clause (g), to the relevant Lender:
(a) concurrently with the delivery of the financial
statements referred to in Section 5.1(a), a certificate of the
independent certified public accountants reporting on such
financial statements stating that in making the examination
necessary therefor no knowledge was obtained of any Default or
Event of Default, except as specified in such certificate;
(b) concurrently with the delivery of any financial
statements pursuant to Section 5.1, (i) a certificate of a
Responsible Officer stating that, to the best of each such
Responsible Officer's knowledge that such Responsible Officer has
obtained no knowledge of any Default or Event of Default except
as specified in such certificate and (ii) in the case of
quarterly or annual financial statements, (x) a Compliance
Certificate containing all information necessary for determining
compliance by the Borrower and its Subsidiaries with the
provisions of this Agreement referred to therein as of the last
day of the fiscal quarter or fiscal year of the Borrower, as the
case may be, and (y) to the extent not previously disclosed to
the Administrative Agent, a listing of any county or state within
the United States where any Loan Party keeps material inventory
or material equipment (other than motor vehicles) and of any
Intellectual Property acquired by any Loan Party since the date
of the most recent list delivered pursuant to this clause (y)
(or, in the case of the first such list so delivered, since the
Closing Date);
(c) as soon as available, and in any event no later than
45 days after the end of each fiscal year of the Borrower, a
detailed consolidated budget of the Borrower and its Subsidiaries
for the following fiscal year (including consolidated statements
of projected cash flow, projected changes in financial position,
projected income and a capital spending plan setting forth in
detail projected maintenance expenditures and projected
project-related expenditures), and, as soon as available,
significant revisions, if any, of such budget and projections
with respect to such fiscal year (collectively, the
"Projections"), which Projections shall in each case be
accompanied by a certificate of a Responsible Officer stating
that such Projections are based on reasonable estimates,
information and assumptions and that such Responsible Officer has
no reason to believe that such Projections are incorrect or
misleading in any material respect;
(d) within 30 days after the end of each fiscal month of
the Borrower, mill manager's report substantially in the form
customary prior to date of this Agreement;
(e) no later than 10 Business Days prior to the
effectiveness thereof, copies of substantially final drafts of
any proposed amendment, supplement, waiver or other modification
with respect to the Second Priority Note Indenture or the
Acquisition Agreement;
(f) within five days after the same are sent, copies of
all financial statements and reports which the Borrower sends to
the holders of any class of its debt securities or public equity
securities and within five days after the same are filed, copies
of all financial statements and reports which the Borrower may
make to, or file with, the Securities and Exchange Commission or
any successor or analogous Governmental Authority; and
(g) promptly, such additional financial and other
information as any Lender may from time to time reasonably
request.
5.3 Payment of Obligations. Pay, discharge or otherwise
satisfy at or before maturity or before they become delinquent, as the
case may be, all its material obligations of whatever nature, except
where the amount or validity thereof is currently being contested in good
faith by appropriate proceedings and reserves in conformity with GAAP
with respect thereto have been provided on the books of the Borrower or
its Subsidiaries, as the case may be.
5.4 Conduct of Business and Maintenance of Existence, etc.
(a) (i) Preserve, renew and keep in full force and effect its corporate
existence and (ii) take all reasonable action to maintain all rights,
privileges and franchises necessary or desirable in the normal conduct of
its business, except, in each case, as otherwise permitted by Section 6.4
and except, in the case of clause (ii) above, to the extent that failure
to do so could not reasonably be expected to have a Material Adverse
Effect; and (b) comply with all Contractual Obligations and Requirements
of Law except to the extent that failure to comply therewith could not,
in the aggregate, reasonably be expected to have a Material Adverse
Effect.
5.5 Maintenance of Property; Insurance. (a) Keep all
Property useful and necessary in its business in good working order and
condition, ordinary wear and tear excepted and (b) maintain with
financially sound and reputable insurance companies insurance on all its
Property in at least such amounts and against at least such risks (but
including in any event public liability, product liability and business
interruption) as are usually insured against in the same general area by
companies engaged in the same or a similar business.
5.6 Inspection of Property; Books and Records;
Discussions. (a) Keep proper books of records and account in which full,
true and correct entries in conformity with GAAP and all Requirements of
Law shall be made of all dealings and transactions in relation to its
business and activities and (b) permit representatives of any Lender to
visit and inspect any of its properties and examine and make abstracts
from any of its books and records at any reasonable time upon reasonable
notice and as often as may reasonably be desired and to discuss the
business, operations, properties and financial and other condition of the
Borrower and its Subsidiaries with officers and employees of the Borrower
and its Subsidiaries and with its independent certified public
accountants.
5.7 Notices. Promptly give notice to the Administrative
Agent and each Lender of:
(a) the occurrence of any Default or Event of Default;
(b) any (i) default or event of default under any material
Contractual Obligation of the Borrower or any of its Subsidiaries
or (ii) litigation, investigation or proceeding which may exist
at any time between the Borrower or any of its Subsidiaries and
any Governmental Authority, which in either case, if not cured or
if adversely determined, as the case may be, could reasonably be
expected to have a Material Adverse Effect;
(c) any litigation or proceeding affecting the Borrower or
any of its Subsidiaries in which the amount involved is
$5,000,000 or more and not covered by insurance or in which
injunctive or similar relief is sought;
(d) the following events, as soon as possible and in any
event within 30 days after the Borrower knows or has reason to
know thereof: (i) the occurrence of any Reportable Event with
respect to any Single Employer Plan, a failure to make any
required contribution to a Single Employer Plan, the creation of
any Lien in favor of the PBGC or a Single Employer Plan or any
withdrawal from, or the termination, Reorganization or Insolvency
of, any Multiemployer Plan or (ii) the institution of proceedings
or the taking of any other action by the PBGC or the Borrower or
any Commonly Controlled Entity or any Multiemployer Plan with
respect to the withdrawal from, or the termination,
Reorganization or Insolvency of, any Plan;
(e) any development, event, or condition relating to any
Environmental Law that, individually or in the aggregate with
other developments, events or conditions relating to any
Environmental Law, could reasonably be expected to result in the
payment by Borrower and its Subsidiaries, in the aggregate, of a
Material Environmental Amount, provided that, with respect to
costs required to maintain the operations of the Borrower and its
Subsidiaries in compliance with Environmental Laws, this
paragraph refers only to the increases in such costs over the
levels the Borrower and its Subsidiaries incurred, in the
aggregate, during fiscal year 1997; and
(f) any development or event which has had or could
reasonably be expected to have a Material Adverse Effect.
Each notice pursuant to this Section 5.7 shall be accompanied by a
statement of a Responsible Officer setting forth details of the
occurrence referred to therein and stating what action the Borrower or
the relevant Subsidiary proposes to take with respect thereto.
5.8 Environmental Laws. (a) (i) Comply with all
Environmental Laws applicable to it, and obtain, comply with and maintain
any and all Environmental Permits necessary for its operations as
conducted and as planned; and (ii) take all reasonable efforts to ensure
that all of its tenants, subtenants, contractors, subcontractors, and
invitees comply with all Environmental Laws, and obtain, comply with and
maintain any and all Environmental Permits, applicable to any of them
insofar as any failure to so comply, obtain or maintain reasonably could
be expected to adversely affect the Borrower. For purposes of this
5.8(a), noncompliance by the Borrower or any of its Subsidiaries with any
applicable Environmental Law or Environmental Permit shall be deemed not
to constitute a breach of this covenant provided that, upon learning of
any actual or suspected noncompliance, the Borrower or Subsidiary, as the
case may be, shall promptly undertake all reasonable efforts to achieve
compliance, and provided further that, in any case, such non-compliance,
and any other noncompliance with Environmental Law, individually or in
the aggregate, could not reasonably be expected to give rise to a
Material Adverse Effect or materially and adversely affect the value of
any Mortgaged Property.
(b) Conduct and complete all investigations, studies,
sampling and testing, and all remedial, removal and other actions
required under Environmental Laws and promptly comply in all material
respects with all lawful orders and directives of all Governmental
Authorities regarding Environmental Laws.
(c) With respect to any development, event, or condition
that is (or should have been) the subject of a notice pursuant to Section
5.7(e) of this Agreement, provide such information as may be necessary to
give the Administrative Agent reasonable assurance that such development,
event, or condition could not reasonably be expected to result in a
Material Adverse Effect.
5.9 Additional Collateral, etc. (a) With respect to any
Property acquired after the Closing Date by the Borrower or any of its
Subsidiaries (other than (x) any Property described in paragraph (b), (c)
or (d) below and (y) any Property subject to a Lien expressly permitted
by Section 6.3(g)) as to which the Administrative Agent, for the benefit
of the Lenders, does not have a perfected Lien, promptly (i) execute and
deliver to the Administrative Agent such amendments to the Security and
Pledge Agreement or such other documents as the Administrative Agent
deems necessary or advisable in order to grant to the Administrative
Agent, for the benefit of the Lenders, a security interest in such
Property except as prohibited by documents permitted by Section 6.13 and
(ii) take all actions necessary or advisable to grant to the
Administrative Agent, for the benefit of the Lenders, a perfected first
priority security interest in such Property subject to Liens permitted by
Section 6.3 and perfected to the extent required by the Security and
Pledge Agreement, including without limitation, the filing of Uniform
Commercial Code financing statements in such jurisdictions as may be
required by the Security and Pledge Agreement or by law or as may be
requested by the Administrative Agent.
(b) With respect to any fee interest in any real estate
having a value (together with improvements thereof) of at least $500,000
acquired after the Closing Date by the Borrower or any of its
Subsidiaries (other than any such real estate subject to a Lien expressly
permitted by Section 6.3(g)), promptly (i) execute and deliver a first
priority Mortgage in favor of the Administrative Agent, for the benefit
of the Lenders, covering such real estate, (ii) if requested by the
Administrative Agent, provide the Lenders with (x) title and extended
coverage insurance covering such real estate in an amount at least equal
to the purchase price of such real estate (or such other amount as shall
be reasonably specified by the Administrative Agent) as well as a current
ALTA survey thereof, together with a surveyor's certificate and (y) any
consents or estoppels reasonably deemed necessary or advisable by the
Administrative Agent in connection with such mortgage or deed of trust,
each of the foregoing in form and substance reasonably satisfactory to
the Administrative Agent and (iii) if requested by the Administrative
Agent, deliver to the Administrative Agent legal opinions relating to the
matters described above, which opinions shall be in form and substance,
and from counsel, reasonably satisfactory to the Administrative Agent.
(c) With respect to any new Subsidiary (other than a
Foreign Subsidiary) created or acquired after the Closing Date by the
Borrower or any of its Subsidiaries, promptly (i) execute and deliver to
the Administrative Agent such amendments to the Security and Pledge
Agreement as the Administrative Agent deems necessary or advisable in
order to grant to the Administrative Agent, for the benefit of the
Lenders, a perfected first priority security interest in the Capital
Stock of such new Subsidiary which is owned by the Borrower or any of its
Subsidiaries, (ii) deliver to the Administrative Agent the certificates
representing such Capital Stock if any, together with undated stock
powers, in blank, executed and delivered by a duly authorized officer of
the Borrower or such Subsidiary, as the case may be, (iii) cause such new
Subsidiary (A) to become a party to the Subsidiary Guarantee and the
Security and Pledge Agreement and (B) to take such actions necessary or
advisable to grant to the Administrative Agent for the benefit of the
Lenders a perfected first priority security interest in the Collateral
described in the Security and Pledge Agreement with respect to such new
Subsidiary, including, without limitation, the filing of Uniform
Commercial Code financing statements in such jurisdictions as may be
required by the Security and Pledge Agreement or by law or as may be
requested by the Administrative Agent, and (iv) if requested by the
Administrative Agent, deliver to the Administrative Agent legal opinions
relating to the matters described above, which opinions shall be in form
and substance, and from counsel, reasonably satisfactory to the
Administrative Agent.
(d) With respect to any new Foreign Subsidiary created or
acquired after the Closing Date by the Borrower or any of its
Subsidiaries, promptly (i) execute and deliver to the Administrative
Agent such amendments to the Security and Pledge Agreement as the
Administrative Agent deems necessary or advisable in order to grant to
the Administrative Agent, for the benefit of the Lenders, a perfected
first priority security interest in the Capital Stock of such new
Subsidiary which is owned by the Borrower or any of its Subsidiaries
(provided that in no event shall more than 65% of the total outstanding
Capital Stock of any such new Subsidiary be required to be so pledged),
(ii) deliver to the Administrative Agent the certificates representing
such Capital Stock, if any, together with undated stock powers, in blank,
executed and delivered by a duly authorized officer of the Borrower or
such Subsidiary, as the case may be, and take such other action as may be
necessary or, in the opinion of the Administrative Agent, desirable to
perfect the Lien thereon, and (iii) if requested by the Administrative
Agent, deliver to the Administrative Agent legal opinions relating to the
matters described above, which opinions shall be in form and substance,
and from counsel, reasonably satisfactory to the Administrative Agent.
5.10 Sales of Products by Agents. Cause all sales of
products produced by the Borrower, whether made directly by the Borrower,
or by Brant-Allen or any division or Subsidiary thereof as agent on
behalf of the Borrower, to be invoiced in a manner to indicate clearly
(i) that such sales are being made for the account of the Borrower and
(ii) that payments in respect of such sales are to be made for the
account of the Borrower, whether made directly to the Borrower or to
Brant-Allen on its behalf; and within 30 days after a request from the
Administrative Agent, take all action necessary to cause the lockbox into
which payments are made in respect of sales of the Borrower's products to
be moved to The Toronto-Dominion Bank (within the United States),
provided that the Borrower is able to obtain the necessary consent from
the National Bank of Canada, its successors or assigns, which consent the
Borrower shall use its commercially reasonable efforts to obtain.
SECTION 6. NEGATIVE COVENANTS
The Borrower hereby agrees that, so long as the
Commitments remain in effect or any Loan or other amount is owing to any
Lender or any Agent hereunder, the Borrower shall not, and shall not
permit any of its Subsidiaries to, directly or indirectly:
6.1 Financial Condition Covenants.
(a) Consolidated Total Debt to Consolidated Total
Capitalization Ratio. Permit the ratio of Consolidated Total Debt to
Consolidated Total Capitalization on the last day of any fiscal quarter
of the Borrower ending during any period set forth below to exceed the
ratio set forth below opposite such period:
Consolidated Total Debt
to Consolidated Total
Period Capitalization Ratio
December 31, 1997 through December 31, 1999 95%
March 31, 2000 through December 31, 2000 90%
March 31, 2001 through December 31, 2001 85%
March 31, 2002 through December 31, 2002 80%
March 31, 2003 through December 31, 2003 75%
March 31, 2004 and thereafter 70%
(b) Consolidated Interest Coverage Ratio. Permit the
Consolidated Interest Coverage Ratio for any Test Period ending during
any period set forth below to be less than the ratio set forth below
opposite such period:
Consolidated Interest
Period Coverage Ratio
March 31, 1998 through December 31, 2000 1.5 to 1
March 31, 2001 and thereafter 2.0 to 1
; provided, that if the Borrower would have been in violation of the
foregoing covenant for three Test Periods but for the inclusion of cash
contributions to the Borrower's equity in the calculation of such
covenant, then, in calculating such covenant for any succeeding Test
Period, cash contributions to the Borrower's equity during the last
fiscal quarter of such Test Period shall not be included.
(c) Consolidated Fixed Charge Coverage Ratio. Permit the
Consolidated Fixed Charge Coverage Ratio for any Test Period to be less
than 1.35 to 1; provided, that if the Borrower would have been in
violation of the foregoing covenant for three Test Periods but for the
inclusion of cash contributions to the Borrower's equity in the
calculation of such covenant, then, in calculating such covenant for any
succeeding Test Period, cash contributions to the Borrower's equity
during the last fiscal quarter of such Test Period shall not be included.
(d) Maintenance of Current Ratio. Permit the ratio of
Consolidated Current Assets to Consolidated Current Liabilities at the
end of any fiscal quarter commencing with the fiscal quarter ending
December 31, 1997 to be less than 1.5 to 1.
6.2 Limitation on Indebtedness. Create, incur, assume or
suffer to exist any Indebtedness, except:
(a) Indebtedness of any Loan Party pursuant to any Loan
Document;
(b) Indebtedness of the Borrower to any Subsidiary (other
than the Finance Subsidiary) and of any Wholly Owned Subsidiary
Guarantor to the Borrower or any other Subsidiary (other than the
Finance Subsidiary);
(c) Indebtedness outstanding on the date hereof and listed
on Schedule 6.2 and any refinancings, refundings, renewals or
extensions thereof (without any increase in the principal amount
thereof);
(d) guarantees made in the ordinary course of business by
the Borrower or any of its Subsidiaries of obligations of any
Wholly Owned Subsidiary Guarantor;
(e) Indebtedness of the Borrower and the Finance
Subsidiary in respect of the Second Priority Notes, and
guarantees thereof by any Subsidiary which is a party to the
Subsidiary Guarantee, and any refinancings thereof on
substantially similar terms and without any increase in the
principal amount thereof;
(f) unsecured Indebtedness of the Borrower or any of its
Subsidiaries on terms and conditions acceptable to the Required
Lenders; provided that (i) the proceeds of such Indebtedness are
used to repay the Loans hereunder pursuant to Section 2.10(a) and
(ii) the weighted average life to maturity of such Indebtedness
is greater than the remaining life of the Loans being prepaid;
(g) Indebtedness of the Borrower in respect of deferred
commissions and management fees owing under the Borrower
Management Contract;
(h) additional Indebtedness of the Borrower and any of its
Subsidiaries in an aggregate principal amount at any time
outstanding not to exceed $12,500,000 (of which not more than
$6,000,000 may be secured, including pursuant to Capital Lease
Obligations);
(i) Indebtedness of the Borrower owed to Brant-Allen for
cash borrowed from Brant-Allen; provided that such Indebtedness
shall (i) be subordinated in right of payment to the Loans under
terms reasonably satisfactory to the Administrative Agent, (ii)
bear no interest, (iii) not require principal payments of any
kind on such Indebtedness to be repaid prior to the final
maturity date of the Term Loans, and (iv) contain no provisions
for remedies (including, without limitation, any defaults or any
other provisions that would result in the acceleration of the
maturity of such Indebtedness); provided, however, that such
Indebtedness may contain provisions for an acceleration of the
maturity of such Indebtedness upon the acceleration of the Loans;
(j) Indebtedness of the Borrower owed to Brant-Allen in
connection with management services provided by Brant-Allen to
the Borrower under the Borrower Management Contract to the extent
such Indebtedness represents fees in excess of 1% of the revenues
(net of transportation costs) of the Borrower; provided that such
Indebtedness shall (a) be subordinated in right of payment to the
Loans under terms reasonably satisfactory to the Administrative
Agent, (b) bear no interest, (c) not require principal payments
of any kind on such Indebtedness to be repaid prior to the final
maturity date of the Term Loans, and (d) shall contain no
provisions for remedies (including, without limitation, any
defaults or any other provisions that would result in the
acceleration of the maturity of such Indebtedness); and
(k) Indebtedness, in an aggregate principal amount not
exceeding $2,000,000, in the form of purchase price adjustments
owing to the Retiring Partners in respect of the Acquisition
Agreement.
6.3 Limitation on Liens. Create, incur, assume or suffer
to exist any Lien upon any of its Property or revenues, whether now owned
or hereafter acquired, except for:
(a) Liens for taxes not yet due or which are being
contested in good faith by appropriate proceedings, provided that
adequate reserves with respect thereto are maintained on the
books of the Borrower or its Subsidiaries, as the case may be, in
conformity with GAAP;
(b) carriers', warehousemen's, mechanics', materialmen's,
repairmen's or other like Liens arising in the ordinary course of
business which are not overdue for a period of more than 30 days
or which are being contested in good faith by appropriate
proceedings;
(c) pledges or deposits in connection with workers'
compensation, unemployment insurance and other social security
legislation;
(d) deposits to secure the performance of bids, trade
contracts (other than for borrowed money), leases, statutory
obligations, surety and appeal bonds, performance bonds and other
obligations of a like nature incurred in the ordinary course of
business;
(e) easements, rights-of-way, restrictions and other
similar encumbrances incurred in the ordinary course of business
which, in the aggregate, are not substantial in amount and which
do not in any case materially detract from the value of the
Property subject thereto or materially interfere with the
ordinary conduct of the business of the Borrower or any of its
Subsidiaries;
(f) Liens in existence on the date hereof listed on
Schedule 6.3, securing Indebtedness permitted by Section 6.2(c),
provided that no such Lien is spread to cover any additional
Property after the Closing Date and that the amount of
Indebtedness secured thereby is not increased;
(g) Liens securing Indebtedness of the Borrower or any
other Subsidiary incurred pursuant to Section 6.2(h) to finance
the acquisition of fixed or capital assets, provided that (i)
such Liens shall be created substantially simultaneously with the
acquisition of such fixed or capital assets, (ii) such Liens do
not at any time encumber any Property other than the Property
financed by such Indebtedness and (iii) the amount of
Indebtedness secured thereby is not increased;
(h) Liens created pursuant to the Security Documents and
the Second Priority Note Security Documents;
(i) any interest or title of a lessor under any lease
entered into by the Borrower or any other Subsidiary in the
ordinary course of its business and covering only the assets so
leased;
(j) Liens not otherwise permitted by this Section 6.3
securing Indebtedness incurred pursuant to Section 6.2(h);
(k) Liens arising under or in connection with
Environmental Laws which are being contested in good faith by
appropriate proceedings provided that adequate reserves with
respect thereto are maintained on the books of the Borrower and
its Subsidiaries, as the case may be, in conformity with GAAP and
that such Liens relate to potential liabilities that are not
reasonably expected to exceed $3,000,000 for the Borrower and its
Subsidiaries in the aggregate;
(l) Liens securing Acquired Indebtedness created prior to
(and not in connection with or in contemplation of) the
incurrence of such Indebtedness by the Borrower or any
Subsidiary; provided that such Lien does not extend to any
property or assets of the Borrower or any Subsidiary other than
assets acquired in connection with the incurrence of such
Acquired Indebtedness;
(m) Liens arising by reason of any judgment, decree or
order of any court so long as such Lien is adequately bonded and
any appropriate legal proceedings that may have been duly
initiated for the review of such judgment, decree or order shall
not have been finally terminated or the period within which such
proceedings may be initiated shall not have expired; and
(n) Liens securing reimbursement obligations with respect
to letters of credit that encumber documents and other property
relating to such letters of credit and the products and proceeds
thereof.
6.4 Limitation on Fundamental Changes. Enter into any
merger, consolidation or amalgamation, or liquidate, wind up or dissolve
itself (or suffer any liquidation or dissolution), or Dispose of all or
substantially all of its Property or business except:
(a) any Subsidiary (other than the Finance Subsidiary) of
the Borrower may be merged or consolidated with or into the
Borrower (provided that the Borrower shall be the continuing or
surviving corporation) or with or into any Wholly Owned
Subsidiary Guarantor (provided that the Wholly Owned Subsidiary
Guarantor shall be the continuing or surviving corporation);
(b) any Subsidiary of the Borrower may Dispose of any or
all of its assets (upon voluntary liquidation or otherwise) to
the Borrower or any Wholly Owned Subsidiary Guarantor; and
(c) the Transactions may be consummated.
6.5 Limitation on Sale of Assets. Dispose of any of its
Property or business (including, without limitation, receivables and
leasehold interests), whether now owned or hereafter acquired, or, in the
case of any Subsidiary, issue or sell any shares of such Subsidiary's
Capital Stock to any Person, except:
(a) the Disposition of obsolete or worn out Property in
the ordinary course of business;
(b) the sale of inventory in the ordinary course of business;
(c) Dispositions permitted by Section 6.4(b);
(d) the sale or issuance of any Subsidiary's Capital Stock
to the Borrower or any Wholly Owned Subsidiary Guarantor;
(e) the Disposition of Property as long as the Net Cash
Proceeds are applied in accordance with Section 2.10; provided
that the Borrower may not Dispose of the principal asset of the
Borrower (consisting of the Borrower's paper mill and the Bel Bai
II paper machine located therein) while this Agreement is in
effect; and
(f) the Disposition of Property for an amount not in
excess of either $300,000 in a single transaction or series of
related transactions or $500,000 in any fiscal year.
6.6 Limitation on Dividends. Declare or pay any dividend
(other than dividends payable solely in common stock of the Person making
such dividend) on, or make any payment on account of, or set apart assets
for a sinking or other analogous fund for, the purchase, redemption,
defeasance, retirement or other acquisition of, any shares of any class
of Capital Stock of the Borrower or any Subsidiary or any warrants or
options to purchase any such Capital Stock, whether now or hereafter
outstanding, or make any other distribution in respect thereof, either
directly or indirectly, whether in cash or property or in obligations of
the Borrower or any Subsidiary (collectively, "Restricted Payments"),
except that:
(a) any Subsidiary may make Restricted Payments to the
Borrower or any Wholly Owned Subsidiary Guarantor;
(b) the Borrower may make Restricted Payments in respect
of Partner Taxes in respect of the Borrower and its Subsidiaries;
(c) so long as no Default or Event of Default shall have
occurred and be continuing, and, if for any fiscal year of the
Borrower commencing with the fiscal year ending December 31,
1998, there shall be Excess Cash Flow, the Borrower may make
Restricted Payments in cash to Brant-Allen on the relevant Excess
Cash Flow Application Date in an amount not to exceed 50% of such
Excess Cash Flow, provided that on the date of such payment Total
Committed Debt is less than $145,000,000;
(d) the payment of a distribution by the Borrower on or
after the Closing Date for Brant-Allen to recover expenses
incurred in connection with the Transactions (as defined in this
Agreement and the Timberlands Credit Agreement) and related
financings; provided that such distribution shall not exceed
$2,000,000; and
(e) the payment of a distribution by the Borrower on or
after the Closing Date to Brant-Allen in an amount equal to the
total federal, state, local and foreign tax liabilities of
Brant-Allen, Peter Brant and Joseph Allen arising as a result of
their direct and indirect ownership of equity interests in Bear
Island Paper Company, L.P. during the first eleven months of
1997, as calculated by the Borrower's Vice President of Finance
and recalculated by the Borrower's independent accountants;
provided, however, that the amount of the payment pursuant to
this paragraph shall not exceed the product of the taxable income
of Bear Island Paper Company, L.P. multiplied by the highest
combined marginal federal, state and local tax rates applicable
to the type of entity or individuals with respect to the taxes of
which the payment is to be made pursuant to this clause 6.6(e) in
the United States during 1997.
6.7 Limitation on Capital Expenditures. Make or commit to
make (by way of the acquisition of securities of a Person or otherwise)
any Capital Expenditure, except (a) Capital Expenditures of the Borrower
and its Subsidiaries in the ordinary course of business not exceeding
$12,000,000; provided, that (i) up to $5,000,000 of any such amount
referred to above, if not so expended in the fiscal year for which it is
permitted, may be carried over for expenditure in the next succeeding
fiscal year but not in any subsequent fiscal year, and (ii) Capital
Expenditures made pursuant to this clause (a) during any fiscal year
shall be deemed made, first, in respect of amounts carried over from the
prior fiscal year pursuant to subclause (i) above and, second, in respect
of amounts permitted for such fiscal year as provided above and (b)
Capital Expenditures made with the proceeds of any Reinvestment Deferred
Amount in respect of the Borrower.
6.8 Limitation on Investments, Loans and Advances. Make
any advance, loan, extension of credit (by way of guaranty or otherwise)
or capital contribution to, or purchase any stock, bonds, notes,
debentures or other securities of or any assets constituting all or a
material part of a business unit of, or make any other investment in, any
Person ("Investments"), except:
(a) extensions of trade credit in the ordinary course of
business;
(b) Investments in Cash Equivalents;
(c) Guarantee Obligations permitted by Section 6.2;
(d) the Borrower may make Investments in any Wholly Owned
Subsidiary Guarantor;
(e) Investments existing on the Closing Date and set forth
on Schedule 6.8(f);
(f) Investments permitted by Section 6.2(b);
(g) Advances to employees in the ordinary course of
business in respect of travel, business and relocation expenses
up to an aggregate of $50,000 at any time outstanding; provided,
however, that the Borrower shall not be deemed to have defaulted
in respect of this provision as of the last day of any fiscal
quarter as long as (i) the addition of the amount in excess of
the $50,000 permitted above to the amount outstanding under
Section 6.2(h) would not result in a violation of such Section
and (ii) the Borrower was in compliance with this Section 6.8(g)
as of the end of the immediately preceding fiscal quarter;
(h) Investments in Brant-Allen consisting of amounts owing
by Brant-Allen to the Borrower or its Subsidiaries as proceeds of
collections on receivables of the Borrower or its Subsidiaries;
provided, that the amount of collected funds received by
Brant-Allen and owing to the Borrower and its Subsidiaries at the
end of any Business Day shall not exceed the sum of (i) the
collected funds received by Brant-Allen for the account of the
Borrower or such Subsidiary during such Business Day and the
immediately preceding Business Day plus (ii) an additional amount
not exceeding $100,000; and
(i) Investments in the form of promissory notes (having a
tenor not exceeding 5 years), in an aggregate principal amount
not exceeding $2,000,000 at any time outstanding, constituting up
to 70% of the sale price of land Disposed of by the Borrower or
its Subsidiaries.
(j) the Borrower may make investments in the Finance
Subsidiary to the extent required to permit it to make the
payments described in Section 6.18(vi).
6.9 Limitation on Optional Payments and Modifications of
Debt Instruments, etc. (a) Make or offer to make any payment, prepayment,
repurchase or redemption of or otherwise defease or segregate funds with
respect to the Second Priority Notes (other than scheduled interest
payments required to be made in cash and other than refinancings
permitted by Section 6.2(e) and other than as may be required upon an
asset sale by the Second Priority Notes after the Term Loans have been
paid in full and the Revolving Credit Commitments have been reduced to
$25,000,000), (b) amend, modify, waive or otherwise change, or consent or
agree to any amendment, modification, waiver or other change to, any of
the terms of the Second Priority Notes (other than any such amendment,
modification, waiver or other change which (i) would extend the maturity
or reduce the amount of any payment of principal thereof, which would
reduce the rate or extend the date for payment of interest thereon or
provide for the payment in kind in lieu of in cash of any interest
thereon or waive any defaults and (ii) does not involve the payment of a
consent fee), or (c) amend its organizational documents in any manner
determined by the Administrative Agent to be materially adverse to the
Lenders without the prior written consent of the Required Lenders.
6.10 Limitation on Transactions with Affiliates. Enter
into any transaction, including, without limitation, any purchase, sale,
lease or exchange of Property, the rendering of any service or the
payment of any management, advisory or similar fees, with any Affiliate
(other than the Borrower or any Wholly Owned Subsidiary Guarantor) unless
such transaction is (a) otherwise permitted under this Agreement, (b) in
the ordinary course of business of the Borrower or such Subsidiary, as
the case may be, and (c) upon fair and reasonable terms no less favorable
to the Borrower or such Subsidiary, as the case may be, than it would
obtain in a comparable arm's length transaction with a Person which is
not an Affiliate. Notwithstanding the foregoing, (i) the Borrower may
perform its obligations under and consummate the transactions
contemplated by the Borrower Management Contract and the Timberlands Wood
Supply Contract, (ii) each of the Borrower and its Subsidiaries may pay
reasonable and customary regular compensation to its respective directors
who are not employees and (iii) the Borrower and its Subsidiaries may pay
dividends and distributions permitted by Section 6.6.
6.11 Limitation on Sales and Leasebacks. Enter into any
arrangement with any Person providing for the leasing by the Borrower or
any Subsidiary of real or personal property which has been or is to be
sold or transferred by the Borrower or such Subsidiary to such Person or
to any other Person to whom funds have been or are to be advanced by such
Person on the security of such property or rental obligations of the
Borrower or such Subsidiary.
6.12 Limitation on Changes in Fiscal Periods. Permit the
fiscal year of the Borrower to end on a day other than December 31 or
change the Borrower's method of determining fiscal quarters.
6.13 Limitation on Negative Pledge Clauses. Enter into or
suffer to exist or become effective any agreement which prohibits or
limits the ability of the Borrower or any of its Subsidiaries to create,
incur, assume or suffer to exist any Lien upon any of its Property or
revenues, whether now owned or hereafter acquired, to secure the
Obligations or, in the case of any guarantor, its obligations under the
Subsidiary Guarantee, other than (a) this Agreement, the other Loan
Documents, the Second Priority Note Indenture, and the Second Priority
Note Security Documents, (b) any agreements governing any purchase money
Liens or Capital Lease Obligations otherwise permitted hereby (in which
case, any prohibition or limitation shall only be effective against the
assets financed thereby) and (c) any prohibition on assignment of any
general intangible contained in the instrument under which such general
intangible arises as contemplated by the Security and Pledge Agreement.
6.14 Limitation on Restrictions on Subsidiary
Distributions. Enter into or suffer to exist or become effective any
consensual encumbrance or restriction on the ability of any Subsidiary of
the Borrower to (a) pay dividends or make any other distributions in
respect of any Capital Stock of such Subsidiary held by, or pay any
Indebtedness owed to, the Borrower or any other Subsidiary of the
Borrower, (b) make loans or advances to the Borrower or any other
Subsidiary of the Borrower or (c) transfer any of its assets to the
Borrower or any other Subsidiary of the Borrower, except for such
encumbrances or restrictions existing under or by reason of (i) any
restrictions existing under the Loan Documents; (ii) any restrictions
with respect to a Subsidiary imposed pursuant to an agreement which has
been entered into in connection with the Disposition of all or
substantially all of the Capital Stock or assets of such Subsidiary;
(iii) customary non-assignment or net worth provisions in any lease
governing a leasehold interest, license or other contract, (iv) any
agreement or other instrument of a Person existing at the time it becomes
a Subsidiary of the Borrower, provided that such encumbrance or
restriction is not applicable to any other Person, or any property of any
other Person, other than such person becoming a Subsidiary of the
Borrower and was not entered into in contemplation of such Person
becoming a Subsidiary of the Borrower, (v) any agreement of a Loan Party
or any of its Subsidiaries in effect as of the Closing Date governing
Indebtedness of a Loan Party or any of its Subsidiaries outstanding as of
the Closing Date and, if such Indebtedness is renewed, extended or
refinanced in accordance with the terms of this Agreement, such other
restrictions in the agreements governing the renewed, extended or
refinanced Indebtedness (and successive renewals, extensions and
refinancing thereof in accordance with the terms of this Agreement)
provided such restrictions are no more restrictive in any material
respect than those contained in the agreements governing such outstanding
Indebtedness being renewed, extended or refinanced, (vi) any agreement
governing Indebtedness permitted by Section 6.2(d), (e), (f), (g), (h),
(i) and (k) provided such restrictions are no more restrictive in any
material respect than those contained in the Loan Documents or (vii)
restrictions required by applicable law.
6.15 Limitation on Lines of Business. Enter into any
business, either directly or through any Subsidiary, except for those
businesses in which the Borrower and its Subsidiaries are engaged on the
date of this Agreement or which are reasonably related thereto.
6.16 Limitation on Amendments to Acquisition Documents.
(a) Amend, supplement or otherwise modify (pursuant to a waiver or
otherwise) the terms and conditions of the indemnities and licenses
furnished to the Borrower or any of its Subsidiaries pursuant to the
Acquisition Agreement or any other document delivered by the Retiring
Partners or any of their affiliates in connection therewith such that
after giving effect thereto such indemnities or licenses shall be
materially less favorable to the interests of the Loan Parties or the
Lenders with respect thereto or (b) otherwise amend, supplement or
otherwise modify the terms and conditions of the Acquisition Agreement or
any such other documents except to the extent that any such amendment,
supplement or modification could not reasonably be expected to have a
Material Adverse Effect.
6.17 Limitation on Amendments to Management Contracts.
Amend, supplement or otherwise modify (pursuant to a waiver or otherwise)
the terms and conditions of the Management Contracts if the effect would
be to change any provision of such Management Contract relating to the
payment or method of calculation of fees thereunder or to materially
reduce the functions required to be performed by Brant-Allen thereunder;
provided, that this Section 6.17 shall cease to apply to the Soucy
Management Contract upon termination of the Soucy Pledge Agreement in
accordance with the terms thereof.
6.18 Limitation on Finance Subsidiary. Make any Investment
in the Finance Subsidiary, or permit the Finance Subsidiary to make any
Investment in any Person, or to conduct, transact or otherwise engage, or
commit to transact, conduct or otherwise engage, in any business or
operations other than (i) acting as co-issuer in respect of the Second
Priority Notes and performance of obligations in connection therewith,
(ii) the entry into, and exercise of rights and performance of
obligations in respect of indentures, engagement letters, underwriting
agreements and other agreements in respect of the Second Priority Notes
or any offering, issuance or sale thereof, (iii) the filing of
registration statements, and compliance with applicable reporting and
other obligations, under federal, state or other securities laws, (iv)
the retention of transfer agents, private placement agents, underwriters,
counsel, accountants and other advisors and consultants, (v) the
performance of obligations under in and compliance with its certificate
of incorporation and by-laws, or any applicable law, ordinance,
regulation, rule, order, judgment, decree or permit, (vi) the incurrence
and payment of any taxes for which it may be liable and (vii) other
activities directly related to the foregoing; provided, that the Borrower
may make Investments in the Finance Subsidiary to the extent required to
permit it to make the payments described in clause (vi) above.
SECTION 7. EVENTS OF DEFAULT
If any of the following events shall occur and be
continuing:
(a) The Borrower shall fail to pay any principal of any
Loan when due in accordance with the terms hereof; or the
Borrower shall fail to pay any interest on any Loan or any other
amount payable hereunder or under any other Loan Document, within
five days after any such interest or other amount becomes due in
accordance with the terms hereof; or
(b) Any representation or warranty made or deemed made by
any Loan Party herein or in any other Loan Document or which is
contained in any certificate, document or financial or other
statement furnished by it at any time under or in connection with
this Agreement or any such other Loan Document shall prove to
have been inaccurate in any material respect on or as of the date
made or deemed made; or
(c) (i) Any Loan Party shall default in the observance or
performance of any agreement contained in clause (i) or (ii) of
Section 5.4(a) (with respect to the Borrower only), Section 5.7(a),
Section 6, or Section 4.5(c) of the Security and Pledge Agreement or
(ii) an "Event of Default" under and as defined in any Mortgage
shall have occurred and be continuing; or
(d) Any Loan Party shall default in the observance or
performance of any other agreement contained in this Agreement or
any other Loan Document (other than as provided in paragraphs (a)
through (c) of this Section), and such default shall continue
unremedied for a period of 30 days; or
(e) Brant-Allen (so long as the Brant-Allen Guarantee is
in effect), the Borrower or any of its Subsidiaries shall (i)
default in making any payment of any principal of any
Indebtedness (including, without limitation, any Guarantee
Obligation, but excluding the Loans) beyond the applicable grace
period, if any, with respect thereto; or (ii) default in making
any payment of any interest on any such Indebtedness beyond the
period of grace, if any, provided in the instrument or agreement
under which such Indebtedness was created; or (iii) default in
the observance or performance of any other agreement or condition
relating to any such Indebtedness or contained in any instrument
or agreement evidencing, securing or relating thereto, or any
other event shall occur or condition exist, the effect of which
default or other event or condition is to cause, or to permit the
holder or beneficiary of such Indebtedness (or a trustee or agent
on behalf of such holder or beneficiary) to cause, with the
giving of notice if required, such Indebtedness to become due
prior to its stated maturity or (in the case of any such
Indebtedness constituting a Guarantee Obligation) to become
payable; provided, that a default, event or condition described
in clause (i), (ii) or (iii) of this paragraph (e) shall not at
any time constitute an Event of Default unless, at such time, one
or more defaults, events or conditions of the type described in
clauses (i), (ii) and (iii) of this paragraph (e) shall have
occurred and be continuing with respect to Indebtedness the
outstanding principal amount of which exceeds in the aggregate
$5,000,000; or
(f) (i) Brant-Allen, or the Borrower, Timberlands, Soucy
or any of their Subsidiaries, shall commence any case, proceeding
or other action (A) under any existing or future law of any
jurisdiction, domestic or foreign, relating to bankruptcy,
insolvency, reorganization or relief of debtors, seeking to have
an order for relief entered with respect to it, or seeking to
adjudicate it a bankrupt or insolvent, or seeking reorganization,
arrangement, adjustment, winding-up, liquidation, dissolution,
composition or other relief with respect to it or its debts, or
(B) seeking appointment of a receiver, trustee, custodian,
conservator or other similar official for it or for all or any
substantial part of its assets, or Brant-Allen, or the Borrower,
Timberlands, Soucy or any of their Subsidiaries, shall make a
general assignment for the benefit of its creditors; or (ii)
there shall be commenced against Brant-Allen, or the Borrower,
Timberlands, Soucy or any of their Subsidiaries, any case,
proceeding or other action of a nature referred to in clause (i)
above which (A) results in the entry of an order for relief or
any such adjudication or appointment or (B) remains undismissed,
undischarged or unbonded for a period of 60 days; or (iii) there
shall be commenced against Brant-Allen, or the Borrower,
Timberlands, Soucy or any of their Subsidiaries, any case,
proceeding or other action seeking issuance of a warrant of
attachment, execution, distraint or similar process against all
or any substantial part of its assets which results in the entry
of an order for any such relief which shall not have been
vacated, discharged, or stayed or bonded pending appeal within 60
days from the entry thereof; or (iv) Brant-Allen, or the
Borrower, Timberlands, Soucy or any of their Subsidiaries, shall
take any action in furtherance of, or indicating its consent to,
approval of, or acquiescence in, any of the acts set forth in
clause (i), (ii), or (iii) above; or (v) Brant-Allen, or the
Borrower, Timberlands, Soucy or any of their Subsidiaries, shall
generally not, or shall be unable to, or shall admit in writing
its inability to, pay its debts as they become due; or
(g) (i) Any Person shall engage in any "prohibited
transaction" (as defined in Section 406 of ERISA or Section 4975
of the Code) involving any Plan, (ii) any "accumulated funding
deficiency" (as defined in Section 302 of ERISA), whether or not
waived, shall exist with respect to any Plan or any Lien in favor
of the PBGC or a Plan shall arise on the assets of the Borrower
or any Commonly Controlled Entity, (iii) a Reportable Event shall
occur with respect to, or proceedings shall commence to have a
trustee appointed, or a trustee shall be appointed, to administer
or to terminate, any Single Employer Plan, which Reportable Event
or commencement of proceedings or appointment of a trustee is
likely to result in the termination of such Plan for purposes of
Title IV of ERISA, (iv) any Single Employer Plan shall terminate
for purposes of Title IV of ERISA, (v) the Borrower or any
Commonly Controlled Entity shall, or is likely to, incur any
liability in connection with a withdrawal from, or the Insolvency
or Reorganization of, a Multiemployer Plan or (vi) any other
event or condition shall occur or exist with respect to a Plan;
and in each case in clauses (i) through (vi) above, such event or
condition, together with all other such events or conditions, if
any, could, in the reasonable judgment of the Required Lenders,
reasonably be expected to have a Material Adverse Effect; or
(h) One or more judgments or decrees shall be entered
against Brant-Allen (so long as the Brant-Allen Guarantee is
still in effect), the Borrower or any of its Subsidiaries
involving in the aggregate a liability (not paid or fully covered
by insurance as to which the relevant insurance company has
acknowledged coverage) of $5,000,000 or more, and all such
judgments or decrees shall not have been vacated, discharged,
stayed or bonded pending appeal within 30 days from the entry
thereof; or
(i) Any of the Security Documents shall cease, for any
reason, to be in full force and effect, or any Loan Party or any
Affiliate of any Loan Party shall so assert, or any Lien created
by any of the Security Documents shall cease to be enforceable
and of the same effect and priority purported to be created thereby
except as provided in any such Security Document; or
(j) The guarantees contained in the Subsidiary Guarantee
shall cease, for any reason, to be in full force and effect or
any Loan Party or any Affiliate of any Loan Party shall so
assert, or the guarantees contained in the Brant-Allen Guarantee
shall cease, for any reason, to be in full force and effect or
any Loan Party or any Affiliate of any Loan Party shall so assert
except after the date set forth in Section 11 thereof; or
(k) A Change of Control shall occur;
then, and in any such event, (A) if such event is an Event of Default
specified in clause (i) or (ii) of paragraph (f) above with respect to
the Borrower, automatically the Commitments shall immediately terminate
and the Loans hereunder (with accrued interest thereon) and all other
amounts owing under this Agreement and the other Loan Documents shall
immediately become due and payable, and (B) if such event is any other
Event of Default, either or both of the following actions may be taken:
(i) with the consent of the Required Revolving Credit Facility Lenders,
the Administrative Agent may, or upon the request of the Required
Revolving Credit Facility Lenders, the Administrative Agent shall, by
notice to the Borrower declare the Revolving Credit Commitments to be
terminated forthwith, whereupon the Revolving Credit Commitments shall
immediately terminate; and (ii) with the consent of the Required Lenders,
the Administrative Agent may, or upon the request of the Required
Lenders, the Administrative Agent shall, by notice to the Borrower,
declare the Loans hereunder (with accrued interest thereon) and all other
amounts owing under this Agreement and the other Loan Documents to be due
and payable forthwith, whereupon the same shall immediately become due
and payable.
SECTION 8. THE AGENTS
8.1 Appointment. Each Lender hereby irrevocably designates
and appoints the Agents as the agents of such Lender under this Agreement
and the other Loan Documents, including acting as agent and fonde de
pouvoir for the Lenders under the Soucy Pledge Agreement, and each such
Lender irrevocably authorizes each Agent, in such capacity, to take such
action on its behalf under the provisions of this Agreement and the other
Loan Documents and to exercise such powers and perform such duties as are
expressly delegated to the such Agent by the terms of this Agreement and
the other Loan Documents, together with such other powers as are
reasonably incidental thereto. Notwithstanding any provision to the
contrary elsewhere in this Agreement, no Agent shall have any duties or
responsibilities, except those expressly set forth herein, or any
fiduciary relationship with any Lender, and no implied covenants,
functions, responsibilities, duties, obligations or liabilities shall be
read into this Agreement or any other Loan Document or otherwise exist
against any Agent.
8.2 Delegation of Duties. Each Agent may execute any of
its duties under this Agreement and the other Loan Documents by or
through agents or attorneys-in-fact and shall be entitled to advice of
counsel concerning all matters pertaining to such duties. No Agent shall
be responsible for the negligence or misconduct of any agents or
attorneys in-fact selected by it with reasonable care.
8.3 Exculpatory Provisions. Neither any Agent nor any of
their respective officers, directors, employees, agents,
attorneys-in-fact or affiliates shall be (i) liable for any action
lawfully taken or omitted to be taken by it or such Person under or in
connection with this Agreement or any other Loan Document (except to the
extent that any of the foregoing are found by a final and nonappealable
decision of a court of competent jurisdiction to have resulted from its
or such Person's own gross negligence or willful misconduct) or (ii)
responsible in any manner to any of the Lenders for any recitals,
statements, representations or warranties made by any Loan Party or any
officer thereof contained in this Agreement or any other Loan Document or
in any certificate, report, statement or other document referred to or
provided for in, or received by the Agents under or in connection with,
this Agreement or any other Loan Document or for the value, validity,
effectiveness, genuineness, enforceability or sufficiency of this
Agreement or any other Loan Document or for any failure of any Loan Party
a party thereto to perform its obligations hereunder or thereunder. The
Agents shall not be under any obligation to any Lender to ascertain or to
inquire as to the observance or performance of any of the agreements
contained in, or conditions of, this Agreement or any other Loan
Document, or to inspect the properties, books or records of any Loan
Party.
8.4 Reliance by Administrative Agent. Each Agent shall be
entitled to rely, and shall be fully protected in relying, upon any
instrument, writing, resolution, notice, consent, certificate, affidavit,
letter, telecopy, telex or teletype message, statement, order or other
document or conversation believed by it to be genuine and correct and to
have been signed, sent or made by the proper Person or Persons and upon
advice and statements of legal counsel (including, without limitation,
counsel to the Loan Parties), independent accountants and other experts
selected by the Administrative Agent. The Agents may deem and treat the
payee of any Note as the owner thereof for all purposes unless a written
notice of assignment, negotiation or transfer thereof shall have been
filed with the Administrative Agent. Each Agent shall be fully justified
in failing or refusing to take any action under this Agreement or any
other Loan Document unless it shall first receive such advice or
concurrence of the Required Lenders (or, if so specified by this
Agreement, all Lenders) as it deems appropriate or it shall first be
indemnified to its satisfaction by the Lenders against any and all
liability and expense which may be incurred by it by reason of taking or
continuing to take any such action. Each Agent shall in all cases be
fully protected in acting, or in refraining from acting, under this
Agreement and the other Loan Documents in accordance with a request of
the Required Lenders (or, if so specified by this Agreement, all
Lenders), and such request and any action taken or failure to act
pursuant thereto shall be binding upon all the Lenders and all future
holders of the Loans.
8.5 Notice of Default. No Agent shall be deemed to have
knowledge or notice of the occurrence of any Default or Event of Default
hereunder unless such Agent has received notice from a Lender or the
Borrower referring to this Agreement, describing such Default or Event of
Default and stating that such notice is a "notice of default". In the
event that the Administrative Agent receives such a notice, the
Administrative Agent shall promptly give notice thereof to the Lenders.
The Administrative Agent shall take such action with respect to such
Default or Event of Default as shall be reasonably directed by the
Required Lenders (or, if so specified by this Agreement, all Lenders);
provided that unless and until the Administrative Agent shall have
received such directions, the Administrative Agent may (but shall not be
obligated to) take such action, or refrain from taking such action, with
respect to such Default or Event of Default as it shall deem advisable in
the best interests of the Lenders.
8.6 Non-Reliance on Agents and Other Lenders. Each Lender
expressly acknowledges that neither the Agents nor any of their
respective officers, directors, employees, agents, attorneys-in-fact or
affiliates have made any representations or warranties to it and that no
act by any Agent hereinafter taken, including any review of the affairs
of a Loan Party or any affiliate of a Loan Party, shall be deemed to
constitute any representation or warranty by any Agent to any Lender.
Each Lender represents to the Agents that it has, independently and
without reliance upon any Agent or any other Lender, and based on such
documents and information as it has deemed appropriate, made its own
appraisal of and investigation into the business, operations, property,
financial and other condition and creditworthiness of the Loan Parties
and their affiliates and made its own decision to make its Loans
hereunder and enter into this Agreement. Each Lender also represents 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 analysis,
appraisals and decisions in taking or not taking action under this
Agreement and the other Loan Documents, and to make such investigation as
it deems necessary to inform itself as to the business, operations,
property, financial and other condition and creditworthiness of the Loan
Parties and their affiliates. Except for notices, reports and other
documents expressly required to be furnished to the Lenders by the
Administrative Agent hereunder, no Agent shall have any duty or
responsibility to provide any Lender with any credit or other information
concerning the business, operations, property, condition (financial or
otherwise), prospects or creditworthiness of any Loan Party or any
affiliate of a Loan Party which may come into the possession of such
Agent or any of its officers, directors, employees, agents,
attorneys-in-fact or affiliates.
8.7 Indemnification. The Lenders agree to indemnify each
Agent solely in its capacity as such (to the extent not reimbursed by the
Borrower and without limiting the obligation of the Borrower to do so),
ratably according to their respective Aggregate Exposure Percentages in
effect on the date on which indemnification is sought under this Section
8.7 (or, if indemnification is sought after the date upon which the
Commitments shall have terminated and the Loans shall have been paid in
full, ratably in accordance with such Percentages immediately prior to
such date), from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind whatsoever which may at any time (including,
without limitation, at any time following the payment of the Loans) be
imposed on, incurred by or asserted against such Agent solely in its
capacity as Agent in any way relating to or arising out of, the
Commitments, this Agreement, any of the other Loan Documents or any
documents contemplated by or referred to herein or therein or the
transactions contemplated hereby or thereby or any action taken or
omitted by such Agent under or in connection with any of the foregoing;
provided that no Lender shall be liable for the payment of any portion of
such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements which are found by a
final and nonappealable decision of a court of competent jurisdiction to
have resulted from such Agent's gross negligence or willful misconduct.
The agreements in this Section 8.7 shall survive the payment of the Loans
and all other amounts payable hereunder.
8.8 Agent in Its Individual Capacity. Each Agent and its
affiliates may make loans to, accept deposits from and generally engage
in any kind of business with any Loan Party as though such Agent was not
an Agent. With respect to its Loans made or renewed by it, each Agent
shall have the same rights, powers and duties under this Agreement and
the other Loan Documents as any Lender and may exercise the same as
though it were not an Agent, and the terms "Lender" and "Lenders" shall
include each Agent in its individual capacity.
8.9 Successor Administrative Agent. The Administrative
Agent may resign as Administrative Agent upon 10 days' notice to the
Lenders and the Borrower. If the Administrative Agent shall resign as
Administrative Agent under this Agreement and the other Loan Documents,
then the Required Lenders shall appoint from among the Lenders a
successor agent for the Lenders, which successor agent shall (unless an
Event of Default under Section 7(a) or Section 7(f) with respect to the
Borrower shall have occurred and be continuing) be subject to approval by
the Borrower (which approval shall not be unreasonably withheld or
delayed), whereupon such successor agent shall succeed to the rights,
powers and duties of the Administrative Agent, and the term
"Administrative Agent" shall mean such successor agent effective upon
such appointment and approval, and the former Administrative Agent's
rights, powers and duties as Administrative Agent shall be terminated,
without any other or further act or deed on the part of such former
Administrative Agent or any of the parties to this Agreement or any
holders of the Loans. If no successor agent has accepted appointment as
Administrative Agent by the date that is 10 days following a retiring
Administrative Agent's notice of resignation, the retiring Administrative
Agent's resignation shall nevertheless thereupon become effective, and
the Lenders shall assume and perform all of the duties of the
Administrative Agent hereunder until such time, if any, as the Required
Lenders appoint a successor agent as provided for above. After any
retiring Agent's resignation as Agent, the provisions of this Section 8
shall inure to its benefit as to any actions taken or omitted to be taken
by it while it was Agent under this Agreement and the other Loan
Documents.
8.10 Authorization to Execute Intercreditor Agreement and
Security Documents and Release Liens. The Administrative Agent is hereby
irrevocably authorized by each of the Lenders to execute and deliver the
Intercreditor Agreement and each of the Security Documents, to release
any Lien covering any Property of Brant-Allen, the Borrower or any of
their respective Subsidiaries (a) which is the subject of a Disposition
which is permitted by this Agreement, (b) which has been consented to in
accordance with Section 9.1 or (c) which is required to be released
pursuant to the terms of any Security Document. Each Lender confirms the
appointments and agreements contained in Section 7 of the Intercreditor
Agreement.
8.11 The Arranger. The Arranger, in its capacity as such,
shall have no duties or responsibilities, and shall incur no liability,
under this Agreement and the other Loan Documents.
SECTION 9. MISCELLANEOUS
9.1 Amendments and Waivers. Neither this Agreement, any
other Loan Document, nor any terms hereof or thereof may be amended,
supplemented or modified except in accordance with the provisions of this
Section 9.1. The Required Lenders and each Loan Party party to the
relevant Loan Document may, or (with the written consent of the Required
Lenders) the Administrative Agent and each Loan Party party to the
relevant Loan Document may, from time to time, (a) enter into written
amendments, supplements or modifications hereto and to the other Loan
Documents for the purpose of adding any provisions to this Agreement or
the other Loan Documents or changing in any manner the rights of the
Lenders or of the Loan Parties hereunder or thereunder or (b) waive, on
such terms and conditions as the Required Lenders, or the Administrative
Agent, as the case may be, may specify in such instrument, any of the
requirements of this Agreement or the other Loan Documents or any Default
or Event of Default and its consequences; provided, however, that no such
waiver and no such amendment, supplement or modification shall (i)
forgive the principal amount or extend the final scheduled date of
maturity of any Loan, extend the scheduled date of any amortization
payment in respect of any Term Loan, reduce the stated rate of any
interest or fee payable hereunder or extend the scheduled date of any
payment thereof, increase the amount or extend the expiration date of any
Lender's Revolving Credit Commitment, or modify any pro rata provisions
of this Agreement pursuant to Section 2.18 in each case without the
consent of each Lender directly affected thereby; (ii) amend, modify or
waive any provision of this Section 9.1 or reduce any percentage
specified in the definition of Required Lenders or Required Prepayment
Lenders, consent to the assignment or transfer by the Borrower of any of
its rights and obligations under this Agreement and the other Loan
Documents, release all or substantially all of the Collateral, release
all or substantially all of the Subsidiary Guarantors from their
obligations under the Subsidiaries Guarantee or release Brant-Allen from
its obligations under the Brant-Allen Guarantee, in each case without the
written consent of all Lenders; (iii) amend, modify or waive any
condition precedent to any extension of credit under the Revolving Credit
Facility set forth in Section 4.2 (including, without limitation, in
connection with any waiver of an existing Default or Event of Default)
without the written consent of the Required Revolving Credit Facility
Lenders; (iv) reduce the percentage specified in the definition of
Required Facility Lenders without the written consent of all Lenders
under each affected Facility; (v) amend, modify or waive any provision of
Section 9 without the written consent of the Agents; or (vi) modify
Section 2.10 without the written consent of the Required Prepayment
Lenders, or modify the provisions of Section 2.16(a), (b), (c) or (d)
without the consent of each Lender affected thereby. Any such waiver and
any such amendment, supplement or modification shall apply equally to
each of the Lenders and shall be binding upon the Loan Parties, the
Lenders, the Administrative Agent and all future holders of the Loans. In
the case of any waiver, the Loan Parties, the Lenders and the
Administrative Agent shall be restored to their former position and
rights hereunder and under the other Loan Documents, and any Default or
Event of Default waived shall be deemed to be cured and not continuing;
but no such waiver shall extend to any subsequent or other Default or
Event of Default, or impair any right consequent thereon.
9.2 Notices. All notices, requests and demands to or upon
the respective parties hereto to be effective shall be in writing
(including by telecopy), and, unless otherwise expressly provided herein,
shall be deemed to have been duly given or made when delivered, or three
Business Days after being deposited in the mail, postage prepaid, or, in
the case of telecopy notice, when received, addressed as follows in the
case of the Borrower and the Administrative Agent, and as set forth in an
administrative questionnaire delivered to the Administrative Agent in the
case of the Lenders, or to such other address as may be hereafter
notified by the respective parties hereto:
The Borrower: BEAR ISLAND PAPER COMPANY, LLC
c/o Brant-Allen Industries
Post Office Box 3443
80 Field Point Road
Greenwich, Connecticut 07830
The Arranger: TD SECURITIES (USA) INC.
31 West 52nd Street
New York, New York 10019
Attention: John Lawson
Telecopy: (212) 397-4135
Telephone: (212) 827-7708
The Administrative Agent: TORONTO DOMINION (TEXAS), INC.
909 Fannin Street
Houston, Texas 77010
Attention: Jano Mott
Telecopy: (713) 951-9921
Telephone: (713) 653-8231
with a copy to: THE TORONTO-DOMINION BANK
31 West 52nd Street
New York, New York 10019
Attention: John Lawson
Telecopy: (212) 397-4135
Telephone: (212) 827-7708
provided that any notice, request or demand to or upon the either Agent
or the Lenders shall not be effective until received.
9.3 No Waiver; Cumulative Remedies. No failure to exercise
and no delay in exercising, on the part of the either Agent or any
Lender, any right, remedy, power or privilege hereunder or under the
other Loan Documents shall operate as a waiver thereof; nor shall any
single or partial exercise of any right, remedy, power or privilege
hereunder preclude any other or further exercise thereof or the exercise
of any other right, remedy, power or privilege. The rights, remedies,
powers and privileges herein provided are cumulative and not exclusive of
any rights, remedies, powers and privileges provided by law.
9.4 Survival of Representations and Warranties. All
representations and warranties made hereunder, in the other Loan
Documents and in any document, certificate or statement delivered
pursuant hereto or in connection herewith shall survive the execution and
delivery of this Agreement and the making of the Loans hereunder.
9.5 Payment of Expenses. The Borrower agrees (a) to pay or
reimburse the Agents for all their reasonable out-of-pocket costs and
expenses incurred in connection with the initial syndication,
development, preparation and execution of, and any amendment, supplement
or modification to, this Agreement and the other Loan Documents and any
other documents prepared in connection herewith or therewith, and the
consummation and administration of the transactions contemplated hereby
and thereby, including, without limitation, the reasonable fees and
disbursements of counsel to the Administrative Agent, (b) to pay or
reimburse each Lender and the Agents for all its costs and expenses
incurred in connection with the enforcement or preservation of any rights
under this Agreement, the other Loan Documents and any such other
documents, including, without limitation, the fees and disbursements of
counsel (including the allocated fees and expenses of in-house counsel)
to each Lender and of counsel to the Agents, (c) to pay, indemnify, and
hold each Lender and the Agents harmless from, any and all recording and
filing fees or any amendment, supplement or modification of, or any
waiver or consent under or in respect of, this Agreement, the other Loan
Documents and any such other documents, and (d) to pay, indemnify, and
hold each Lender and the Agents and their respective officers, directors,
trustees, employees, affiliates, agents and controlling persons (each, an
"indemnitee") harmless from and against any and all other liabilities,
obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature whatsoever with
respect to any pending or threatened litigation or proceeding arising in
respect of the execution, delivery, enforcement, performance and
administration of this Agreement, the other Loan Documents and any such
other documents, including, without limitation, any of the foregoing
relating to the use of proceeds of the Loans or the violation of,
noncompliance with or liability under, any Environmental Law applicable
to the operations of Brant-Allen, the Borrower, any of its Subsidiaries
or any of the Properties (all the foregoing in this clause (d),
collectively, the "indemnified liabilities"), provided, that the Borrower
shall have no obligation hereunder to any indemnitee with respect to
indemnified liabilities to the extent such indemnified liabilities result
from the gross negligence or willful misconduct of such indemnitee.
Without limiting the foregoing, and to the extent permitted by applicable
law, the Borrowers agree not to assert and to cause its Subsidiaries not
to assert, and hereby waive and agree to cause their Subsidiaries to so
waive, all rights for contribution or any other rights of recovery with
respect to all claims, demands, penalties, fines, liabilities,
settlements, damages, costs and expenses of whatever kind or nature,
under or related to Environmental Laws applicable to Brant-Allen, the
Borrower, any of its Subsidiaries or any of the Properties that any of
them might have by statute or otherwise against any indemnitee, except to
the extent resulting from the gross negligence or willful misconduct of
any indemnitee. The agreements in this Section shall survive repayment of
the Loans and all other amounts payable hereunder.
9.6 Successors and Assigns; Participations and
Assignments. (a) This Agreement shall be binding upon and inure to the
benefit of the Borrower, the Lenders, the Agents, all future holders of
the Loans and their respective successors and assigns, except that the
Borrower may not assign or transfer any of its rights or obligations
under this Agreement without the prior written consent of the Agents and
each Lender.
(b) Any Lender may, without the consent of the Borrower,
in accordance with applicable law, at any time sell to one or more banks,
financial institutions or other entities (each, a "Participant")
participating interests in any Loan owing to such Lender, any Commitment
of such Lender or any other interest of such Lender hereunder and under
the other Loan Documents. In the event of any such sale by a Lender of a
participating interest to a Participant, such Lender's obligations under
this Agreement to the other parties to this Agreement shall remain
unchanged, such Lender shall remain solely responsible for the
performance thereof, such Lender shall remain the holder of any such Loan
for all purposes under this Agreement and the other Loan Documents, and
the Borrower and the Agents shall continue to deal solely and directly
with such Lender in connection with such Lender's rights and obligations
under this Agreement and the other Loan Documents. In no event shall any
Participant under any such participation 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 affect the Participant as
described in (i) of the proviso in Section 9.1, in each case to the
extent subject to such participation. The Borrower agrees that at anytime
that an Event of Default has occurred and is continuing, each Participant
shall, to the maximum extent permitted by applicable law, be deemed to
have the right of setoff in respect of its participating interest in
amounts owing under this Agreement to the same extent as if the amount of
its participating interest were owing directly to it as a Lender under
this Agreement, provided that, in purchasing such participating interest,
such Participant shall be deemed to have agreed to share with the Lenders
the proceeds thereof as provided in Section 9.7(a) as fully as if it were
a Lender hereunder. The Borrower also agrees that each Participant shall
be entitled to the benefits of Sections 2.17, 2.18 and 2.19 with respect
to its participation in the Commitments and the Loans outstanding from
time to time as if it was a Lender; provided that, in the case of Section
2.18, such Participant shall have complied with the requirements of said
Section and provided, further, that no Participant shall be entitled to
receive any greater amount pursuant to any such Section than the
transferor Lender would have been entitled to receive in respect of the
amount of the participation transferred by such transferor Lender to such
Participant had no such transfer occurred.
(c) Any Lender (an "Assignor") may, in accordance with
applicable law, at any time and from time to time upon three Business
Days notice to the Administrative Agent assign to any Lender or any
affiliate thereof or any Approved Fund or, with the consent of the
Borrower, and the Administrative Agent (which, in each case, shall not be
unreasonably withheld or delayed) (provided the consent of the Borrower
need not be obtained with respect to any assignment to a Lender or any
Affiliate thereof), to an additional bank, financial institution or other
entity (an "Assignee") all or any part of its rights and obligations
under this Agreement pursuant to an Assignment and Acceptance,
substantially in the form of Exhibit I, executed by such Assignee, such
Assignor and the Administrative Agent (and, where the consent of the
Borrower is required pursuant to the foregoing provisions, by the
Borrower) and delivered to the Administrative Agent for its acceptance
and recording in the Register; provided that, other than in the case of
an assignment of all of a Lender's interests under this Agreement, after
giving effect to such assignment, and to all other assignments by such
Assignor and assignments to such Assignee, the sum of the Commitments of
and Loans owing to such Assignee, and if such Assignor is assigning only
a portion of its Commitments and Loans, of such Assignor, is at least
$5,000,000 unless otherwise agreed by the Borrower and the Administrative
Agent and that no such assignment shall be effective until executed by
the Administrative Agent. Any such assignment need not be ratable as
among the Facilities. Upon such execution, delivery, acceptance and
recording, from and after the effective date determined pursuant to such
Assignment and Acceptance, (x) the Assignee thereunder shall be a party
hereto and, to the extent provided in such Assignment and Acceptance,
have the rights and obligations of a Lender hereunder with a Commitment
and/or Loans as set forth therein, and (y) the Assignor thereunder shall,
to the extent provided in such Assignment and Acceptance, be released
from its obligations under this Agreement (and, in the case of an
Assignment and Acceptance covering all of an Assignor's rights and
obligations under this Agreement, such assigning Lender shall cease to be
a party hereto except for the obligations of the Borrower under Section
9.5, which shall survive such assignment). Subject to Sections 2.18(d)
and (e), but notwithstanding any provision of this Section 9.6, the
consent of the Borrower shall not be required for any assignment which
occurs at any time when any Event of Default shall have occurred and be
continuing.
(d) The Administrative Agent shall maintain at its address
referred to in Section 9.2 a copy of each Assignment and Acceptance
delivered to it and a register (the "Register") for the recordation of
the names and addresses of the Lenders and the Commitment of, and
principal amount of the Loans owing to, each Lender from time to time and
any Notes evidencing such Loans. The entries in the Register shall be
conclusive, in the absence of manifest error, and the Borrower, the
Administrative Agent and the Lenders shall treat each Person whose name
is recorded in the Register as the owner of the Loan and any Note
evidencing such Loan recorded therein for all purposes of this Agreement.
Any assignment of any Loan whether or not evidenced by a Note shall be
effective only upon appropriate entries with respect thereto being made
in the Register (and each Note shall expressly so provide). Any
assignment or transfer of all or part of a Loan evidenced by a Note shall
be registered on the Register only upon surrender for registration of
assignment or transfer of the Note evidencing such Loan, accompanied by a
duly executed Assignment and Acceptance, and thereupon one or more new
Notes in the same aggregate principal amount shall be issued to the
designated Assignee and the old Notes shall be returned by the
Administrative Agent to the Borrower marked "cancelled". The Register
shall be available for inspection by the Borrower or any Lender at any
reasonable time and from time to time upon reasonable prior notice.
(e) Upon its receipt of an Assignment and Acceptance
executed by an assigning Lender and an Assignee (and, in the case of an
Assignee that is not then a Lender or an affiliate thereof or a Person
under common management with such Lender, by the Borrower or the
Administrative Agent) together with payment by the Assignor or the
Assignee to the Administrative Agent of a registration and processing fee
of $3,500 (except that no such registration and processing fee shall be
payable (y) in connection with an assignment by The Toronto-Dominion Bank
or (z) in the case of an Assignee which is already a Lender or is an
affiliate of a Lender or a Person under common management with a Lender),
the Administrative Agent shall (i) promptly accept such Assignment and
Acceptance and (ii) on the effective date determined pursuant thereto
record the information contained therein in the Register and give notice
of such acceptance and recordation to the Lenders and the Borrower. On or
prior to such effective date, the Borrower, at its own expense, upon
request, shall execute and deliver to the Administrative Agent (in
exchange for the Revolving Credit Note and/or Term Notes, as the case may
be, of the assigning Lender) a new Revolving Credit Note and/or Term
Notes, as the case may be, to the order of such Assignee in an amount
equal to the Revolving Credit Commitment and/or applicable Term Loans, as
the case may be, assumed or acquired by it pursuant to such Assignment
and Acceptance and, if the assigning Lender has retained a Revolving
Credit Commitment and/or Term Loans, as the case may be, upon request, a
new Revolving Credit Note and/or Term Note, as the case may be, to the
order of the assigning Lender in an amount equal to the Revolving Credit
Commitment and/or applicable Term Loans, as the case may be, retained by
it hereunder. Such new Notes shall be dated the Closing Date and shall
otherwise be in the form of the Note replaced thereby.
(f) For avoidance of doubt, the parties to this Agreement
acknowledge that the provisions of this Section concerning assignments of
Loans and Notes relate only to absolute assignments and that such
provisions do not prohibit assignments creating security interests,
including, without limitation, any pledge or assignment by a Lender of
any Loan or Note to any Federal Reserve Bank in accordance with
applicable law.
9.7 Adjustments; Set-off. (a) Except to the extent that
this Agreement provides for payments to be allocated to the Lenders under
a particular Facility, if any Lender (a "Benefitted Lender") shall at any
time receive any payment of all or part of its Loans owing to it, or
interest thereon, or receive any collateral in respect thereof (whether
voluntarily or involuntarily, by set-off, pursuant to events or
proceedings of the nature referred to in Section 7(f), or otherwise), in
a greater proportion than any such payment to or collateral received by
any other Lender, if any, in respect of such other Lender's Loans owing
to such other Lender, or interest thereon, such Benefitted Lender shall
purchase for cash from the other Lenders a participating interest in such
portion of each such other Lender's Loan owing to each such other Lender,
or shall provide such other Lenders with the benefits of any such
collateral, or the proceeds thereof, as shall be necessary to cause such
Benefitted Lender to share the excess payment or benefits of such
collateral or proceeds ratably with each of the Lenders; provided,
however, that if all or any portion of such excess payment or benefits is
thereafter recovered from such Benefitted Lender, such purchase shall be
rescinded, and the purchase price and benefits returned, to the extent of
such recovery, but without interest.
(b) In addition to any rights and remedies of the Lenders
provided by law, each Lender shall have the right, without prior notice
to the Borrower, any such notice being expressly waived by the Borrower
to the extent permitted by applicable law, at any time when an Event of
Default has occurred and is continuing, to set off and appropriate and
apply against such amount any and all deposits (general or special, time
or demand, provisional or final), in any currency, and any other credits,
indebtedness or claims, in any currency, in each case whether direct or
indirect, absolute or contingent, matured or unmatured, at any time held
or owing by such Lender or any branch or agency thereof to or for the
credit or the account of the Borrower. Each Lender agrees promptly to
notify the Borrower and the Administrative Agent after any such setoff
and application made by such Lender, provided that the failure to give
such notice shall not affect the validity of such setoff and application.
9.8 Counterparts. This Agreement may be executed by one or
more of the parties to this Agreement on any number of separate
counterparts (including by telecopy), and all of said counterparts taken
together shall be deemed to constitute one and the same instrument. A set
of the copies of this Agreement signed by all the parties shall be lodged
with the Borrower and the Administrative Agent.
9.9 Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof,
and any such prohibition or unenforceability in any jurisdiction shall
not invalidate or render unenforceable such provision in any other
jurisdiction.
9.10 Integration. This Agreement and the other Loan
Documents represent the agreement of the Borrower, the Administrative
Agent and the Lenders with respect to the subject matter hereof, and
there are no promises, undertakings, representations or warranties by the
Administrative Agent or any Lender relative to subject matter hereof not
expressly set forth or referred to herein or in the other Loan Documents.
9.11 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW
YORK.
9.12 Submission To Jurisdiction; Waivers. The Borrower
hereby irrevocably and unconditionally:
(a) submits for itself and its Property in any legal
action or proceeding relating to this Agreement and the other
Loan Documents to which it is a party, or for recognition and
enforcement of any judgment in respect thereof, to the
non-exclusive general jurisdiction of the Courts of the State of
New York, the courts of the United States of America for the
Southern District of New York, and appellate courts from any
thereof;
(b) consents that any such action or proceeding may be
brought in such courts and waives any objection that it may now
or hereafter have to the venue of any such action or proceeding
in any such court or that such action or proceeding was brought
in an inconvenient court and agrees not to plead or claim the
same;
(c) agrees that service of process in any such action or
proceeding may be effected by mailing a copy thereof by
registered or certified mail (or any substantially similar form
of mail), postage prepaid, the Borrower, its address set forth in
Section 9.2 or at such other address of which the Administrative
Agent shall have been notified pursuant thereto;
(d) agrees that nothing herein shall affect the right to
effect service of process in any other manner permitted by law or
shall limit the right to sue in any other jurisdiction; and
(e) waives, to the maximum extent not prohibited by law,
any right it may have to claim or recover in any legal action or
proceeding referred to in this Section 9.12 any special,
exemplary, punitive or consequential damages.
9.13 Acknowledgements. The Borrower hereby acknowledges
that:
(a) it has been advised by counsel in the negotiation,
execution and delivery of this Agreement and the other Loan
Documents;
(b) neither the Administrative Agent nor any Lender has
any fiduciary relationship with or duty to the Borrower arising
out of or in connection with this Agreement or any of the other
Loan Documents, and the relationship between Administrative Agent
and Lenders, on one hand, and the Borrower, on the other hand, in
connection herewith or therewith is solely that of debtor and
creditor; and
(c) no joint venture is created hereby or by the other
Loan Documents or otherwise exists by virtue of the transactions
contemplated hereby among the Lenders or among the Borrower and
the Lenders.
9.14 WAIVERS OF JURY TRIAL. THE BORROWER, THE AGENTS
AND THE LENDERS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY
JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY
OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.
9.15 Confidentiality. Each of the Agents and each Lender
agrees to keep confidential all non-public information provided to it by
any Loan Party pursuant to this Agreement that is designated by such Loan
Party as confidential; provided that nothing herein shall prevent any
Agent or any Lender from disclosing any such information (a) to the
Administrative Agent, any other Lender or any affiliate of any Lender,
(b) to any Participant or Assignee (each, a "Transferee") or prospective
Transferee which agrees to comply with the provisions of this Section,
(c) to the employees, directors, trustees, agents, attorneys, accountants
and other professional advisors of such Lender or its affiliates who
agree to comply with the provisions of this Section, (d) upon the request
or demand of any Governmental Authority having jurisdiction over the such
Agent or such Lender, (e) in response to any order of any court or other
Governmental Authority or as may otherwise be required pursuant to any
Requirement of Law, (f) if requested or required to do so in connection
with any litigation or similar proceeding, (g) which has been publicly
disclosed other than in breach of this Section 9.15, (h) to the National
Association of Insurance Commissioners or any similar organization or any
nationally recognized rating agency that requires access to information
about a Lender's investment portfolio in connection with ratings issued
with respect to such Lender, or (i) in connection with the exercise of
any remedy hereunder or under any other Loan Document.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered by their proper and duly
authorized officers as of the day and year first above written.
BEAR ISLAND PAPER COMPANY, LLC, as
Borrower
By: /s/ Edward D. Sherrick
-----------------------------------
Title: Vice President of Finance
TD SECURITIES (USA) INC.,
as Arranger
By: /s/ John Lawson
--------------------------------------
Title: Vice President and Director
TORONTO-DOMINION (TEXAS), INC., as
Administrative Agent
By: /s/ Jano Mott
-------------------------------------
Title: Vice President
TORONTO-DOMINION (TEXAS), INC.
By: /s/ Jano Mott
Title: Vice President
CHRISTIANIA BANK OG KREDITKASS ASA
By: /s/ Carl Petter Svendsen
Title: First Vice President
By: /s/ Peter M. Dodge
---------------------------------
Title: First Vice President
KEYPORT LIFE INSURANCE COMPANY
By: /s/ Daniel T. H. Yin
---------------------------------
Title: Assistant Vice President
PRIME INCOME TRUST
By: /s/ Rafael Scolari
---------------------------------
Title: Sr. VP
DEEPROCK & COMPANY
BY: EATON VANCE MANAGEMENT, AS
INVESTMENT ADVISOR
By: /s/ Scott H. Page
---------------------------------
Title: Vice President
MERRILL LYNCH SENIOR FLOATING RATE
FUND, INC.
By: /s/ Gilles Marchand, CFA
---------------------------------
Title: Authorized Signatory
VAN KAMPEN AMERICAN CAPITAL PRIME
RATE INCOME TRUST
By: /s/ Jeffrey W. Maillet
---------------------------------
Title: Sr. Vice Pres. & Director
Annex A
PRICING GRID FOR REVOLVING CREDIT LOANS,
TERM LOANS AND COMMITMENT FEES
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------
Applicable Applicable
Margin- Margin- Applicable Applicable
Consolidated Eurodollar Base Rate Margin- Margin-Base
Leverage Revolving Revolving Eurodollar Rate Term Commitment
Ratio Credit Loans Credit Loans Term Loan Loans Fee
----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
= 4.00 x 2.75% 1.75% 3.00% 2.00% .50%
= 3.00 x 2.50% 1.50% 3.00% 2.00% .50%
= 2.50 x 2.25% 1.25% 2.75% 1.75% .375%
= 2.00 x 2.00% 1.00% 2.75% 1.75% .375%
2.00 x 1.50% 0.50% 2.75% 1.75% .375%
==================== ================ ================= ============== ============= ==============
Changes in the Applicable Margin or in the Commitment Fee
Rate resulting from changes in the Consolidated Leverage Ratio shall
become effective on the date (the "Adjustment Date") on which financial
statements are delivered to the Administrative Agent and the Lenders
pursuant to Section 6.1 (but in any event not later than the 45th day
after the end of each of the first three quarterly periods of each fiscal
year or the 90th day after the end of each fiscal year, as the case may
be) and shall remain in effect until the next change to be effected
pursuant to this paragraph. If any financial statements referred to above
are not delivered within the time periods specified above, then, until
such financial statements are delivered, the Consolidated Leverage Ratio
as at the end of the fiscal period that would have been covered thereby
shall for the purposes of this definition be deemed to be greater than 4
to 1. Each determination of the Consolidated Leverage Ratio pursuant to
this definition shall be made with respect to the period of four
consecutive fiscal quarters of the Borrower ending at the end of the
period covered by the relevant financial statements; provided, however,
that with respect to the end of the first fiscal quarter ending after the
Closing Date, such determination shall be made by multiplying the results
for such quarter by four; with respect to the end of the second fiscal
quarter ending after the Closing Date, such determination shall be made
by adding the results for the two fiscal quarters ending after the
Closing Date and multiplying by two; and with respect to the end of the
third fiscal quarter ending after the Closing Date, such determination
shall be made by adding the results for the three fiscal quarters ending
after the Closing Date and multiplying by 4/3.
Notwithstanding the foregoing, until January 1, 1999, the
Applicable Margin in respect of Term Loans which are Eurodollar Loans
shall be 3.00%, and the Applicable Margin in respect of Term Loans which
are Base Rate Loans shall be 2.00%. From and after the Closing Date to
the first measurement date described above, the Applicable Margin in
respect of Revolving Credit Loans which are Eurodollar Loans shall be 2.75%,
and the Applicable Margin in respect of Revolving Credit Loans which are
Base Rate Loans, 1.75%, and the Commitment Fee Rate shall be .50%.
EXHIBIT A
SUBSIDIARY GUARANTEE
SUBSIDIARY GUARANTEE, dated as of December 1, 1997, made by
each of the corporations that are signatories hereto (the
"Guarantors"), in favor of TORONTO DOMINION (TEXAS), INC., as
Administrative Agent (in such capacity, the "Administrative
Agent") for the lenders (the "Lenders") parties to the Credit
Agreement, dated as of December 1, 1997 (as amended, supplemented
or otherwise modified from time to time, the "Credit Agreement"),
among Bear Island Paper Company, LLC (the "Borrower"), the
Lenders, the Arranger named therein and the Administrative Agent.
WITNESSETH:
WHEREAS, pursuant to the Credit Agreement, the Lenders have
severally agreed to make Loans to the Borrower upon the terms and
subject to the conditions set forth therein;
WHEREAS, the Borrower owns directly or indirectly all of the
issued and outstanding equity interests of each Guarantor;
WHEREAS, the Borrower and the Guarantors are engaged in
related businesses, and each Guarantor will derive substantial
direct and indirect benefit from the making of the Loans; and
WHEREAS, it is a condition precedent to the obligation of
the Lenders to make their respective Loans to the Borrower under
the Credit Agreement that the Guarantors shall have executed and
delivered this Guarantee to the Administrative Agent for the
ratable benefit of the Lenders.
NOW, THEREFORE, in consideration of the premises and to
induce the Administrative Agent and the Lenders to enter into the
Credit Agreement and to induce the Lenders to make their
respective Loans to the Borrower under the Credit Agreement, the
Guarantors hereby agree with the Administrative Agent, for the
ratable benefit of the Lenders, as follows:
1. Defined Terms. (a) Unless otherwise defined herein,
terms defined in the Credit Agreement and used herein shall have
the meanings given to them in the Credit Agreement.
(b) The words "hereof," "herein" and "hereunder" and words
of similar import when used in this Guarantee shall refer to this
Guarantee as a whole and not to any particular provision of this
Guarantee, and section and paragraph references are to this
Guarantee unless otherwise specified.
(c) The meanings given to terms defined herein shall be
equally applicable to both the singular and plural forms of such
terms.
2. Guarantee (a) Subject to the provisions of paragraph
2(b), each of the Guarantors hereby, jointly and severally,
unconditionally and irrevocably, guarantees to the Administrative
Agent, for the ratable benefit of the Lenders and their
respective permitted successors, indorsees, transferees and
assigns, the prompt and complete payment and performance by the
Borrower when due (whether at the stated maturity, by
acceleration or otherwise) of the Obligations.
(b) Anything herein or in any other Loan Document to the
contrary notwithstanding, the maximum liability of each Guarantor
hereunder and under the other Loan Documents shall in no event
exceed the amount which can be guaranteed by such Guarantor under
applicable federal and state laws relating to the insolvency of
debtors.
(c) Each Guarantor further agrees to pay any and all
reasonable out-of-pocket expenses (including, without limitation,
all reasonable fees and disbursements of counsel) which may be
paid or incurred by the Administrative Agent or any Lender in
enforcing, or obtaining advice of counsel in respect of, any
rights with respect to, or collecting, any or all of the
Obligations and/or enforcing any rights with respect to, or
collecting against, such Guarantor under this Guarantee. This
Guarantee shall remain in full force and effect until the
Obligations are paid in full and the Commitments are terminated,
notwithstanding that from time to time prior thereto the Borrower
may be free from any Obligations.
(d) Each Guarantor agrees that the Obligations may at any
time and from time to time exceed the amount of the liability of
such Guarantor hereunder without impairing this Guarantee or
affecting the rights and remedies of the Administrative Agent or
any Lender hereunder.
(e) No payment or payments made by the Borrower, any of the
Guarantors, any other guarantor or any other Person or received
or collected by the Administrative Agent or any Lender from the
Borrower, any of the Guarantors, any other guarantor or any other
Person by virtue of any action or proceeding or any set-off or
appropriation or application at any time or from time to time in
reduction of or in payment of the Obligations other than payments
made by such Guarantor in respect of the Obligations or payments
received or collected from such Guarantor in respect of the
Obligations shall be deemed to modify, reduce, release or
otherwise affect the liability of any Guarantor hereunder which
shall, notwithstanding any such payment or payments, remain
liable for the Obligations up to the maximum liability of such
Guarantor hereunder until the Obligations are paid in full and
the Commitments are terminated.
(f) Each Guarantor agrees that whenever, at any time, or
from time to time, it shall make any payment to the
Administrative Agent or any Lender on account of its liability
hereunder, it will notify the Administrative Agent in writing
that such payment is made under this Guarantee for such purpose.
3. Right of Contribution. Each Guarantor hereby agrees
that to the extent that a Guarantor shall have paid more than its
proportionate share of any payment made hereunder, such Guarantor
shall be entitled to seek and receive contribution from and
against any other Guarantor hereunder who has not paid its
proportionate share of such payment. Each Guarantor's right of
contribution shall be subject to the terms and conditions of
Section 5 hereof. The provisions of this Section shall in no
respect limit the obligations and liabilities of any Guarantor to
the Administrative Agent and the Lenders, and each Guarantor
shall remain liable to the Administrative Agent and the Lenders
for the full amount guaranteed by such Guarantor hereunder.
4. Right of Set-off. Each Guarantor hereby irrevocably
authorizes each Lender at any time and from time to time when an
Event of Default has occurred and is continuing, without notice
to such Guarantor or any other Guarantor, any such notice being
expressly waived by each Guarantor, to set-off and appropriate
and apply any and all deposits (general or special, time or
demand, provisional or final), in any currency, and any other
credits, indebtedness or claims, in any currency, in each case
whether direct or indirect, absolute or contingent, matured or
unmatured, at any time held or owing by such Lender to or for the
credit or the account of such Guarantor, or any part thereof in
such amounts as such Lender may elect, against and on account of
the obligations and liabilities of such Guarantor to such Lender
hereunder and claims of every nature and description of such
Lender against such Guarantor, in any currency, whether arising
hereunder, under the Credit Agreement, any Note, any other Loan
Documents or otherwise, as such Lender may elect, whether or not
the Administrative Agent or any Lender has made any demand for
payment and although such obligations, liabilities and claims may
be contingent or unmatured. The Administrative Agent and each
Lender shall notify such Guarantor promptly of any such set-off
and the application made by the Administrative Agent or such
Lender, provided that the failure to give such notice shall not
affect the validity of such set-off and application. The rights
of the Administrative Agent and each Lender under this Section
are in addition to other rights and remedies (including, without
limitation, other rights of set-off) which the Administrative
Agent or such Lender may have.
5. No Subrogation. Notwithstanding any payment or
payments made by any of the Guarantors hereunder or any set-off
or application of funds of any of the Guarantors by any Lender,
no Guarantor shall be entitled to be subrogated to any of the
rights of the Administrative Agent or any Lender against the
Borrower or any other Guarantor or any collateral security or
guarantee or right of offset held by any Lender for the payment
of the Obligations, nor shall any Guarantor seek or be entitled
to seek any contribution or reimbursement from the Borrower or
any other Guarantor in respect of payments made by such Guarantor
hereunder, until all amounts owing to the Administrative Agent
and the Lenders by the Borrower on account of the Obligations are
paid in full and the Commitments are terminated. If any amount
shall be paid to any Guarantor on account of such subrogation
rights at any time when all of the Obligations shall not have
been paid in full, such amount shall be held by such Guarantor in
trust for the Administrative Agent and the Lenders, segregated
from other funds of such Guarantor, and shall, forthwith upon
receipt by such Guarantor, be turned over to the Administrative
Agent in the exact form received by such Guarantor (duly indorsed
by such Guarantor to the Administrative Agent, if required), to
be applied against the Obligations, whether matured or unmatured,
in such order as the Credit Agreement shall provide.
6. Amendments, etc. with respect to the Obligations;
Waiver of Rights. Each Guarantor shall remain obligated
hereunder notwithstanding that, without any reservation of rights
against any Guarantor and without notice to or further assent by
any Guarantor, any demand for payment of any of the Obligations
made by the Administrative Agent or any Lender may be rescinded
by such party and any of the Obligations continued, and the
Obligations, or the liability of any other party upon or for any
part thereof, or any collateral security or guarantee therefor or
right of offset with respect thereto, may, from time to time, in
whole or in part, be renewed, extended, amended, modified,
accelerated, compromised, waived, surrendered or released by the
Administrative Agent or any Lender, and the Credit Agreement, the
Notes and the other Loan Documents and any other documents
executed and delivered in connection therewith may be amended,
modified, supplemented or terminated, in whole or in part, as the
Administrative Agent (or the Required Lenders, as the case may
be) may deem advisable from time to time, and any collateral
security, guarantee or right of offset at any time held by the
Administrative Agent or any Lender for the payment of the
Obligations may be sold, exchanged, waived, surrendered or
released. Neither the Administrative Agent nor any Lender shall
have any obligation to protect, secure, perfect or insure any
Lien at any time held by it as security for the Obligations or
for this Guarantee or any property subject thereto. When making
any demand hereunder against any of the Guarantors, the
Administrative Agent or any Lender may, but shall be under no
obligation to, make a similar demand on the Borrower or any other
Guarantor or guarantor, and any failure by the Administrative
Agent or any Lender to make any such demand or to collect any
payments from the Borrower or any such other Guarantor or
guarantor or any release of the Borrower or such other Guarantor
or guarantor shall not relieve any of the Guarantors in respect
of which a demand or collection is not made or any of the
Guarantors not so released of their several obligations or
liabilities hereunder, and shall not impair or affect the rights
and remedies, express or implied, or as a matter of law, of the
Administrative Agent or any Lender against any of the Guarantors.
For the purposes hereof "demand" shall include the commencement
and continuance of any legal proceedings.
7. Guarantee Absolute and Unconditional. Each Guarantor
waives any and all notice of the creation, renewal, extension or
accrual of any of the Obligations and notice of or proof of
reliance by the Administrative Agent or any Lender upon this
Guarantee or acceptance of this Guarantee, the Obligations, and
any of them, shall conclusively be deemed to have been created,
contracted or incurred, or renewed, extended, amended or waived,
in reliance upon this Guarantee; and all dealings between the
Borrower and any of the Guarantors, on the one hand, and the
Administrative Agent and the Lenders, on the other hand, likewise
shall be conclusively presumed to have been had or consummated in
reliance upon this Guarantee. Each Guarantor waives diligence,
presentment, protest, demand for payment and notice of default or
nonpayment to or upon the Borrower or any of the Guarantors with
respect to the Obligations. Each Guarantor understands and
agrees that this Guarantee shall be construed as a continuing,
absolute and unconditional guarantee of payment without regard to
(a) the validity, regularity or enforceability of the Credit
Agreement, any Note or any other Loan Document, any of the
Obligations or any other collateral security therefor or
guarantee or right of offset with respect thereto at any time or
from time to time held by the Administrative Agent or any Lender
(b) any defense, set-off or counterclaim (other than a defense of
payment or performance) which may at any time be available to or
be asserted by the Borrower against the Administrative Agent or
any Lender, or (c) any other circumstance whatsoever (with or
without notice to or knowledge of the Borrower or such Guarantor)
which constitutes, or might be construed to constitute, an
equitable or legal discharge of the Borrower for the Obligations,
or of such Guarantor under this Guarantee, in bankruptcy or in
any other instance. When pursuing its rights and remedies
hereunder against any Guarantor, the Administrative Agent and any
Lender may, but shall be under no obligation to, pursue such
rights and remedies as it may have against the Borrower or any
other Person or against any collateral security or guarantee for
the Obligations or any fight of offset with respect thereto, and
any failure by the Administrative Agent or any Lender to pursue
such other rights or remedies or to collect any payments from the
Borrower or any such other Person or to realize upon any such
collateral security or guarantee or to exercise any such right of
offset, or any release of the Borrower or any such other Person
or any such collateral security, guarantee or right of offset,
shall not relieve such Guarantor of any liability hereunder, and
shall not impair or affect the rights and remedies, whether
express, implied or available as a matter of law, of the
Administrative Agent and the Lenders against such Guarantor.
This Guarantee shall remain in full force and effect and be
binding in accordance with and to the extent of its terms upon
each Guarantor and the successors and assigns thereof, and shall
inure to the benefit of the Administrative Agent and the Lenders,
and their respective successors, indorsees, transferees and
assigns, until all the Obligations and the obligations of each
Guarantor under this Guarantee shall have been satisfied by
payment in full and the Commitments shall be terminated,
notwithstanding that from time to time during the term of the
Credit Agreement the Borrower may be free from any Obligations.
8. Reinstatement. This Guarantee shall continue to be
effective, or be reinstated, as the case may be, if at any time
payment, or any part thereof, of any of the Obligations is
rescinded or must otherwise be restored or returned by the
Administrative Agent or any Lender upon the insolvency,
bankruptcy, dissolution, liquidation or reorganization of the
Borrower or any Guarantor, or upon or as a result of the
appointment of a receiver, intervenor or conservator of, or
trustee or similar officer for, the Borrower or any Guarantor or
any substantial part of its property, or otherwise, all as though
such payments had not been made.
9. Payments. Each Guarantor hereby guarantees that
payments hereunder will be paid to the Administrative Agent
without set-off or counterclaim in U.S. Dollars at the office of
the Administrative Agent located at 31 West 52nd Street, New
York, New York 10019.
10. Representations and Warranties. Each Guarantor hereby
represents and warrants that:
(a) it is a corporation or limited liability company duly
organized, validly existing and in good standing under the laws
of the jurisdiction of its organization and has the corporate or
other power and authority and the legal right to own and operate
its property, to lease the property it operates and to conduct
the business in which it is currently engaged;
(b) it has the power and authority and the legal right to
execute and deliver, and to perform its obligations under, this
Guarantee, and has taken all necessary action to authorize its
execution, delivery and performance of this Guarantee;
(c) this Guarantee constitutes a legal, valid and binding
obligation of such Guarantor enforceable in accordance with its
terms, except as affected by bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and other similar laws
relating to or affecting the enforcement of creditors' rights
generally, general equitable principles and an implied covenant
of good faith and fair dealing;
(d) the execution, delivery and performance of this
Guarantee will not violate any provision of any material
Requirement of Law or material Contractual Obligation of such
Guarantor and will not result in or require the creation or
imposition of any Lien on any of the properties or revenues of
such Guarantor pursuant to any such Requirement of Law or
Contractual Obligation of the Guarantor;
(e) no consent or authorization of, filing with, or other
act by or in respect of, any arbitrator or Governmental Authority
and no consent of any other Person (including, without
limitation, any stockholder or creditor of such Guarantor) is
required in connection with the execution, delivery, performance,
validity or enforceability of this Guarantee, except as described
in Section 3.4 of the Credit Agreement; and
(f) no litigation, investigation or proceeding of or before
any arbitrator or Governmental Authority is pending or, to the
knowledge of such Guarantor, threatened by or against such
Guarantor or against any of its properties or revenues (1) with
respect to this Guarantee or any of the transactions contemplated
hereby or, (2) which could reasonably be expected to have a
material adverse effect on the business, operations, property or
financial or other condition of such Guarantor.
Each Guarantor agrees that the foregoing
representations and warranties shall be deemed to have been made
by such Guarantor on the date of each borrowing by the Borrower
under the Credit Agreement on and as of such date of borrowing as
though made hereunder on and as of such date.
11. Authority of Administrative Agent. Each Guarantor
acknowledges that the rights and responsibilities of the
Administrative Agent under this Guarantee with respect to any
action taken by the Administrative Agent or the exercise or non-
exercise by the Administrative Agent of any option, right,
request, judgment or other right or remedy provided for herein or
resulting or arising out of this Guarantee shall, as between the
Administrative Agent and the Lenders, be governed by the Credit
Agreement, but, as between the Administrative Agent and such
Guarantor, the Administrative Agent shall be conclusively
presumed to be acting as agent for the Lenders with full and
valid authority so to act or refrain from acting, and no
Guarantor shall be under any obligation, or entitlement, to make
any inquiry respecting such authority.
12. Notices. All notices, requests and demands to or upon
the Administrative Agent, any Lender or any Guarantor to be
effective shall be in writing (including by telecopy) and, unless
otherwise expressly provided herein, shall be deemed to have been
duly given or made when delivered or deposited in the mails,
postage prepaid or in the case of telecopy notice, when received,
addressed as follows:
(a) if to the Administrative Agent, at its address or
transmission number for notices provided in subsection 9.2 of the
Credit Agreement, and
(b) if to any Guarantor, at its address or transmission
number for notices set forth under its signature below.
The Administrative Agent and each Guarantor may change its
address and transmission numbers for notices by notice in the
manner provided in this Section.
13. Counterparts. This Guarantee may be executed by one or
more of the Guarantors on any number of separate counterparts,
and all of said counterparts taken together shall be deemed to
constitute one and the same instrument. A set of the
counterparts of this Guarantee signed by all the Guarantors shall
be lodged with the Administrative Agent.
14. Severability. Any provision of this Guarantee which is
prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions
hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such
provision in any other jurisdiction.
15. Integration. This Guarantee represents the agreement
of each Guarantor with respect to the subject matter hereof and
there are no promises or representations by the Administrative
Agent or any Lender relative to the subject matter hereof not
reflected herein.
16. Amendments in Writing; No Waiver; Cumulative Remedies.
(a) None of the terms or provisions of this Guarantee may be
waived, amended, supplemented or otherwise modified except by a
written instrument executed by each Guarantor and the
Administrative Agent, provided that any provision of this
Guarantee may be waived by the Administrative Agent and the
Lenders in a letter or agreement executed by the Administrative
Agent or by telex or facsimile transmission from the
Administrative Agent.
(b) Neither the Administrative Agent nor any Lender shall
by any act (except by a written instrument pursuant to paragraph
18(a) hereof), delay, indulgence, omission or otherwise be deemed
to have waived any right or remedy hereunder or to have
acquiesced in any Default or Event of Default or in any breach of
any of the terms and conditions hereof. No failure to exercise,
nor any delay in exercising, on the part of the Administrative
Agent or any Lender, any other, power or privilege hereunder
shall operate as a waiver thereof. No single or partial exercise
of any right, power or privilege hereunder shall preclude any
other or further exercise thereof or the exercise of any other
right, power or privilege. A waiver by the Administrative Agent
or any Lender of any right or remedy hereunder on any one
occasion shall not be construed as a bar to any right or remedy
which the Administrative Agent or such Lender would otherwise
have on any future occasion.
(c) The rights and remedies herein provided are cumulative,
may be exercised singly or concurrently and arc not exclusive of
any other rights or remedies provided by law.
17. Section Headings. The section headings used in this
Guarantee are for convenience of reference only and are not to
affect, the construction hereof or be taken into consideration in
the interpretation hereof.
18. Successors and Assigns. This Guarantee shall be
binding upon the successors and assigns of each Guarantor and
shall inure to the benefit of the Administrative Agent and the
Lenders and their respective permitted successors and assigns.
19. Additional Guarantors. Each Subsidiary of the Borrower
that is required to become a party to this Agreement pursuant to
Section 5.9 of the Credit Agreement shall become a Guarantor for
all purposes of this Agreement upon execution and delivery by
such Subsidiary of an Assumption Agreement in the form of Annex I
hereto.
20. Governing Law. This Guarantee shall be governed by,
and construed and interpreted in accordance with, the law of the
State of New York.
21. Term of this Guarantee. This Guarantee shall continue
in full force and effect until the Obligations and the
obligations of each Guarantor hereunder shall be paid in full and
the Commitments shall have been terminated. Upon such payment
and termination, this Guarantee shall automatically terminate and
the Guarantee hereunder released and the Administrative Agent and
the Lenders shall, upon the request of any Guarantor and at the
expense of such Guarantor, execute such documents and instruments
evidencing such termination and release.
IN WITNESS WHEREOF, each of the undersigned has caused
this Guarantee to be duly executed and delivered by its duly
authorized officer as of the day and year first above written.
[NAME OF SUBSIDIARY [NAME OF SUBSIDIARY
GUARANTOR] GUARANTOR]
By ___________________________ By ___________________________
Title _________________________ Title ________________________
Address for Notices: Address for Notices:
______________________________ ______________________________
______________________________ ______________________________
Telex: ________________________ Telex: _______________________
Fax: __________________________ Fax: ________________________
[NAME OF SUBSIDIARY [NAME OF SUBSIDIARY
GUARANTOR] GUARANTOR]
By ___________________________ By ___________________________
Title _________________________ Title _________________________
Address for Notices: Address for Notices:
______________________________ ______________________________
______________________________ ______________________________
Telex: ________________________ Telex: _______________________
Fax: __________________________ Fax: _________________________
Annex 1 to
Subsidiary Guarantee
ASSUMPTION AGREEMENT, dated as of ____________________,
199__, made by _________________________, a ________________
corporation (the "Additional Guarantor"), in favor of TORONTO-
DOMINION (TEXAS), as administrative agent (in such capacity, the
"Administrative Agent") for the banks and other financial
institutions (the "Lenders") parties to the Credit Agreement
referred to below. All capitalized terms not defined herein
shall have the meaning ascribed to them in such Credit Agreement.
WITNESSETH:
WHEREAS, Bear Island Paper Company, LLC (the "Borrower"),
the Lenders, the Arranger and the Administrative Agent have
entered into a Credit Agreement, dated as of December 1, 1997 (as
amended, supplemented or otherwise modified from time to time,
the "Credit Agreement");
WHEREAS, in connection with the Credit Agreement, the
Subsidiaries of the Borrower (other than the Additional
Guarantor) have entered into the Subsidiary Guarantee, dated as
of December 1, 1997 (as amended, supplemented or otherwise
modified from time to time, the "Subsidiary Guarantee") in favor
of the Administrative Agent for the benefit of the Lenders;
WHEREAS, the Credit Agreement requires the Additional
Guarantor to become a party to the Subsidiary Guarantee; and
WHEREAS, the Additional Guarantor has agreed to execute and
deliver this Assumption Agreement in order to become a party to
the Subsidiary Guarantee;
NOW, THEREFORE, IT IS AGREED:
1. Subsidiary Guarantee. By executing and delivering this
Assumption Agreement, the Additional Guarantor, as provided in
Section 19 of the Subsidiary Guarantee, hereby becomes a party to
the Subsidiary Guarantee as a Guarantor thereunder with the same
force and effect as if originally named therein as a Guarantor
and, without limiting the generality of the foregoing, hereby
expressly assumes all obligations and liabilities of a Guarantor
thereunder. The Additional Guarantor hereby represents and
warrants that each of the representations and warranties
contained in Section 10 of the Subsidiary Guarantee is true and
correct with respect to such Additional Guarantor on and as the
date hereof (after giving effect to this Assumption Agreement) as
if made on and as of such date.
2. GOVERNING LAW. THIS ASSUMPTION AGREEMENT SHALL BE
GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH,
THE LAW OF THE STATE OF NEW YORK.
IN WITNESS WHEREOF, the undersigned has caused this
Assumption Agreement to be duly executed and delivered as of the
date first above written.
[ADDITIONAL GUARANTOR]
By:_______________________
Name:
Title:
Address for Notices:
EXHIBIT B TO 10.2
EXECUTION COPY
BRANT-ALLEN GUARANTEE
BRANT-ALLEN GUARANTEE, dated as of December 1, 1997, made by
BRANT-ALLEN INDUSTRIES, INC., a Delaware corporation (the
"Guarantor"), in favor of TORONTO-DOMINION (TEXAS), INC., as
Administrative Agent (in such capacity, the "Administrative Agent")
for the lenders (the "Lenders") parties to the Credit Agreement,
dated as of December 1, 1997 (as amended, supplemented or otherwise
modified from time to time, the "Credit Agreement"), among Bear
Island Paper Company, LLC (the "Borrower"), the Lenders, the
Arranger named therein and the Administrative Agent.
W I T N E S S E T H:
WHEREAS, pursuant to the Credit Agreement, the Lenders have
severally agreed to make Loans to the Borrower upon the terms and
subject to the conditions set forth therein;
WHEREAS, it is a condition precedent to the obligation of
the Lenders to make their respective Loans to the Borrower under the
Credit Agreement that the Guarantor shall have executed and
delivered this Guarantee to the Administrative Agent for the ratable
benefit of the Lenders; and
WHEREAS, the Borrower is a Wholly Owned Subsidiary of the
Guarantor, and it is to the advantage of Guarantor that the Lenders
make the Loans to the Borrower.
NOW, THEREFORE, in consideration of the premises and to
induce the Administrative Agent and the Lenders to enter into the
Credit Agreement and to induce the Lenders to make their respective
Loans to the Borrower under the Credit Agreement, the Guarantor
hereby agrees with the Administrative Agent, for the ratable benefit
of the Lenders, as follows:
1. Defined Terms. (a) Unless otherwise defined herein, terms
defined in the Credit Agreement and used herein shall have the meanings
given to them in the Credit Agreement.
(b) The words "hereof," "herein" and "hereunder" and words of
similar import when used in this Guarantee shall refer to this
Guarantee as a whole and not to any particular provision of this
Guarantee, and section and paragraph references are to this
Guarantee unless otherwise specified.
(c) The meanings given to terms defined herein shall be
equally applicable to both the singular and plural forms of such
terms.
2. Guarantee. (a) The Guarantor hereby unconditionally and
irrevocably guarantees to the Administrative Agent, for the ratable
benefit of the Lenders and their respective permitted successors,
indorsees, transferees and assigns, the prompt and complete payment
and performance by the Borrower when due (whether at the stated
maturity, by acceleration or otherwise) of the Obligations.
(b) The Guarantor further agrees to pay any and all reasonable
out-of-pocket expenses (including, without limitation, all
reasonable fees and disbursements of counsel) which may be paid or
incurred by the Administrative Agent or any Lender in enforcing, or
obtaining advice of counsel in respect of, any rights with respect
to, or collecting, any or all of the Obligations and/or enforcing
any rights with respect to, or collecting against, the Guarantor
under this Guarantee. This Guarantee shall remain in full force and
effect until all obligations of the Guarantor under this Guarantee
have been released pursuant to Section 11.
(c) No payment or payments made by the Borrower or any other
Person or received or collected by the Administrative Agent or any
Lender from the Borrower or any other Person by virtue of any action
or proceeding or any set-off or appropriation or application, at any
time or from time to time, in reduction of or in payment of the
Obligations (other than any payment made by the Guarantor with
respect to the Obligations or any payment received or collected from
the Guarantor with respect to the Obligations) shall be deemed to
modify, reduce, release or otherwise affect the liability of the
Guarantor hereunder which shall remain obligated hereunder,
notwithstanding any such payment or payments until all obligations
of the Guarantor under this Guarantee have been released pursuant to
Section 11.
(d) The Guarantor agrees that whenever, at any time, or from
time to time, it shall make any payment to the Administrative Agent
or any Lender on account of its liability hereunder, it will notify
the Administrative Agent and such Lender in writing that such
payment is made under this Guarantee for such purpose.
3. Right of Set-off. The Administrative Agent and each Lender is
hereby irrevocably authorized at any time and from time to time when an
Event of Default has occurred and is continuing, without notice to the
Guarantor, any such notice being expressly waived by the Guarantor, to set
off and appropriate and apply any and all deposits (general or special,
time or demand, provisional or final), in any currency, and any other
credits, indebtedness or claims, in any currency, in each case whether
direct or indirect, absolute or contingent, matured or unmatured, at any
time held or owing by the Administrative Agent or such Lender to or for the
credit or the account of the Guarantor, or any part thereof in such amounts
as the Administrative Agent or such Lender may elect, against or on account
of the obligations and liabilities of the Guarantor to the Administrative
Agent or such Lender hereunder and claims of every nature and description
of the Administrative Agent or such Lender against the Guarantor, in any
currency, whether arising hereunder, under the Credit Agreement, any Note,
any other Loan Document or otherwise, as the Administrative Agent or such
Lender may elect, whether or not the Administrative Agent or such Lender
has made any demand for payment and although such obligations, liabilities
and claims may be contingent or unmatured. The Administrative Agent and
each Lender shall notify the Guarantor promptly of any such set-off and the
application made by the Administrative Agent or such Lender, as the case
may be, of the proceeds thereof; provided that the failure to give such
notice shall not affect the validity of such set-off and application. The
rights of the Administrative Agent and each Lender under this paragraph are
in addition to other rights and remedies (including, without limitation,
other rights of set-off) which the Administrative Agent or such Lender may
have.
4. No Subrogation. Notwithstanding any payment or payments
made by the Guarantor hereunder, or any set-off or application of
funds of the Guarantor by the Administrative Agent or any Lender,
the Guarantor shall not be entitled to be subrogated to any of the
rights of the Administrative Agent or any Lender against the
Borrower or against any collateral security or guarantee or right of
offset held by the Administrative Agent or any Lender for the
payment of the Obligations, nor shall the Guarantor seek or be
entitled to seek any contribution or reimbursement from the Borrower
in respect of payments made by the Guarantor hereunder, until all
amounts owing to the Administrative Agent and the Lenders by the
Borrower on account of the Obligations are paid in full and the
Commitments are terminated. If any amount shall be paid to the
Guarantor on account of such subrogation rights at any time when all
of the Obligations shall not have been paid in full, such amount
shall be held by the Guarantor in trust for the Administrative Agent
and the Lenders, segregated from other funds of the Guarantor, and
shall, forthwith upon receipt by the Guarantor, be turned over to
the Administrative Agent in the exact form received by the Guarantor
(duly indorsed by the Guarantor to the Administrative Agent, if
required), to be applied against the Obligations, whether matured or
unmatured, in such order as the Credit Agreement shall provide.
5. Amendments, etc. with respect to the Obligations; Waiver of
Rights. The Guarantor shall remain obligated hereunder notwithstanding
that, without any reservation of rights against the Guarantor, and
without notice to or further assent by the Guarantor, any demand for
payment of any of the Obligations made by the Administrative Agent or
any Lender may be rescinded by the Administrative Agent or such
Lender, and any of the Obligations continued, and the Obligations, or
the liability of any other party upon or for any part thereof, or any
collateral security or guarantee therefor or right of offset with
respect thereto, may, from time to time, in whole or in part, be
renewed, extended, amended, modified, accelerated, compromised,
waived, surrendered or released by the Administrative Agent or any
Lender, and the Credit Agreement, any Notes, and the other Loan
Documents and any other documents executed and delivered in connection
therewith may be amended, modified, supplemented or terminated, in
whole or in part, as the Administrative Agent (or the Required
Lenders, as the case may be) may deem advisable from time to time, and
any collateral security, guarantee or right of offset at any time held
by the Administrative Agent or any Lender for the payment of the
Obligations may be sold, exchanged, waived, surrendered or released.
Neither the Administrative Agent nor any Lender shall have any
obligation to protect, secure, perfect or insure any Lien at any time
held by it as security for the Obligations or for this Guarantee or
any property subject thereto. When making any demand hereunder against
the Guarantor, the Administrative Agent or any Lender may, but shall
be under no obligation to, make a similar demand on the Borrower or
any other guarantor, and any failure by the Administrative Agent or
any Lender to make any such demand or to collect any payments from the
Borrower or any such other guarantor or any release of the Borrower or
such other guarantor shall not relieve the Guarantor of its
obligations or liabilities hereunder, and shall not impair or affect
the rights and remedies, express or implied, or as a matter of law, of
the Administrative Agent or any Lender against the Guarantor. For the
purposes hereof "demand" shall include the commencement and
continuance of any legal proceedings.
6. Guarantee Absolute and Unconditional. The Guarantor waives
any and all notice of the creation, renewal, extension or accrual of
any of the Obligations and notice of or proof of reliance by the
Administrative Agent or any Lender upon this Guarantee or acceptance
of this Guarantee; the Obligations, and any of them, shall
conclusively be deemed to have been created, contracted or incurred,
or renewed, extended, amended or waived, in reliance upon this
Guarantee; and all dealings between the Borrower or the Guarantor,
on the one hand, and the Administrative Agent and the Lenders, on
the other, shall likewise be conclusively presumed to have been had
or consummated in reliance upon this Guarantee. The Guarantor waives
diligence, presentment, protest, demand for payment and notice of
default or nonpayment to or upon the Borrower or the Guarantor with
respect to the Obligations. This Guarantee shall be construed as a
continuing, absolute and unconditional guarantee of payment without
regard to (a) the validity, regularity or enforceability of the
Credit Agreement, any Note, or any other Loan Document, any of the
Obligations or any other collateral security therefor or guarantee
or right of offset with respect thereto at any time or from time to
time held by the Administrative Agent or any Lender, (b) any
defense, set-off or counterclaim (other than a defense of payment or
performance) which may at any time be available to or be asserted by
the Borrower against the Administrative Agent or any Lender, or (c)
any other circumstance whatsoever (with or without notice to or
knowledge of the Borrower or the Guarantor) which constitutes, or
might be construed to constitute, an equitable or legal discharge of
the Borrower for the Obligations, or of the Guarantor under this
Guarantee, in bankruptcy or in any other instance. When pursuing its
rights and remedies hereunder against the Guarantor, the
Administrative Agent and any Lender may, but shall be under no
obligation to, pursue such rights and remedies as it may have
against the Borrower or any other Person or against any collateral
security or guarantee for the Obligations or any right of offset
with respect thereto, and any failure by the Administrative Agent or
any Lender to pursue such other rights or remedies or to collect any
payments from the Borrower or any such other Person or to realize
upon any such collateral security or guarantee or to exercise any
such right of offset, or any release of the Borrower or any such
other Person or of any such collateral security, guarantee or right
of offset, shall not relieve the Guarantor of any liability
hereunder, and shall not impair or affect the rights and remedies,
whether express, implied or available as a matter of law, of the
Administrative Agent or any Lender against the Guarantor. This
Guarantee shall remain in full force and effect and be binding in
accordance with and to the extent of its terms upon the Guarantor
and its successors and assigns thereof, and shall inure to the
benefit of the Administrative Agent and the Lenders, and their
respective successors, indorsees, transferees and assigns, until all
obligations of the Guarantor under this Guarantee have been released
pursuant to Section 11, notwithstanding that from time to time
during the term of the Credit Agreement the Borrower may be free
from any Obligations.
7. Reinstatement. This Guarantee shall continue to be
effective, or be reinstated, as the case may be, if at any time
payment, or any part thereof, of any of the Obligations is rescinded
or must otherwise be restored or returned by the Administrative Agent
or any Lender upon the insolvency, bankruptcy, dissolution,
liquidation or reorganization of the Borrower or upon or as a result
of the appointment of a receiver, intervenor or conservator of, or
trustee or similar officer for, the Borrower or any substantial part
of its property, or otherwise, all as though such payments had not
been made.
8. Payments. The Guarantor hereby agrees that the Obligations
will be paid to the Administrative Agent without set-off or
counterclaim in U.S. Dollars at the office of the Administrative Agent
located at 31 West 52nd Street, New York, New York 10019.
9. Representations and Warranties. The Guarantor represents
and warrants to the Administrative Agent and the Lenders that:
(a) the Guarantor is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of
its incorporation and has the corporate power and authority and the
legal right to own and operate its property, to lease the property
it operates and to conduct the business in which it is currently
engaged;
(b) the Guarantor has the corporate power and authority and
the legal right to execute and deliver, and to perform its
obligations under, this Guarantee, and has taken all necessary
corporate action to authorize its execution, delivery and
performance of this Guarantee;
(c) this Guarantee constitutes a legal, valid and binding
obligation of the Guarantor enforceable in accordance with its
terms, except as affected by bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and other similar laws
relating to or affecting the enforcement of creditors' rights
generally, general equitable principles and an implied covenant of
good faith and fair dealing;
(d) the execution, delivery and performance of this Guarantee
will not violate any provision of any material Requirement of Law or
material Contractual Obligation of the Guarantor and will not result
in or require the creation or imposition of any Lien on any of the
properties or revenues of the Guarantor pursuant to any such
Requirement of Law or Contractual Obligation of the Guarantor;
(e) no consent or authorization of, filing with, or other act
by or in respect of, any arbitrator or Governmental Authority and no
consent of any other Person (including, without limitation, any
stockholder or creditor of the Guarantor) is required in connection
with the execution, delivery, performance, validity or
enforceability of this Guarantee except as described in Section 3.4
of the Credit Agreement; and
(f) no litigation, investigation or proceeding of or before
any arbitrator or Governmental Authority is pending or, to the
knowledge of the Guarantor, threatened by or against the Guarantor
or against any of its properties or revenues (1) with respect to this
Guarantee or any of the transactions contemplated hereby, and (2) which
could reasonably be expected to have a material adverse effect on
the business, operations, property or financial or other condition
of the Guarantor.
The Guarantor agrees that the foregoing representations and
warranties shall be deemed to have been made by the Guarantor on the
date of each borrowing by the Borrower under the Credit Agreement on
and as of such date of borrowing as though made hereunder on and as of
such date.
10. Authority of Administrative Agent. The Guarantor
acknowledges that the rights and responsibilities of the
Administrative Agent under this Guarantee with respect to any action
taken by the Administrative Agent or the exercise or non-exercise by
the Administrative Agent of any option, right, request, judgment or
other right or remedy provided for herein or resulting or arising
out of this Guarantee shall, as between the Administrative Agent and
the Lenders, be governed by the Credit Agreement, but, as between
the Administrative Agent and the Guarantor, the Administrative Agent
shall be conclusively presumed to be acting as agent for the Lenders
with full and valid authority so to act or refrain from acting, and
the Guarantor shall not be under any obligation, or entitlement, to
make any inquiry respecting such authority.
11. Release of Guarantee. The Guarantor shall be automatically
released from its obligations under this Guarantee and this
Guarantee shall be automatically terminated on the earlier of (a)
the date on which all the Obligations are paid in full and the
Commitments are terminated, and (b) the later of (i) the date upon
which the Timberlands Loan has been repaid in full and (ii) the date
on which Total Commitment Debt is less than $145,000,000.
12. Notices. All notices, requests and demands to or upon the
Administrative Agent, or the Guarantor to be effective shall be in
writing (including by telecopy) and, unless otherwise expressly
provided herein shall be deemed to have been duly given or made when
delivered or deposited in the mail, postage prepaid or in the case
of telecopy notice, when received, addressed as follows:
(a) if to the Administrative Agent, at its address or
transmission number for notices provided in subsection 9.2 of the
Credit Agreement; and
(b) if to the Guarantor, at its address or transmission number
for notices set forth under its signature below.
The Administrative Agent, each Lender and the Guarantor may
change its address and transmission numbers for notices by notice in
the manner provided in this Section.
13. Severability. Any provision of this Guarantee which is
prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions
hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such
provision in any other jurisdiction.
14. Integration. This Guarantee represents the agreement of
the Guarantor with respect to the subject matter hereof and there are
no promises or representations by the Administrative Agent or any
Lender relative to the subject matter hereof not reflected herein.
15. Amendments in Writing; No Waiver; Cumulative Remedies.
(a) None of the terms or provisions of this Guarantee may be waived,
amended, supplemented or otherwise modified except by a written
instrument executed by the Guarantor and the Administrative Agent,
provided that any provision of this Guarantee may be waived by the
Administrative Agent and the Lenders in a letter or agreement
executed by the Administrative Agent or by telex or facsimile
transmission from the Administrative Agent.
(b) Neither the Administrative Agent nor any Lender shall by
any act (except by a written instrument pursuant to paragraph hereof),
delay, indulgence, omission or otherwise be deemed to have waived any
right or remedy hereunder or to have acquiesced in any Default or
Event of Default or in any breach of any of the terms and conditions
hereof. No failure to exercise, nor any delay in exercising, on the
part of the Administrative Agent or any Lender, any right, power or
privilege hereunder shall operate as a waiver thereof. No single or
partial exercise of any right, power or privilege hereunder shall
preclude any other or further exercise thereof or the exercise of any
other right, power or privilege. A waiver by the Administrative Agent
or any Lender of any right or remedy hereunder on any one occasion
shall not be construed as a bar to any right or remedy which the
Administrative Agent or such Lender would otherwise have on any future
occasion.
(c) The rights and remedies herein provided are cumulative,
may be exercised singly or concurrently and are not exclusive of any
other rights or remedies provided by law.
16. Section Headings. The section headings used in this
Guarantee are for convenience of reference only and are not to affect
the construction hereof or be taken into consideration in the
interpretation hereof.
17. Successors and Assigns. This Guarantee shall be binding
upon the successors and assigns of the Guarantor and shall inure to
the benefit of the Administrative Agent and the Lenders and their
permitted successors and assigns.
18. Governing Law. This Guarantee shall be governed by, and
construed and interpreted in accordance with, the law of the State of
New York.
IN WITNESS WHEREOF, the undersigned has caused this
Guarantee to be duly executed and delivered by its duly authorized
officer as of the day and year first above written.
BRANT-ALLEN INDUSTRIES, INC.
By: /s/ Edward D. Sherrick
Title: Vice President of Finance
Address for Notices:
Post Office Box 3443
80 Field Point Road
Greenwich, Connecticut 06830
Phone: 203-661-3344
Fax: 203-661-3349
EXHIBIT C
SECURITY AND PLEDGE AGREEMENT
made by
BEAR ISLAND PAPER COMPANY, LLC
and its Subsidiaries
in favor of
TORONTO-DOMINION (TEXAS), INC.,
as Administrative Agent
Dated as of December 1, 1997
TABLE OF CONTENTS
Page
SECTION 1. DEFINED TERMS................................................... 2
1.1 Definitions................................................... 2
1.2 Other Definitional Provisions................................. 6
SECTION 2. GRANT OF SECURITY INTEREST...................................... 6
SECTION 3. REPRESENTATIONS AND WARRANTIES.................................. 7
3.1 Representations in Credit Agreement........................... 7
3.2 Title; No Other Liens......................................... 7
3.3 Perfected First Priority Liens................................ 8
3.4 Chief Executive Office........................................ 8
3.5 Inventory and Equipment....................................... 8
3.6 Farm Products................................................. 8
3.7 Pledged Securities............................................ 8
3.8 Receivables................................................... 9
3.9 Contracts..................................................... 9
3.10 Intellectual Property......................................... 10
3.11 Vehicles...................................................... 10
SECTION 4. COVENANTS....................................................... 10
4.1 Covenants in Credit Agreement................................. 10
4.2 Delivery of Instruments and Chattel Paper..................... 11
4.3 Maintenance of Insurance...................................... 11
4.4 Payment of Obligations........................................ 11
4.5 Maintenance of Perfected Security Interest;
Further Documentation....................................... 11
4.6 Changes in Locations, Name, etc............................... 12
4.7 Notices....................................................... 12
4.8 Pledged Securities............................................ 12
4.9 Receivables................................................... 14
4.10 Contracts..................................................... 14
4.11 Intellectual Property......................................... 14
4.12 Vehicles...................................................... 15
SECTION 5. REMEDIAL PROVISIONS............................................. 15
5.1 Certain Matters Relating to Receivables....................... 15
5.2 Communications with Obligors; Grantors Remain Liable.......... 16
5.3 Pledged Securities............................................ 17
5.4 Proceeds to be Turned Over To Administrative Agent............ 17
5.5 Application of Proceeds....................................... 18
5.6 Code and Other Remedies....................................... 18
5.7 Registration Rights........................................... 19
5.8 Waiver; Deficiency............................................ 20
SECTION 6. THE ADMINISTRATIVE AGENT........................................ 20
6.1 Administrative Agent's Appointment as Attorney-in-Fact, etc... 20
6.2 Duty of Administrative Agent.................................. 21
6.3 Execution of Financing Statements............................. 22
6.4 Authority of Administrative Agent............................. 22
SECTION 7. MISCELLANEOUS................................................... 22
7.1 Amendments in Writing......................................... 22
7.2 Notices....................................................... 22
7.3 No Waiver by Course of Conduct; Cumulative Remedies........... 22
7.4 Enforcement Expenses; Indemnification......................... 22
7.5 Successors and Assigns........................................ 23
7.6 Set-Off....................................................... 23
7.7 Counterparts.................................................. 23
7.8 Severability.................................................. 23
7.9 Section Headings.............................................. 24
7.10 Integration................................................... 24
7.11 GOVERNING LAW................................................. 24
7.12 Submission To Jurisdiction; Waivers........................... 24
7.13 Acknowledgements.............................................. 24
7.14 WAIVER OF JURY TRIAL.......................................... 25
7.15 Additional Grantors........................................... 25
7.16 Releases...................................................... 25
SECURITY AND PLEDGE AGREEMENT
SECURITY AND PLEDGE AGREEMENT, dated as of December 1,
1997, made by each of the signatories hereto (together with any other
entity that may become a party hereto as provided herein, the
"Grantors"), in favor of TORONTO-DOMINION (TEXAS), INC., as
Administrative Agent (in such capacity, the "Administrative Agent") for
the lenders (the "Lenders") parties to the Credit Agreement, dated as of
December 1, 1997 (as amended, supplemented or otherwise modified from
time to time, the "Credit Agreement"), among Bear Island Paper Company,
LLC (the "Borrower"), the Lenders, the Arranger named therein and the
Administrative Agent.
W I T N E S S E T H:
WHEREAS, pursuant to the Credit Agreement, the Lenders have
severally agreed to make extensions of credit to the Borrower upon the
terms and subject to the conditions set forth therein;
WHEREAS, the Borrower is a member of an affiliated group
of companies that includes each other Grantor;
WHEREAS, the proceeds of the Loans under the Credit
Agreement will be used in part to enable the Borrower to make valuable
transfers to one or more of the other Grantors in connection with the
operation of their respective businesses;
WHEREAS, the Borrower and the other Grantors are engaged in
related businesses, and each Grantor will derive substantial direct and
indirect benefit from the making of the Loans under the Credit Agreement;
WHEREAS, it is a condition precedent to the obligation of
the Lenders to make their respective Loans to the Borrower under the
Credit Agreement that the Grantors (other than the Borrower) guarantee
payment and performance of the Borrower's Obligations under the Credit
Agreement and the other Loan Documents, and in satisfaction of such
condition, each Grantor (other than the Borrower) has entered into a
guarantee of even date herewith (as amended, supplemented or otherwise
modified from time to time, the "Subsidiary Guarantee") for the benefit
of the Administrative Agent and the Lenders; and
WHEREAS, it is a further condition precedent to the
obligation of the Lenders to make their respective Loans to the Borrower
under the Credit Agreement that the Grantors shall have executed and
delivered this Agreement to the Administrative Agent for the ratable
benefit of the Lenders;
NOW, THEREFORE, in consideration of the premises and to
induce the Administrative Agent and the Lenders to enter into the Credit
Agreement and to induce the Lenders to make their respective Loans to the
Borrower thereunder, each Grantor hereby agrees with the Administrative
Agent, for the ratable benefit of the Lenders, as follows:
SECTION 1. DEFINED TERMS
1.1 Definitions. (a) Unless otherwise defined herein, terms
defined in the Credit Agreement and used herein shall have the meanings
given to them in the Credit Agreement, and the following terms which are
defined in the Uniform Commercial Code in effect in the State of New York
on the date hereof are used herein as so defined: Accounts, Chattel
Paper, Documents, Equipment, Farm Products, Instruments, Inventory and
Investment Property.
(b) The following terms shall have the following meanings:
"Agreement": this Security and Pledge Agreement, as the
same may be amended, supplemented or otherwise modified from
time to time.
"Collateral": as defined in Section 2.
"Collateral Account": any collateral account established
by the Administrative Agent as provided in Section 5.1 or 5.4.
"Contracts": the contracts and agreements listed in
Schedule 7, as the same may be amended, supplemented or otherwise
modified from time to time, including, without limitation, (i)
all rights of any Grantor to receive moneys due and to become due
to it thereunder or in connection therewith, (ii) all rights of
any Grantor to damages arising thereunder and (iii) all rights of
any Grantor to perform and to exercise all remedies thereunder.
"Copyrights": (i) all copyrights arising under the laws of
the United States, any other country or any political subdivision
thereof, whether registered or unregistered and whether published
or unpublished (including, without limitation, those listed in
Schedule 6), all registrations and recordings thereof, and all
applications in connection therewith, including, without
limitation, all registrations, recordings and applications in the
United States Copyright Office, and (ii) the right to obtain all
renewals thereof.
"Copyright Licenses": any written agreement naming any
Grantor as licensor or licensee (including, without limitation,
those listed in Schedule 6), granting any right under any
Copyright, including, without limitation, the grant of rights to
manufacture, distribute, exploit and sell materials derived from
any Copyright; in each case with respect to all of the foregoing
only to the extent the grant by such Grantor of a security
interest pursuant to this Agreement in its right, title and
interest in such contract, agreement, instrument or indenture is
not prohibited by such contract, agreement, instrument or
indenture without the consent of any other party thereto, would
not give any other party to such contract, agreement, instrument
or indenture the right to terminate its obligations thereunder,
or is permitted with consent if all necessary consents to such
grant of a security interest have been obtained from the other
parties thereto (it being understood that the foregoing shall not
be deemed to obligate such Grantor to obtain such consents);
provided, that the foregoing limitation shall not affect, limit,
restrict or impair the grant by such Grantor of a security
interest pursuant to this Agreement in any Receivable or any
money or other amounts due or to become due under any such
contract, agreement, instrument or indenture.
"General Intangibles": all "general intangibles" as such
term is defined in Section 9-106 of the Uniform Commercial Code
in effect in the State of New York on the date hereof and, in any
event, including, without limitation, with respect to any
Grantor, all contracts, agreements, instruments and indentures in
any form, and portions thereof, to which such Grantor is a party
or under which such Grantor has any right, title or interest or
to which such Grantor or any property of such Grantor is subject,
as the same may from time to time be amended, supplemented or
otherwise modified, including, without limitation, (i) all rights
of such Grantor to receive moneys due and to become due to it
thereunder or in connection therewith, (ii) all rights of such
Grantor to damages arising thereunder and (iii) all rights of
such Grantor to perform and to exercise all remedies thereunder;
in each case with respect to all of the foregoing only to the
extent the grant by such Grantor of a security interest pursuant
to this Agreement in its right, title and interest in such
contract, agreement, instrument or indenture is not prohibited by
such contract, agreement, instrument or indenture without the
consent of any other party thereto, would not give any other
party to such contract, agreement, instrument or indenture the
right to terminate its obligations thereunder, or is permitted
with consent if all necessary consents to such grant of a
security interest have been obtained from the other parties
thereto (it being understood that the foregoing shall not be
deemed to obligate such Grantor to obtain such consents);
provided, that the foregoing limitation shall not affect, limit,
restrict or impair the grant by such Grantor of a security
interest pursuant to this Agreement in any Receivable or any
money or other amounts due or to become due under any such
contract, agreement, instrument or indenture.
"Guarantors": as defined in the Subsidiary Guarantee.
"Intellectual Property": the collective reference to all
rights, priorities and privileges relating to intellectual
property, whether arising under United States, multinational or
foreign laws or otherwise, including, without limitation, the
Copyrights, the Copyright Licenses, the Patents, the Patent
Licenses, the Trademarks and the Trademark Licenses, and all
rights to sue at law or in equity for any infringement or other
impairment thereof, including the right to receive all proceeds
and damages therefrom; in each case only to the extent the grant
by such Grantor of a security interest pursuant to this Agreement
in its right, title and interest in such intellectual property is
not prohibited by any agreement relating thereto without the
consent of any other party thereto, would not give any other
party to such agreement the right to terminate its obligations
thereunder, or is permitted with consent if all necessary
consents to such grant of a security interest have been obtained
from the other parties thereto (it being understood that the
foregoing shall not be deemed to obligate such Grantor to obtain
such consents); provided, that the foregoing limitation shall not
affect, limit, restrict or impair the grant by such Grantor of a
security interest pursuant to this Agreement in any Receivable or
any money or other amounts due or to become due in respect of any
such intellectual property.
"Intercompany Note": any promissory note evidencing
loans made by any Grantor to any Affiliate or any of its
Subsidiaries.
"Issuers": the collective reference to each issuer of a
Pledged Security.
"New York UCC": the Uniform Commercial Code as from time
to time in effect in the State of New York.
"Patents": (i) all letters patent of the United States, any
other country or any political subdivision thereof, all reissues
and extensions thereof including, without limitation, any of the
foregoing referred to in Schedule 6, (ii) 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 of the foregoing referred to
in Schedule 6, and (iii) all rights to obtain any reissues or
extensions of the foregoing.
"Patent License": all agreements, whether written or oral,
providing for the grant by or to any Grantor of any right to
manufacture, use or sell any invention covered in whole or in
part by a Patent, including, without limitation, any of the
foregoing referred to in Schedule 6; in each case with respect to
all of the foregoing only to the extent the grant by such Grantor
of a security interest pursuant to this Agreement in its right,
title and interest in such contract, agreement, instrument or
indenture is not prohibited by such contract, agreement,
instrument or indenture without the consent of any other party
thereto, would not give any other party to such contract,
agreement, instrument or indenture the right to terminate its
obligations thereunder, or is permitted with consent if all
necessary consents to such grant of a security interest have been
obtained from the other parties thereto (it being understood that
the foregoing shall not be deemed to obligate such Grantor to
obtain such consents); provided, that the foregoing limitation
shall not affect, limit, restrict or impair the grant by such
Grantor of a security interest pursuant to this Agreement in any
Receivable or any money or other amounts due or to become due
under any such contract, agreement, instrument or indenture.
"Pledged LLC Interests": in each case, whether now
existing or hereafter acquired, all of each Grantor's right,
title and interest in and to:
(a) the equity interests of any Issuer that is a limited
liability company, but not any Grantor's obligations from time to
time as a holder of interests in any such Issuer (unless the
Administrative Agent or its designee, on behalf of the
Administrative Agent and the Lenders, shall elect to become a
holder of equity interests in any such Issuer in connection with
its exercise of remedies pursuant to the terms hereof);
(b) any and all moneys due and to become due to each
Grantor now or in the future by way of a distribution made to any
Grantor in its capacity as a holder of equity interests in any
such Issuer or otherwise in respect of such Grantor's interest as
a holder of equity interests in any such Issuer;
(c) any other property of any such Issuer to which each
Grantor now or in the future may be entitled in respect of its
equity interests in any such Issuer by way of distribution,
return of capital or otherwise;
(d) any other claim or right which each Grantor now has or
may in the future acquire in respect of its equity interests in
any such Issuer;
(e) all certificates, options or rights of any nature
whatsoever that may be issued or granted by any such Issuer with
respect to the equity interests of such Issuer to each Grantor
while this Agreement is in effect; and
(f) to the extent not otherwise included, all Proceeds
of any or all of the foregoing.
"Pledged Notes": all promissory notes listed on Schedule
2, all Intercompany Notes at any time issued to any Grantor
and all other promissory notes issued to or held by any
Grantor.
"Pledged Note Collateral": all of the mortgages, deeds
of trust, security agreements, assignments of leases, UCC
financing statements, guaranties and other documents securing
or guaranteeing the indebtedness evidenced by the Pledged
Notes.
"Pledged Partnership Interests": in each case, whether
now existing or hereafter acquired, all of each Grantor's
right, title and interest in and to:
(a) the partnership interests of any Issuer that is a
partnership, but not any Grantor's obligations from time to time
as a general or limited partner, as the case may be, in any such
Issuer (unless the Administrative Agent or its designee, on
behalf of the Administrative Agent and the Lenders, shall elect
to become a general or limited partner, as the case may be, in
any such Issuer in connection with its exercise of remedies
pursuant to the terms hereof);
(b) any and all moneys due and to become due each Grantor
now or in the future by way of a distribution made to each
Grantor in its capacity as a general partner or limited partner,
as the case may be, in any such Issuer or otherwise in respect of
each such Grantor's interest as a general partner or limited
partner, as the case may be, in any such Issuer;
(c) any other property of any such Issuer to which each
Grantor's now or in the future may be entitled in respect of its
interests as a general partner or limited partner, as the case
may be, in any such Issuer by way of distribution, return of
capital or otherwise;
(d) any other claim or right which each Grantor now has
or may in the future acquire in respect of its general or limited
partnership interests in any such Issuer;
(e) the partnership agreement or other organizational
documents of any such Issuer;
(f) all certificates, options or rights of any nature
whatsoever that may be issued or granted by any such Issuer with
respect to the partnership interests of such Issuer to each
Grantor while this Agreement is in effect; and
(g) to the extent not otherwise included, all Proceeds
of any or all of the foregoing.
"Pledged Securities": the collective reference to the
Pledged Notes, the Pledged Partnership Interests, the Pledged
LLC Interests and the Pledged Stock, together with any
Proceeds thereof.
"Pledged Stock": the shares of Capital Stock listed on
Schedule 2, together with any other shares, stock certificates,
options or rights of any nature whatsoever in respect of the
Capital Stock (other than Pledged LLC Interests and Pledged
Partnership Interests) of any Person that may be issued or
granted to, or held by, any Grantor while this Agreement is in
effect other than the Capital Stock of the Finance Subsidiary.
"Proceeds": all "proceeds" as such term is defined in
Section 9-306(1) of the Uniform Commercial Code in effect in the
State of New York on the date hereof and, in any event, shall
include, without limitation, all dividends or other income from
the Pledged Securities, collections thereon or distributions or
payments with respect thereto.
"Receivable": any right to payment for goods sold or
leased or for services rendered, whether or not such right is
evidenced by an Instrument or Chattel Paper and whether or not
it has been earned by performance (including, without
limitation, any Account).
"Securities Act": the Securities Act of 1933, as amended.
"Subsidiary Guarantee": as defined in the recitals hereto.
"Trademarks": (i) all trademarks, trade names, corporate
names, company names, business names, fictitious business names,
trade styles, service marks, logos and other source or business
identifiers, and all 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, and all common-law rights related thereto,
including, without limitation, any of the foregoing referred to
in Schedule 6, and (ii) the right to obtain all renewals thereof.
"Trademark License": any agreement, whether written or
oral, providing for the grant by or to any Grantor of any right
to use any Trademark, including, without limitation, any of the
foregoing referred to in Schedule 6; in each case with respect to
all of the foregoing only to the extent the grant by such Grantor
of a security interest pursuant to this Agreement in its right,
title and interest in such contract, agreement, instrument or
indenture is not prohibited by such contract, agreement,
instrument or indenture without the consent of any other party
thereto, would not give any other party to such contract,
agreement, instrument or indenture the right to terminate its
obligations thereunder, or is permitted with consent if all
necessary consents to such grant of a security interest have been
obtained from the other parties thereto (it being understood that
the foregoing shall not be deemed to obligate such Grantor to
obtain such consents); provided, that the foregoing limitation
shall not affect, limit, restrict or impair the grant by such
Grantor of a security interest pursuant to this Agreement in any
Receivable or any money or other amounts due or to become due
under any such contract, agreement, instrument or indenture..
"Vehicles": all cars, trucks, trailers, construction and
earth moving equipment and other vehicles covered by a
certificate of title law of any state and, in any event
including, without limitation, the vehicles listed on Schedule
8 and all tires and other appurtenances to any of the
foregoing.
1.2 Other Definitional Provisions. (a) The words "hereof,"
"herein", "hereto" and "hereunder" and words of similar import when used
in this Agreement shall refer to this Agreement as a whole and not to any
particular provision of this Agreement, and Section and Schedule
references are to this Agreement unless otherwise specified.
(b) The meanings given to terms defined herein shall be
equally applicable to both the singular and plural forms of such terms.
(c) Where the context requires, terms relating to the
Collateral or any part thereof, when used in relation to a Grantor, shall
refer to such Grantor's Collateral or the relevant part thereof.
SECTION 2. GRANT OF SECURITY INTEREST
Each Grantor hereby assigns and transfers to the
Administrative Agent, and hereby grants to the Administrative Agent, for
the ratable benefit of the Lenders, a security interest in, all of the
following property now owned or at any time hereafter acquired by such
Grantor or in which such Grantor now has or at any time in the future may
acquire any right, title or interest (collectively, the "Collateral"), as
collateral security for the prompt and complete payment and performance
when due (whether at the stated maturity, by acceleration or otherwise)
of the Obligations:
(a) all Accounts;
(b) all Chattel Paper;
(c) all Contracts;
(d) all Documents;
(e) all Equipment;
(f) all General Intangibles;
(g) all Instruments;
(h) all Intellectual Property;
(i) all Inventory;
(j) all Pledged Securities;
(k) all Vehicles;
(l) all Investment Property;
(m) all books and records pertaining to the Collateral; and
(n) to the extent not otherwise included, all Proceeds and
products of any and all of the foregoing and all collateral
security and guarantees given by any Person with respect to any
of the foregoing.
Notwithstanding the foregoing, the maximum amount of
Obligations secured by the assets of any Grantor which is a Subsidiary of
the Borrower shall not in any event exceed the maximum amount that may be
so secured under applicable federal and state laws relating to the
insolvency of debtors.
SECTION 3. REPRESENTATIONS AND WARRANTIES
To induce the Administrative Agent and the Lenders to enter
into the Credit Agreement and to induce the Lenders to make their
respective Loans to the Borrower thereunder, each Grantor hereby
represents and warrants to the Administrative Agent and each Lender that:
3.1 Representations in Credit Agreement. In the case of
each Grantor other than the Borrower, the representations and warranties
set forth in Section 3 of the Credit Agreement as they relate to such
Grantor or to the Loan Documents to which such Grantor is a party, each
of which is hereby incorporated herein by reference, are true and correct
in all material respects, and the Administrative Agent and each Lender
shall be entitled to rely on each of them as if they were fully set forth
herein, provided that each reference in each such representation and
warranty to the Borrower's knowledge shall, for the purposes of this
Section 3.1, be deemed to be a reference to such Grantor's knowledge.
3.2 Title; No Other Liens. Except for the security
interest granted to the Administrative Agent for the ratable benefit
of the Lenders pursuant to this Agreement and the other Liens
permitted to exist on the Collateral by the Credit Agreement, such
Grantor owns each item of the Collateral free and clear of any and all
Liens or claims of others. No effective financing statement or other
public notice with respect to all or any part of the Collateral is on
file or of record in any public office, except such as have been filed
in favor of the Administrative Agent, for the ratable benefit of the
Lenders, pursuant to this Agreement or as are permitted by the Credit
Agreement or as set forth on Schedule 6.3 in the Credit Agreement.
3.3 Perfected First Priority Liens. The security interests
granted pursuant to this Agreement (a) constitute valid perfected
security interests in all of the Collateral (other than the Vehicles and
other than Pledged Notes, Instruments or Chattel Paper not required to be
delivered hereunder) in favor of the Administrative Agent (or, with
respect to Patents, Copyrights and registered trademarks or trademark
applications, will constitute perfected security interests upon the
recordation of the Lenders' interest therein with the appropriate
intellectual property registry and upon the registration of unregistered
copyrights), for the ratable benefit of the Lenders, as collateral
security for such Grantor's Obligations, enforceable in accordance with
the terms hereof against all creditors of such Grantor and any Persons
purporting to purchase any Collateral (other than the Vehicles and other
than Pledged Notes, Instruments or Chattel Paper not required to be
delivered hereunder) from such Grantor and (b) are prior to all other
Liens on the Collateral in existence on the date hereof except for Liens
permitted by the Credit Agreement.
3.4 Chief Executive Office. On the date hereof, such
Grantor's jurisdiction of organization and the location of such Grantor's
chief executive office or sole place of business are specified on
Schedule 4.
3.5 Inventory and Equipment. On the date hereof, the
Inventory and the Equipment (other than mobile goods) are kept at the
locations listed on Schedule 5.
3.6 Farm Products. None of the Collateral constitutes,
or is the Proceeds of, Farm Products.
3.7 Pledged Securities. (a) The shares of Pledged Stock
pledged by such Grantor hereunder constitute all the issued and
outstanding shares of all classes of the Capital Stock of each Issuer
which is a Domestic Subsidiary owned by such Grantor and not more than
65% of the Capital Stock of each Issuer which is a Foreign Subsidiary
owned by such Grantor.
(b) All the shares of the Pledged Stock, Pledged
Partnership Interests and the Pledged LLC Interests pledged by such
Grantor have been duly and validly issued and, to the extent applicable,
are fully paid and nonassessable.
(c) The Pledged Partnership Interests pledged by such
Grantor constitute all the issued and outstanding partnership interests
of each Issuer that is a partnership in which such Grantor has any right,
title or interest.
(d) The Pledged LLC Interests pledged by such Grantor
constitute all the issued and outstanding equity interests of each Issuer
that is a limited liability company in which such Grantor has any right,
title or interest.
(e) As of the date hereof, to the best knowledge of such
Grantor, each of the Pledged Notes and the documents comprising the
Pledged Note Collateral constitutes the legal, valid and binding
obligation of the obligor with respect thereto, enforceable in accordance
with its terms, subject to the effects of bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other
similar laws relating to or affecting creditors' rights generally,
general equitable principles (whether considered in a proceeding in
equity or at law) and an implied covenant of good faith and fair dealing.
As of the date hereof, no Grantor has sent any notice of default to the
obligor under any Pledged Note or under any Pledged Note Collateral and
to the applicable Grantor's knowledge, no state of facts exists which
constitutes, or with notice or the passage of time or both would
constitute, a default under the Pledged Notes or the Pledged Note
Collateral. As of the date hereof, no Grantor has any knowledge of any
offsets, counterclaims or defenses to the obligor's obligations under the
Pledged Notes or the documents comprising the Pledged Note Collateral.
(f) Such Grantor is the owner of, and has title to, the
Pledged Securities pledged by it hereunder, free of any and all Liens or
options in favor of, or claims of, any other Person, except the security
interest created by this Agreement and Liens permitted by the Credit
Agreement.
(g) Schedule 2 accurately reflects each Grantor's
partnership interests and interests in limited liability companies
pledged by such Grantor and held as of the date hereof.
3.8 Receivables. (a) No amount payable to such Grantor
under or in connection with any Receivable is evidenced by any Instrument
or Chattel Paper in the amount of more than $500,000 individually or
$1,000,000 in the aggregate which has not been delivered to the
Administrative Agent.
(b) None of the obligors on any Receivables is a
Governmental Authority, other than Receivables aggregating not in excess
of $500,000 unless the relevant Grantor has taken the actions requested
by the Administrative Agent which are required to cause the security
interest of the Administrative Agent therein to be perfected, including
compliance with the Assignment of Claims Act, if applicable.
(c) The amounts represented by such Grantor to the Lenders
from time to time as owing to such Grantor in respect of the Receivables
will at such times be accurate in all material respects.
3.9 Contracts. (a) No consent of any party (other than such
Grantor) to any Contract pledged hereunder is required, or purports to be
required, in connection with the execution, delivery and performance of
this Agreement.
(b) Each Contract is in full force and effect and
constitutes to the best knowledge of such Grantor with respect to parties
other than a Grantor, a valid and legally enforceable obligation of the
parties thereto, subject to the effects of bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other similar laws
relating to or affecting creditors' rights generally, general equitable
principles (whether considered in a proceeding in equity or at law) and
an implied covenant of good faith and fair dealing.
(c) To the best knowledge of such Grantor with respect to
parties other than a Grantor, no consent or authorization of, filing with
or other act by or in respect of any Governmental Authority is required
in connection with the execution, delivery, performance, validity or
enforceability of any of the Contracts by any party thereto other than
those which have been duly obtained, made or performed, are in full force
and effect and do not subject the scope of any such Contract to any
material adverse limitation, either specific or general in nature.
(d) Neither such Grantor nor (to the best of such Grantor's
knowledge) any of the other parties to the Contracts is in default in the
performance or observance of any of the terms thereof in any manner that,
in the aggregate, could reasonably be expected to have a Material Adverse
Effect.
(e) The right, title and interest of such Grantor in, to
and under the Contracts are not subject to any defenses, offsets,
counterclaims or claims that, in the aggregate, could reasonably be
expected to have a Material Adverse Effect.
(f) Such Grantor has delivered to the Administrative Agent
a complete and correct copy of each Contract, including all amendments,
supplements and other modifications thereto.
(g) No amount payable to such Grantor under or in
connection with any Contract is evidenced by any Instrument or Chattel
Paper in excess of $500,000 individually or $1,000,000 in the aggregate
which has not been delivered to the Administrative Agent.
(h) None of the parties to any Contract under which more
than $500,000 is payable is a Governmental Authority unless the relevant
Grantor has taken the actions requested by the Administrative Agent which
are required to cause the security interest of the Administrative Agent
therein to be perfected, including compliance with the Assignment of
Claims Act, if applicable.
3.10 Intellectual Property. (a) Schedule 6 lists all
Patents and all registrations and applications for Copyrights and
Trademarks owned by such Grantor in its own name on the date hereof.
(b) On the date hereof, all material Intellectual Property
is subsisting, unexpired (except as set forth on Schedule 6) and to the
best of Grantor's knowledge enforceable, has not been abandoned and does
not, to the knowledge of any Grantor, infringe the intellectual property
rights of any other Person.
(c) Except as set forth in Schedule 6, on the date hereof,
none of the Intellectual Property is the subject of any licensing or
franchise agreement pursuant to which such Grantor is the licensor or
franchisor.
(d) No holding, decision or judgment has been rendered by
any Governmental Authority which would limit, cancel or question the
validity of, or such Grantor's rights in, any Intellectual Property in
any respect that could reasonably be expected to have a Material Adverse
Effect.
(e) No action or proceeding is pending, or, to the
knowledge of such Grantor, threatened, on the date hereof (i) seeking to
limit, cancel or question the validity of any Intellectual Property or
such Grantor's ownership interest therein, or (ii) which, if adversely
determined, would have a material adverse effect on the value of any
Intellectual Property.
3.11 Vehicles. The book value of all Vehicles owned by all
Grantors on the date hereof does not exceed $250,000.
SECTION 4. COVENANTS
Each Grantor covenants and agrees with the Administrative
Agent and the Lenders that, from and after the date of this Agreement
until the Obligations shall have been paid in full and the Commitments
shall have terminated:
4.1 Covenants in Credit Agreement. In the case of each
Grantor other than the Borrower, such Grantor shall take, or shall
refrain from taking, as the case may be, each action that is
necessary to be taken or not taken, as the case may be, so that no
Default or Event of Default is caused by the failure to take such action
or to refrain from taking such action by such Grantor or any of its
Subsidiaries.
4.2 Delivery of Instruments and Chattel Paper. If any
amount in excess of $500,000 individually or $1,000,000 in the aggregate
payable under or in connection with any of the Collateral shall be or
become evidenced by any Instrument or Chattel Paper, such Instrument or
Chattel Paper shall be, promptly upon receipt thereof by such Grantor,
delivered to the Administrative Agent, duly indorsed in a manner
satisfactory to the Administrative Agent, to be held as Collateral
pursuant to this Agreement.
4.3 Maintenance of Insurance. (a) Such Grantor will
maintain, with financially sound and reputable companies, insurance
policies (i) insuring the Inventory, Equipment and Vehicles against loss
by fire, explosion, theft and such other casualties as may be customary
in the business in which the Borrower is engaged insuring such Grantor,
the Administrative Agent and the Lenders against liability for personal
injury and property damage relating to such Inventory, Equipment and
Vehicles, such policies to be in such form and amounts and having such
coverage as may be customary in the business in which the Borrower is
engaged.
(b) All such insurance shall (i) provide that no
cancellation, material reduction in amount or material change in coverage
thereof shall be effective until at least 30 days after receipt by the
Administrative Agent of written notice thereof, (ii) name the
Administrative Agent as additional insured party or loss payee, (iii) if
reasonably requested by the Administrative Agent, include a breach of
warranty clause and (iv) be reasonably satisfactory in all other respects
to the Administrative Agent.
(c) The Borrower shall deliver to the Administrative Agent
and the Lenders annually a report of a reputable insurance broker with
respect to such insurance and such supplemental reports with respect
thereto as the Administrative Agent may from time to time reasonably
request.
4.4 Payment of Obligations. Such Grantor will pay and
discharge or otherwise satisfy at or before maturity or before they
become delinquent, as the case may be, all taxes, assessments and
governmental charges or levies imposed upon the Collateral or in respect
of income or profits therefrom (excluding taxes arising from the income
of the Administrative Agent or any Lender which are covered by Section
2.18 of the Credit Agreement), as well as all claims of any kind
(including, without limitation, claims for labor, materials and supplies)
against or with respect to the Collateral, except that no such charge
need be paid if the amount or validity thereof is currently being
contested in good faith by appropriate proceedings, reserves in
conformity with GAAP with respect thereto have been provided on the books
of such Grantor and such proceedings could not reasonably be expected to
result in the sale, forfeiture or loss of any material portion of the
Collateral or any interest therein.
4.5 Maintenance of Perfected Security Interest; Further
Documentation. (a) Such Grantor shall maintain the security interest
created by this Agreement as a perfected security interest having at
least the priority described in Section 3.3 and shall defend such
security interest against the claims and demands of all Persons
whomsoever except for holders of permitted Liens.
(b) Such Grantor will furnish to the Administrative Agent
and the Lenders 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.
(c) At any time and from time to time, upon the written
request of the Administrative Agent, and at the sole expense of such
Grantor, such Grantor will promptly and duly execute and deliver, and
have recorded, such further instruments and documents and take such
further actions as the Administrative Agent may reasonably request for
the purpose of obtaining or preserving the full benefits of this
Agreement and of the rights and powers herein granted, including, without
limitation, the filing of any financing or continuation statements under
the Uniform Commercial Code (or other similar laws) in effect in any
jurisdiction with respect to the security interests created hereby, other
than foreign Intellectual Property filings. If any amount payable to any
Grantor under or in connection with any of the Pledged Securities with
respect to the equity interests of such Grantor in the Issuer thereof
shall be or become evidenced by any promissory note, other instrument or
chattel paper, such note, instrument or chattel paper in excess of
$500,000 individually or $1,000,000 in the aggregate shall be promptly
upon receipt thereof by such Grantor delivered to the Administrative
Agent, duly endorsed in a manner satisfactory to the Administrative
Agent, to be held as Pledged Securities pursuant to this Agreement other
than any note, instrument or chattel paper distributed as part of a
Restricted Payment permitted to be made or received pursuant to the
Credit Agreement.
(d) Concurrently with the delivery to the Administrative
Agent of each certificate representing one or more shares of Pledged
Stock to the Administrative Agent, such Grantor shall deliver an undated
stock power covering such certificate, duly executed in blank by such
Grantor.
(e) All Pledged Notes, when delivered, shall be duly
endorsed in blank. At the time of delivery of any Pledged Notes, the
applicable Grantor shall deliver the originals of the documents
comprising the Pledged Note Collateral with respect to such Pledged
Notes, together with an assignment of mortgage or deed of trust, as
applicable, in a form which is recordable in the county records where the
real property covered by such mortgage or deed of trust is located, duly
executed by such Grantor and acknowledged by a notary public.
4.6 Changes in Locations, Name, etc. Such Grantor will not,
except upon 15 days' prior written notice to the Administrative Agent and
upon delivery to the Administrative Agent of (a) all additional executed
financing statements and other documents reasonably requested by the
Administrative Agent to maintain the validity, perfection and priority of
the security interests provided for herein and (b) if applicable, a
written supplement to Schedule 5 showing any additional location at which
Inventory or Equipment shall be kept:
(i) permit any of the Inventory or Equipment to be kept
at a location other than those listed on Schedule 5;
(ii) change the location of its chief executive office or
sole place of business from that referred to in Section 4.4; or
(iii) 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 misleading.
4.7 Notices. Such Grantor will advise the Administrative
Agent and the Lenders promptly, in reasonable detail, of:
(a) any Lien (other than security interests created hereby
or Liens permitted under the Credit Agreement) on any of the Collateral
which would adversely affect the ability of the Administrative Agent to
exercise any of its remedies hereunder; and
(b) of the occurrence of any other event which could
reasonably be expected to have a material adverse effect on the aggregate
value of the Collateral or on the security interests created hereby.
4.8 Pledged Securities. (a) If such Grantor shall become
entitled to receive or shall receive any certificate (including, without
limitation, any certificate representing a stock dividend or a
distribution in connection with any reclassification, increase or
reduction of capital or any certificate issued in connection with any
reorganization), option or rights in respect of the Capital Stock of any
Issuer, whether in addition to, in substitution of, as a conversion of,
or in exchange for, any shares of the Pledged Stock, the Pledged
Partnership Interests or the Pledged LLC Interests or otherwise in
respect thereof, such Grantor shall accept the same as the agent of the
Administrative Agent and the Lenders, hold the same in trust for the
Administrative Agent and the Lenders and deliver the same forthwith to
the Administrative Agent in the exact form received, duly indorsed by
such Grantor to the Administrative Agent, if required, together with an
undated stock power covering such certificate duly executed in blank by
such Grantor and with, if the Administrative Agent so requests, signature
guaranteed, to be held by the Administrative Agent, subject to the terms
hereof, as additional collateral security for the Obligations. Any sums
paid upon or in respect of the Pledged Securities upon the liquidation or
dissolution of any Issuer shall be paid over to the Administrative Agent
to be held by it hereunder as additional collateral security for the
Obligations, and in case any distribution of capital shall be made on or
in respect of the Pledged Securities or any property shall be distributed
upon or with respect to the Pledged Securities, in each case pursuant to
the recapitalization or reclassification of the capital of any Issuer or
pursuant to the reorganization thereof, the property so distributed
shall, unless otherwise subject to a perfected security interest in favor
of the Administrative Agent, be delivered to the Administrative Agent to
be held by it hereunder as additional collateral security for the
Obligations. If any sums of money or property so paid or distributed in
respect of the Pledged Securities (other than distributions permitted to
be made or received pursuant to the Credit Agreement) shall be received
by such Grantor, such Grantor shall, until such money or property is paid
or delivered to the Administrative Agent, hold such money or property in
trust for the Lenders, segregated from other funds of such Grantor, as
additional collateral security for the Obligations.
(b) Except as otherwise permitted by the Credit Agreement,
without the prior written consent of the Administrative Agent (which
consent will not be unreasonably withheld), such Grantor will not (i)
vote to enable, or take any other action to permit, any Issuer to issue
any stock or other equity securities of any nature or to issue any other
securities convertible into or granting the right to purchase or exchange
for any stock or other equity securities of any nature of any Issuer
except the issuance to Grantor of equity securities which constitute
Collateral, (ii) sell, assign, transfer, exchange, or otherwise dispose
of, or grant any option with respect to, the Pledged Securities or
Proceeds thereof (except pursuant to a transaction expressly permitted by
the Credit Agreement), (iii) create, incur or permit to exist any Lien or
option in favor of, or any claim of any Person with respect to, any of
the Pledged Securities or Proceeds thereof, or any interest therein,
except for the security interests created by this Agreement or (iv) enter
into any agreement or undertaking restricting the right or ability of
such Grantor to sell, assign or transfer any of the Pledged Securities or
Proceeds thereof.
(c) In the case of each Grantor which is an Issuer, such
Issuer agrees that (i) it will be bound by the terms of this Agreement
relating to the Pledged Securities issued by it and will comply with such
terms insofar as such terms are applicable to it, (ii) it will notify the
Administrative Agent promptly in writing of the occurrence of any of the
events described in Section 4.8(a) with respect to the Pledged Securities
issued by it and (iii) the terms of Sections 5.3(c) and 5.7 shall apply
to it, mutatis mutandis, with respect to all actions that may be required
of it pursuant to Section 5.3(c) or 5.7 with respect to the Pledged
Securities issued by it.
(d) With respect to the Pledged Notes, the Grantors shall
(i) not extinguish, cancel or reduce the indebtedness evidenced by the
Pledged Notes (other than the Intercompany Notes) except as a result of
payment by the obligors thereunder, (ii) not amend or permit the
amendment of such Pledged Notes or the Pledged Note Collateral, or
release any of the property encumbered by the Pledged Note Collateral and
(iii) enforce or secure the performance of each and every obligation,
term, covenant, condition and agreements relating to the Pledged Notes
and the Pledged Note Collateral and not waive or compromise any rights it
may have thereunder except, with respect to the foregoing clauses (i),
(ii) and (iii), in each case other than in the ordinary course of
business.
(e) With respect to the Pledged LLC Interests and the
Pledged Partnership Interests, (i) perform and comply in all material
respects with all terms and provisions of each limited liability company
agreement and each partnership agreement then in effect with respect
thereto and required to be performed or complied with by it and (ii)
enforce each partnership agreement and limited liability company
agreement then in effect in accordance in all material respects with its
terms.
4.9 Receivables. (a) Other than in the ordinary course of
business consistent with its past practice, such Grantor will not (i)
grant any extension of the time of payment of any Receivable, (ii)
compromise or settle any Receivable for less than the full amount
thereof, (iii) release, wholly or partially, any Person liable for the
payment of any Receivable, (iv) allow any credit or discount whatsoever
on any Receivable or (v) amend, supplement or modify any Receivable in
any manner that could reasonably be expected to adversely affect the
value thereof.
(b) Such Grantor will deliver to the Administrative Agent a
copy of each material demand, notice or document received by it that
questions or calls into doubt the validity or enforceability of more than
5% of the aggregate amount of the then outstanding Receivables.
4.10 Contracts. (a) Such Grantor will perform and comply in
all material respects with all its obligations under the Contracts.
(b) Such Grantor will not amend, modify, terminate or waive
any provision of any Contract in any manner which could reasonably be
expected to cause a Material Adverse Effect.
(c) Subject to Section 4.10(b), such Grantor will exercise
promptly and diligently each and every material right which it may have
under each Contract (other than any right of termination).
(d) Such Grantor will deliver to the Administrative Agent a
copy of each material demand, notice or document received by it relating
in any way to any material Contract that questions the validity or
enforceability of such Contract.
4.11 Intellectual Property. (a) Such Grantor (either itself
or through licensees) will (i) continue to use each material Trademark 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 Trademark, (iii) use such
Trademark with the appropriate notice of registration and all other
notices and legends required by applicable material Requirements of Law,
(iv) not adopt or use any mark which is confusingly similar or a
colorable imitation of such Trademark unless the Administrative Agent,
for the ratable benefit of the Lenders, shall obtain a perfected security
interest in such mark pursuant to this Agreement, and (v) not (and not
knowingly permit any licensee or sublicensee thereof to) do any act or
knowingly omit to do any act whereby such Trademark may become
invalidated or impaired in any way.
(b) Such Grantor (either itself or through licensees) will
not do any act, or omit to do any act, whereby any material Patent may
become forfeited, abandoned or dedicated to the public.
(c) Such Grantor (either itself or through licensees) (i)
will employ each material Copyright and (ii) will not (and will not
knowingly permit any licensee or sublicensee thereof to) do any act or
knowingly omit to do any act whereby any material portion of the
Copyrights may become invalidated or otherwise impaired. Such Grantor
will not (either itself or through licensees) do any act whereby any
material portion of the Copyrights may fall into the public domain.
(d) Such Grantor (either itself or through licensees) will
not do any act that knowingly uses any material Intellectual Property to
infringe the intellectual property rights of any other Person.
(e) Such Grantor will notify the Administrative Agent and
the Lenders promptly if it knows, or has reason to know, that any
application or registration relating to any material Intellectual
Property may become forfeited, abandoned or dedicated to the public, 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, the
United States Copyright Office or any court or tribunal in any country)
regarding such Grantor's ownership of, or the validity of, any material
Intellectual Property or such Grantor's right to register the same or to
own and maintain the same.
(f) Whenever such Grantor, either by itself or through any
agent, employee, licensee or designee, shall file an application for the
registration of any Intellectual Property with the United States Patent
and Trademark Office, the United States Copyright Office or any similar
office or agency in any other country or any political subdivision
thereof, such 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 with respect to filings in the United States
and, with respect to filings outside the United States, within five
Business Days after the last day of the fiscal quarter in which the
Grantor is notified of such filing by its foreign agent. Upon request of
the Administrative Agent, such Grantor shall execute and deliver, and
have recorded, any and all agreements, instruments, documents, and papers
as the Administrative Agent may request to evidence the Administrative
Agent's and the Lenders' security interest in any Copyright, Patent or
Trademark and the goodwill and general intangibles of such Grantor
relating thereto or represented thereby.
(g) Such Grantor will take all reasonable and necessary
steps, including, without limitation, in any proceeding before the United
States Patent and Trademark Office, the United States Copyright 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 Intellectual Property, including, without limitation, filing
of applications for renewal, affidavits of use and affidavits of
incontestability.
(h) In the event that any material Intellectual Property is
infringed, misappropriated or diluted by a third party, such Grantor
shall (i) take such actions as such Grantor shall reasonably deem
appropriate under the circumstances to protect such Intellectual Property
and (ii) if such Intellectual Property is of material economic value,
promptly notify the Administrative Agent after it learns thereof and sue
for infringement, misappropriation or dilution, to seek injunctive relief
where appropriate and to recover any and all damages for such
infringement, misappropriation or dilution.
4.12 Vehicles. If the aggregate book value of all
Vehicles owned by all Grantors exceeds $250,000, the Borrower shall
promptly notify the Administrative Agent thereof and the Borrower will
cause all actions to be taken as may be required by the Administrative
Agent to cause the security interest of the Administrative Agent to be
perfected on such Vehicles as requested by the Administrative Agent.
SECTION 5. REMEDIAL PROVISIONS
5.1 Certain Matters Relating to Receivables. (a) The
Administrative Agent shall have the right to make test verifications of
the Receivables in any manner and through any medium that it reasonably
considers advisable, and each Grantor shall furnish all such assistance
and information as the Administrative Agent may require in connection
with such test verifications. At any time and from time to time, upon the
Administrative Agent's reasonable request and at the expense of the
relevant Grantor, such Grantor shall cause independent public accountants
or others satisfactory to the Administrative Agent to furnish to the
Administrative Agent reports showing reconciliations, aging and test
verifications of, and trial balances for, the Receivables; provided, that
the Administrative Agent may not make such a request more than once per
calendar year when no Event of Default is in existence or more than four
times per calendar year when an Event of Default is in existence.
(b) The Administrative Agent hereby authorizes each Grantor
to collect such Grantor's Receivables, subject to the Administrative
Agent's direction and control, and the Administrative Agent may curtail
or terminate said authority at any time after the occurrence and during
the continuance of an Event of Default. If required by the Administrative
Agent at any time after the occurrence and during the continuance of an
Event of Default, any payments of Receivables, when collected by any
Grantor, (i) shall be forthwith (and, in any event, within two Business
Days) deposited by such Grantor in the exact form received, duly indorsed
by such Grantor to the Administrative Agent if required, in a Collateral
Account maintained under the sole dominion and control of the
Administrative Agent, subject to withdrawal by the Administrative Agent
for the account of the Lenders only as provided in Section 5.5, and (ii)
until so turned over, shall be held by such Grantor in trust for the
Administrative Agent and the Lenders, segregated from other funds of such
Grantor. Each such deposit of Proceeds of Receivables after the
occurrence and during the continuance of an Event of Default shall be
accompanied by a report identifying in reasonable detail the nature and
source of the payments included in the deposit.
(c) At the Administrative Agent's reasonable request, each
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 Receivables, including, without limitation, all
original orders, invoices and shipping receipts; provided, that only
copies (or other than originals) of the foregoing documents shall be
required to be delivered in the absence of an Event of Default.
5.2 Communications with Obligors; Grantors Remain Liable.
(a) The Administrative Agent in its own name or in the name of others may
at any time after the occurrence and during the continuance of an Event
of Default communicate with obligors under the Receivables and parties to
the Contracts to verify with them to the Administrative Agent's
satisfaction the existence, amount and terms of any Receivables or
Contracts.
(b) Upon the request of the Administrative Agent at any
time after the occurrence and during the continuance of an Event of
Default, each Grantor shall notify obligors on the Receivables and
parties to the Contracts that a security interest in the Receivables and
the Contracts has been assigned to the Administrative Agent for the
ratable benefit of the Lenders and that payments in respect thereof shall
be made directly to the Administrative Agent.
(c) Anything herein to the contrary notwithstanding, each
Grantor shall remain liable under each of the Receivables and Contracts
to observe and perform all the conditions and obligations to be observed
and performed by it thereunder, all in accordance with the terms of any
agreement giving rise thereto in the case of Receivables or such
Contract. Neither the Administrative Agent nor any Lender shall have any
obligation or liability under any Receivable (or any agreement giving
rise thereto) or Contract by reason of or arising out of this Agreement
or the receipt by the Administrative Agent or any Lender of any payment
relating thereto, nor shall the Administrative Agent or any Lender be
obligated in any manner to perform any of the obligations of any Grantor
under or pursuant to any Receivable (or any agreement giving rise
thereto) or Contract, to make any payment, 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 thereunder, to present or
file any claim, to take any action to enforce any performance or to
collect the payment of any amounts which may have been assigned to it or
to which it may be entitled at any time or times.
5.3 Pledged Securities. (a) Unless an Event of Default
shall have occurred and be continuing and the Administrative Agent shall
have given notice to the relevant Grantor of the Administrative Agent's
intent to exercise its corresponding rights pursuant to Section 5.3(b),
each Grantor shall be permitted to receive all dividends paid in respect
of the Pledged Stock and all payments made in the ordinary course in
respect of the Pledged Notes and all distributions in respect of the
Pledge Partnership Interests and Pledged LLC Interests, to the extent
permitted in the Credit Agreement, and to exercise all voting and
corporate rights with respect to the Pledged Securities; provided,
however, that no vote shall be cast or corporate right exercised or other
action taken which, in the Administrative Agent's reasonable judgment,
would materially impair the Collateral or which would be inconsistent
with or result in any violation of any provision of the Credit Agreement,
this Agreement or any other Loan Document.
(b) If an Event of Default shall occur and be continuing
and the Administrative Agent shall give notice of its intent to exercise
such rights to the relevant Grantor or Grantors, (i) the Administrative
Agent shall have the right to receive any and all cash dividends,
payments or other Proceeds paid in respect of the Pledged Securities and
make application thereof to the Obligations in such order as the
Administrative Agent may determine, and (ii) any or all of the Pledged
Securities shall be registered in the name of the Administrative Agent or
its nominee, and the Administrative Agent or its nominee may thereafter
exercise (x) all voting, corporate and other rights pertaining to such
Pledged Securities at any meeting of shareholders of the relevant Issuer
or Issuers or otherwise and (y) any and all rights of conversion,
exchange and subscription and any other rights, privileges or options
pertaining to such Pledged Securities as if it were the absolute owner
thereof (including, without limitation, the right to exchange at its
discretion any and all of the Pledged Securities upon the merger,
consolidation, reorganization, recapitalization or other fundamental
change in the corporate structure of any Issuer, or upon the exercise by
any Grantor or the Administrative Agent of any right, privilege or option
pertaining to such Pledged Securities, and in connection therewith, the
right to deposit and deliver any and all of the Pledged Securities with
any committee, depositary, transfer agent, registrar or other designated
agency upon such terms and conditions as the Administrative Agent may
determine), all without liability except to account for property actually
received by it and except to the extent resulting from the gross
negligence or willful misconduct of the Administrative Agent, but the
Administrative Agent shall have no duty to any Grantor to exercise any
such right, privilege or option and shall not be responsible for any
failure to do so or delay in so doing.
(c) Each Grantor hereby authorizes and instructs each
Issuer of any Pledged Securities pledged by such Grantor hereunder to
(i) comply with any instruction received by it from the Administrative
Agent in writing that (x) states that an Event of Default has occurred
and is continuing and (y) is otherwise in accordance with the terms of
this Agreement, without any other or further instructions from such
Grantor, and each Grantor agrees that each Issuer shall be fully
protected in so complying, and (ii) upon the occurrence and during the
continuance of an Event of Default, unless otherwise expressly
permitted hereby, pay any dividends or other payments with respect to
the Pledged Securities directly to the Administrative Agent.
5.4 Proceeds to be Turned Over To Administrative Agent. In
addition to the rights of the Administrative Agent and the Lenders
specified in Section 5.1 with respect to payments of Receivables, if an
Event of Default shall occur and be continuing, all Proceeds received by
any Grantor consisting of cash, checks and other similar items shall be
held by such Grantor in trust for the Administrative Agent and the
Lenders, segregated from other funds of such Grantor, and shall,
forthwith upon receipt by such Grantor, be turned over to the
Administrative Agent in the exact form received by such Grantor (duly
indorsed by such Grantor to the Administrative Agent, if required). All
Proceeds received by the Administrative Agent hereunder shall be held by
the Administrative Agent in a Collateral Account maintained under its
sole dominion and control. All Proceeds while held by the Administrative
Agent in a Collateral Account (or by such Grantor in trust for the
Administrative Agent and the Lenders) shall continue to be held as
collateral security for all the Obligations and shall not constitute
payment thereof until applied as provided in Section 5.5.
5.5 Application of Proceeds. At such intervals as may be
agreed upon by the Borrower and the Administrative Agent, or, if an Event
of Default shall have occurred and be continuing, the Administrative
Agent may apply all or any part of Proceeds received by it constituting
Collateral, whether or not held in any Collateral Account, in payment of
the Obligations in the following order:
First, to pay incurred and unpaid fees and expenses of
the Administrative Agent under the Loan Documents;
Second, to the Administrative Agent, for application by it
towards payment of amounts then due and owing and remaining
unpaid in respect of the Obligations, pro rata among the Lenders
according to the amounts of the Obligations then due and owing
and remaining unpaid to the Lenders;
Third, to the Administrative Agent, for application by it
towards prepayment of the Obligations, pro rata among the Lenders
according to the amounts of the Obligations then held by the
Lenders; and
Fourth, any balance of such Proceeds remaining after the
Obligations shall have been paid in full, and the Commitments
shall have terminated shall be paid over to the Borrower or to
whomsoever may be lawfully entitled to receive the same.
5.6 Code and Other Remedies. If an Event of Default
shall occur and be continuing, the Administrative Agent, on behalf of
the Lenders, may exercise, in addition to all other rights and
remedies granted to them in this Agreement and in any other instrument
or agreement securing, evidencing or relating to the Obligations, all
rights and remedies of a secured party under the New York UCC or any
other applicable law. Without limiting the generality of the
foregoing, the Administrative Agent, without demand of performance or
other demand, presentment, protest, advertisement or notice of any
kind (except any notice required by law referred to below) to or upon
any Grantor or any other Person (all and each of which demands,
defenses, advertisements and notices are hereby waived), may in such
circumstances forthwith collect, receive, appropriate and realize upon
the Collateral, or any part thereof, and/or may forthwith sell, lease,
assign, give option or options to purchase, or otherwise dispose of
and deliver the Collateral or any part thereof (or contract to do any
of the foregoing), in one or more parcels at public or private sale or
sales, at any exchange, broker's board or office of the Administrative
Agent or any Lender or elsewhere upon such terms and conditions as it
may deem advisable and at such prices as it may deem best, for cash or
on credit or for future delivery without assumption of any credit
risk. The Administrative Agent or any Lender shall have the right upon
any such public sale or sales, and, to the extent permitted by law,
upon any such private sale or sales, to purchase the whole or any part
of the Collateral so sold, free of any right or equity of redemption
in any Grantor, which right or equity is waived and released upon
consummation of such sale. Each Grantor further agrees, at the
Administrative Agent's request, to assemble the Collateral and make it
available to the Administrative Agent at places which the
Administrative Agent shall reasonably select, whether at such
Grantor's premises or elsewhere. The Administrative Agent shall apply
the net proceeds of any action taken by it pursuant to this Section
5.6, after deducting all reasonable costs and expenses of every kind
incurred in connection therewith or incidental to the care or
safekeeping of any of the Collateral or in any way relating to the
Collateral or the rights of the Administrative Agent and the Lenders
hereunder, including, without limitation, reasonable attorneys' fees
and disbursements, to the payment in whole or in part of the
Obligations, in such order as the Administrative Agent may elect and
as permitted by law, and only after such application and after the
payment by the Administrative Agent of any other amount required by
any provision of law, including, without limitation, Section
9-504(1)(c) of the New York UCC, need the Administrative Agent account
for the surplus, if any, to any Grantor. To the extent permitted by
applicable law, each Grantor waives all claims, damages and demands it
may acquire against the Administrative Agent or any Lender arising out
of the exercise by them of any rights hereunder, except to the extent
arising out of gross negligence or willful misconduct of the Agent or
such Lender. If any notice of a proposed sale or other disposition of
Collateral shall be required by law, such notice shall be deemed
reasonable and proper if given at least 10 days before such sale or
other disposition.
5.7 Registration Rights. (a) If the Administrative Agent
shall determine to exercise its right to sell any or all of the Pledged
Securities pursuant to Section 5.6, and if in the reasonable opinion of
the Administrative Agent it is necessary or advisable to have the Pledged
Securities or that portion thereof to be sold, registered under the
provisions of the Securities Act, the relevant Grantor will cause the
Issuer thereof to (i) execute and deliver, and cause the directors and
officers of such Issuer to execute and deliver, all such instruments and
documents, and do or cause to be done all such other acts as may be, in
the reasonable opinion of the Administrative Agent, necessary or
advisable to register the Pledged Securities or that portion thereof to
be sold, under the provisions of the Securities Act, (ii) use its
reasonable efforts to cause the registration statement relating thereto
to become effective and to remain effective for a period of one year from
the date of the first public offering of the Pledged Securities, or that
portion thereof to be sold, and (iii) make all amendments thereto and/or
to the related prospectus which, in the reasonable opinion of the
Administrative Agent, are necessary or advisable, all in conformity with
the requirements of the Securities Act and the rules and regulations of
the Securities and Exchange Commission applicable thereto. Each Grantor
agrees to cause such Issuer to comply with the provisions of the
securities or "Blue Sky" laws of any and all jurisdictions of the United
States which the Administrative Agent shall designate and to make
available to its security holders, as soon as practicable, an earnings
statement (which need not be audited) which will satisfy the provisions
of Section 11(a) of the Securities Act.
(b) Each Grantor recognizes that the Administrative
Agent may be unable to effect a public sale of any or all the Pledged
Securities, by reason of certain prohibitions contained in the
Securities Act and applicable state securities laws or otherwise, and
may be compelled to resort to one or more private sales thereof to a
restricted group of purchasers which will be obliged to agree, among
other things, to acquire such securities for their own account for
investment and not with a view to the distribution or resale thereof.
Each Grantor acknowledges and agrees that any such private sale may
result in prices and other terms less favorable than if such sale were
a public sale and, notwithstanding such circumstances, agrees that any
such private sale shall be deemed to have been made in a commercially
reasonable manner. The Administrative Agent shall be under no
obligation to delay a sale of any of the Pledged Securities for the
period of time necessary to permit the Issuer thereof to register such
securities for public sale under the Securities Act, or under
applicable state securities laws of the United States, even if such
Issuer would agree to do so.
(c) Each Grantor agrees to use its reasonable efforts to do
or cause to be done all such other acts as may be necessary to make such
sale or sales of all or any portion of the Pledged Securities pursuant to
this Section 5.7 valid and binding and in compliance with any and all
other applicable Requirements of Law. Each Grantor further agrees that a
breach of any of the covenants contained in this Section 5.7 will cause
irreparable injury to the Administrative Agent and the Lenders, that the
Administrative Agent and the Lenders have no adequate remedy at law in
respect of such breach and, as a consequence, that each and every
covenant contained in this Section 5.7 shall be specifically enforceable
against such Grantor, and such Grantor hereby waives and agrees not to
assert any defenses against an action for specific performance of such
covenants except for a defense that no Event of Default has occurred
under the Credit Agreement.
5.8 Waiver; Deficiency. Each Grantor waives and agrees not
to assert any rights or privileges which it may acquire under Section
9-112 of the New York UCC. Each Grantor shall remain liable for any
deficiency if the proceeds of any sale or other disposition of the
Collateral are insufficient to pay its Obligations and the fees and
disbursements of any attorneys employed by the Administrative Agent or
any Lender to collect such deficiency.
SECTION 6. THE ADMINISTRATIVE AGENT
6.1 Administrative Agent's Appointment as Attorney-in-Fact,
etc. (a) Each Grantor hereby irrevocably constitutes and appoints the
Administrative Agent and any officer or agent thereof, with full power of
substitution, as its true and lawful attorney-in-fact with full
irrevocable power and authority in the place and stead of such Grantor
and in the name of such Grantor or in its own name, for the purpose of
carrying out the terms of this Agreement, to take any and all appropriate
action and to execute any and all documents and instruments which may be
necessary or desirable to accomplish the purposes of this Agreement, and,
without limiting the generality of the foregoing, each Grantor hereby
gives the Administrative Agent the power and right, on behalf of such
Grantor, without notice to or assent by such Grantor, to do any or all of
the following, in each case, subject to the last sentence of this Section
6.1(a):
(i) in the name of such Grantor or its own name, or
otherwise, take possession of and indorse and collect any checks,
drafts, notes, acceptances or other instruments for the payment
of moneys due under any Receivable or Contract or with respect to
any other Collateral and file any claim or take any other action
or proceeding in any court of law or equity or otherwise deemed
appropriate by the Administrative Agent for the purpose of
collecting any and all such moneys due under any Receivable or
Contract or with respect to any other Collateral whenever
payable;
(ii) in the case of any Intellectual Property, execute and
deliver, and have recorded, any and all agreements, instruments,
documents and papers as the Administrative Agent may request to
evidence the Administrative Agent's and the Lenders' security
interest in such Intellectual Property and the goodwill and
General Intangibles of such Grantor relating thereto or
represented thereby;
(iii) pay or discharge taxes and Liens levied or placed on
or threatened against the Collateral, effect any repairs or any
insurance called for by the terms of this Agreement and pay all
or any part of the premiums therefor and the costs thereof;
(iv) execute, in connection with any sale provided for in
Section 5.6 or 5.7, any indorsements, assignments or other
instruments of conveyance or transfer with respect to the
Collateral; and
(v) (1) direct any party liable for any payment under any
of the Collateral to make payment of any and all moneys due or to
become due thereunder directly to the Administrative Agent or as
the Administrative Agent shall direct; (2) ask or demand for,
collect, and receive payment of and receipt for, any and all
moneys, claims and other amounts due or to become due at any time
in respect of or arising out of any Collateral; (3) sign and
indorse any invoices, freight or express bills, bills of lading,
storage or warehouse receipts, drafts against debtors,
assignments, verifications, notices and other documents in
connection with any of the Collateral; (4) commence and prosecute
any suits, actions or proceedings at law or in equity in any
court of competent jurisdiction to collect the Collateral or any
portion thereof and to enforce any other right in respect of any
Collateral; (5) defend any suit, action or proceeding brought
against such Grantor with respect to any Collateral; (6) settle,
compromise or adjust any such suit, action or proceeding and, in
connection therewith, give such discharges or releases as the
Administrative Agent may deem appropriate; (7) assign any
Copyright, Patent or Trademark (along with the goodwill of the
business to which any such Trademark pertains), throughout the
world for such term or terms, on such conditions, and in such
manner, as the Administrative Agent shall in its sole discretion
determine subject, however, to licenses theretofore issued by
Grantor to the extent permitted hereunder; and (8) generally,
sell, transfer, pledge and make any agreement with respect to or
otherwise deal with any of the Collateral as fully and completely
as though the Administrative Agent were the absolute owner
thereof for all purposes, and do, at the Administrative Agent's
option and such Grantor's expense, at any time, or from time to
time, all acts and things which the Administrative Agent deems
necessary to protect, preserve or realize upon the Collateral and
the Administrative Agent's and the Lenders' security interests
therein and to effect the intent of this Agreement, all as fully
and effectively as such Grantor might do.
Anything in this Section 6.1(a) 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 6.1(a) unless an
Event of Default shall have occurred and be continuing.
(b) If any Grantor fails to perform or comply with any of
its agreements contained herein, the Administrative Agent, at its option,
but without any obligation so to do, may perform or comply, or otherwise
cause performance or compliance, with such agreement.
(c) The reasonable out-of-pocket expenses of the
Administrative Agent incurred in connection with actions undertaken as
provided in this Section 6.1, together with interest thereon at a rate
per annum equal to the rate per annum at which interest would then be
payable on past due Term Loans that are Base Rate Loans under the Credit
Agreement, from the date of payment by the Administrative Agent to the
date reimbursed by the relevant Grantor, shall be payable by such Grantor
to the Administrative Agent on demand.
(d) Each Grantor hereby ratifies all that said attorneys
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 in
accordance with the terms hereof.
6.2 Duty of Administrative Agent. The Administrative
Agent's sole duty with respect to the custody, safekeeping and physical
preservation of the Collateral in its possession, under Section 9-207 of
the New York UCC or otherwise, shall be to deal with it in the same
manner as the Administrative Agent deals with similar property for its
own account. Neither the Administrative Agent, any Lender nor any of
their respective officers, directors, employees or agents shall be liable
for failure to demand, collect or realize upon any of the Collateral or
for any delay in doing so or shall be under any obligation to sell or
otherwise dispose of any Collateral upon the request of any Grantor or
any other Person or to take any other action whatsoever with regard to
the Collateral or any part thereof. The powers conferred on the
Administrative Agent and the Lenders hereunder are solely to protect the
Administrative Agent's and the Lenders' interests in the Collateral and
shall not impose any duty upon the Administrative Agent or any Lender to
exercise any such powers. The Administrative Agent and the Lenders shall
be accountable only for amounts that they actually receive as a result of
the exercise of such powers, and neither they nor any of their officers,
directors, employees or agents shall be responsible to any Grantor for
any act or failure to act hereunder, except for their own gross
negligence or willful misconduct.
6.3 Execution of Financing Statements. Pursuant to Section
9-402 of the New York UCC and any other applicable law, each Grantor
authorizes the Administrative Agent to file or record financing
statements and other filing or recording documents or instruments with
respect to the Collateral without the signature of such Grantor in such
form and in such offices as the Administrative Agent reasonably
determines appropriate to perfect the security interests of the
Administrative Agent under this Agreement. A photographic or other
reproduction of this Agreement shall be sufficient as a financing
statement or other filing or recording document or instrument for filing
or recording in any jurisdiction.
6.4 Authority of Administrative Agent. Each Grantor
acknowledges that the rights and responsibilities of the Administrative
Agent under this Agreement with respect to any action taken by the
Administrative Agent or the exercise or non-exercise by the
Administrative Agent of any option, voting right, request, judgment or
other right or remedy provided for herein or resulting or arising out of
this Agreement shall, as between the Administrative Agent and the
Lenders, be governed by the Credit Agreement, but, as between the
Administrative Agent and the Grantors, the Administrative Agent shall be
conclusively presumed to be acting as agent for the Lenders with full and
valid authority so to act or refrain from acting, and no Grantor shall be
under any obligation, or entitlement, to make any inquiry respecting such
authority.
SECTION 7. MISCELLANEOUS
7.1 Amendments in Writing. None of the terms or provisions
of this Agreement may be waived, amended, supplemented or otherwise
modified except in accordance with subsection 9.1 of the Credit
Agreement.
7.2 Notices. All notices, requests and demands to or upon
the Administrative Agent or any Grantor hereunder shall be effected in
the manner provided for in subsection 9.2 of the Credit Agreement;
provided that any such notice, request or demand to or upon any Guarantor
shall be addressed to such Guarantor at its notice address set forth on
Schedule 1.
7.3 No Waiver by Course of Conduct; Cumulative Remedies.
Neither the Administrative Agent nor any Lender shall by any act (except
by a written instrument pursuant to Section 7.1), delay, indulgence,
omission or otherwise be deemed to have waived any right or remedy
hereunder or to have acquiesced in any Default or Event of Default. No
failure to exercise, nor any delay in exercising, on the part of the
Administrative Agent or any Lender, any right, power or privilege
hereunder shall operate as a waiver thereof. No single or partial
exercise of any right, power or privilege hereunder shall preclude any
other or further exercise thereof or the exercise of any other right,
power or privilege. A waiver by the Administrative Agent or any Lender of
any right or remedy hereunder on any one occasion shall not be construed
as a bar to any right or remedy which the Administrative Agent or such
Lender would otherwise have on any future occasion. The rights and
remedies herein provided are cumulative, may be exercised singly or
concurrently and are not exclusive of any other rights or remedies
provided by law.
7.4 Enforcement Expenses; Indemnification. (a) Each Grantor
agrees to pay or reimburse each Lender and the Administrative Agent for
all its reasonable out-of-pocket costs and expenses incurred in
collecting against such Grantor under the Subsidiary Guarantee (other
than the Borrower) or otherwise enforcing or in the case of the
Administrative Agent only, preserving any rights under this Agreement and
the other Loan Documents to which such Grantor is a party, including,
without limitation, the reasonable fees and reasonable disbursements of
counsel (including the allocated fees and expenses of in-house counsel)
to each Lender and of counsel to the Administrative Agent.
(b) Each Grantor agrees to pay, and to save the
Administrative Agent and the Lenders harmless from, any and all
liabilities with respect to, or resulting from any delay in paying, any
and all stamp, excise, sales or other taxes (other than taxes arising
from the income of the Administrative Agent or any Lender which are
covered by Section 2.18 of the Credit Agreement) which may be payable or
determined to be payable with respect to any of the Collateral or in
connection with any of the transactions contemplated by this Agreement.
(c) Each Grantor agrees to pay, and to save the
Administrative Agent and the Lenders harmless from, any and all
liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind or nature whatsoever
with respect to the execution, delivery, enforcement, performance and
administration of this Agreement to the extent the Borrower would be
required to do so pursuant to subsection 9.5 of the Credit Agreement.
(d) The agreements in this Section 7.4 shall survive
repayment of the Obligations and all other amounts payable under the
Credit Agreement and the other Loan Documents.
7.5 Successors and Assigns. This Agreement shall be binding
upon the successors and assigns of each Grantor and shall inure to the
benefit of the Administrative Agent and the Lenders and their respective
permitted successors and assigns; provided that no Grantor may assign,
transfer or delegate any of its rights or obligations under this
Agreement without the prior written consent of the Administrative Agent.
7.6 Set-Off. Each Grantor hereby irrevocably authorizes
the Administrative Agent and each Lender at any time and from time to
time while an Event of Default shall have occurred and be continuing,
without notice to such Grantor or any other Grantor, any such notice
being expressly waived by each Grantor, to set-off and appropriate and
apply any and all deposits (general or special, time or demand,
provisional or final), in any currency, and any other credits,
indebtedness or claims, in any currency, in each case whether direct
or indirect, absolute or contingent, matured or unmatured, at any time
held or owing by the Administrative Agent or such Lender to or for the
credit or the account of such Grantor, or any part thereof in such
amounts as the Administrative Agent or such Lender may elect, against
and on account of the obligations and liabilities of such Grantor to
the Administrative Agent or such Lender hereunder and claims of every
nature and description of the Administrative Agent or such Lender
against such Grantor, in any currency, whether arising hereunder,
under the Credit Agreement, any other Loan Document or otherwise, as
the Administrative Agent or such Lender may elect, whether or not the
Administrative Agent or any Lender has made any demand for payment and
although such obligations, liabilities and claims may be contingent or
unmatured. The Administrative Agent and each Lender shall notify such
Grantor promptly of any such set-off and the application made by the
Administrative Agent or such Lender of the proceeds thereof, provided
that the failure to give such notice shall not affect the validity of
such set-off and application. The rights of the Administrative Agent
and each Lender under this Section 7.6 are in addition to other rights
and remedies (including, without limitation, other rights of set-off)
which the Administrative Agent or such Lender may have.
7.7 Counterparts. This Agreement may be executed by one or
more of the parties to this Agreement on any number of separate
counterparts (including by telecopy), and all of said counterparts taken
together shall be deemed to constitute one and the same instrument.
7.8 Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof,
and any such prohibition or unenforceability in any jurisdiction shall
not invalidate or render unenforceable such provision in any other
jurisdiction.
7.9 Section Headings. The Section headings used in this
Agreement are for convenience of reference only and are not to affect the
construction hereof or be taken into consideration in the interpretation
hereof.
7.10 Integration. This Agreement and the other Loan
Documents represent the agreement of the Grantors, the Administrative
Agent and the Lenders with respect to the subject matter hereof and
thereof, and there are no promises, undertakings, representations or
warranties by the Administrative Agent or any Lender relative to subject
matter hereof and thereof not expressly set forth or referred to herein
or in the other Loan Documents.
7.11 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY,
AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE
STATE OF NEW YORK.
7.12 Submission To Jurisdiction; Waivers. Each Grantor
hereby irrevocably and unconditionally:
(a) submits for itself and its property in any legal action
or proceeding relating to this Agreement and the other Loan
Documents to which it is a party, or for recognition and
enforcement of any judgment in respect thereof, to the
non-exclusive general jurisdiction of the Courts of the State of
New York, the courts of the United States of America for the
Southern District of New York, and appellate courts from any
thereof;
(b) consents that any such action or proceeding may be
brought in such courts and waives any objection that it may now
or hereafter have to the venue of any such action or proceeding
in any such court or that such action or proceeding was brought
in an inconvenient court and agrees not to plead or claim the
same;
(c) agrees that service of process in any such action or
proceeding may be effected by mailing a copy thereof by
registered or certified mail (or any substantially similar form
of mail), postage prepaid, to such Grantor at its address
referred to in Section 7.2 or at such other address of which the
Administrative Agent shall have been notified in the manner
described in Section 7.2;
(d) agrees that nothing herein shall affect the right to
effect service of process in any other manner permitted by law or
shall limit the right to sue in any other jurisdiction; and
(e) waives, to the maximum extent not prohibited by law,
any right it may have to claim or recover in any legal action or
proceeding referred to in this Section any special, exemplary,
punitive or consequential damages.
7.13 Acknowledgements. Each Grantor hereby acknowledges
that:
(a) it has been advised by counsel in the negotiation,
execution and delivery of this Agreement and the other Loan
Documents to which it is a party;
(b) neither the Administrative Agent nor any Lender has any
fiduciary relationship with or fiduciary duty to any Grantor
arising out of or in connection with this Agreement or any of the
other Loan Documents, and the relationship between the Grantors,
on the one hand, and the Administrative Agent and Lenders, on the
other hand, in connection herewith or therewith is solely that of
debtor and creditor; and
(c) no joint venture is created hereby or by the other Loan
Documents or otherwise exists by virtue of the transactions
contemplated hereby among the Lenders or among the Grantors and
the Lenders.
7.14 WAIVER OF JURY TRIAL. EACH GRANTOR AND THE
ADMINISTRATIVE AGENT BY ITS ACCEPTANCE HEREOF HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING
RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY
COUNTERCLAIM THEREIN.
7.15 Additional Grantors. Each Subsidiary of the Borrower
that is required to become a party to this Agreement pursuant to Section
5.9 of the Credit Agreement shall become a Grantor for all purposes of
this Agreement upon execution and delivery by such Subsidiary of an
Assumption Agreement in the form of Annex 1 hereto.
7.16 Releases. (a) At such time as the Loans, and the other
Obligations shall have been paid in full and the Commitments have been
terminated, the Collateral shall automatically be released from the Liens
created hereby, and this Agreement and all obligations (other than those
expressly stated to survive such termination) of the Administrative Agent
and each Grantor hereunder shall automatically terminate, all without
delivery of any instrument or performance of any act by any party, and
all rights to the Collateral shall revert to the Grantors. At the request
and sole expense of any Grantor following any such termination, the
Administrative Agent shall deliver to such Grantor any Collateral held by
the Administrative Agent hereunder, and execute and deliver to such
Grantor such documents as such Grantor shall reasonably request to
evidence such termination and release.
(b) If any of the Collateral shall be sold, transferred
or otherwise disposed of by any Grantor in a transaction permitted by
the Credit Agreement, then the Administrative Agent, at the request
and sole expense of such Grantor, shall execute and deliver to such
Grantor all releases or other documents reasonably necessary or
desirable for the release of the Liens created hereby on such
Collateral. At the request and sole expense of the Borrower, a Grantor
that is a Subsidiary of the Borrower shall be released from its
obligations hereunder in the event that all the Capital Stock of such
Subsidiary shall be sold, transferred or otherwise disposed of in a
transaction permitted by the Credit Agreement or such entity is no
longer a "Subsidiary" as permitted by the Credit Agreement; provided
that the Borrower 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 identifying the relevant Subsidiary and
the terms of the sale or other disposition in reasonable detail,
including the price thereof and any expenses in connection therewith,
together with a certification by the Borrower stating that such
transaction is in compliance with the Credit Agreement and the other
Loan Documents.
Notwithstanding the foregoing, no such release of any
Collateral shall be effected unless any lien on such Collateral securing
the Second Priority Notes shall also be released.
IN WITNESS WHEREOF, each of the undersigned has caused this
Security and Pledge Agreement to be duly executed and delivered as of the
date first above written.
BEAR ISLAND PAPER COMPANY, LLC
By: /s/ Edward D. Sherrick
Title: Vice President of Finance
ACKNOWLEDGEMENT AND CONSENT
The undersigned hereby acknowledges receipt of a copy of the
Security and Pledge Agreement dated as of December 1, 1997 (the
"Agreement"), made by the Grantors parties thereto for the benefit of
Toronto-Dominion (Texas), Inc., as Administrative Agent. The undersigned
agrees for the benefit of the Administrative Agent and the Lenders as
follows:
8. The undersigned will be bound by the terms of the Agreement
and will comply with such terms insofar as such terms are applicable to
the undersigned.
9. The undersigned will notify the Administrative Agent promptly
in writing of the occurrence of any of the events described in Section
4.8(a) of the Agreement.
10. The terms of Sections 5.3(a) and 5.7 of the Agreement shall
apply to it, mutatis mutandis, with respect to all actions that may be
required of it pursuant to Section 5.3(a) or 5.7 of the Agreement.
[NAME OF ISSUER]
By _____________________________
Title __________________________
Address for Notices:
_________________________________
_________________________________
Fax: ____________________________
Annex 1 to
Security and Pledge Agreement
ASSUMPTION AGREEMENT, dated as of ________________, 199_, made by
______________________________, a ______________ corporation (the
"Additional Grantor"), in favor of Toronto-Dominion (Texas), Inc., as
administrative agent (in such capacity, the "Administrative Agent") for
the banks and other financial institutions (the "Lenders") parties to the
Credit Agreement referred to below. All capitalized terms not defined
herein shall have the meaning ascribed to them in such Credit Agreement.
W I T N E S S E T H :
WHEREAS, The Bear Island Paper Company, LLC (the "Borrower"), the
Lenders, the Arranger and the Administrative Agent have entered into a
Credit Agreement, dated as of ____________________, 199_ (as amended,
supplemented or otherwise modified from time to time, the "Credit
Agreement");
WHEREAS, in connection with the Credit Agreement, the Borrower
and certain of its Affiliates (other than the Additional Grantor) have
entered into the Security and Pledge Agreement, dated as of
________________________, 199_ (as amended, supplemented or otherwise
modified from time to time, the "Security and Pledge Agreement") in favor
of the Administrative Agent for the benefit of the Lenders;
WHEREAS, the Credit Agreement requires the Additional Grantor
to become a party to the Security and Pledge Agreement; and
WHEREAS, the Additional Grantor has agreed to execute and deliver
this Assumption Agreement in order to become a party to the Security and
Pledge Agreement;
NOW, THEREFORE, IT IS AGREED:
1. Security and Pledge Agreement. By executing and delivering
this Assumption Agreement, the Additional Grantor, as provided in Section
7.15 of the Security and Pledge Agreement, hereby becomes a party to the
Security and Pledge Agreement as a Grantor thereunder with the same force
and effect as if originally named therein as a Grantor and, without
limiting the generality of the foregoing, hereby expressly assumes all
obligations and liabilities of a Grantor thereunder. The information set
forth in Annex 1-A hereto is hereby added to the information set forth in
Schedules ____________1 to the Security and Pledge Agreement. The
Additional Grantor hereby represents and warrants that each of the
representations and warranties contained in Section 4 of the Security and
Pledge Agreement is true and correct with respect to the Additional
Grantor on and as the date hereof (after giving effect to this Assumption
Agreement and the new information on such Schedules) as if made on and as
of such date.
- - -----------
1 Refer to each Schedule which needs to be supplemented.
2. GOVERNING LAW. THIS ASSUMPTION AGREEMENT SHALL BE GOVERNED BY,
AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE
STATE OF NEW YORK.
IN WITNESS WHEREOF, the undersigned has caused this Assumption
Agreement to be duly executed and delivered as of the date first above
written.
[ADDITIONAL GRANTOR]
By:____________________________
Name:
Title:
SCHEDULE 1
NOTICE ADDRESSES OF GRANTORS
Post Office Box 2119
10026 Old Ridge Road, Rte. 738
Ashland, Virginia 23005
Attention: Vice President/General Manager
Telephone: (804) 227-4000
Telecopy: (804) 227-4014
SCHEDULE 2
DESCRIPTION OF PLEDGED SECURITIES
PLEDGED STOCK:
Issuer Class of Stock Stock Certificate No. No. of Shares
None
PLEDGED LLC INTERESTS:
Name of Limited Liability Company Type of Interest Percentage Interest
None
PLEDGED PARTNERSHIP INTERESTS:
Name of Partnership Type of Interest Percentage Interest
None
PLEDGED NOTES:
Issuer Payee Principal Amount
None
SCHEDULE 3
FILINGS AND OTHER ACTIONS
REQUIRED TO PERFECT SECURITY INTERESTS*
I. Uniform Commercial Code Filings
State Corporation Commission of Virginia
Hanover County, Virginia
Buckingham County, Virginia
Caroline County, Virginia
Cumberland County, Virginia
Gloucester County, Virginia
Lancaster County, Virginia
Louisa County, Virginia
Orange County, Virginia
Richmond County, Virginia
II. Trademark Filings
None.**
III. Patent Filings
U.S. Patent and Trademark Office
State Corporation Commission of Virginia
Hanover County, Virginia
Buckingham County, Virginia
Caroline County, Virginia
Cumberland County, Virginia
Gloucester County, Virginia
Lancaster County, Virginia
Louisa County, Virginia
Orange County, Virginia
Richmond County, Virginia
All foreign offices where Patents have been issued or are pending.
IV. Copyright Filings
U.S. Copyright Office
V. Actions with respect to Pledged Stock
None.
VI. Other Actions
None.
* Note that perfection of security interests in patents and
trademarks requires filings under the UCC in jurisdictions where
filings would be made for general intangibles, as well as filings
in the U.S. Copyright and the U.S. Patent and Trademark Office,
and, with respect to foreign patent and trademark registrations
and applications, filing in the appropriate offices in the
related foreign jurisdictions. Perfecting a security interest in
U.S. Copyrights and the receivables arising therefrom requires
that such copyrights be registered in the U.S. Copyright Office.
** Any Trademark registrations or applications assigned after the
date hereof will require filings in the U.S. Patent and Trademark
Office or appropriate foreign Trademark registry.
SCHEDULE 4
LOCATION OF JURISDICTION OF ORGANIZATION
AND CHIEF EXECUTIVE OFFICE
Jurisdiction of
Grantor Organization Location
Bear Island Paper Virginia Post Office Box 2119
Company, L.L.C. 10026 Old Ridge Road,
Rte. 738
Ashland, Virginia 23005
SCHEDULE 5
LOCATION OF INVENTORY AND EQUIPMENT
Grantor Locations
Bear Island Paper Company, L.L.C. 10026 Old Ridge Road,
Rte. 738
Ashland, Virginia 23005
Gloucester County, Virginia
(See Item 4 attached hereto
for the legal description)
Richmond County, Virginia
(See Item 8 attached hereto
for the legal description)
Item 1
Property Location: Glenn Woodyard, GL-901
Gloucester County, VA
Tax Parcel Id #: 8 15B
SCHEDULE A
Legal Description
PARCEL GL-901:
ALL that certain lot, piece or parcel of land, together with all rights,
ways, improvements and appurtenances, located in Petsworth Magisterial
District, Gloucester County, Virginia, containing 14.029 acres, all as is
more fully shown on plat of survey entitled "Plat Showing Property to be
Acquired by Seashore Corporation, Petsworth Magisterial District,
Gloucester County, Virginia," prepared by A. James Phillips, C.L.S.,
dated July 19, 1979, a copy of which plat is attached to and made a part
of that certain deed recorded in the Clerk's Office, Circuit Court,
County of Gloucester, Virginia, in Deed Book 224, page 758, and according
to which plat the parcel is substantially bounded as follows: on the
Northeast by property (now or formerly) Arnold J. & Marie L. Wiggins; on
the East by the line of southbound U.S. Route 17; on the Southeast by the
properties of Commonwealth of Virginia (now or formerly) Leroy R. Rust,
(now or formerly) Norman P. and Doris Wood, and (now or formerly) William
T. and Francis Goode; on the Southwest by property of (now or formerly)
William T. and Francis Goode; and on the Northwest by property (now or
formerly) Gregory Land Corporation and a portion of a sand and shell road
15' - 20' wide.
TOGETHER with a non-exclusive, appurtenant easement or right-of-way for
ingress and egress, 50 feet in width (25 feet of which is included within
the property described above and 25 feet of which is located on property
of the grantor [Seashore Corporation, a Virginia corporation] to the
Northeast), extending from a pipe on the line of southbound U.S. Route
17, a corner with (now or formerly) Arnold J. and Marie J. Wiggins, South
66 degrees 28 minutes 22 seconds East a distance of 420.00 feet, the
center-line of which easement or right-of-way being the northeast
boundary line of the real estate described above. This easement or
right-of-way is also shown on plant of survey entitled "Plat Showing
Property to be Acquired by Seashore Corporation, Petsworth Magisterial
District, Gloucester County, Virginia," prepared by A. James Phillips,
C.L.S., dated July 19, 1979, a copy of which plat is attached to and made
a part of that certain deed recorded in the aforesaid Clerk's Office in
Deed Book 224, page 758, for a more particular description, and from
which the above description was taken.
PARCEL GL-901 BEING the same real estate conveyed to Bear Island Paper
Company, a Virginia limited partnership, by deed form Seashore
Corporation, a Virginia corporation, dated August 14, 1979, recorded
August 31, 1979, in the Clerk's Office, Circuit Court, Gloucester County,
Virginia, in Deed Book 224, page 758.
Item 8
No Legal Description Available
SCHEDULE 6
I. Trademarks Registrations and Applications
NONE
II. Copyright Registrations and Applications
Company Title of Work Date Registered Reg. No
USA Bear Island Tracker April 9, 1990 TXU 410351
(computer program and
user's manual)
III. Patents and Patent Applications
Title of Patent No. Date Issued
Country Invention (App. No.) (filed)
Australia Sulphonating 8550277 7/10/86
Mechanical
Pulp Fibres
Australia Sulphonating 588006 9/7/89
Mechanical
Pulp Fibres
Canada System and Process For 1,250,702 3/7/89
Sulfonating Mechanical
Pulp Fibres
Finland System Och Foerfarande (8,505,119) 7/1/86
Foer Sulfonering Av
Fibrena I Mekanisk
Sellulosamassa
Norway Fremgangsmaate Og (8505245) 2/15/93
Apparat For Sufonering
Av
Fibrere I Mekanisk Pulp
Norway Fremgangsmaate Og 171997 5/26/93
Apparat for Forbedring
Av Egenskapene Til
Trefibre I Mekanisk
Masse Ved Sulfonering
I Flere Trinn
Sweden Forfarande Och System (8506079) 12/20/85
For Sulfonering Av Fibrer
I Mekanisk Massa
Sweden Forfarande Och 468818 7/22/93
Anordining Foer (lapsed 9/4/95)
Sulfonering I Tvaa Steg
Av Fibrer I
Mekanisk Massa
United States Two-State Process For 4,708,771 11/24/87
Sulphonating (lapsed 11/29/95)
Mechanical
Pulp Fibres
United States System For Sulfonating 5,089,089 11/3/89
Mechanical Pulp Fibres (lapsed 4/30/96)
IV. Copyright Licenses
None
V. Patent Licenses
None
VI. Trademark Licenses
None
SCHEDULE 7
CONTRACTS
1. Management Services Agreement, dated December 1, 1997, between
Bear Islands Paper Company, L.L.C. and Brant-Allen Industries,
Inc.
2. Wood Supply Agreement, dated December 1 1997, between Bear Island
Paper Company, L.L.C. and Bear Island Timberlands Company, L.L.C.
3. Marketing and Consulting Services Agreement, dated October 11,
1988 and effective as of July 12, 1988, between Bear Islands
Paper Company, L.L.C., Bear Island Timberlands Company, L.L.C.
and The Elebash Company.
SCHEDULE 8
VEHICLES
None
SCHEDULE 9
EXISTING PRIOR LIENS
</TABLE>
<TABLE>
<CAPTION>
NAME OF JURISDICTION/ FILE NUMBER/ TYPE OF DESCRIPTION OF
DEBTOR SECURED PARTY OFFICE DATE FILED UCC COLLATERAL DISPOSITION
------ ------------- -------- ------------ --- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Bear Island Paper Republic Financial Connecticut 870136/ UCC-1 Leased Measurex UT PAID OFF
Company, L.P. Corporation 3-26-90 Process Control NO TERMINATION
System; Debtor FILED
is not authorized
to dispose of this
leased equipment
Republic Financial Connecticut 873528/ UCC-3 Assignment of
Corporation 4-18-90 Assignment #870136;
assigned to:
First National
Bank of
Louisville
First National Bank Connecticut 1578044/ UCC-3 Continuation of
of Louisville 9-26-94 Continuation #870136
Bear Island Paper Measurex Systems, Virginia 900211243/ UCC-1 Leased One Measurex PAID OFF
Company, L.P. Inc. 2-9-90 UT Process Control NO TERMINATION
Assigned to: System and all FILED
Republic Financial insurance and
Corporation proceeds thereof.
Precautionary Filing.
Republic Financial Virginia 900331442/ UCC-1 Assignment of
Corporation 3-20-90 Assignment #900211243;
assigned to:
First National
Bank of Louis-
ville
First National Bank Virginia 9501037198/ UCC-3 Continuation of
of Louisville 1-3-94 Continuation #900211243
Bear Island Paper CCA Financial, Inc. Virginia 9708297172/ UCC-1 Leased equipment
Company, L.P. 8-29-97
Bear Island Paper Republic Financial Hanover Co., 245-90/ UCC-1 Leased Measurex UT PAID OFF
Company, L.P. Corporation Virginia 3-21-90 Process Control NO TERMINATION
System; Debtor is FILED
not authorized to
dispose of this
leased equipment
Republic Financial Hanover Co., 245-90/ UCC-3 Assignment of
Corporation Virginia 4-2-90 Assignment #245-90;
assigned to:
First National
Bank of
Louisville
First National Bank Hanover Co., 245-90/ UCC-3 Continuation of
of Louisville Virginia 9-26-94 Continuation #245-90
Bear Island Paper CCA Financial, Inc. Hanover Co., 687-97/ UCC-1 Leased equipment
Company, L.P. Virginia 8-29-97
Bear Island Paper Welders Rental Hanover Co., 1149/376/ Mechanics Mechanics Lien in JUDGEMENT
Company, L.P. Company Virginia 10-18-95 Lien the amount of SATISFIED
$4,774.76
</TABLE>
UCC = UCCs on file
F = Fixtures
STL = State Tax Liens
FTL = Federal Tax Lien
EXHIBIT (D-1)
SOUCY PLEDGE AGREEMENT
SOUCY PLEDGE AGREEMENT, dated as of December 1, 1997,
made by BRANT-ALLEN INDUSTRIES, INC., a Delaware corporation (the
"Pledgor") in favor of (i) TORONTO-DOMINION (TEXAS), INC., as
agent (in such capacity, the "Agent") for (i) the Timberlands
Agent for the benefit of the Timberlands Lenders and (ii) the
Paper Company Agent for the benefit of the Paper Company Lenders
(as such terms are hereinafter defined).
W I T N E S S E T H :
WHEREAS, pursuant to the Paper Company Credit Agreement, the
Paper Company Lenders have severally agreed to make loans to the
Paper Company (the "Paper Company Loans") upon the terms and
subject to the conditions set forth therein and as a condition
precedent thereof, the Pledgor has guaranteed payment and
performance of the obligations of the Paper Company thereunder
pursuant to a Guarantee of even date herewith (as amended
modified and otherwise supplemented from time to time (the
"Brant-Allen Guarantee");
WHEREAS pursuant to the Timberlands Credit Agreement, the
Timberlands Lenders have severally agreed to make loans to the
Pledgor (the "Timberlands Loans") upon the terms and subject to
the conditions set forth therein; and
WHEREAS, it is a condition precedent to the obligation of
the Paper Company Lenders to make the Paper Company Loans under
the Paper Company Credit Agreement and the Timberlands Lenders to
make the Timberlands Loans under the Timberlands Credit Agreement
that the Pledgor shall have executed and delivered this Agreement
to (i) secure payment and performance of the obligations of the
Paper Company under the Paper Company Credit Agreement and the
Pledgor under the Brant-Allen Guarantee and (ii) secure payment
and performance of the obligations of the Pledgor under the
Timberlands Credit Agreement.
NOW, THEREFORE, in consideration of the premises and to
induce (i) the Paper Company Administrative Agent and the Paper
Company Lenders to enter into the Paper Company Credit Agreement
and to induce the Paper Company Lenders to make the Paper Company
Loans and (ii) the Timberlands Administrative Agent and the
Timberlands Lenders to enter into the Timberlands Credit
Agreement and to induce the Timberlands Lenders to make the
Timberlands Loans, the Pledgor hereby agrees with the Agent, for
the ratable benefit of (i) the Paper Company Agent for the
benefit of the Paper Company Lenders and (ii) the Timberlands
Agent for the benefit of the Timberlands Lenders, as follows:
1. Defined Terms. (a) The following terms shall have
the following meanings:
"Agreement": this Pledge Agreement, as the same may be
amended, modified or otherwise supplemented from time to time.
"Capital Stock": as defined in the Paper Company Credit
Agreement.
"Closing Date": as defined in the Paper Company Credit
Agreement.
"Code": the Uniform Commercial Code from time to time in
effect in the State of New York.
"Collateral": the Pledged Stock and all Proceeds.
"Collateral Account": any account established to hold cash
Proceeds, maintained under the sole dominion and control of the
Agent, subject to withdrawal by the Agent for the account of the
Lenders only as provided in paragraph 8(a).
"Commitment": as defined in the Paper Company Credit
Agreement.
"Contractual Obligation": as defined in the Paper Company
Credit Agreement.
"Credit Agreements": the collective reference to the Paper
Company Credit Agreement and the Timberlands Credit Agreement.
"Default": any of the events specified in either Section 7
of the Paper Company Credit Agreement or Section 7 of the
Timberlands Credit Agreement , whether or not any requirement for
the giving of notice, the lapse of time, or both, has been
satisfied.
"Disposition": as defined in the Paper Company Credit
Agreement.
"Event of Default": any of the events specified in Section
7 of the Paper Company Credit Agreement or Section 7 of the
Timberlands Credit Agreement, provided that any requirement for
the giving of notice, the lapse of time, or both, has been
satisfied.
"Governmental Authority": as defined in the Paper Company
Credit Agreement.
"Guarantee Obligation": as defined in the Paper Company
Credit Agreement.
"Brant-Allen Guarantee": as defined in the recitals hereto.
"Issuer": the company identified on Schedule 1 attached
hereto as the issuer of the Pledged Stock.
"Lenders": the collective reference to the Paper Company
Lenders and the Timberlands Lenders.
"Lien": as defined in the Paper Company Credit Agreement.
"Loans": the collective reference to the Paper Company
Loans and the Timberlands Loans.
"Material Adverse Effect": as defined in the Timberlands
Credit Agreement.
"Paper Company": as defined in the definition of the Paper
Company Credit Agreement.
"Paper Company Agent": as defined in the definition of the
Paper Company Credit Agreement.
"Paper Company Credit Agreement": the Credit Agreement,
dated as of December 1, 1997 (as amended, supplemented or
otherwise modified from time to time) among Bear Island Paper
Company, LLC (the "Paper Company"), Toronto-Dominion (Texas),
Inc., as administrative agent (in such capacity, the "Paper
Company Agent"), the arranger party thereto and the Lenders
parties thereto (the "Paper Company Lenders").
"Paper Company Lenders": as defined in the definition of
the Paper Company Credit Agreement.
"Paper Company Loans": as defined in the recitals hereto.
"Paper Company Obligations": the "Obligations" as defined
in the Paper Company Credit Agreement.
"Person": as defined in the Paper Company Credit Agreement.
"Pledged Stock": the shares of Capital Stock listed on
Schedule 1 hereto, together with all stock certificates, options
or rights of any nature whatsoever that may be issued or granted
by the Issuer to the Pledgor while this Agreement is in effect.
"Proceeds": all "proceeds" as such term is defined in
Section 9-306(1) of the Uniform Commercial Code in effect in the
State of New York on the date hereof and, in any event, shall
include, without limitation, all dividends or other income from
the Pledged Stock, collections thereon or distributions with
respect thereto.
"Property": as defined in the Paper Company Credit
Agreement.
"Requirement of Law": as defined in the Paper Company
Credit Agreement.
"Responsible Officer": as defined in the Paper Company
Credit Agreement.
"Secured Obligations": the collective reference to (a) the
Paper Company Obligations, (b) Timberlands Obligations and (c)
all obligations and liabilities of the Pledgor which may arise
under or in connection with this Agreement, the Brant-Allen
Guarantee or any other Loan Document to which the Pledgor is a
party, whether on account of fees, indemnities, costs, expenses
or otherwise that are required to be paid by the Pledgor pursuant
to the terms thereof (including, without limitation, all
reasonable fees and disbursements of counsel to the
Administrative Agent or to the Lenders that are required to be
paid by the Pledgor pursuant to the terms of this Agreement or
any other Loan Document to which the Pledgor is a party).
"Securities Act": the Securities Act of 1933, as amended,
together with the securities laws of any other jurisdiction in
which the Pledged Stock may be sold.
"Soucy Management Contract": as defined in the Paper
Company Credit Agreement.
"Subsidiary": as defined in the Paper Company Credit
Agreement.
"Timberlands Agent": as defined in the definition of the
Timberlands Credit Agreement.
"Timberlands Credit Agreement": the Credit Agreement, dated
as of December 1, 1997 (as amended, supplemented or otherwise
modified from time to time) among the Pledgor, Toronto-Dominion
(Texas), Inc., as administrative agent (in such capacity, the
"Timberlands Agent") and the Lenders parties thereto (the
"Timberlands Lenders").
"Timberlands Lenders": as defined in the definition of the
Timberlands Credit Agreement.
"Timberlands Loans": as defined in the recitals hereto.
"Timberlands Obligations": the "Obligations" as defined in
the Timberlands Credit Agreement.
"Total Committed Debt": as defined in the Paper Company
Credit Agreement.
(b) The words "hereof," "herein" and "hereunder" and words
of similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this
Agreement, and section and paragraph references are to this
Agreement unless otherwise specified.
(c) The meanings given to terms defined herein shall be
equally applicable to both the singular and plural forms of such
terms.
2. Pledge; Grant of Security Interest. The Pledgor hereby
delivers to the Agent, for the benefit of (i) the Paper Company
Agent for the benefit of the Paper Company Lenders and (ii) the
Timberlands Agent for the benefit of the Timberlands Lenders, all
the Pledged Stock and hereby pledges in favor of and grants to
the Agent, for the benefit of the Paper Company Lenders and the
Timberlands Lenders, a first security interest in the Collateral,
as collateral security for the prompt and complete payment and
performance when due (whether at the stated maturity, by
acceleration or otherwise) of the Secured Obligations (for the
benefit of the Paper Company Lenders and the Timberlands Lenders
in the respective priorities established pursuant to the
Intercreditor Agreement).
3. Stock Powers. Concurrently with the delivery to the
Agent of each certificate representing one or more shares of
Pledged Stock, the Pledgor shall deliver an undated stock power
covering such certificate, duly executed in blank by the Pledgor
with, if the Agent so requests, signature guaranteed.
4. Representations and Warranties. The Pledgor represents
and warrants that:
(a) The Pledgor has the corporate power and authority and
the legal right to execute and deliver, to perform its
obligations under, and to grant the security interest in the
Collateral pursuant to, this Agreement and has taken all
necessary corporate action to authorize its execution, delivery
and performance of, and grant of the security interest in the
Collateral pursuant to, this Agreement.
(b) This Agreement constitutes a legal, valid and binding
obligation of the Pledgor, enforceable in accordance with its
terms, and upon delivery to the Agent of the stock certificates
evidencing the Pledged Stock and completion of the registration
actions required under Quebec Law, the security interest created
pursuant to this Agreement will constitute a valid, perfected
first priority security interest in the Collateral in favor of
the Agent for the benefit of (i) the Paper Company Agent for the
benefit of the Paper Company Lenders and (ii) the Timberlands
Agent for the benefit of the Timberlands Lenders, respectively,
enforceable in accordance with its terms against all creditors of
the Pledgor and any Persons purporting to purchase any Collateral
from the Pledgor, except in each case as enforceability may be
affected by bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws relating to or
affecting creditors' rights generally, general equitable
principles (whether considered in a proceeding in equity or at
law) and an implied covenant of good faith and fair dealing.
(c) The execution, delivery and performance of this
Agreement will not violate any provision of any material
Requirement of Law or material Contractual Obligation of the
Pledgor and will not result in the creation or imposition of any
Lien on any of the properties or revenues of the Pledgor pursuant
to any such Requirement of Law or Contractual Obligation of the
Pledgor, except the security interest created by this Agreement.
(d) No consent or authorization of, filing with, or other
act by or in respect of, any arbitrator or Governmental Authority
and no consent of any other Person (including, without
limitation, any stockholder or creditor of the Pledgor), is
required in connection with the execution, delivery, performance,
validity or enforceability of this Agreement, except as described
in Section 3.4 of the Paper Company Credit Agreement.
(e) No litigation, investigation or proceeding of or before
any arbitrator or Governmental Authority is pending or, to the
knowledge of the Pledgor, threatened by or against the Pledgor or
against any of its properties or revenues with respect to this
Agreement or any of the transactions contemplated hereby.
(f) The shares of Pledged Stock constitute 65% of all the
issued and outstanding shares of all classes of the capital stock
of the Issuer.
(g) All the shares of the Pledged Stock have been duly and
validly issued and are fully paid and nonassessable.
(h) The Pledgor is the record and beneficial owner of, and
has title to, the Pledged Stock, free of any and all Liens or
options in favor of, or claims of, any other Person, except the
security interest created by this Agreement and Liens pursuant to
the Second Priority Note Security Documents.
5. Covenants. The Pledgor covenants and agrees with the
Agent and the Lenders that, from and after the date of this
Agreement until this Agreement is terminated and the security
interests created hereby are released in accordance with the
terms hereof:
(a) If the Pledgor shall, as a result of its ownership of
the Pledged Stock, become entitled to receive or shall receive
any stock certificate (including, without limitation, any
certificate representing a stock dividend or a distribution in
connection with any reclassification, increase or reduction of
capital or any certificate issued in connection with any
reorganization), option or rights, whether in addition to, in
substitution of, as a conversion of, or in exchange for any
shares of the Pledged Stock, or otherwise in respect thereof, the
Pledgor shall accept the same as the agent of the Agent and the
Lenders, hold the same in trust for the Agent and the Lenders and
deliver the same forthwith to the Agent in the exact form
received, duly indorsed by the Pledgor to the Agent, if required,
together with an undated stock power covering such certificate
duly executed in blank by the Pledgor and with, if the Agent so
requests, signature guaranteed, to be held by the Agent, subject
to the terms hereof, as additional collateral security for the
Secured Obligations. Any sums paid upon or in respect of the
Pledged Stock upon the liquidation or dissolution of any Issuer
shall be paid over to the Agent to be held by it hereunder as
additional collateral security for the Secured Obligations, and
in case any distribution of capital shall be made on or in
respect of the Pledged Stock or any property shall be distributed
upon or with respect to the Pledged Stock, in each case pursuant
to the recapitalization or reclassification of the capital of the
Issuer or pursuant to the reorganization thereof, the property so
distributed shall be delivered to the Agent to be held by it
hereunder as additional collateral security for the Secured
Obligations. If any sums of money or property so paid or
distributed in respect of the Pledged Stock (other than
distributions permitted to be made or received pursuant to the
Credit Agreements) shall be received by the Pledgor, the Pledgor
shall, until such money or property is paid or delivered to the
Agent, hold such money or property in trust for the Lenders,
segregated from other funds of the Pledgor, as additional
collateral security for the Secured Obligations.
(b) Except as permitted by the Credit Agreements, without
the prior written consent of the Agent, the Pledgor will not (1)
vote to enable, or take any other action to permit, the Issuer to
issue any stock or other equity securities of any nature or to
issue any other securities convertible into or granting the right
to purchase or exchange for any stock or other equity securities
of any nature of the Issuer except issuances of equity interests
to the Pledgor which constitute Collateral hereunder, (2) sell,
assign, transfer, exchange, or otherwise dispose of, or grant any
option with respect to, the Collateral or any other shares of
Capital Stock of the Issuer owned by the Pledgor, (3) create,
incur or permit to exist any Lien or option in favor of, or any
claim of any Person with respect to, any of the Collateral or any
other shares of Capital Stock of the Issuer owned by the Pledgor,
or any interest therein, except for the security interests
created by this Agreement or (4) enter into any agreement or
undertaking restricting the right or ability of the Pledgor or
the Agent (after foreclosure) to sell, assign or transfer any of
the Collateral other than such restrictions under the Credit
Agreements, the Second Priority Notes and the Second Priority
Note Indenture (as each such term is defined in the Paper Company
Credit Agreement).
(c) The Pledgor shall maintain the security interest
created by this Agreement as a first, perfected security interest
and shall defend such security interest against claims and
demands of all Persons whomsoever except for permitted liens. At
any time and from time to time, upon the written request of the
Agent, and at the sole expense of the Pledgor, the Pledgor will
promptly and duly execute and deliver such further instruments
and documents and take such further actions as the Agent may
reasonably request for the purposes of obtaining or preserving
the full benefits of this Agreement and of the rights and powers
herein granted. If any amount payable under or in connection
with any of the Collateral (to the extent such amounts are
otherwise required by this Agreement to be paid to the Agent)
shall be or become evidenced by any promissory note, other
instrument or chattel paper, such note, instrument or chattel
paper in excess of $500,000 shall promptly upon receipt be
delivered to the Agent, duly endorsed in a manner satisfactory to
the Agent, to be held as Collateral pursuant to this Agreement.
(d) The Pledgor shall pay, and save the Agent and the
Lenders harmless from, any and all liabilities with respect to,
or resulting from any delay in paying, any and all stamp, excise,
sales or other similar taxes which may be payable or determined
to be payable with respect to any of the Collateral or in
connection with any of the transactions contemplated by this
Agreement, other than taxes covered by Section 2.18 of the Paper
Company Credit Agreement or Section 2.15 of the Timberlands
Credit Agreement.
(e) The Pledgor shall not permit the Issuer to, directly or
indirectly, create, incur, assume or suffer to exist any
Indebtedness except as permitted by the Timberlands Credit
Agreement.
(f) The Pledgor shall not directly or indirectly, create,
incur, assume or suffer to exist any Lien on the Capital Stock of
the Issuer owned by the Pledgor except as permitted by the
Timberlands Credit Agreement.
(g) The Pledgor shall not permit the Issuer to, directly or
indirectly, declare or pay any dividend (other than dividends
payable solely in common stock of the Person making such
dividend) on, or make any payment on account of, or set apart
assets for a sinking or other analogous fund for, the purchase,
redemption, defeasance, retirement, or other acquisition of, any
shares of any class of Capital Stock of the Issuer or any of its
Subsidiaries or any warrants or options to purchase any such
Capital Stock, whether now or hereafter outstanding, or make any
other distribution in respect thereof, either directly or
indirectly, whether in cash or property or in obligations of the
Issuer or any of its Subsidiaries, except as permitted by the
Timberlands Credit Agreement.
(h) The Pledgor shall not and shall not permit the Issuer
to, directly or indirectly, amend, supplement or otherwise modify
(pursuant to a waiver or otherwise) the terms and conditions of
the Soucy Management Contract except as permitted by the
Timberlands Credit Agreement; provided, however, that the Pledgor
may transfer its interest thereunder to an Affiliate of the
Pledgor.
To the extent that the provisions of this Section 5
refer to the Timberlands Credit Agreement, if the Timberlands
Credit Agreement shall terminate, such references shall be deemed
to refer to the Timberlands Credit Agreement immediately prior to
such termination.
6. Voting Rights. No vote shall be cast or corporate right
exercised or other action taken which, in the Agent's reasonable
judgment, would impair in any material respect the Collateral or
which would be inconsistent with or result in any violation of
any provision of the Credit Agreements, the notes thereunder,
this Agreement or any other Loan Document.
7. Rights of the Lenders and the Agent. (a) All money
Proceeds received by the Agent hereunder shall be held by the
Agent for the ratable benefit of the Lenders in a Collateral
Account. All Proceeds while held by the Agent in a Collateral
Account (or by the Pledgor in trust for the Agent and the
Lenders) shall continue to be held as collateral security for all
the Secured Obligations and shall not constitute payment thereof
until applied as provided in paragraph 8(a).
(b) If an Event of Default shall occur and be continuing
and the Agent shall give notice of its intent to exercise such
rights to the Pledgor, (1) the Agent shall have the right to
receive any and all cash dividends paid in respect of the Pledged
Stock and make applications thereof to the Secured Obligations in
such order as the Agent may determine, and (2) all shares of the
Pledged Stock shall be registered in the name of the Agent or its
nominee, and the Agent or its nominee may thereafter exercise (A)
all voting, corporate and other rights pertaining to such shares
of the Pledged Stock at any meeting of shareholders of the Issuer
or otherwise and (B) any and all rights of conversion, exchange,
subscription and any other rights, privileges or options
pertaining to such shares of the Pledged Stock as if it were the
absolute owner thereof (including, without limitation, the right
to exchange at its discretion any and all of the Pledged Stock
upon the merger, consolidation, reorganization, recapitalization
or other fundamental change in the corporate structure of the
Issuer, or upon the exercise by the Pledgor or the Agent of any
right, privilege or option pertaining to such shares of the
Pledged Stock, and in connection therewith, the right to deposit
and deliver any and all of the Pledged Stock with any committee,
depositary, transfer agent, registrar or other designated agency
upon such terms and conditions as the Agent may determine), all
without liability except to account for property actually
received by it, but the Agent shall have no duty to the Pledgor
to exercise any such right, privilege or option and shall not be
responsible for any failure to do so or delay in so doing.
8. Remedies. (a) If an Event of Default shall have
occurred and be continuing, at any time at the Agent's election,
the Agent may apply all or any part of Proceeds held in any
Collateral Account in payment of the Secured Obligations ratably
in accordance with the Intercreditor Agreement and as permitted
by law.
(b) If an Event of Default shall occur and be continuing,
the Agent, on behalf of the Lenders, may exercise, in addition to
all other rights and remedies granted in this Agreement and in
any other instrument or agreement securing, evidencing or
relating to the Secured Obligations, all rights and remedies of a
secured party under the Code. Without limiting the generality of
the foregoing, the Agent, without demand of performance or other
demand, presentment, protest, advertisement or notice of any kind
(except any notice required by law referred to below) to or upon
the Pledgor or any other Person (all and each of which demands,
defenses, advertisements and notices are hereby waived), may in
such circumstances forthwith collect, receive, appropriate and
realize upon the Collateral, or any part thereof, and/or may
forthwith sell, assign, give option or options to purchase or
otherwise dispose of and deliver the Collateral or any part
thereof (or contract to do any of the foregoing), in one or more
parcels at public or private sale or sales, in the over-the-
counter market, at any exchange, broker's board or office of the
Agent or any Lender or elsewhere upon such terms and conditions
as it may deem advisable and at such prices as it may deem best,
for cash or on credit or for future delivery without assumption
of any credit risk. The Agent or any Lender shall have the right
upon any such public sale or sales, and, to the extent permitted
by law, upon any such private sale or sales, to purchase the
whole or any part of the Collateral so sold, free of any right or
equity of redemption in the Pledgor, which right or equity is
waived or released upon the consummation of such sale. The Agent
shall apply any Proceeds from time to time held by it and the net
proceeds of any such collection, recovery, receipt,
appropriation, realization or sale, after deducting all
reasonable costs and expenses of every kind incurred in respect
thereof or incidental to the care or safekeeping of any of the
Collateral or in any way relating to the Collateral or the rights
of the Agent and the Lenders hereunder, including, without
limitation, reasonable attorneys' fees and disbursements of
counsel to the Agent, to the payment in whole or in part of the
Secured Obligations ratably in accordance with the Intercreditor
Agreement and as permitted by law, and only after such
application and after the payment by the Agent of any other
amount required by any provision of law, including, without
limitation, Section 9-504(1)(c) of the Code, need the Agent
account for the surplus, if any, to the Pledgor. To the extent
permitted by applicable law, the Pledgor waives all claims,
damages and demands it may acquire against the Agent or any
Lender arising out of the exercise by them of any rights
hereunder except to the extent arising out of gross negligence or
willful misconduct of the Agent or such Lender. If any notice of
a proposed sale or other disposition of Collateral shall be
required by law, such notice shall be deemed reasonable and
proper if given at least 10 days before such sale or other
disposition.
9. Registration Rights; Private Sales. (a) If the Agent
shall determine to exercise its right to sell any or all of the
Pledged Stock pursuant to paragraph 8(b) hereof, and if in the
reasonable opinion of the Agent it is necessary or advisable to
have the Pledged Stock, or that portion thereof to be sold,
registered under the provisions of the Securities Act, the
Pledgor will cause the Issuer thereof to (1) execute and deliver,
and cause the directors and officers of the Issuer to execute and
deliver, all such instruments and documents, and do or cause to
be done all such other acts as may be, in the reasonable opinion
of the Agent, necessary or advisable to register the Pledged
Stock, or that portion thereof to be sold, under the provisions
of the Securities Act, (2) to use its reasonable efforts to cause
the registration statement relating thereto to become effective
and to remain effective for a period of one year from the date of
the first public offering of the Pledged Stock, or that portion
thereof to be sold, and (3) to make all amendments thereto and/or
to the related prospectus which, in the reasonable opinion of the
Agent, are necessary or advisable, all in conformity with the
requirements of the Securities Act and the rules and regulations
of the Securities and Exchange Commission applicable thereto.
The Pledgor agrees to cause the Issuer to comply with the
provisions of the securities or "Blue Sky" laws of any and all
jurisdictions of the United States and Canada which the Agent
shall designate and to make available to its security holders, as
soon as practicable, an earnings statement (which need not be
audited) which will satisfy the provisions of Section 11(a) of
the Securities Act.
(b) The Pledgor recognizes that the Agent may be unable to
effect a public sale of any or all the Pledged Stock, by reason
of certain prohibitions contained in the Securities Act and
applicable state securities laws or otherwise, and may be
compelled to resort to one or more private sales thereof to a
restricted group of purchasers which will be obliged to agree,
among other things, to acquire such securities for their own
account for investment and not with a view to the distribution or
resale thereof. The Pledgor acknowledges and agrees that any
such private sale may result in prices and other terms less
favorable than if such sale were a public sale and,
notwithstanding such circumstances, agrees that any such private
sale shall be deemed to have been made in a commercially
reasonable manner. The Agent shall be under no obligation to
delay a sale of any of the Pledged Stock for the period of time
necessary to permit the Issuer thereof to register such
securities for public sale under the Securities Act, or under
applicable state securities laws of the United States and Canada,
even if the Issuer would agree to do so.
(c) The Pledgor further agrees to use its reasonable
efforts to do or cause to be done all such other acts as may be
necessary to make such sale or sales of all or any portion of the
Pledged Stock pursuant to this Section valid and binding and in
compliance with any and all other applicable Requirements of Law.
The Pledgor further agrees that a breach of any of the covenants
contained in this Section will cause irreparable injury to the
Agent and the Lenders, that the Agent and the Lenders have no
adequate remedy at law in respect of such breach and, as a
consequence, that each and every covenant contained in this
Section shall be specifically enforceable against the Pledgor,
and the Pledgor hereby waives and agrees not to assert any
defenses against an action for specific performance of such
covenants except for a defense that no Event of Default has
occurred under the Credit Agreement.
10. Irrevocable Authorization and Instruction to Issuer.
The Pledgor hereby authorizes and instructs the Issuer to comply
with any instruction received by it from the Agent in writing
that (a) states that an Event of Default has occurred and is
continuing and (b) is otherwise in accordance with the terms of
this Agreement, without any other or further instructions from
the Pledgor, and the Pledgor agrees that the Issuer shall be
fully protected in so complying.
11. Agent's Appointment as Attorney-in-Fact. (a) The
Pledgor hereby irrevocably constitutes and appoints the Agent and
any officer or agent of the Agent, with full power of
substitution, as its true and lawful attorney-in-fact with full
irrevocable power and authority in the place and stead of the
Pledgor and in the name of the Pledgor or in the Agent's own
name, from time to time in the Agent's discretion, for the
purpose of carrying out the terms of this Agreement, to take any
and all appropriate action and to execute any and all documents
and instruments which may be necessary or desirable to accomplish
the purposes of this Agreement, including, without limitation,
any financing statements, endorsements, assignments or other
instruments of transfer, which power of attorney is only
exercisable if an Event of Default shall have occurred and be
continuing.
(b) The Pledgor hereby ratifies all that said attorneys
shall lawfully do or cause to be done pursuant to the power of
attorney granted in paragraph 11(a). 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 in
accordance with the terms hereof.
12. Duty of Agent. The Agent's sole duty with respect to
the custody, safekeeping and physical preservation of the
Collateral in its possession, under Section 9-207 of the Code or
otherwise, shall be to deal with it in the same manner as the
Agent deals with similar securities and property for its own
account, except that after the occurrence and during the
continuance of an Event of Default the Agent shall have no
obligation to invest funds held in any Collateral Account and may
hold the same as demand deposits. Neither the Agent, any Lender
nor any of their respective directors, officers, employees or
agents shall be liable for failure to demand, collect or realize
upon any of the Collateral or for any delay in doing so (unless
the same shall result from the gross negligence or willful
misconduct of such Person) or shall be under any obligation to
sell or otherwise dispose of any Collateral upon the request of
the Pledgor or any other Person or to take any other action
whatsoever with regard to the Collateral or any part thereof.
13. Execution of Financing Statements. Pursuant to Section
9-402 of the Code, the Pledgor authorizes the Agent to file
financing statements with respect to the Collateral without the
signature of the Pledgor in such form and in such filing offices
as the Agent reasonably determines appropriate to perfect the
security interests of the Agent under this Agreement. A carbon,
photographic or other reproduction of this Agreement shall be
sufficient as a financing statement for filing in any
jurisdiction.
14. Authority of Agent. The Pledgor acknowledges that the
rights and responsibilities of the Agent under this Agreement
with respect to any action taken by the Agent or the exercise or
non-exercise by the Agent of any option, voting right, request,
judgment or other right or remedy provided for herein or
resulting or arising out of this Agreement shall, as between the
Agent, the Paper Company Agent and the Timberlands Agent, be
governed by the Credit Agreements and the Intercreditor
Agreement, but, as between the Agent and the Pledgor, the Agent
shall be conclusively presumed to be acting as agent for the
Paper Company Agent and the Timberlands Agent with full and valid
authority so to act or refrain from acting, and neither the
Pledgor nor the Issuer shall be under any obligation, or
entitlement, to make any inquiry respecting such authority.
15. Release of Pledge Agreement. The Pledgor shall be
automatically released from its obligations under this Agreement
and this Agreement shall automatically terminate on the earlier
of (a) the date on which all the Secured Obligations are paid in
full and all the Commitments thereunder are terminated, and (b)
the later of (i) the date upon which the Timberlands Loans have
been repaid in full and (ii) the date on which Total Committed
Debt is less than $145,000,000; and at the time of such release
the Agent shall deliver the Collateral to the Pledgor.
16. Notices. All notices, requests and demands to or upon
the Agent or the Pledgor to be effective shall be in writing
(including by telecopy) and, unless otherwise expressly provided
herein, shall be deemed to have been duly given or made when
delivered three Business Days after being deposited in the mails,
postage prepaid, or in the case of telecopy notice, when
received, addressed as follows:
(1) if to the Agent, at its address or transmission number
for notices provided below:
Toronto-Dominion (Texas), Inc.
909 Fannin Street
Houston, TX 77010
Attention: Jano Mott
Phone: (713) 951-9921
Telecopy: (713) 653-8283
with a copy to: The Toronto-Dominion Bank
31 West 52nd Street
New York, New York 10019
Attention: John Lawson
Phone: (212) 468-0708
Telecopy: (212) 397-4135
(2) if to the Pledgor, at its address or transmission
number for notices set forth under its signature below.
The Agent and the Pledgor may change their addresses and
transmission numbers for notices by notice in the manner provided
in this Section.
17. Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions
hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such
provision in any other jurisdiction.
18. Amendments in Writing; No Waiver; Cumulative Remedies.
(a) None of the terms or provisions of this Agreement may be
waived, amended, supplemented or otherwise modified except by a
written instrument executed by the Pledgor and the Agent,
provided that any provision of this Agreement may be waived by
the Agent and the Lenders in a letter or agreement executed by
the Agent or by telex or facsimile transmission from the Agent.
(b) Neither the Agent nor any Lender shall by any act
(except by a written instrument pursuant to paragraph 18(a)
hereof), delay, indulgence, omission or otherwise be deemed to
have waived any right or remedy hereunder or to have acquiesced
in any Default or Event of Default or in any breach of any of the
terms and conditions hereof. No failure to exercise, nor any
delay in exercising, on the part of the Agent or any Lender, any
right, power or privilege hereunder shall operate as a waiver
thereof. No single or partial exercise of any right, power or
privilege hereunder shall preclude any other or further exercise
thereof or the exercise of any other right, power or privilege.
A waiver by the Agent or any Lender of any right or remedy
hereunder on any one occasion shall not be construed as a bar to
any right or remedy which the Agent or such Lender would
otherwise have on any future occasion.
(c) The rights and remedies herein provided are cumulative,
may be exercised singly or concurrently and are not exclusive of
any other rights or remedies provided by law.
(d) The Pledgor agrees that it will not permit any
amendment or other modification of any of the covenants in the
Timberlands Credit Agreement that are incorporated by reference
or referred to herein unless such amendment or other modification
has been consented to in writing by the Required Lenders under
the Paper Company Credit Agreement.
19. Section Headings. The section headings used in this
Agreement are for convenience of reference only and are not to
affect the construction hereof or be taken into consideration in
the interpretation hereof.
20. Successors and Assigns. This Agreement shall be
binding upon the successors and assigns of the Pledgor and shall
inure to the benefit of the Agent and the Lenders and their
respective permitted successors and assigns.
21. Governing Law. This Agreement shall be governed by,
and construed and interpreted in accordance with, the law of the
State of New York.
22. Notwithstanding any other provision of this Agreement,
at no time shall the Pledgor be required to pledge more than 65%
of all of the voting stock of all classes of the capital stock of
the Issuer.
IN WITNESS WHEREOF, the undersigned has caused this
Agreement to be duly executed and delivered as of the date first
above written.
BRANT-ALLEN INDUSTRIES, INC.
By: /s/ Edward D. Sherrick
Title: Vice President of Finance
Address for Notices:
Post Office Box 3443
80 Field Point Road
Greenwich, Connecticut 06830
Phone: 203-661-3344
Fax: 203-661-3349
ACKNOWLEDGEMENT AND CONSENT
The undersigned hereby acknowledges receipt of a copy of the
Pledge Agreement dated December 1, 1997, made by Brant-Allen
Industries, Inc. for the benefit of Toronto-Dominion (Texas),
Inc., as Agent (the "Pledge Agreement"). The undersigned agrees
for the benefit of the Agent and the Lenders as follows:
1. The undersigned will notify the Agent promptly in
writing of the occurrence of any of the events described in
paragraph 5(a) of the Pledge Agreement.
2. The terms of paragraph 9(c) of the Pledge Agreement
shall apply to it, mutatis mutandis, with respect to all actions
that may be required of it under or pursuant to or arising out of
Section 9 of the Pledge Agreement.
F.F. SOUCY, INC.
By: /s/ Edward D. Sherrick
Title: Vice President of Finance
Address for Notices:
Post Office Box 3443
80 Field Point Road
Greenwich, Connecticut 06830
Phone: 203-661-3344
Fax: 203-661-3349
SCHEDULE 1
TO SOUCY PLEDGE AGREEMENT
DESCRIPTION OF PLEDGED STOCK
Stock
Class of Certificate No. of
Issuer Stock No. Shares
F.F. Soucy, Inc., a Common C-5 271,479
corporation organized
under the laws of
Quebec, Canada
EXECUTION COPY
PAPER COMPANY PLEDGE AGREEMENT
PAPER COMPANY PLEDGE AGREEMENT, dated as of December 1,
1997, made by BRANT-ALLEN INDUSTRIES, INC., a Delaware
corporation (the "Pledgor") in favor of TORONTO-DOMINION (TEXAS),
INC., as Administrative Agent (in such capacity, the
"Administrative Agent") for the lenders (the "Lenders") parties
to the Credit Agreement, dated as of December 1, 1997 (as
amended, supplemented or otherwise modified from time to time,
the "Credit Agreement"), among Bear Island Paper Company, LLC
(the "Borrower"), the Lenders, the Arranger named therein and the
Administrative Agent.
W I T N E S S E T H :
WHEREAS, pursuant to the Credit Agreement, the Lenders have
severally agreed to make Loans to the Borrower upon the terms and
subject to the conditions set forth therein; and
WHEREAS, it is a condition precedent to the obligation of
the Lenders to make their respective Loans to the Borrower that
the Pledgor guarantee payment and performance of the Borrower's
obligations under the Credit Agreement, the Notes and the other
Loan Documents; and
WHEREAS, in satisfaction of such condition, the Pledgor has
entered into a Guarantee of even date herewith (as amended,
supplemented or otherwise modified from time to time, the "Brant-
Allen Guarantee") for the benefit of the Administrative Agent and
the Lenders; and
WHEREAS, it is a further condition precedent to the
obligation of the Lenders to make their respective Loans to the
Borrower under the Credit Agreement that the Pledgor shall have
executed and delivered this Pledge Agreement to secure payment
and performance of the Pledgor's obligations under the Brant-
Allen Guarantee and the Borrower's Obligations under the Credit
Agreement.
NOW, THEREFORE, in consideration of the premises and to
induce the Administrative Agent and the Lenders to enter into the
Credit Agreement and to induce the Lenders to make their
respective Loans to the Borrower, the Pledgor hereby agrees with
the Administrative Agent, for the ratable benefit of the Lenders,
as follows:
1. Defined Terms. (a) Unless otherwise defined herein,
terms defined in the Credit Agreement and used herein shall have
the meanings given to them in the Credit Agreement.
(b) The following terms shall have the following meanings:
"Agreement": this Pledge Agreement, as the same may be
amended, modified or otherwise supplemented from time to time.
"Code": the Uniform Commercial Code from time to time in
effect in the State of New York.
"Collateral": the Pledged LLC Interests and all Proceeds.
"Collateral Account": any account established to hold cash
Proceeds, maintained under the sole dominion and control of the
Administrative Agent, subject to withdrawal by the Administrative
Agent for the account of the Lenders only as provided in
paragraph 7(a).
"Issuer": the company identified on Schedule 1 attached
hereto.
"Paper Company Management Contract": the Management
Services Agreement dated as of November 26, 1997 between the
Pledgor and the Issuer, as amended, supplemented or otherwise
modified in accordance with the terms of the Credit Agreement.
"Pledged LLC Interests": in each case, whether now existing
or hereafter acquired, all of the Pledgor's right, title and
interest in and to:
(a) equity interests of the Borrower, but not the
Pledgor's obligations from time to time as a holder of
equity interests in such Borrower, as further described on
Schedule 1 (unless the Administrative Agent or its designee,
on behalf of the Administrative Agent and the Lenders, shall
elect to become a holder of interests in the Borrower in
connection with its exercise of remedies pursuant to the
terms hereof);
(b) any and all moneys due and to become due to the
Pledgor now or in the future by way of a distribution made
to the Pledgor in its capacity as a holder of equity
interests in the Borrower or otherwise in respect of the
Pledgor's interest as a holder of equity interests in the
Borrower;
(c) any other property of the Borrower to which the
Pledgor now or in the future may be entitled in respect of
its equity interests in the Borrower by way of distribution,
return of capital or otherwise;
(d) any other claim or right which the Pledgor now has
or may in the future acquire in respect of its equity
interests in the Borrower;
(e) all certificates, options or rights of any nature
whatsoever that may be issued or granted by the Borrower
with respect to the equity interests of the Borrower to the
Pledgor while this Agreement is in effect; and
(f) to the extent not otherwise included, all Proceeds
of any or all of the foregoing.
"Proceeds": all "proceeds" as such term is defined in
Section 9-306(1) of the Uniform Commercial Code in effect in the
State of New York on the date hereof and, in any event, shall
include, without limitation, all dividends or other income from
the Pledged LLC Interests, collections thereon or distributions
with respect thereto.
"Secured Obligations": the collective reference to (a) the
Obligations and (b) all obligations and liabilities of the
Pledgor which may arise under or in connection with this
Agreement, the Brant-Allen Guarantee, any Interest Rate
Protection Agreement or Currency Swap Agreement entered into with
any Lender or any affiliate thereof or any other Loan Document to
which the Pledgor is a party, whether on account of reimbursement
obligations, fees, indemnities, costs, expenses or otherwise that
are required to be paid by the Pledgor pursuant to the terms
thereof (including, without limitation, all reasonable fees and
disbursements of counsel to the Administrative Agent or to the
Lenders that are required to be paid by the Pledgor pursuant to
the terms of this Agreement or any other Loan Document to which
the Pledgor is a party).
"Securities Act": the Securities Act of 1933, as amended.
"Timberlands Credit Agreement": the credit agreement, dated
as of December 1, 1997 (as amended, supplemented or otherwise
modified from time to time) among the Pledgor, Toronto-Dominion
(Texas), Inc., as administrative agent and the lender parties
thereto.
(c) The words "hereof," "herein" and "hereunder" and words
of similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this
Agreement, and section and paragraph references are to this
Agreement unless otherwise specified.
(d) The meanings given to terms defined herein shall be
equally applicable to both the singular and plural forms of such
terms.
2. Pledge; Grant of Security Interest. The Pledgor hereby
grants to the Administrative Agent, for the ratable benefit of
the Lenders, a first security interest in the Collateral, as
collateral security for the prompt and complete payment and
performance when due (whether at the stated maturity, by
acceleration or otherwise) of the Secured Obligations.
3. Representations and Warranties. The Pledgor represents
and warrants that:
(a) The Pledgor has the corporate power and authority and
the legal right to execute and deliver, to perform its
obligations under, and to grant the security interest in the
Collateral pursuant to, this Agreement and has taken all
necessary corporate action to authorize its execution, delivery
and performance of, and grant of the security interest in the
Collateral pursuant to, this Agreement.
(b) This Agreement constitutes a legal, valid and binding
obligation of the Pledgor, enforceable in accordance with its
terms, and upon the filing of a UCC-1 financing statement in
appropriate form in the office of the Secretary of State of
Connecticut, the security interest created pursuant to this
Agreement will constitute a valid, perfected first priority
security interest in the Collateral in favor of the
Administrative Agent for the ratable benefit of the Lenders,
enforceable in accordance with its terms against all creditors of
the Pledgor and any Persons purporting to purchase any Collateral
from the Pledgor, except in each case as enforceability may be
affected by bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws relating to or
affecting creditors' rights generally, general equitable
principles (whether considered in a proceeding in equity or at
law) and an implied covenant of good faith and fair dealing.
(c) The execution, delivery and performance of this
Agreement will not violate any provision of any material
Requirement of Law or material Contractual Obligation of the
Pledgor and will not result in the creation or imposition of any
Lien on any of the properties or revenues of the Pledgor pursuant
to any such Requirement of Law or Contractual Obligation of the
Pledgor, except the security interest created by this Agreement.
(d) No consent or authorization of, filing with, or other
act by or in respect of, any arbitrator or Governmental Authority
and no consent of any other Person (including, without
limitation, any equity holder or creditor of the Pledgor), is
required in connection with the execution, delivery, performance,
validity or enforceability of this Agreement except as described
in Section 3.4 of the Credit Agreement.
(e) No litigation, investigation or proceeding of or before
any arbitrator or Governmental Authority is pending or, to the
knowledge of the Pledgor, threatened by or against the Pledgor or
against any of its properties or revenues with respect to this
Agreement or any of the transactions contemplated hereby.
(f) The Pledged LLC Interests constitute all the issued and
outstanding equity interests of the Borrower.
(g) The Pledged LLC Interests have been duly and validly
issued.
(h) The Pledgor is the owner of, and has title to, the
Pledged LLC Interests, free of any and all Liens or options in
favor of, or claims of, any other Person, except the security
interest created by this Agreement and Liens pursuant to the
Second Priority Note Security Documents.
(i) Each of the representations and warranties made by the
Pledgor pursuant to Section 3 of the Timberlands Credit Agreement
shall be true and correct on and as of the date hereof and is
incorporated herein by reference.
4. Covenants. The Pledgor covenants and agrees with the
Administrative Agent and the Lenders that, from and after the
date of this Agreement until this Agreement is terminated and the
security interest created hereby is released in accordance with
the terms hereof:
(a) If the Pledgor shall, as a result of its ownership of
the Pledged LLC Interests, become entitled to receive or shall
receive any certificate or instrument (including, without
limitation, any certificate representing a stock dividend or a
distribution in connection with any reclassification, increase or
reduction of capital or any certificate issued in connection with
any reorganization), option or rights, whether in addition to, in
substitution of, as a conversion of, or in exchange for any
equity interests of the Pledged LLC Interests, or otherwise in
respect thereof, the Pledgor shall accept the same as the agent
of the Administrative Agent and the Lenders, hold the same in
trust for the Administrative Agent and the Lenders and deliver
the same forthwith to the Administrative Agent in the exact form
received, duly indorsed by the Pledgor to the Administrative
Agent, if required, together with an undated stock power covering
such certificate duly executed in blank by the Pledgor and with,
if the Administrative Agent so requests, signature guaranteed, to
be held by the Administrative Agent, subject to the terms hereof,
as additional collateral security for the Secured Obligations.
Any sums paid upon or in respect of the Pledged LLC Interests
upon the liquidation or dissolution of the Borrower shall be paid
over to the Administrative Agent to be held by it hereunder as
additional collateral security for the Secured Obligations, and
in case any distribution of capital shall be made on or in
respect of the Pledged LLC Interests or any property shall be
distributed upon or with respect to the Pledged LLC Interests, in
each case pursuant to the recapitalization or reclassification of
the capital of the Borrower or pursuant to the reorganization
thereof, the property so distributed shall be delivered to the
Administrative Agent to be held by it hereunder as additional
collateral security for the Secured Obligations. If any sums of
money or property so paid or distributed in respect of the
Pledged LLC Interests (other than distributions permitted to be
made or received pursuant to the Credit Agreement) shall be
received by the Pledgor, the Pledgor shall, until such money or
property is paid or delivered to the Administrative Agent, hold
such money or property in trust for the Lenders, segregated from
other funds of the Pledgor, as additional collateral security for
the Secured Obligations.
(b) Without the prior written consent of the Administrative
Agent, the Pledgor will not (1) vote to enable, or take any other
action to permit, the Borrower to issue any stock or other equity
securities of any nature or to issue any other securities
convertible into or granting the right to purchase or exchange
for any stock or other equity securities of any nature of the
Borrower except issuances of equity interests to the Pledgor
which constitute Collateral hereunder, (2) sell, assign,
transfer, exchange, or otherwise dispose of, or grant any option
with respect to, the Collateral or any other shares of Capital
Stock of the Issuer owned by the Pledgor, (3) create, incur or
permit to exist any Lien or option in favor of, or any claim of
any Person with respect to, any of the Collateral or any other
shares of Capital Stock of the Issuer owned by the Pledgor, or
any interest therein, except for the security interests created
by this Agreement or (4) enter into any agreement or undertaking
restricting the right or ability of the Pledgor or the
Administrative Agent (after foreclosure) to sell, assign or
transfer any of the Collateral, except for agreements permitted
by the Credit Agreement.
(c) The Pledgor shall maintain the security interest
created by this Agreement as a first, perfected security interest
and shall defend such security interest against claims and
demands of all Persons whomsoever except for permitted liens. At
any time and from time to time, upon the written request of the
Administrative Agent, and at the sole expense of the Pledgor, the
Pledgor will promptly and duly execute and deliver such further
instruments and documents and take such further actions as the
Administrative Agent may reasonably request for the purposes of
obtaining or preserving the full benefits of this Agreement and
of the rights and powers herein granted, including, without
limitation, the filing of any financing or continuation
statements under the Uniform Commercial Code (or similar laws) in
effect in any jurisdiction with respect to the security interest
created hereby. If any amount payable under or in connection
with any of the Collateral (to the extent such amounts are
otherwise required by this Agreement to be paid to the
Administrative Agent) shall be or become evidenced by any
promissory note, other instrument or chattel paper, such note,
instrument or chattel paper in excess of $500,000 shall promptly
upon receipt by Pledgor be delivered to the Administrative Agent,
duly endorsed in a manner satisfactory to the Administrative
Agent, to be held as Collateral pursuant to this Agreement.
(d) With respect to the Pledged LLC Interests, the Pledgor
shall and shall cause the Borrower to, directly or indirectly,
(i) perform and comply in all material respects with all the
terms and provisions of any limited liability company agreement
then in effect with respect thereto and required to be performed
or complied by it, and (ii) enforce any limited liability company
agreement then in effect in accordance with its terms.
(e) The Pledgor shall pay, and save the Administrative
Agent and the Lenders harmless from, any and all liabilities with
respect to, or resulting from any delay in paying, any and all
stamp, excise, sales or other similar taxes which may be payable
or determined to be payable with respect to any of the Collateral
or in connection with any of the transactions contemplated by
this Agreement other than taxes covered by Section 2.18 of the
Credit Agreement.
(f) The Pledgor shall, and shall cause Timberlands, and,
until the pledge of the Collateral (as defined in the Soucy
Pledge Agreement) is released, Soucy, and each of the
Subsidiaries of Timberlands and Soucy, as applicable, to furnish
to the Administrative Agent each of the financial statements,
certificates and other information as described in Sections 5.1
and 5.2 of the Timberlands Credit Agreement.
(g) The Pledgor shall not, directly or indirectly, amend,
supplement or otherwise modify (pursuant to a waiver or
otherwise) the terms and conditions of the Paper Company
Management Contract, except as permitted by the Timberlands
Credit Agreement; provided, however, that the Pledgor may
transfer its sole interest thereunder to an Affiliate of the
Pledgor.
(h) The Pledgor shall not suffer to exist any Lien on the
equity interests of the Pledgor without prior written notice to
the Administrative Agent.
To the extent that the provisions of this Section 4
refer to the Timberlands Credit Agreement, if the Timberlands
Credit Agreement shall terminate, such references shall be deemed
to refer to the Timberlands Credit Agreement immediately prior to
such termination.
5. Voting Rights. No vote shall be cast or corporate right
exercised or other action taken which, in the Administrative
Agent's reasonable judgment, would impair in any material respect
the Collateral or which would be inconsistent with or result in
any violation of any provision of the Credit Agreement, the
Notes, this Agreement or any other Loan Document.
6. Rights of the Lenders and the Administrative Agent. (a)
All money Proceeds received by the Administrative Agent hereunder
shall be held by the Administrative Agent for the ratable benefit
of the Lenders in a Collateral Account. All Proceeds while held
by the Administrative Agent in a Collateral Account (or by the
Pledgor in trust for the Administrative Agent and the Lenders)
shall continue to be held as collateral security for all the
Secured Obligations and shall not constitute payment thereof
until applied as provided in paragraph 7(a).
(b) If an Event of Default shall occur and be continuing
and the Administrative Agent shall give notice of its intent to
exercise such rights to the Pledgor, (1) the Administrative Agent
shall have the right to receive any and all cash dividends and
distributions paid in respect of the Pledged LLC Interests and
make application thereof to the Secured Obligations in such order
as the Credit Agreement shall provide, and (2) all equity
interests of the Pledged LLC Interests shall be registered in the
name of the Administrative Agent or its nominee, and the
Administrative Agent or its nominee may thereafter exercise (A)
all voting, corporate and other rights pertaining to such shares
of the Pledged LLC Interests at any meeting of shareholders of
the Borrower or otherwise and (B) any and all rights of
conversion, exchange, subscription and any other rights,
privileges or options pertaining to such equity interests of the
Pledged LLC Interests as if it were the absolute owner thereof
(including, without limitation, the right to exchange at its
discretion any and all of the Pledged LLC Interests upon the
merger, consolidation, reorganization, recapitalization or other
fundamental change in the corporate structure of the Borrower, or
upon the exercise by the Pledgor or the Administrative Agent of
any right, privilege or option pertaining to such shares of the
Pledged LLC Interests, and in connection therewith, the right to
deposit and deliver any and all of the Pledged LLC Interests with
any committee, depositary, transfer agent, registrar or other
designated agency upon such terms and conditions as the
Administrative Agent may determine), all without liability except
to account for property actually received by it, but the
Administrative Agent shall have no duty to the Pledgor to
exercise any such right, privilege or option and shall not be
responsible for any failure to do so or delay in so doing.
7. Remedies. (a) If an Event of Default shall have
occurred and be continuing, at any time at the Administrative
Agent's election, the Administrative Agent may apply all or any
part of Proceeds held in any Collateral Account in payment of the
Secured Obligations in such order as the Administrative Agent may
elect and as permitted by law.
(b) If an Event of Default shall occur and be continuing,
the Administrative Agent, on behalf of the Lenders, may exercise,
in addition to all other rights and remedies granted in this
Agreement and in any other instrument or agreement securing,
evidencing or relating to the Secured Obligations, all rights and
remedies of a secured party under the Code. Without limiting the
generality of the foregoing, the Administrative Agent, without
demand of performance or other demand, presentment, protest,
advertisement or notice of any kind (except any notice required
by law referred to below) to or upon the Pledgor or any other
Person (all and each of which demands, defenses, advertisements
and notices are hereby waived), may in such circumstances
forthwith collect, receive, appropriate and realize upon the
Collateral, or any part thereof, and/or may forthwith sell,
assign, give option or options to purchase or otherwise dispose
of and deliver the Collateral or any part thereof (or contract to
do any of the foregoing), in one or more parcels at public or
private sale or sales, in the over-the-counter market, at any
exchange, broker's board or office of the Administrative Agent or
any Lender or elsewhere upon such terms and conditions as it may
deem advisable and at such prices as it may deem best, for cash
or on credit or for future delivery without assumption of any
credit risk. The Administrative Agent or any Lender shall have
the right upon any such public sale or sales, and, to the extent
permitted by law, upon any such private sale or sales, to
purchase the whole or any part of the Collateral so sold, free of
any right or equity of redemption in the Pledgor, which right or
equity is waived or released upon the consummation of such sale.
The Administrative Agent shall apply any Proceeds from time to
time held by it and the net proceeds of any such collection,
recovery, receipt, appropriation, realization or sale, after
deducting all reasonable costs and expenses of every kind
incurred in respect thereof or incidental to the care or
safekeeping of any of the Collateral or in any way relating to
the Collateral or the rights of the Administrative Agent and the
Lenders hereunder, including, without limitation, reasonable
attorneys' fees and disbursements of counsel to the
Administrative Agent, to the payment in whole or in part of the
Secured Obligations, in such order as the Administrative Agent
may elect and as permitted by law, and only after such
application and after the payment by the Administrative Agent of
any other amount required by any provision of law, including,
without limitation, Section 9-504(1)(c) of the Code, need the
Administrative Agent account for the surplus, if any, to the
Pledgor. To the extent permitted by applicable law, the Pledgor
waives all claims, damages and demands it may acquire against the
Administrative Agent or any Lender arising out of the exercise by
them of any rights hereunder except to the extent arising out of
gross negligence or willful misconduct of the Administrative
Agent or such Lender. If any notice of a proposed sale or other
disposition of Collateral shall be required by law, such notice
shall be deemed reasonable and proper if given at least 10 days
before such sale or other disposition.
8. Registration Rights; Private Sales. (a) If the
Administrative Agent shall determine to exercise its right to
sell any or all of the Pledged LLC Interests pursuant to
paragraph 7(b) hereof, and if in the reasonable opinion of the
Administrative Agent it is necessary or advisable to have the
Pledged LLC Interests, or that portion thereof to be sold,
registered under the provisions of the Securities Act, the
Pledgor will cause the Borrower to (1) execute and deliver, and
cause the directors and officers of the Borrower to execute and
deliver, all such instruments and documents, and do or cause to
be done all such other acts as may be, in the reasonable opinion
of the Administrative Agent, necessary or advisable to register
the Pledged LLC Interests, or that portion thereof to be sold,
under the provisions of the Securities Act, (2) to use its
reasonable efforts to cause the registration statement relating
thereto to become effective and to remain effective for a period
of one year from the date of the first public offering of the
Pledged LLC Interests, or that portion thereof to be sold, and
(3) to make all amendments thereto and/or to the related
prospectus which, in the reasonable opinion of the Administrative
Agent, are necessary or advisable, all in conformity with the
requirements of the Securities Act and the rules and regulations
of the Securities and Exchange Commission applicable thereto.
The Pledgor agrees to cause the Borrower to comply with the
provisions of the securities or "Blue Sky" laws of any and all
jurisdictions of the United States which the Administrative Agent
shall designate and to make available to its security holders, as
soon as practicable, an earnings statement (which need not be
audited) which will satisfy the provisions of Section 11(a) of
the Securities Act.
(b) The Pledgor recognizes that the Administrative Agent
may be unable to effect a public sale of any or all the Pledged
LLC Interests, by reason of certain prohibitions contained in the
Securities Act and applicable state securities laws or otherwise,
and may be compelled to resort to one or more private sales
thereof to a restricted group of purchasers which will be obliged
to agree, among other things, to acquire such securities for
their own account for investment and not with a view to the
distribution or resale thereof. The Pledgor acknowledges and
agrees that any such private sale may result in prices and other
terms less favorable than if such sale were a public sale and,
notwithstanding such circumstances, agrees that any such private
sale shall be deemed to have been made in a commercially
reasonable manner. The Administrative Agent shall be under no
obligation to delay a sale of any of the Pledged LLC Interests
for the period of time necessary to permit the Borrower thereof
to register such securities for public sale under the Securities
Act, or under applicable state securities laws of the United
States, even if the Borrower would agree to do so.
(c) The Pledgor further agrees to use its reasonable
efforts to do or cause to be done all such other acts as may be
necessary to make such sale or sales of all or any portion of the
Pledged LLC Interests pursuant to this Section valid and binding
and in compliance with any and all other applicable Requirements
of Law. The Pledgor further agrees that a breach of any of the
covenants contained in this Section will cause irreparable injury
to the Administrative Agent and the Lenders, that the
Administrative Agent and the Lenders have no adequate remedy at
law in respect of such breach and, as a consequence, that each
and every covenant contained in this Section shall be
specifically enforceable against the Pledgor, and the Pledgor
hereby waives and agrees not to assert any defenses against an
action for specific performance of such covenants except for a
defense that no Event of Default has occurred under the Credit
Agreement.
9. Irrevocable Authorization and Instruction to Borrower.
The Pledgor hereby authorizes and instructs the Borrower to
comply with any instruction received by it from the
Administrative Agent in writing that (a) states that an Event of
Default has occurred and is continuing and (b) is otherwise in
accordance with the terms of this Agreement, without any other or
further instructions from the Pledgor, and the Pledgor agrees
that the Borrower shall be fully protected in so complying.
10. Administrative Agent's Appointment as Attorney-in-Fact.
(a) The Pledgor hereby irrevocably constitutes and appoints the
Administrative Agent and any officer or agent of the
Administrative Agent, with full power of substitution, as its
true and lawful attorney-in-fact with full irrevocable power and
authority in the place and stead of the Pledgor and in the name
of the Pledgor or in the Administrative Agent's own name, from
time to time in the Administrative Agent's discretion, for the
purpose of carrying out the terms of this Agreement, to take any
and all appropriate action and to execute any and all documents
and instruments which may be necessary or desirable to accomplish
the purposes of this Agreement, including, without limitation,
any financing statements, endorsements, assignments or other
instruments of transfer, which power of attorney is only
exercisable if an Event of Default shall have occurred and be
continuing.
(b) The Pledgor hereby ratifies all that said attorneys
shall lawfully do or cause to be done pursuant to the power of
attorney granted in paragraph 10(a). 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 in
accordance with the terms hereof.
11. Duty of Administrative Agent. The Administrative
Agent's sole duty with respect to the custody, safekeeping and
physical preservation of the Collateral in its possession, under
Section 9-207 of the Code or otherwise, shall be to deal with it
in the same manner as the Administrative Agent deals with similar
securities and property for its own account, except that after
the occurrence and during the continuance of an Event of Default
the Administrative Agent shall have no obligation to invest funds
held in any Collateral Account and may hold the same as demand
deposits. Neither the Administrative Agent, any Lender nor any
of their respective directors, officers, employees or agents
shall be liable for failure to demand, collect or realize upon
any of the Collateral or for any delay in doing so (unless the
same shall result from the gross negligence or willful misconduct
of such Person) or shall be under any obligation to sell or
otherwise dispose of any Collateral upon the request of the
Pledgor or any other Person or to take any other action
whatsoever with regard to the Collateral or any part thereof.
12. Execution of Financing Statements. Pursuant to Section
9-402 of the Code, the Pledgor authorizes the Administrative
Agent to file financing statements with respect to the Collateral
without the signature of the Pledgor in such form and in such
filing offices as the Administrative Agent reasonably determines
appropriate to perfect the security interests of the
Administrative Agent under this Agreement. A carbon,
photographic or other reproduction of this Agreement shall be
sufficient as a financing statement for filing in any
jurisdiction.
13. Authority of Administrative Agent. The Pledgor
acknowledges that the rights and responsibilities of the
Administrative Agent under this Agreement with respect to any
action taken by the Administrative Agent or the exercise or non-
exercise by the Administrative Agent of any option, voting right,
request, judgment or other right or remedy provided for herein or
resulting or arising out of this Agreement shall, as between the
Administrative Agent and the Lenders, be governed by the Credit
Agreement, but, as between the Administrative Agent and the
Pledgor, the Administrative Agent shall be conclusively presumed
to be acting as agent for the Lenders with full and valid
authority so to act or refrain from acting, and neither the
Pledgor nor the Borrower shall be under any obligation, or
entitlement, to make any inquiry respecting such authority.
14. Notices. All notices, requests and demands to or upon
the Administrative Agent or the Pledgor to be effective shall be
in writing (including by telecopy) and, unless otherwise
expressly provided herein, shall be deemed to have been duly
given or made when delivered or three Business Days after
deposited in the mails, postage prepaid, or in the case of
telecopy notice, when received, addressed as follows:
(1) if to the Administrative Agent, at its address or
transmission number for notices provided in Section 9.2 of
the Credit Agreement; and
(2) if to the Pledgor, at its address or transmission
number for notices set forth under its signature below.
The Administrative Agent and the Pledgor may change their
addresses and transmission numbers for notices by notice in the
manner provided in this Section.
15. Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions
hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such
provision in any other jurisdiction.
16. Term of this Agreement. This Agreement shall continue
in full force and effect until the Obligations and the
obligations of the Pledgor hereunder shall be paid in full and
the Commitments shall have been terminated. Upon such payment
and termination, this Agreement shall automatically terminate and
the security interests, pledges and liens hereunder released and
the Agent and the Lenders shall, upon the request of the Pledgor
and at the Pledgor's expense, execute and deliver to the Pledgor
such documents and instruments evidencing such termination and
release.
17. Amendments in Writing; No Waiver; Cumulative Remedies.
(a) None of the terms or provisions of this Agreement may be
waived, amended, supplemented or otherwise modified except by a
written instrument executed by the Pledgor and the Administrative
Agent, provided that any provision of this Agreement may be
waived by the Administrative Agent and the Lenders in a letter or
agreement executed by the Administrative Agent or by telex or
facsimile transmission from the Administrative Agent.
(b) Neither the Administrative Agent nor any Lender shall
by any act (except by a written instrument pursuant to paragraph
17(a) hereof), delay, indulgence, omission or otherwise be deemed
to have waived any right or remedy hereunder or to have
acquiesced in any Default or Event of Default or in any breach of
any of the terms and conditions hereof. No failure to exercise,
nor any delay in exercising, on the part of the Administrative
Agent or any Lender, any right, power or privilege hereunder
shall operate as a waiver thereof. No single or partial exercise
of any right, power or privilege hereunder shall preclude any
other or further exercise thereof or the exercise of any other
right, power or privilege. A waiver by the Administrative Agent
or any Lender of any right or remedy hereunder on any one
occasion shall not be construed as a bar to any right or remedy
which the Administrative Agent or such Lender would otherwise
have on any future occasion.
(c) The rights and remedies herein provided are cumulative,
may be exercised singly or concurrently and are not exclusive of
any other rights or remedies provided by law.
(d) The Pledgor agrees that it will not permit any
amendment or other modification of any of the covenants in the
Timberlands Credit Agreement that are incorporated by reference
or referred to herein unless such amendment or other modification
has been consented to in writing by the Required Lenders under
the Paper Company Credit Agreement.
18. Section Headings. The section headings used in this
Agreement are for convenience of reference only and are not to
affect the construction hereof or be taken into consideration in
the interpretation hereof.
19. Successors and Assigns. This Agreement shall be
binding upon the successors and assigns of the Pledgor and shall
inure to the benefit of the Administrative Agent and the Lenders
and their successors and assigns.
20. Governing Law. This Agreement shall be governed by,
and construed and interpreted in accordance with, the laws of the
State of New York.
21. Submission To Jurisdiction; Waivers. The Pledgor
hereby irrevocably and unconditionally:
(a) submits for itself and its Property in any legal action
or proceeding relating to this Agreement and the other Loan
Documents to which it is a party, or for recognition and
enforcement of any judgment in respect thereof, to the
non-exclusive general jurisdiction of the Courts of the State of
New York, the courts of the United States of America for the
Southern District of New York, and appellate courts from any
thereof;
(b) consents that any such action or proceeding may be
brought in such courts and waives any objection that it may now
or hereafter have to the venue of any such action or proceeding
in any such court or that such action or proceeding was brought
in an inconvenient court and agrees not to plead or claim the
same;
(c) agrees that service of process in any such action or
proceeding may be effected by mailing a copy thereof by
registered or certified mail (or any substantially similar form
of mail), postage prepaid, to the Pledgor, its address set forth
under its signature below or at such other address of which the
Administrative Agent shall have been notified pursuant to Section
14 hereof;
(d) agrees that nothing herein shall affect the right to
effect service of process in any other manner permitted by law or
shall limit the right to sue in any other jurisdiction; and
(e) waives, to the maximum extent not prohibited by law,
any right it may have to claim or recover in any legal action or
proceeding referred to in this Section 20 any special, exemplary,
punitive or consequential damages.
22. Acknowledgements. The Pledgor hereby acknowledges
that:
(a) it has been advised by counsel in the negotiation,
execution and delivery of this Agreement and the other Loan
Documents to which it is a party;
(b) neither the Administrative Agent nor any Lender has any
fiduciary relationship with or duty to the Pledgor arising out of
or in connection with this Agreement or any of the other Loan
Documents to which it is a party, and the relationship between
Administrative Agent and Lenders, on one hand, and the Pledgor,
on the other hand, in connection herewith or therewith is solely
that of debtor and creditor; and
(c) no joint venture is created hereby or by the other Loan
Documents or otherwise exists by virtue of the transactions
contemplated hereby among the Lenders or among the Pledgor and
the Lenders.
23. WAIVER OF JURY TRIAL. THE PLEDGOR AND, BY ACCEPTANCE
HEREOF, EACH OF THE ADMINISTRATIVE AGENT AND THE LENDERS, HEREBY
IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL
ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT TO WHICH IT IS A PARTY AND FOR ANY COUNTERCLAIM THEREIN.
24. Limitation on Recourse. Anything herein to the
contrary notwithstanding, from and after the date on which the
Brant-Allen Guarantee shall have terminated in accordance with
Section 11 thereof, the Agent and the Lenders shall have recourse
in respect of the Pledgor's obligations hereunder solely to the
Collateral and not to the Pledgor personally or to other assets
of the Pledgor other than the Collateral.
IN WITNESS WHEREOF, the undersigned has caused this
Agreement to be duly executed and delivered as of the date first
above written.
BRANT-ALLEN INDUSTRIES, INC.
By: /s/ Edward D. Sherrick
Title: Vice President of Finance
Address for Notices:
Post Office Box 3443
80 Field Point Road
Greenwich, Connecticut 06830
Phone: 203-661-3344
Fax: 203-661-3349
ACKNOWLEDGEMENT AND CONSENT
The undersigned hereby acknowledges receipt of a copy of the
Pledge Agreement dated December 1, 1997, made by Brant-Allen
Industries, Inc. for the benefit of Toronto-Dominion (Texas),
Inc., as Administrative Agent (the "Pledge Agreement"). The
undersigned agrees for the benefit of the Administrative Agent
and the Lenders as follows:
1. The undersigned will be bound by the terms of the Pledge
Agreement and will comply with such terms insofar as such terms
are applicable to the undersigned.
2. The undersigned will notify the Administrative Agent
promptly in writing of the occurrence of any of the events
described in paragraph 4(a) of the Pledge Agreement.
3. The terms of paragraph 8(c) of the Pledge Agreement
shall apply to it, mutatis mutandis, with respect to all actions
that may be required of it under or pursuant to or arising out of
Section 8 of the Pledge Agreement.
4. The undersigned agrees that it will not take any action
or fail to take any action that will permit the Pledged LLC
Interests to become "securities" within the meaning of Article 8
of the Uniform Commercial Code of the State of New York unless
(i) the Issuer shall have provided 30 days prior written notice
to the Administrative Agent and (ii) at the sole expense of the
Issuer, the Issuer shall promptly and duly execute and deliver
such further instruments and documents and take such further
actions as the Administrative Agent may reasonably request to
ensure that the Administrative Agent has "control" of such
securities within the meaning of Article 8 of the Uniform
Commercial Code of the State of New York and for the purposes of
obtaining or preserving the full benefits of the Pledge Agreement
and of the rights and powers granted therein.
BEAR ISLAND PAPER COMPANY L.L.C.
By: /s/ Edward D. Sherrick
Title: Vice President of Finance
Address for Notices:
Post Office Box 3443
80 Field Point Road
Greenwich, Connecticut 06830
Phone: 203-661-3344
Fax: 203-661-3349
SCHEDULE 1
TO PLEDGE AGREEMENT
DESCRIPTION OF PLEDGED LLC INTERESTS
Percentage
Issuer Type of Interest Interest
Bear Island Paper Membership 100%
Company, LLC, a Virginia Interest
limited liability
company.
EXHIBIT E
This document was prepared by, and [Virginia]
after recording, please return to:
Simpson Thacher & Bartlett
a partnership which includes
professional corporations
425 Lexington Avenue
New York, New York 10017
ATTN: Amy Jedlicka, Esq.
THIS IS A CREDIT LINE DEED OF TRUST within the meaning of Section
55-58.2 of the Code of Virginia (1950), as amended. For purposes
of and to the extent required by such Section, (i) the name of,
and the address at which communications may be mailed or
delivered to the Administrative Agent acting on behalf of the
noteholders secured by this Deed of Trust is TORONTO-DOMINION
(TEXAS), INC., as Administrative Agent, 909 Fannin Street,
Houston, Texas 77010, and (ii) the maximum aggregate amount of
principal to be secured hereunder at any one time is
$120,000,000.00.
DEED OF TRUST
THIS DEED OF TRUST, dated as of December 1, 1997 is
made by BEAR ISLAND PAPER COMPANY, L.L.C., a Virginia limited
liability company ("GRANTOR"), successor by merger to BEAR ISLAND
MERGERCO, L.L.C., successor by conversion to BEAR ISLAND PAPER
COMPANY, L.P., whose address is P.O. Box 2119, 10026 Old Ridge
Rd. (Route 738), Ashland, Virginia 23005, to SOUTHERN TITLE
SERVICES CORPORATION, a Virginia corporation, ("TRUSTEE") whose
address is P.O. Box 399, Richmond, Virginia 23218-0399, for the
use and benefit of TORONTO-DOMINION (TEXAS), INC., as
Administrative Agent for the Lenders referred to below (in such
capacity, together with its successors and assigns,
"BENEFICIARY"), whose address is 909 Fannin Street, Houston,
Texas 77010. References to this "DEED OF TRUST" shall mean this
instrument and any and all renewals, modifications, amendments,
supplements, extensions, consolidations, substitutions, spreaders
and replacements of this instrument.
Background
A. Grantor has entered into that certain Credit
Agreement dated as of the date hereof (as the same may be
amended, supplemented or otherwise modified from time to time,
the "CREDIT AGREEMENT") with the several banks and other
financial institutions or entities from time to time parties
thereto (the "LENDERS"), Beneficiary and TD Securities (USA),
Inc., as Arranger. The terms of the Credit Agreement are
incorporated by reference in this Deed of Trust as if the terms
thereof were fully set forth herein. Capitalized terms not
otherwise defined herein shall have the meanings ascribed thereto
in the Credit Agreement. References in this Deed of Trust to the
"DEFAULT RATE" shall mean the rate of interest per annum
equivalent to the Base Rate plus 2%.
B. Grantor is the owner of the parcel(s) of real
property described on Schedule A attached (such real property,
together with all of the buildings, improvements, structures and
fixtures now or subsequently located thereon (the
"IMPROVEMENTS"), being collectively referred to as the "REAL
ESTATE").
C. Pursuant to the terms and conditions of the Credit
Agreement, (i) the Term Loan Lenders have agreed to make certain
Term Loans to Grantor in the aggregate principal amount of
$70,000,000 and (ii) the Revolving Credit Lenders have agreed to
make certain Revolving Credit Loans to Grantor in the maximum
aggregate principal amount of $50,000,000.
D. It is a condition precedent, among others, to the
obligations of the Lenders to make the Loans that Grantor execute
and deliver this Deed of Trust.
Granting Clauses
For good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Grantor agrees that
to secure:
(a) repayment of the principal of and payment of
interest (including, without limitation, interest
accruing after the maturity of the Loans made by
each Lender and interest accruing after the filing
of any petition in bankruptcy, or the commencement
of any insolvency, reorganization or like
proceeding, relating to Grantor, whether or not a
claim for post-filing or post-petition interest is
allowed in such proceeding) on the Loans made by
each Lender to, and the Notes held by each Lender
of, Grantor;
(b) payment of all obligations of Grantor under any
Interest Rate Protection Agreement and Currency
Swap Agreement;
(c) payment of all other obligations and liabilities
of Grantor to Beneficiary and the Lenders, whether
direct or indirect, absolute or contingent, due or
to become due, or now existing or hereafter
incurred, which may arise under, out of, or in
connection with, the Credit Agreement, the Notes,
the Interest Rate Protection Agreements, Currency
Swap Agreements, this Deed of Trust, the other
Loan Documents or any other document made,
delivered or given in connection herewith or
therewith, in each case whether on account of
principal, interest, reimbursement obligations,
fees, indemnities, costs, expenses or otherwise
(including, without limitation, all reasonable
fees and disbursements of counsel to Beneficiary
or to the Lenders that are required to be paid by
Grantor pursuant to the terms of the Credit
Agreement, this Deed of Trust or any other Loan
Documents) (the items set forth in clauses (a)
through (c) being referred to herein collectively
as the "INDEBTEDNESS"); and
(d) the performance and observance of each obligation,
term, covenant and condition to be performed or
observed by Grantor (the "OBLIGATIONS") under, in
connection with or pursuant to the provisions of
the Credit Agreement, the Notes, the Interest Rate
Protection Agreements, Currency Swap Agreements,
this Deed of Trust and any of the other Security
Documents or any of the other Loan Documents;
GRANTOR HEREBY CONVEYS TO TRUSTEE AND HEREBY GRANTS, ASSIGNS,
TRANSFERS AND SETS OVER TO TRUSTEE, IN TRUST FOREVER, WITH
GENERAL WARRANTY AND ENGLISH COVENANTS OF TITLE AND WITH POWER OF
SALE AND RIGHT OF ENTRY AND POSSESSION, AND GRANTS BENEFICIARY
AND TRUSTEE A SECURITY INTEREST IN:
(A) the Real Estate; all (i) trees and timber,
including, without limitation, standing timber and crops,
now located on or hereafter planted or growing in the soil
of, or otherwise attributable to, any of the Premises (as
hereinafter defined), or any part or parcel thereof, and all
additions, substitutions and replacements thereof and (ii)
any and all trees and timber which have been severed, cut or
harvested from the Premises or any part or parcel thereof
("HARVESTED TIMBER"; all of the foregoing in clauses (i) and
(ii) of this paragraph (A) being referred to as "TIMBER");
(B) all the estate, right, title, claim or demand
whatsoever of Grantor, in possession or expectancy, in and
to the Real Estate or any part thereof;
(C) all right, title and interest of Grantor in, to
and under all easements, rights of way, gores of land,
streets, ways, alleys, passages, sewer rights, waters, water
courses, water and riparian rights, development rights, air
rights, mineral rights and all estates, rights, titles,
interests, privileges, licenses, tenements, hereditaments
and appurtenances belonging, relating or appertaining to the
Real Estate, and any reversions, remainders, rents, issues,
profits and revenue thereof and all land lying in the bed of
any street, road or avenue, in front of or adjoining the
Real Estate to the center line thereof;
(D) all right, title and interest of Grantor in, to
and under all of the fixtures, chattels, business machines,
machinery, apparatus, equipment, furnishings, fittings and
articles of personal property of every kind and nature
whatsoever, and all appurtenances and additions thereto and
substitutions or replacements thereof (together with, in
each case, attachments, components, parts and accessories)
currently owned or subsequently acquired by Grantor and now
or subsequently attached to, or contained in or used or
usable in any way in connection with any operation or
letting of the Real Estate, including but without limiting
the generality of the foregoing, all screens, awnings,
shades, blinds, curtains, draperies, artwork, carpets, rugs,
storm doors and windows, furniture and furnishings, heating,
electrical, and mechanical equipment, lighting,
switchboards, plumbing, ventilating, air conditioning and
air-cooling apparatus, refrigerating, and incinerating
equipment, escalators, elevators, loading and unloading
equipment and systems, stoves, ranges, laundry equipment,
cleaning systems (including window cleaning apparatus),
telephones, communication systems (including satellite
dishes and antennae), televisions, computers, sprinkler
systems and other fire prevention and extinguishing
apparatus and materials, security systems, motors, engines,
machinery, pipes, pumps, tanks, conduits, appliances, data
processing equipment, fittings and fixtures of every kind
and description (all of the foregoing in this paragraph
(D) being referred to as the "EQUIPMENT");
(E) all right, title and interest of Grantor in and to
all substitutes and replacements of, and all additions and
improvements to, the Real Estate and the Equipment,
subsequently acquired by or released to Grantor or
constructed, assembled or placed by Grantor on the Real
Estate, immediately upon such acquisition, release,
construction, assembling or placement, including, without
limitation, any and all building materials whether stored at
the Real Estate or offsite, and, in each such case, without
any further mortgage, conveyance, assignment or other act by
Grantor;
(F) all right, title and interest of Grantor in, to
and under all leases, subleases, underlettings, concession
agreements, management agreements, licenses and other
agreements relating to the use or occupancy of the Real
Estate or the Equipment or any part thereof, now existing or
subsequently entered into by Grantor and whether written or
oral and all guarantees of any of the foregoing
(collectively, as any of the foregoing may be amended,
restated, extended, renewed or modified from time to time,
the "LEASES"), and all rights of Grantor in respect of cash
and securities deposited thereunder and the right to receive
and collect the revenues, income, rents, issues and profits
thereof, together with all other rents, royalties, issues,
profits, revenue, income and other benefits arising from the
use and enjoyment of the Trust Property (as defined below)
(collectively, the "RENTS");
(G) all unearned premiums under insurance policies now
or subsequently obtained by Grantor relating to the Real
Estate or Equipment and Grantor's interest in and to all
such insurance policies and all proceeds of any such
insurance policies (including title insurance policies)
including the right to collect and receive such proceeds,
subject to the provisions relating to insurance generally
set forth below; and all awards and other compensation,
including the interest payable thereon and the right to
collect and receive the same, made to the present or any
subsequent owner of the Real Estate or Equipment for the
taking by eminent domain, condemnation or otherwise, of all
or any part of the Real Estate or any easement or other
right therein;
(H) all right, title and interest of Grantor in and to
(i) all contracts from time to time executed by Grantor or
any manager or agent on its behalf relating to the
ownership, construction, maintenance, repair, operation,
occupancy, sale or financing of the Real Estate or Equipment
or any part thereof and all agreements relating to the
purchase or lease of any portion of the Real Estate or any
property which is adjacent or peripheral to the Real Estate,
together with the right to exercise such options and all
leases of Equipment (collectively, the "CONTRACTS"), (ii)
all consents, licenses, building permits, documents,
certificates of occupancy and other governmental approvals
relating to (a) the construction, completion, occupancy, use
or operation of the Real Estate or any part thereof and (b)
the harvesting, cutting, severing, transportation, storage,
processing or handling of the Timber (collectively, the
"PERMITS") and (iii) all drawings, plans, engineering
reports, specifications, land planning, maps, surveys and
information and any other reports and similar or related
items relating to the Real Estate (collectively, the
"PLANS");
(I) any and all monies now or subsequently on deposit
for the payment of real estate taxes or special assessments
against the Real Estate or for the payment of premiums on
insurance policies covering the foregoing property or
otherwise on deposit with or held by Beneficiary as provided
in this Deed of Trust;
(J) all proceeds, both cash and noncash, of the
foregoing;
Provided, however, that in each case with respect to
all of the foregoing such grant is made only to the extent
the grant by such Grantor of a security interest pursuant to
this Deed of Trust in its right, title and interest in such
contract, agreement, instrument, indenture or other general
intangible is not prohibited by such contract, agreement,
instrument, indenture or other general intangible without
the consent of any party thereto, would not give any other
party to such contract, agreement, instrument, indenture or
other general intangible the right to terminate its
obligations thereunder, or is permitted with consent if all
necessary consents to such grant of a security interest have
been obtained from the other parties thereto (it being
understood that the foregoing shall not be deemed to
obligate such Grantor to obtain such consents); provided,
that the foregoing limitation shall not affect, limit,
restrict or impair the grant by such Grantor of a security
interest pursuant to this Deed of Trust in any amounts due
or become due under any such contract, agreement,
instrument, indenture, or other general intangible.
(All of the foregoing property and rights and interests
now owned or held or subsequently acquired by Grantor and
described in the foregoing clauses (A) through (E) are
collectively referred to as the "PREMISES", and those described
in the foregoing clauses (A) through (J) are collectively
referred to as the "TRUST PROPERTY").
TO HAVE AND TO HOLD the Trust Property and the rights
and privileges hereby granted unto Trustee, its successors and
assigns IN TRUST FOREVER for the uses and purposes set forth,
until the Indebtedness is fully paid and the Obligations fully
performed.
Terms and Conditions
Grantor further represents, warrants, covenants and
agrees with Trustee and Beneficiary as follows:
1. Warranty of Title. GRANTOR WARRANTS ITS TITLE TO
THE TRUST PROPERTY GENERALLY AND WITH ENGLISH COVENANTS OF TITLE,
subject only to (i) the matters that are set forth in Schedule B
of the title insurance policy or policies being issued to
Beneficiary to insure the lien of this Deed of Trust, (ii) the
security interest granted by Grantor to Beneficiary pursuant to
the Security and Pledge Agreement, and (iii) liens permitted by
the Credit Agreement (the "PERMITTED EXCEPTIONS").
2. Payment of Indebtedness. Grantor shall pay the
Indebtedness at the times and places and in the manner specified
in the Notes, the Credit Agreement, any Interest Rate Protection
Agreement and in any other Loan Document and shall perform all
the Obligations.
3. Requirements. (a) Grantor shall promptly comply
with, or cause to be complied with, and conform to all present
and future laws, statutes, codes, ordinances, orders, judgments,
decrees, rules, regulations and requirements, and irrespective of
the nature of the work to be done, of each of the United States
of America, any State and any municipality, local government or
other political subdivision thereof and any agency, department,
bureau, board, commission or other instrumentality of any of
them, now existing or subsequently created (collectively,
"GOVERNMENTAL AUTHORITY") which has jurisdiction over the Trust
Property or relates to the harvesting, cutting, severance,
handling or transporting of Timber, and all covenants,
restrictions and conditions now or later of record which may be
applicable to any of the Trust Property, or to the use, manner of
use, occupancy, possession, operation, maintenance, alteration,
repair or reconstruction of any of the Trust Property, except to
the extent that failure to comply therewith could not, in the
aggregate, reasonably be expected to have a Material Adverse
Effect. All present and future laws, statutes, codes,
ordinances, orders, judgments, decrees, rules, regulations and
requirements of every Governmental Authority applicable to
Grantor or to any of the Trust Property and all covenants,
restrictions, and conditions which now or later may be applicable
to any of the Trust Property are collectively referred to as the
"LEGAL REQUIREMENTS".
(b) From and after the date of this Deed of Trust,
Grantor shall not by act or omission permit any building or other
improvement on any premises not subject to the lien created by
this Deed of Trust to rely on the Premises or any part thereof or
any interest therein to fulfill any Legal Requirement, and
Grantor hereby assigns to Beneficiary any and all rights to give
consent for all or any portion of the Premises or any interest
therein to be so used. Grantor shall not by act or omission
impair the integrity of any of the Real Estate so as to
constitute an illegal subdivision or to prohibit separately
described parcels of the Premises and Improvements from being
conveyed as separate zoning or tax lots. Grantor represents that
the Premises are not part of a larger tract of land owned by
Grantor or its affiliates or otherwise considered as part of one
zoning or tax lot, or, if they are that any authorization or
variance required for the subdivision of such larger tract which
a sale of the Premises would entail has been obtained from all
appropriate Governmental Authorities so that the Premises and
Improvements constitute one zoning or tax lot capable of being
conveyed as such. Any act or omission by Grantor which would
result in a violation of any of the provisions of this subsection
shall be void.
4. Payment of Taxes and Other Impositions. (a)
Promptly when due, Grantor shall pay and discharge all taxes of
every kind and nature (including, without limitation, all real
and personal property, income, franchise, withholding, transfer,
gains, profits and gross receipts taxes), all charges for any
easement or agreement maintained for the benefit of any of the
Trust Property, all general and special assessments, levies,
permits, inspection and license fees, all water and sewer rents
and charges, vault taxes and all other public charges even if
unforeseen or extraordinary, imposed upon or assessed against or
which may become a lien on any of the Trust Property, or arising
in respect of the occupancy, use or possession thereof, together
with any penalties or interest on any of the foregoing (all of
the foregoing are collectively referred to as the "IMPOSITIONS").
Grantor shall within 30 days after each due date deliver to
Beneficiary (i) original or copies of receipted bills and
cancelled checks evidencing payment of such Imposition if it is a
real estate tax or other public charge and (ii) evidence
acceptable to Beneficiary showing the payment of any other such
Imposition. If by law any Imposition, at Grantor's option, may
be paid in installments (whether or not interest shall accrue on
the unpaid balance of such Imposition), Grantor may elect to pay
such Imposition in such installments and shall be responsible for
the payment of such installments with interest, if any.
(b) Nothing herein shall affect any right or remedy of
Trustee or Beneficiary under this Deed of Trust or otherwise,
without notice or demand to Grantor, to pay any Imposition after
the date such Imposition shall have become due. Any sums paid by
Trustee or Beneficiary in discharge of any Impositions shall be
payable on demand by Grantor to Trustee or Beneficiary, as the
case may be, together with interest at the Default Rate as set
forth above.
(c) Grantor shall have the right before any
delinquency occurs to contest or object in good faith to the
amount or validity of any 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 this Section unless (i) Grantor has given prior written notice
to Beneficiary of Grantor's intent so to contest or object to an
Imposition, (ii) Grantor shall demonstrate to Beneficiary's
satisfaction that the legal proceedings shall operate
conclusively to prevent the sale of the Trust Property, or any
part thereof, to satisfy such Imposition prior to final
determination of such proceedings and (iii) Grantor shall furnish
a good and sufficient bond or surety as requested by and
reasonably satisfactory to Beneficiary in the amount of the
Impositions which are being contested plus any interest and
penalty which may be imposed thereon and which could become a
charge against the Real Estate or any part of the Trust Property.
5. Insurance. (a) Grantor shall maintain or cause to
be maintained on all of the Premises:
(i) property insurance against loss or damage by fire,
lightning, windstorm, tornado, water damage, flood,
earthquake and by such other further risks and hazards as
now are or subsequently may be covered by an "all risk"
policy or a fire policy covering "special" causes of loss,
and the policy limits shall be automatically reinstated
after each loss (provided that Grantor shall not be
obligated to maintain the insurance coverage required by
this subparagraph (i) with respect to any portion of the
Premises that consists of a separate tract or parcel
containing 75 or more acres on which (and only for so long
as) the average capitalized cost of the Improvements is less
than $50.00 (Fifty Dollars) per acre net of depreciation
(collectively, "UNIMPROVED LANDS"));
(ii) commercial general liability insurance under a
policy including the "broad form CGL endorsement" (or which
incorporates the language of such endorsement), covering all
claims for personal injury, bodily injury or death, or
property damage occurring on, in or about the Premises in an
amount not less than $10,000,000 or such other amount as may
be approved by Beneficiary (such $10,000,000 coverage may be
satisfied by a combination of primary and excess limit or
umbrella coverage totalling not less than $10,000,000)
combined single limit with respect to injury and property
damage relating to any one occurrence plus such excess
limits as Beneficiary shall request from time to time;
(iii) insurance against rent loss, extra expense or
business interruption in amounts satisfactory to
Beneficiary, but not less than one year's gross rent or
gross income (provided that Grantor shall not be obligated
to maintain the insurance coverage required by this
subparagraph (iii) with respect to any Unimproved Lands);
(iv) if any portion of the Premises upon which any
Improvements are located are in an area identified as a
special flood hazard area by the Federal Emergency
Management Agency or other applicable agency, flood
insurance in an amount satisfactory to Beneficiary, but in
no event less than the maximum limit of coverage available
under the National Flood Insurance Act of 1968, as amended;
and
(v) such other insurance in such amounts as
Beneficiary may reasonably request from time to time against
loss or damage by any other risk commonly insured against by
persons occupying or using like properties in the locality
or localities in which the Real Estate is situated.
(b) Each insurance policy (other than flood insurance)
shall (i) provide that it shall not be cancelled without 30-days'
prior written notice to Beneficiary, and (ii) with respect to all
property insurance, provide for deductibles in an amount
reasonably satisfactory to Beneficiary, contain a "Replacement
Cost Endorsement" (or attaching an agreed amount endorsement
satisfactory to Beneficiary), with loss payable solely to
Beneficiary as its interest may appear, without contribution,
under a "standard" or "New York" mortgagee clause acceptable to
Beneficiary. Each policy shall expressly provide that any
proceeds which are payable to Beneficiary shall be paid by check
payable to the order of Beneficiary only and requiring the
endorsement of Beneficiary. In lieu thereof, the Grantor may
satisfy the foregoing by delivering an irrevocable power of
attorney to Beneficiary authorizing Beneficiary to endorse any
check payable under such policy which is made out to Grantor.
(c) Grantor shall deliver to Beneficiary an original
of each insurance policy required to be maintained, or a
certificate of such insurance acceptable to Beneficiary, together
with a copy of the declaration page for each such policy.
Grantor shall (i) pay as they become due all premiums for such
insurance and (ii) not later than 15 days prior to the expiration
of each policy to be furnished pursuant to the provisions of this
Section, deliver a renewed policy or policies, or duplicate
original or originals thereof, marked "premium paid," or
accompanied by such other evidence of payment satisfactory to
Beneficiary.
(d) If Grantor is in default of its obligations to
insure or deliver any such prepaid policy or policies, then
Beneficiary, at its option and without notice, may effect such
insurance from year to year, and pay the premium or premiums
therefor, and Grantor shall pay to Beneficiary on demand such
premium or premiums so paid by Beneficiary with interest from the
time of payment at the Default Rate.
(e) Grantor promptly shall comply with and conform to
(i) all provisions of each such insurance policy, and (ii) all
requirements of the insurers applicable to Grantor or to any of
the Trust Property or to the use, manner of use, occupancy,
possession, operation, maintenance, alteration or repair of any
of the Trust Property. Grantor shall not use or permit the use
of the Trust Property in any manner which would permit any
insurer to cancel any insurance policy or void coverage required
to be maintained by this Deed of Trust. Grantor shall give
Beneficiary 30-days prior notice of any non-renewal or material
amendment of each insurance policy (other than flood insurance)
required under this Section 5 of this Deed of Trust.
(f) If the Trust Property, or any part thereof, shall
be destroyed or damaged, Grantor shall give immediate notice
thereof to Beneficiary. All insurance proceeds shall be paid to
Beneficiary to be held by Beneficiary as collateral to secure the
payment and performance of the Indebtedness and the Obligations.
Notwithstanding the preceding sentence, provided that no Event of
Default shall have occurred and be continuing, Grantor shall have
the right to adjust such loss, and the insurance proceeds
relating to such loss shall be paid over promptly to Grantor;
provided that, if any such insurance proceeds are received, then
Grantor shall either (i) apply such proceeds promptly after any
such damage to repair all such damage regardless of whether such
proceeds are sufficient to pay for the costs of repair, or (ii)
apply such proceeds in any other manner that complies with
Section 2.10 of the Credit Agreement.
(g) In the event of foreclosure of this Deed of Trust
or other transfer of title to the Trust Property, all right,
title and interest of Grantor in and to any insurance policies
then in force shall pass to the purchaser or grantee.
(h) Grantor may maintain insurance required under this
Deed of Trust by means of one or more blanket insurance policies
maintained by Grantor; provided, however, that (i) any such
policy shall specify, or Grantor shall furnish to Beneficiary a
written statement from the insurer so specifying, the maximum
amount of the total insurance afforded by such blanket policy
that is allocated to the Premises and the other Trust Property
and any sublimits in such blanket policy applicable to the
Premises and the other Trust Property, (ii) each such blanket
policy shall include an endorsement providing that, in the event
of a loss resulting from an insured peril, insurance proceeds
shall be allocated to the Trust Property in an amount equal to
the coverages required to be maintained by Grantor as provided
above and (iii) the protection afforded under any such blanket
policy shall be no less than that which would have been afforded
under a separate policy or policies relating only to the Trust
Property.
(i) Notwithstanding anything to the contrary in this
section, Beneficiary agrees that the types, terms, and amounts of
insurance that Grantor maintains as of the date of this Deed of
Trust satisfies the requirements of this Section 5 of this Deed
of Trust.
6. Restrictions on Liens and Encumbrances. Except for
the lien of this Deed of Trust and the Permitted Exceptions, and
except as expressly permitted under the Credit Agreement, Grantor
shall not further mortgage, nor otherwise encumber the Trust
Property nor create or suffer to exist any lien, charge or
encumbrance on the Trust Property, or any part thereof, whether
superior or subordinate to the lien created by this Deed of Trust
and whether recourse or non-recourse.
7. Due on Sale and Other Transfer Restrictions.
Except as expressly permitted under the Credit Agreement, Grantor
shall not sell, transfer, convey or assign all or any portion of,
or any interest in, the Trust Property.
8. Maintenance; No Alteration; Inspection; Utilities.
(a) Grantor shall maintain or cause to be maintained all the
Improvements in good condition and repair (ordinary wear and tear
excepted) and shall not commit or suffer any waste of the
Improvements. Notwithstanding any other provision of this Deed
of Trust, with respect to Unimproved Lands, the harvesting of
Timber and forest management practices may be carried out in
accordance with Best Management Practices prevailing in the
Commonwealth of Virginia with respect to similarly situated land,
which Best Management Practices are more particularly set forth
in the Loggers Guide published by the Virginia Department of
Forestry (December 1988), as the same may be revised from time to
time. Grantor shall repair, restore, replace or rebuild promptly
any part of the Premises which may be damaged or destroyed by any
casualty whatsoever if as a result of which casualty, no
insurance or condemnation proceeds are received. The
Improvements shall not be demolished or materially altered, nor
any material additions built, without the prior written consent
of Beneficiary.
(b) Beneficiary and any persons authorized by
Beneficiary shall have the right upon reasonable notice and at
any reasonable time to enter and inspect the Premises and all
work done, labor performed and materials furnished in and about
the Improvements and to inspect and make copies of all books,
contracts and records of Grantor relating to the Trust Property.
(c) Grantor shall pay or cause to be paid when due all
utility charges which are incurred for gas, electricity, water or
sewer services furnished to the Premises and all other
assessments or charges of a similar nature, whether public or
private, affecting the Premises or any portion thereof, whether
or not such assessments or charges are liens thereon.
9. Condemnation/Eminent Domain. Immediately upon
obtaining knowledge of the institution of any proceedings for the
condemnation of the Trust Property, or any portion thereof,
Grantor will notify Beneficiary of the pendency of such
proceedings. Beneficiary is hereby authorized and empowered by
Grantor to settle or compromise any claim in connection with such
condemnation and to receive all awards and proceeds thereof to be
held by Beneficiary as collateral to secure the payment and
performance of the Indebtedness and the Obligations.
Notwithstanding the preceding sentence, provided no Event of
Default shall have occurred and be continuing, Grantor shall, at
its expense, diligently prosecute any proceeding relating to such
condemnation, settle or compromise any claims in connection
therewith and receive any awards or proceeds thereof, provided
that, if any such awards or proceeds thereof are received, then
Grantor shall either (i) apply such proceeds promptly to repair
and restore the Trust Property to its condition prior to such
condemnation, regardless of whether such award is sufficient to
pay for the costs of such repair and restoration, or (ii) apply
such proceeds in any other manner that complies with Section 2.10
of the Credit Agreement.
10. Restoration. Grantor shall use all insurance
proceeds and all condemnation proceeds and awards received by the
Grantor to either (i) promptly restore the Trust Property to its
condition prior to such casualty or condemnation, (giving effect
to the remaining configuration of the Premises after such
condemnation) and in compliance with all Legal Requirements, or
(ii) in any other manner which complies with the Credit
Agreement.
11. Leases. (a) Grantor shall not (i) execute an
assignment or pledge of any Lease relating to all or any portion
of the Trust Property other than in favor of Beneficiary, or (ii)
except as expressly permitted under the Credit Agreement,
without the prior written consent of Beneficiary, execute or
permit to exist any Lease of any of the Trust Property, provided
that Grantor may enter into leases having an aggregate term of
less than twelve months (including all extension or renewal
terms) which are primarily for agricultural or recreational
hunting purposes without the prior written consent of
Beneficiary.
(b) As to any Lease consented to by Beneficiary,
Grantor shall:
(i) promptly perform all of the provisions of the
Lease on the part of the lessor thereunder to be performed;
(ii) promptly enforce all of the provisions of the
Lease on the part of the lessee thereunder to be performed;
(iii) appear in and defend any action or proceeding
arising under or in any manner connected with the Lease or
the obligations of Grantor as lessor or of the lessee
thereunder;
(iv) exercise, within 5 business days after a request
by Beneficiary, any right to request from the lessee a
certificate with respect to the status thereof;
(v) simultaneously deliver to Beneficiary copies of
any notices of default which Grantor may at any time forward
to or receive from the lessee;
(vi) promptly deliver to Beneficiary a fully executed
counterpart of the Lease; and
(vii) promptly deliver to Beneficiary, upon
Beneficiary's request, an assignment of the Grantor's
interest under such Lease.
(c) Grantor shall deliver to Beneficiary, within 10
days after a request by Beneficiary, a written statement,
certified by Grantor as being true, correct and complete,
containing the names of all lessees and other occupants of the
Trust Property, the terms of all Leases and the spaces occupied
and rentals payable thereunder, and a list of all Leases which
are then in default, including the nature and magnitude of the
default; such statement shall be accompanied by credit
information with respect to the lessees and such other
information as Beneficiary may request.
(d) All Leases entered into by Grantor after the date
hereof, if any, and all rights of any lessees thereunder shall be
subject and subordinate in all respects to the lien and
provisions of this Deed of Trust unless Beneficiary shall
otherwise elect in writing.
(e) As to any Lease now in existence or subsequently
consented to by Beneficiary, except as expressly permitted under
the Credit Agreement, Grantor shall not accept a surrender or
terminate, cancel, rescind, supplement, alter, revise, modify or
amend such Lease or permit any such action to be taken nor shall
Grantor accept the payment of rent more than thirty (30) days in
advance of its due date.
12. Further Assurances. To further assure
Beneficiary's and Trustee's rights under this Deed of Trust,
Grantor agrees upon demand of Beneficiary or Trustee to do any
act or execute any additional documents (including, but not
limited to, security agreements on any personalty included or to
be included in the Trust Property and a separate assignment of
each Lease in recordable form) as may be required by Beneficiary
or Trustee to confirm the lien of this Deed of Trust and all
other rights or benefits conferred on Beneficiary or Trustee by
this Deed of Trust.
13. Beneficiary's Right to Perform. If Grantor fails
to perform any of the covenants or agreements of Grantor,
Beneficiary or Trustee, without waiving or releasing Grantor from
any obligation or default under this Deed of Trust, may, at any
time (but shall be under no obligation to) pay or perform the
same, and the amount or cost thereof, with interest at the
Default Rate, shall immediately be due from Grantor to
Beneficiary or Trustee (as the case may be) and the same shall be
secured by this Deed of Trust and shall be an encumbrance on the
Trust Property prior to any right, title to, interest in or claim
upon the Trust Property attaching subsequent to the date of this
Deed of Trust. No payment or advance of money by Beneficiary or
Trustee under this Section shall be deemed or construed to cure
Grantor's default or waive any right or remedy of Beneficiary or
Trustee.
14. Hazardous Material. (a) In the event Grantor
fails to comply with Sections 5.8(a) or 5.8(b) of the Credit
Agreement, after notice to Grantor and the expiration of the
earlier of (i) any applicable cure period under the Credit
Agreement, or (ii) the cure period permitted under the applicable
Legal Requirement, Beneficiary may declare such failure an Event
of Default or arrange to have compliance with Section 5.8(a) or
5.8(b), as the case may be, implemented, and the cost of such
implementation with interest at the Default Rate shall
immediately be due from Grantor to Beneficiary. Beneficiary
shall have the right to conduct an environmental assessment of
the Premises at Grantor's sole cost and expense, if any Event of
Default has occurred or any event has occurred that, if it
continues would constitute an Event of Default (such Event of
Default, or event, a "Default"), or at any other time at
Beneficiary's sole cost and expense, provided: (i) Beneficiary
provides Grantor with at least five business days notice of its
intent to conduct said environmental assessment, which notice
shall include Beneficiary's proposed scope of work for the
environmental assessment; (ii) Beneficiary allows Grantor to have
Grantor's personnel and outside representatives, including
attorneys or environmental professionals, be present during any
inspection of the Trust Property that may be a part of the
environmental assessment; (iii) with respect to any environmental
sampling to be performed: (A) it is recommended and supervised by
a reputable independent environmental consultant selected by the
Beneficiary, subject to the approval of the Grantor (such
approval not to be unreasonably withheld or delayed), (B)
Beneficiary provides Grantor with the opportunity to collect
split samples, and (C) at Grantor's reasonable request
Beneficiary restores the Premises in all material respects to its
presampling condition, the cost of such restoration with interest
at the Default Rate immediately due from Grantor to the
Beneficiary if there has been a Default; and (iv) Beneficiary
provides to Grantor copies of all final reports prepared in
connection with any environmental assessment conducted hereunder.
Grantor shall cooperate with Beneficiary with respect to the
conduct of said environmental audits consistent with the terms of
this Section.
15. Events of Default. The occurrence of an Event of
Default under the Credit Agreement shall constitute an Event of
Default hereunder.
16. Remedies. (a) Upon the occurrence of any Event
of Default, in addition to any other rights and remedies
Beneficiary may have pursuant to the Loan Documents, or as
provided by law, and without limitation, (1) if such event is an
Event of Default specified in clause (i) or (ii) of Section 7(f)
of the Credit Agreement with respect to Grantor, automatically
the Commitments shall immediately terminate and the Loans (with
accrued interest thereon) and all other amounts owing under the
Credit Agreement and the other Loan Documents shall immediately
become due and payable, and (2) if such event is any other Event
of Default, either or both of the following actions may be taken:
(i) with the consent of the Required Revolving Credit Lenders,
Beneficiary may, or upon the request of the Required Revolving
Credit Lenders, Beneficiary shall, by notice to Grantor declare
the Revolving Credit Commitments to be terminated forthwith,
whereupon the Revolving Credit Commitments shall immediately
terminate; and (ii) with the consent of the Required Lenders,
Beneficiary may, or upon the request of the Required Lenders,
Beneficiary shall, by notice to Grantor, declare the Loans (with
accrued interest thereon) and all other amounts owing under the
Credit Agreement and the other Loan Documents to be due and
payable forthwith, whereupon the same shall immediately become
due and payable. Except as expressly provided above in this
Section, presentment, demand, protest and all other notices of
any kind are hereby expressly waived. In addition, upon the
occurrence and during the continuance of any Event of Default,
Beneficiary may immediately take such action, without notice or
demand (except to the extent required by applicable law), as it
deems advisable to protect and enforce its rights against Grantor
and in and to the Trust Property, including, but not limited to,
the following actions, each of which may be pursued concurrently
or otherwise, at such time and in such manner as Beneficiary may
determine, in its sole discretion, without impairing or otherwise
affecting the other rights and remedies of Beneficiary:
(i) Beneficiary may elect to cause the Trust Property
or any part thereof to be sold as follows:
(A) Beneficiary may proceed as if all of the
Trust Property were real property in accordance with
subparagraph (C) below, or Beneficiary may elect to
treat any of the Trust Property which consists of a
right in action or which is property that can be
severed from the Real Estate without causing structural
damage thereto as if the same were personal property,
and dispose of the same in accordance with the
provisions of this Deed of Trust which relate to the
exercise of remedies with respect to that portion of
the Trust Property which is personal property, separate
and apart from the sale of real property.
(B) Beneficiary may direct the Trustee to cause
any such sale or other disposition to be conducted
immediately following the expiration of any grace
period, if any, herein provided, and any advertisement
required by law or herein and the notice required by
Section 55-59.1 of the Code of Virginia (1950) (1995
Replacement Volume), as the same may be amended from
time to time (hereinafter, "CODE OF VIRGINIA"), or
Beneficiary and Trustee may delay any such sale or
other disposition for such period of time as Trustee or
Beneficiary deems to be appropriate. Should
Beneficiary desire that more than one (1) such sale or
other disposition be conducted, Beneficiary may, at its
option, cause the same to be conducted simultaneously,
or successively, on the same day, or at such different
days or times and in such order as Beneficiary and
Trustee may deem to be appropriate.
(C) Should Beneficiary elect to direct the
Trustee to sell the Trust Property or any part thereof
which is real property or which Beneficiary has elected
to treat as real property, upon such election, the
Trustee shall give such notice of default and election
to sell as may then be required by law. Thereafter,
upon the expiration of such time and the giving of the
notice of sale required by Section 55-59.1 of the Code
of Virginia, and after having advertised the sale once
a week for four weeks in a newspaper having general
circulation in the jurisdiction wherein the Real Estate
lies, and without the necessity of any demand on
Grantor, Trustee, at the time and place specified in
the notice of sale, shall sell the 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. Trustee may, and upon request of
Beneficiary shall, from time to time, postpone the sale
by public announcement thereof at the time and place
noticed therefor. If the Trust Property consists of
several lots or parcels, Trustee may designate the
order in which such lots or parcels shall be offered
for sale or sold. Any person, including Grantor or
Beneficiary, may purchase at the sale. Upon any sale,
Trustee 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.
(D) 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 facts, such as
default, the giving of notice of default and notice of
sale, demand that such sale should be made,
postponement of sale, terms of sale, sale, purchase,
payment of purchase money and other facts affecting the
regularity or validity of such sale or disposition,
shall be conclusive proof of the truth of such facts;
any such deed or conveyance shall be conclusive against
all persons as to such facts recited therein.
(E) The acknowledgment of the receipt of the
purchase money, contained in any deed or conveyance
executed as aforesaid, shall be sufficient discharge to
the grantee thereof from all obligations to see to the
proper application of the consideration therefor as
hereinafter provided.
(ii) Beneficiary may, to the extent permitted by
applicable law, (A) institute and maintain an action of
judicial foreclosure against all or any part of the Trust
Property, (B) institute and maintain an action on the
Indebtedness, or (C) take such other action at law or in
equity for the enforcement of this Deed of Trust or any of
the Loan Documents as the law may allow. Beneficiary may
proceed in any such action to final judgment and execution
thereon for all sums due hereunder, together with interest
thereon at the Default Rate and all costs of suit,
including, without limitation, reasonable attorneys' fees
and disbursements. Interest at the Default Rate shall be
due on any judgment obtained by Beneficiary from the date of
judgment until actual payment is made of the full amount of
the judgment.
(iii) Upon the completion of any sale or sales made by
Trustee or Beneficiary, as the case may be, under or by
virtue of this subsection (a), Trustee or any officer of any
court empowered to do so, shall execute and deliver as
aforesaid, to the accepted purchaser or purchasers a good
and sufficient instrument, or good and sufficient
instruments, conveying, assigning and transferring all
estate, right, title and interest in and to the property and
rights sold. Trustee is hereby appointed irrevocably the
true and lawful attorney of Grantor in its name and stead to
make all necessary conveyances, assignments, transfers and
deliveries of the Trust Property or any part thereof and the
rights so sold and for that purpose, Trustee may execute all
necessary instruments of conveyance, assignment and
transfer, Grantor hereby ratifying and confirming all that
its attorney shall lawfully do by virtue hereof.
Nevertheless, Grantor, if so requested by Trustee or
Beneficiary, shall ratify and confirm any such sale or sales
by executing and delivering to Trustee or to such purchaser
or purchasers all such instruments as may be advisable, in
the judgment of Trustee or Beneficiary, for the purpose as
may be designated in such request. Any such sale or sales
made under or by virtue of this subsection (a), whether made
under the power of sale herein granted or under or by virtue
of judicial proceedings or of a judgment or decree of
foreclosure and sale or under or by virtue of SECTIONS 55-59
and 55-59.1 through 55-59.4 of the Code of Virginia, shall
operate to divest all of the estate, right, title, interest,
claim and demand whatsoever, whether at law or in equity, of
Grantor in and to the properties and rights so sold, and
shall be a perpetual bar, both at law and in equity against
Grantor and any and all persons claiming or who may claim
the same, or any part thereof, from, through or under
Grantor.
(iv) Grantor hereby expressly waives any right which
it may have to direct the order in which any of the Trust
Property shall be sold in the event of any sale or sales
pursuant hereto.
(v) The purchase money proceeds or avails of any sale
made pursuant to SECTIONS 55-59 and 55-59.1 through SECTION
55-59.4 of the Code of Virginia and under or by virtue of this
subsection (a), together with all other sums which then may
be held by Trustee or Beneficiary under this Deed of Trust,
whether under the provisions of this subsection (a), or
otherwise, shall be distributed pursuant to applicable law
as set forth in SECTION 55-59.4 of the Code of Virginia.
(vi) Beneficiary may personally, or by its agents,
attorneys and employees and without regard to the adequacy
or inadequacy of the Trust Property or any other collateral
as security for the Indebtedness and Obligations enter into
and upon the Trust Property and each and every part thereof
and exclude Grantor and its agents and employees therefrom
without liability for trespass, damage or otherwise (Grantor
hereby agreeing to surrender possession of the Trust
Property to Beneficiary upon demand at any such time) and
use, operate, manage, maintain and control the Trust
Property and every part thereof. Following such entry and
taking of possession, Beneficiary shall be entitled, without
limitation, (x) to lease all or any part or parts of the
Trust Property for such periods of time and upon such
conditions as Beneficiary may, in its discretion, deem
proper, (y) to enforce, cancel or modify any Lease and (z)
generally to execute, do and perform any other act, deed,
matter or thing concerning the Trust Property as Beneficiary
shall deem appropriate as fully as Grantor might do.
(b) Beneficiary, in any action to foreclose this Deed
of Trust in a judicial procedure or in connection with the
exercise of any non-judicial power of sale by Trustee, shall be
entitled to the appointment of a receiver. In case of a
trustee's sale or foreclosure sale, the Real Estate may be sold,
at Beneficiary's election, in one parcel or in more than one
parcel and Beneficiary is specifically empowered (without being
required to do so, and in its sole and absolute discretion) to
cause successive sales of portions of the Trust Property to be
held.
(c) In the event of any breach of any of the
covenants, agreements, terms or conditions contained in this Deed
of Trust which is not cured after the giving of any applicable
notice and the expiration of any applicable cure period,
Beneficiary or Trustee shall be entitled to enjoin such breach
and obtain specific performance of any covenant, agreement, term
or condition and Beneficiary and Trustee shall have the right to
invoke any equitable right or remedy as though other remedies
were not provided for in this Deed of Trust.
17. Right of Beneficiary to Credit Sale. Upon the
occurrence of any sale made under this Deed of Trust, whether
made under the power of sale or by virtue of judicial proceedings
or of a judgment or decree of foreclosure and sale or under or by
virtue of SECTIONS 55-59 and 55-59.1 through 55-59.4 of the Code of
Virginia, Beneficiary may bid for and acquire the Trust Property
or any part thereof. In lieu of paying cash therefor,
Beneficiary may make settlement for the purchase price by
crediting upon the Indebtedness or other sums secured by this
Deed of Trust the net sales price after deducting therefrom the
expenses of sale and the cost of the action and any other sums
which Beneficiary is authorized to deduct under this Deed of
Trust. In such event, this Deed of Trust, the Credit Agreement,
the Notes, the other Loan Documents and any documents evidencing
expenditures secured hereby may be presented to the person or
persons conducting the sale in order that the amount so used or
applied may be credited upon the Indebtedness as having been
paid.
18. Appointment of Receiver. If an Event of Default
shall have occurred and be continuing, Beneficiary as a matter of
right and without notice to Grantor, unless otherwise required by
applicable law, and without regard to the adequacy or inadequacy
of the Trust Property or any other collateral as security for the
Indebtedness and Obligations or the interest of Grantor therein,
shall have the right to apply to any court having jurisdiction to
appoint a receiver or receivers or other manager of the Trust
Property, and Grantor hereby irrevocably consents to such
appointment and waives notice of any application therefor (except
as may be required by law). Any such receiver or receivers shall
have all the usual powers and duties of receivers in like or
similar cases and all the powers and duties of Beneficiary in
case of entry as provided in this Deed of Trust, including,
without limitation and to the extent permitted by law, the right
to enter into leases of all or any part of the Trust Property,
and shall continue as such and exercise all such powers until the
date of confirmation of sale of the Trust Property unless such
receivership is sooner terminated.
19. Extension, Release, etc. (a) Without affecting
the lien or charge of this Deed of Trust upon any portion of the
Trust Property not then or theretofore released as security for
the full amount of the Indebtedness, Beneficiary may, from time
to time and without notice, agree to (i) release any person
liable for the Indebtedness, (ii) extend the maturity or alter
any of the terms of the Indebtedness or any guaranty thereof,
(iii) grant other indulgences, (iv) release or reconvey, or cause
to be released or reconveyed at any time at Beneficiary's option
any parcel, portion or all of the Trust Property, (v) take or
release any other or additional security for any obligation
herein mentioned, or (vi) make compositions or other arrangements
with debtors in relation thereto. If at any time this Deed of
Trust shall secure less than all of the principal amount of the
Indebtedness, it is expressly agreed that any repayments of the
principal amount of the Indebtedness shall not reduce the amount
of the lien created by this Deed of Trust until the lien amount
shall equal the principal amount of the Indebtedness outstanding.
(b) No recovery of any judgment by Beneficiary and no
levy of an execution under any judgment upon the Trust Property
or upon any other property of Grantor shall affect the lien
created by this Deed of Trust or any liens, rights, powers or
remedies of Beneficiary or Trustee hereunder, and such liens,
rights, powers and remedies shall continue unimpaired.
(c) If Beneficiary shall have the right to foreclose
this Deed of Trust or to direct the Trustee to exercise its power
of sale, Grantor authorizes Beneficiary at its option to
foreclose the lien of this Deed of Trust (or direct the Trustee
to sell the Trust Property, as the case may be) subject to the
rights of any tenants of the Trust Property. The failure to make
any such tenants parties defendant to any such foreclosure
proceeding and to foreclose their rights, or to provide notice to
such tenants as required in any statutory procedure governing a
sale of the Trust Property by Trustee, or to terminate such
tenant's rights in such sale will not be asserted by Grantor as a
defense to any proceeding instituted by Beneficiary to collect
the Indebtedness or to foreclose the lien created by this Deed of
Trust.
(d) Unless expressly provided otherwise, in the event
that Beneficiary's interest in this Deed of Trust and title to
the Trust Property or any estate therein shall become vested in
the same person or entity, this Deed of Trust shall not merge in
such title but shall continue as a valid lien on the Trust
Property for the amount secured hereby.
20. Security Agreement under Uniform Commercial Code.
(a) It is the intention of the parties hereto that this Deed of
Trust shall constitute a Security Agreement within the meaning of
the Uniform Commercial Code of the Commonwealth of Virginia (the
"CODE"). If an Event of Default shall occur and be continuing
under this Deed of Trust, then in addition to having any other
right or remedy available at law or in equity, Beneficiary shall
have the option of either (i) proceeding under the Code and
exercising such rights and remedies as may be provided to a
secured party by the Code with respect to all or any portion of
the Trust Property which is personal property (including, without
limitation, taking possession of and selling such property) or
(ii) treating such property as real property and proceeding with
respect to both the real and personal property constituting the
Trust Property in accordance with Beneficiary's rights, powers
and remedies with respect to the real property (in which event
the default provisions of the Code shall not apply). If
Beneficiary shall elect to proceed under the Code, then ten days'
notice of sale of the personal property shall be deemed
reasonable notice and the reasonable expenses of retaking,
holding, preparing for sale, selling and the like incurred by
Beneficiary shall include, but not be limited to, reasonable
attorneys' fees and legal expenses. At Beneficiary's request,
Grantor shall assemble the personal property and make it
available to Beneficiary at a place designated by Beneficiary
which is reasonably convenient to both parties.
(b) Grantor and Beneficiary agree, to the extent
permitted by law, that: (i) all of the goods described within the
definition of the word "Equipment" and all Timber to be cut are
or are to become fixtures on the Real Estate; (ii) this Deed of
Trust upon recording or registration in the real estate records
of the proper office shall constitute a financing statement filed
as a "fixture filing" within the meaning of Sections 8.9-313 and
8.9-402 of the Code; (iii) Grantor is the record owner of the
Real Estate; and (iv) the addresses of Grantor and Beneficiary
are as set forth on the first page of this Deed of Trust. This
Deed of Trust covers Timber to be cut and Harvested Timber, as
well as accounts resulting from the sale thereof, and this Deed
of Trust upon being recorded in the real estate records shall
operate also as a financing statement upon such of the Trust
Property as constitute or may constitute Timber to be cut and
Harvested Timber, as well as accounts resulting from the sale
thereof, in accordance with Sections 8.9-402 and 8.9-403 of the
Code. Grantor has an interest of record in the land upon which
the Timber is being grown and was grown, which land is more
particularly described in Schedule A to this Deed of Trust.
(c) Grantor, upon request by Beneficiary from time to
time, shall execute, acknowledge and deliver to Beneficiary one
or more separate security agreements, in form reasonably
satisfactory to Beneficiary, covering all or any part of the
Trust Property and will further execute, acknowledge and deliver,
or cause to be executed, acknowledged and delivered, any
financing statement, affidavit, continuation statement or
certificate or other document as Beneficiary may request in order
to perfect, preserve, maintain, continue or extend the security
interest under and the priority of this Deed of Trust and such
security instrument. Grantor further agrees to pay to
Beneficiary on demand all costs and expenses incurred by
Beneficiary in connection with the preparation, execution,
recording, filing and re-filing of any such document and all
reasonable costs and expenses of any record searches for
financing statements Beneficiary shall reasonably require.
Grantor shall from time to time, on request of Beneficiary,
deliver to Beneficiary an inventory in reasonable detail of any
of the Trust Property which constitutes personal property. If
Grantor shall fail to furnish any financing or continuation
statement within 10 days after request by Beneficiary, then
pursuant to the provisions of the Code, Grantor hereby authorizes
Beneficiary, without the signature of Grantor, to execute and
file any such financing and continuation statements. The filing
of any financing or continuation statements in the records
relating to personal property or chattels shall not be construed
as in any way impairing the right of Beneficiary to proceed
against any personal property encumbered by this Deed of Trust as
real property, as set forth above.
21. Assignment of Rents. Grantor hereby assigns to
Trustee, for the benefit of Beneficiary, the Rents as further
security for the payment of the Indebtedness and performance of
the Obligations, and Grantor grants to Trustee and Beneficiary
the right to enter the Trust Property for the purpose of
collecting the same and to let the Trust Property or any part
thereof, and to apply the Rents on account of the Indebtedness.
The foregoing assignment and grant is present and absolute and
shall continue in effect until the Indebtedness is paid in full,
but Beneficiary and Trustee hereby waive the right to enter the
Trust Property for the purpose of collecting the Rents and
Grantor shall be entitled to collect, receive, use and retain the
Rents until the occurrence and continuance of an Event of Default
under this Deed of Trust; such right of Grantor to collect,
receive, use and retain the Rents may be revoked by Beneficiary
upon the occurrence and continuance of any Event of Default under
this Deed of Trust by giving not less than five days' written
notice of such revocation to Grantor; in the event such notice is
given, Grantor shall pay over to Beneficiary, or to any receiver
appointed to collect the Rents, any lease security deposits.
Grantor shall not accept prepayments of installments of Rent to
become due for a period of more than one month in advance (except
for security deposits and estimated payments of percentage rent,
if any).
22. Trust Funds. All lease security deposits of the
Real Estate shall be treated as trust funds not to be commingled
with any other funds of Grantor. Within 10 days after request by
Beneficiary, Grantor shall furnish Beneficiary satisfactory
evidence of compliance with this subsection, together with a
statement of all lease security deposits by lessees and copies of
all Leases not previously delivered to Beneficiary, which
statement shall be certified by Grantor.
23. Additional Rights. The holder of any subordinate
lien or subordinate deed of trust on the Trust Property shall
have no right to terminate any Lease whether or not such Lease is
subordinate to this Deed of Trust nor shall any holder of any
subordinate lien or subordinate deed of trust join any tenant
under any Lease in any trustee's sale or action to foreclose the
lien or modify, interfere with, disturb or terminate the rights
of any tenant under any Lease. By recordation of this Deed of
Trust all subordinate lienholders and the trustees and
beneficiaries under subordinate deeds of trust are subject to and
notified of this provision, and any action taken by any such
lienholder or trustee or beneficiary contrary to this provision
shall be null and void. Upon the occurrence and continuance of
any Event of Default, Beneficiary may, in its sole discretion and
without regard to the adequacy of its security under this Deed of
Trust, apply all or any part of any amounts on deposit with
Beneficiary under this Deed of Trust against all or any part of
the Indebtedness. Any such application shall not be construed to
cure or waive any default or Event of Default or invalidate any
act taken by Beneficiary on account of such default or Event of
Default.
24. All notices, requests, demands and other
communications hereunder shall be given in accordance with the
provisions of the Credit Agreement regarding the giving of
notices, addressed if to Grantor, Beneficiary or Trustee, as the
case may be, at their respective addresses given on the first
page of this Deed of Trust.
25. No Oral Modification. This Deed of Trust may not
be amended, supplemented or otherwise modified except in
accordance with the provisions of subsection 9.1 of the Credit
Agreement. Any agreement made by Grantor and Beneficiary after
the date of this Deed of Trust relating to this Deed of Trust
shall be superior to the rights of the holder of any intervening
or subordinate deed of trust, lien or encumbrance. Trustee's
execution of any written agreement between Grantor and
Beneficiary shall not be required for the effectiveness thereof
as between Grantor and Beneficiary.
26. Partial Invalidity. In the event any one or more
of the provisions contained in this Deed of Trust shall for any
reason be held to be invalid, illegal or unenforceable in any
respect, such invalidity, illegality or unenforceability shall
not affect any other provision hereof, but each shall be
construed as if such invalid, illegal or unenforceable provision
had never been included. Notwithstanding to the contrary
anything contained in this Deed of Trust or in any provisions of
the Indebtedness or Loan Documents, the obligations of Grantor
and of any other obligor under the Indebtedness or Loan Documents
shall be subject to the limitation that Beneficiary shall not
charge, take or receive, nor shall Grantor or any other obligor
be obligated to pay to Beneficiary, any amounts constituting
interest in excess of the maximum rate permitted by law to be
charged by Beneficiary.
27. Grantor's Waiver of Rights. To the fullest extent
permitted by law, Grantor waives the benefit of all laws now
existing or that may subsequently be enacted providing for (i)
any appraisement before sale of any portion of the Trust
Property, (ii) any extension of the time for the enforcement of
the collection of the Indebtedness or the creation or extension
of a period of redemption from any sale made in collecting such
debt and (iii) exemption of the Trust Property from attachment,
levy or sale under execution or exemption from civil process. To
the full extent Grantor may do so, Grantor agrees that Grantor
will not at any time insist upon, plead, claim or take the
benefit or advantage of any law now or hereafter in force
providing for any appraisement, valuation, stay, exemption,
extension or redemption, or requiring foreclosure of this Deed of
Trust before exercising any other remedy granted hereunder and
Grantor, for Grantor and its successors and assigns, and for any
and all persons ever claiming any interest in the Trust Property,
to the extent permitted by law, hereby waives and releases all
rights of redemption, valuation, appraisement, stay of execution,
notice of election to mature or declare due the whole of the
secured indebtedness and marshalling in the event of exercise by
Trustee or Beneficiary of the power of sale or other rights
hereby created.
28. Remedies Not Exclusive. Beneficiary and Trustee
shall be entitled to enforce payment of the Indebtedness and
performance of the Obligations and to exercise all rights and
powers under this Deed of Trust or under any of the other Loan
Documents or other agreement or any laws now or hereafter in
force, notwithstanding some or all of the Indebtedness and
Obligations may now or hereafter be otherwise secured, whether by
deed of trust, mortgage, security agreement, pledge, lien,
assignment or otherwise. Neither the acceptance of this Deed of
Trust nor its enforcement, shall prejudice or in any manner
affect Beneficiary's or Trustee's right to realize upon or
enforce any other security now or hereafter held by Beneficiary
or Trustee, it being agreed that Beneficiary and Trustee shall be
entitled to enforce this Deed of Trust and any other security now
or hereafter held by Beneficiary or Trustee in such order and
manner as Beneficiary may determine in its absolute discretion.
No remedy herein conferred upon or reserved to Trustee or
Beneficiary is intended to be exclusive of any other remedy
herein or by law provided or permitted, but each shall be
cumulative and shall be in addition to every other remedy given
hereunder or now or hereafter existing at law or in equity or by
statute. Every power or remedy given by any of the Loan
Documents to Beneficiary or Trustee or to which either may
otherwise be entitled, may be exercised, concurrently or
independently, from time to time and as often as may be deemed
expedient by Beneficiary or Trustee, as the case may be. In no
event shall Beneficiary or Trustee, in the exercise of the
remedies provided in this Deed of Trust (including, without
limitation, in connection with the assignment of Rents, or the
appointment of a receiver and the entry of such receiver on to
all or any part of the Trust Property), be deemed a "mortgagee in
possession," and neither Beneficiary nor Trustee shall in any way
be made liable for any act, either of commission or omission, in
connection with the exercise of such remedies.
29. Multiple Security. If (a) the Premises shall
consist of one or more parcels, whether or not contiguous and
whether or not located in the same county, or (b) in addition to
this Deed of Trust, Beneficiary shall now or hereafter hold or be
the beneficiary of one or more additional mortgages, liens, deeds
of trust or other security (directly or indirectly) for the
Indebtedness upon other property in the State in which the
Premises are located (whether or not such property is owned by
Grantor or by others) or (c) both the circumstances described in
clauses (a) and (b) shall be true, then to the fullest extent
permitted by law, Beneficiary may, at its election, commence or
consolidate in a single trustee's sale or foreclosure action all
trustee's sale or foreclosure proceedings against all such
collateral securing the Indebtedness (including the Trust
Property), which action may be brought or consolidated in the
courts of, or sale conducted in, any city or county in which any
of such collateral is located. Grantor acknowledges that the
right to maintain a consolidated trustee's sale or foreclosure
action is a specific inducement to Beneficiary to extend the
Indebtedness, and Grantor expressly and irrevocably waives any
objections to the commencement or consolidation of the
foreclosure proceedings in a single action and any objections to
the laying of venue or based on the grounds of forum non
conveniens which it may now or hereafter have. Grantor further
agrees that if Trustee or Beneficiary shall be prosecuting one or
more foreclosure or other proceedings against a portion of the
Trust Property or against any collateral other than the Trust
Property, which collateral directly or indirectly secures the
Indebtedness, or if Beneficiary shall have obtained a judgment of
foreclosure and sale or similar judgment against such collateral
(or, in the case of a trustee's sale, shall have met the
statutory requirements therefor with respect to such collateral),
then, whether or not such proceedings are being maintained or
judgments were obtained in or outside the State in which the
Premises are located, Beneficiary may commence or continue any
trustee's sale or foreclosure proceedings and exercise its other
remedies granted in this Deed of Trust against all or any part of
the Trust Property and Grantor waives any objections to the
commencement or continuation of a foreclosure of this Deed of
Trust or exercise of any other remedies hereunder based on such
other proceedings or judgments, and waives any right to seek to
dismiss, stay, remove, transfer or consolidate either any action
under this Deed of Trust or such other proceedings on such basis.
The commencement or continuation of proceedings to sell the Trust
Property in a trustee's sale, to foreclose this Deed of Trust or
the exercise of any other rights hereunder or the recovery of any
judgment by Beneficiary or the occurrence of any sale by the
Trustee in any such proceedings shall not prejudice, limit or
preclude Beneficiary's right to commence or continue one or more
trustee's sales, foreclosure or other proceedings or obtain a
judgment against (or, in the case of a trustee's sale, to meet
the statutory requirements for, any such sale of) any other
collateral (either in or outside the State in which the Real
Estate is located) which directly or indirectly secures the
Indebtedness, and Grantor expressly waives any objections to the
commencement of, continuation of, or entry of a judgment in such
other sales or proceedings or exercise of any remedies in such
sales or proceedings based upon any action or judgment connected
to this Deed of Trust, and Grantor also waives any right to seek
to dismiss, stay, remove, transfer or consolidate either such
other sales or proceedings or any sale or action under this Deed
of Trust on such basis. It is expressly understood and agreed
that to the fullest extent permitted by law, Beneficiary may, at
its election, cause the sale of all collateral which is the
subject of a single trustee's sale or foreclosure action at
either a single sale or at multiple sales conducted
simultaneously and take such other measures as are appropriate in
order to effect the agreement of the parties to dispose of and
administer all collateral securing the Indebtedness (directly or
indirectly) in the most economical and least time-consuming
manner.
30. Successors and Assigns. All covenants of Grantor
contained in this Deed of Trust are imposed solely and
exclusively for the benefit of Beneficiary and Trustee and their
respective successors and assigns, and no other person or entity
shall have standing to require compliance with such covenants or
be deemed, under any circumstances, to be a beneficiary of such
covenants, any or all of which may be freely waived in whole or
in part by Beneficiary or Trustee at any time if in the sole
discretion of either of them such waiver is deemed advisable.
All such covenants of Grantor shall run with the land and bind
Grantor, the successors and assigns of Grantor (and each of them)
and all subsequent owners, encumbrancers and tenants of the Trust
Property, and shall inure to the benefit of Beneficiary, Trustee
and their respective successors and assigns. Without limiting
the generality of the foregoing, any successor to Trustee
appointed by Beneficiary shall succeed to all rights of Trustee
as if such successor had been originally named as Trustee
hereunder. The word "Grantor" shall be construed as if it read
"Grantors" whenever the sense of this Deed of Trust so requires
and if there shall be more than one Grantor, the obligations of
the Grantors shall be joint and several.
31. No Waivers, etc. Any failure by Beneficiary to
insist upon the strict performance by Grantor of any of the terms
and provisions of this Deed of Trust shall not be deemed to be a
waiver of any of the terms and provisions hereof, and Beneficiary
or Trustee, notwithstanding any such failure, shall have the
right thereafter to insist upon the strict performance by Grantor
of any and all of the terms and provisions of this Deed of Trust
to be performed by Grantor. Beneficiary may release, regardless
of consideration and without the necessity for any notice to or
consent by the beneficiary of any subordinate deed of trust or
the holder of any subordinate lien on the Trust Property, any
part of the security held for the obligations secured by this
Deed of Trust without, as to the remainder of the security, in
any way impairing or affecting this Deed of Trust or the priority
of this Deed of Trust over any subordinate lien or deed of trust.
32. Governing Law, etc. This Deed of Trust shall be
governed by and construed in accordance with the laws of the
Commonwealth of Virginia, except that Grantor expressly
acknowledges that by its terms the Note shall be governed and
construed in accordance with the laws of the State of New York,
without regard to principles of conflict of law, and for purposes
of consistency, Grantor agrees that in any in personam proceeding
related to the Deed of Trust the rights of the parties to this
Deed of Trust shall also be governed by and construed in
accordance with the laws of the State of New York governing
contracts made and to be performed in that State, without regard
to principles of conflict of law.
33. Waiver of Trial by Jury. GRANTOR, TRUSTEE AND
BENEFICIARY EACH HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE
TRIAL BY JURY IN ANY ACTION, CLAIM, SUIT OR PROCEEDING RELATING
TO THIS DEED OF TRUST AND FOR ANY COUNTERCLAIM BROUGHT HEREIN.
Grantor hereby waives all rights to interpose any counterclaim in
any suit brought by Beneficiary or Trustee hereunder and all
rights to have any such suit consolidated with any separate suit,
action or proceeding.
34. Incorporation by Reference. Grantor agrees that
in addition to all other remedies and rights provided for in this
Deed of Trust, this Deed of Trust shall be construed to impose
and confer upon the parties hereto, and the Beneficiary
hereunder, all duties, rights and obligations prescribed in
Section 55-59 and 55-59.1 through 55-59.4 of the Code of
Virginia, as amended and in effect as of the date of the
acknowledgement hereof, and further to incorporate herein the
following provisions, by the short-term references below, of
Sections 55-59 and 55-60 of the Code of Virginia:
(a) EXEMPTIONS WAIVED
(b) RENEWAL OR EXTENSIONS PERMITTED
(c) REINSTATEMENT PERMITTED
(d) SUBJECT TO ALL UPON DEFAULT
35. Certain Definitions. Unless the context clearly
indicates a contrary intent or unless otherwise specifically
provided herein, words used in this Deed of Trust shall be used
interchangeably in singular or plural form and the word "Grantor"
shall mean "each Grantor or any subsequent owner or owners of the
Trust Property or any part thereof or interest therein," the word
"Beneficiary" shall mean "Beneficiary or any successor agent for
the Lenders," the word "Trustee" shall mean "Trustee and any
successor trustee hereunder," the word "Notes" shall mean "the
Notes, the Credit Agreement or any other evidence of indebtedness
secured by this Deed of Trust," the word "person" shall include
any individual, corporation, partnership, trust, unincorporated
association, government, governmental authority, or other entity,
and the words "Trust Property" shall include any portion of the
Trust Property or interest therein. Whenever the context may
require, any pronouns used herein shall include the corresponding
masculine, feminine or neuter forms, and the singular form of
nouns and pronouns shall include the plural and vice versa. The
captions in this Deed of Trust are for convenience or reference
only and in no way limit or amplify the provisions hereof.
36. Reconveyance by Trustee. Upon written request of
Beneficiary stating that all sums secured hereby have been paid,
and upon payment by Grantor of a Trustee's fees, Trustee shall
reconvey to Grantor, or the person or persons legally entitled
thereto, without warranty, any portion of the Trust Property then
held hereunder. The recitals in such reconveyance of any matters
or facts shall be conclusive proof of the truthfulness thereof.
The grantee in any reconveyance may be described as "the person
or persons legally entitled thereto."
37. To the extent that (i) this Deed of Trust creates
a lien on, or contains covenants with respect to, Equipment
(other than fixtures), or Leases, Rents or Contracts in respect
of such Equipment, and (ii) the Security and Pledge Agreement
creates a security interest, which is perfected, in such
Equipment, Leases, Rents or Contracts, the provisions of the
Security and Pledge Agreement will control with respect to such
Equipment, Leases, Rents or Contracts.
This Deed of Trust has been duly executed by Grantor on
December 1, 1997 and is intended to be effective as of December
1, 1997.
BEAR ISLAND PAPER COMPANY, L.L.C.
By: /s/ Edward D. Sherrick
Title: Vice President of
Finance
STATE OF CONNECTICUT )
: ss.:
COUNTY OF FAIRFIELD )
The foregoing instrument was acknowledged before me
this 1st day of December, 1997, by ,
[the][a] of BEAR ISLAND PAPER COMPANY, L.L.C.,
a Virginia limited liability company.
Notary Public
[Notarial Stamp]
My Commission expires:
Schedule A
Description of the Premises
[Attach Legal Description of all parcels]
[Virginia]
DEED OF TRUST
from
BEAR ISLAND PAPER COMPANY, L.L.C., Grantor,
successor by merger to
BEAR ISLAND MERGERCO, L.L.C.,
successor by conversion to
BEAR ISLAND PAPER COMPANY, L.P.
to
SOUTHERN TITLE SERVICES CORPORATION, Trustee
for the use and
benefit of
TORONTO-DOMINION (TEXAS), INC.,
As Administrative Agent, Beneficiary
DATED AS OF DECEMBER 1, 1997
This document was prepared by, and
after recording, please return to:
Simpson Thacher & Bartlett
a partnership which includes
professional corporations
425 Lexington Avenue
New York, New York 10017
ATTN: Amy Jedlicka, Esq.
EXHIBIT F
EXECUTION COPY
INTERCREDITOR AGREEMENT
INTERCREDITOR AGREEMENT, dated as of December 1, 1997,
among CRESTAR BANK (the "Trustee"), under the Indenture dated
December 1, 1997 made by Bear Island Paper Company, LLC ("BIPCO")
and Bear Island Finance Company ("FinCo") in favor of the Trustee
(the "Indenture"); TORONTO-DOMINION (TEXAS), INC., as
Administrative Agent under the BIPCO Credit Agreement
(capitalized terms having the definitions set forth in Section 1
below; in such capacity, the "BIPCO Agent"); TORONTO-DOMINION
(TEXAS), INC., in its capacity as Administrative Agent under the
BAI Credit Agreement (in such capacity, the "BAI Agent"); and
BEAR ISLAND PAPER COMPANY, LLC ("BIPCO") and BRANT-ALLEN
INDUSTRIES, INC. ("BAI"; together with BIPCO, the "Borrowers").
W I T N E S S E T H :
WHEREAS, BIPCO, a wholly owned subsidiary of BAI,
intends to make secured borrowings under the BIPCO Credit
Agreement;
WHEREAS, BAI intends to make secured borrowings under
the BAI Credit Agreement;
WHEREAS, BIPCO and its wholly owned subsidiary FinCo
intend to issue secured notes under the Indenture;
WHEREAS, BAI and its affiliates have pledged certain
collateral ("Collateral") to secure their obligations under more
than one of the foregoing agreements;
WHEREAS, the parties hereto desire to set forth their
relative rights in respect of such shared collateral and the
security interests granted therein;
NOW, THEREFORE, in consideration of the premises, the
parties hereto hereby agree as follows:
1. Definitions. (a) Unless otherwise defined herein,
terms defined in the Credit Agreements and the Loan Documents
have the meanings given to them in such documents.
(b) The following terms shall have the following meanings:
"Agreement": this Intercreditor Agreement, as the same
may be amended, supplemented or otherwise modified from time
to time.
"BAI Credit Agreement": the Credit Agreement, dated as
of the date hereof, among the BAI Agent, the BAI Lenders and
BAI, as amended, supplemented or otherwise modified from
time to time; for the purposes hereof, "BAI Credit
Agreement" shall also be deemed to refer to any credit
agreement or similar document entered into by BAI and any
lenders to replace the BAI Credit Agreement in whole or in
part.
"BAI Lenders": the lenders parties from time to time
to the BAI Credit Agreement in their capacity as lenders
thereunder, and their respective successors and assigns.
"BAI Lender Priority Collateral": any and all Lender
Priority Collateral pledged to secure the BAI Obligations.
"BAI Loan Documents": the collective reference to the
BAI Credit Agreement, each "Loan Document" as defined
therein and all other documents that from time to time
evidence the BAI Obligations or secure or support payment or
performance thereof or of any guarantee thereof.
"BAI Loan Parties": BAI and each other Loan Party
under (and as defined in) the BAI Loan Documents, and each
successor and assign of the foregoing.
"BAI Obligations": the Lender Obligations in respect
of the BAI Loan Documents.
"BIPCO Credit Agreement": the Credit Agreement, dated
as of the date hereof, among the BIPCO Agent, the BIPCO
Lenders and BIPCO, as amended, supplemented or otherwise
modified from time to time; for the purposes hereof, "BIPCO
Credit Agreement" shall also be deemed to refer to any
credit agreement or similar document entered into by BIPCO
and any lenders to replace the BIPCO Credit Agreement in
whole or in part.
"BIPCO Lenders": the lenders parties from time to time
to the BIPCO Credit Agreement in their capacity as lenders
thereunder, and their respective successors and assigns.
"BIPCO Lender Priority Collateral": any and all Lender
Priority Collateral pledged to secure the BIPCO Obligations.
"BIPCO Loan Documents": the collective reference to
the BIPCO Credit Agreement, each "Loan Document" as defined
therein and all other documents that from time to time
evidence the BIPCO Obligations or secure or support payment
or performance thereof or of any guarantee thereof.
"BIPCO Loan Parties": BIPCO and each other Loan Party
under (and as defined in) the BIPCO Loan Documents, and each
successor and assign of the foregoing.
"BIPCO Obligations": the Lender Obligations in respect
of the BIPCO Loan Documents.
"BITCO": Bear Island Timberlands Company, LLC, a
Virginia limited liability company.
"BITCO Collateral": the membership interests of BITCO
identified on Schedule 1 of the Timberlands Pledge
Agreement.
"Credit Agreements": the BAI Credit Agreement and the
BIPCO Credit Agreement.
"Lender Obligations": the collective reference to the
unpaid principal of and interest owing under the Credit
Agreements and all other obligations and liabilities of the
Borrowers thereunder, including, without limitation,
interest accruing at the applicable rate provided in the
Credit Agreements after the filing of any petition in
bankruptcy or the commencement of any insolvency,
reorganization or like proceeding, relating to the Borrower
or any other party specified therein, whether or not a claim
for post-filing or post-petition interest is allowed in such
proceeding), whether direct or indirect, absolute or
contingent, due or to become due, or now existing or
hereafter incurred, which may arise under, out of, or in
connection with, the Credit Agreements (including, without
limitation, any obligations under any Interest Rate
Protection Agreement referred to in a Credit Agreement),
this Agreement, the BAI Loan Documents, the BIPCO Loan
Documents or any other document made, delivered or given in
connection therewith, in each case whether on account of
principal, interest, reimbursement obligations, fees,
indemnities, costs, expenses or otherwise, including,
without limitation, all fees and disbursements of counsel
that are required to be paid by the Borrowers pursuant to
the terms of the Credit Agreements, this Agreement or, the
BAI Loan Documents or the BIPCO Loan Documents.
"Lender Priority Collateral": the collective reference
to any and all property from time to time subject to a
security interest to secure payment or performance of the
Lender Obligations or the Trustee Obligations.
"Loan Documents": the BAI Loan Documents and the BIPCO
Loan Documents.
"Loan Parties": the BAI Loan Parties and the BIPCO
Loan Parties.
"Senior Secured Lender": each of the BAI Agent, the
BIPCO Agent, each BAI Lender and each BIPCO Lender.
"Soucy Collateral": the "Pledged Stock" as defined in
the Soucy Pledge Agreement.
"Soucy Pledge Agreement": the Soucy Pledge Agreement
dated as of the date hereof, made by BAI in favor of the
BIPCO Agent and the BAI Agent and, for the purposes of this
Agreement, the notarial deed of hypothec granted on the
Collateral (as defined in the Soucy Pledge Agreement)
pursuant to the laws of the province of Quebec (Canada).
"Subordinated Security Documents": the collective
reference to any and all documents providing for collateral
security, guarantees or negative pledges in connection with
the notes issued under the Indenture as the same may be
amended, supplemented or otherwise modified from time to
time in accordance with Section 6.9 of the BIPCO Credit
Agreement.
"Timberlands Pledge Agreement": the meaning ascribed
in the BAI Credit Agreement.
"Trustee Documents": the collective reference to the
Indenture, the notes issued thereunder and the Subordinated
Security Documents.
"Trustee Obligations": the collective reference to the
unpaid principal of and interest owing under the Indenture
and the notes issued thereunder and all other obligations
and liabilities of BIPCO and FinCo thereunder (including,
without limitation, interest accruing at the then applicable
rate provided in the Indenture and the notes issued
thereunder after the maturity of the principal obligations
owing thereunder and interest accruing at the then
applicable rate provided in the Indenture and the notes
issued thereunder after the filing of any petition in
bankruptcy, or the commencement of any insolvency,
reorganization or like proceeding, relating to BIPCO or
FinCo, whether or not a claim for post-filing or post-
petition interest is allowed in such proceeding), whether
direct or indirect, absolute or contingent, due or to become
due, or now existing or hereafter incurred, which may arise
under, out of, or in connection with, the Indenture, the
notes issued thereunder, this Agreement, or any other
Subordinated Security Document, in each case whether on
account of principal, interest, reimbursement obligations,
fees, indemnities, costs, expenses or otherwise (including,
without limitation, all fees and disbursements of counsel to
the Trustee that are required to be paid by the Borrower or
FinCo pursuant to the terms of the Indenture or this
Agreement or any other Subordinated Security Document).
(c) The words "hereof," "herein" and "hereunder" and words
of similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this
Agreement, and section and paragraph references are to this
Agreement unless otherwise specified.
(d) The meanings given to terms defined herein shall be
equally applicable to both the singular and plural forms of such
terms.
2. Acknowledgements The Trustee (a) acknowledges that the
Borrowers and the other Loan Parties have granted senior priority
security interests in the Lender Priority Collateral to secure
the Lender Obligations and that such security interests are prior
in all respects to the junior security interests in the Lender
Priority Collateral granted to the Trustee, (b) agrees that the
Trustee shall not have any claim to or in respect of the BAI
Lender Priority Collateral, or any proceeds of or realization on
such BAI Lender Priority Collateral, on a parity with or prior to
the claim of the BAI Obligations, nor any claim to or in respect
of the BIPCO Lender Priority Collateral, or any proceeds of or
realization on such BIPCO Lender Priority Collateral, on a parity
with or prior to the claim of the BIPCO Obligations, and (c)
agrees that, notwithstanding such junior security interests and
any rights of the Trustee in respect thereof, (i) so long as the
BAI Obligations have not been paid in full or the commitments
under the BAI Credit Agreement have not been terminated, the
Trustee shall not have any right or claim in respect of the
exercise of rights and remedies of the Senior Secured Lenders in
respect of the BAI Lender Priority Collateral nor shall any
Senior Secured Lender have any obligation regarding any such
exercise or any other obligation or duty in respect of the
interests of the Trustee except as set forth in paragraph 3(d)
hereof, and that the Trustee shall not assert any such claim or
right in any such bankruptcy proceeding or otherwise, and (ii) so
long as the BIPCO Obligations have not been paid in full or the
commitments under the BIPCO Credit Agreement have not been
terminated, the Trustee shall not have any right or claim in
respect of the exercise of rights and remedies of the Senior
Secured Lenders in respect of the BIPCO Lender Priority
Collateral nor shall any Senior Secured Lender have any
obligation regarding any such exercise or any other obligation or
duty in respect of the interests of the Trustee except as set
forth in paragraph 3(d) hereof, and that the Trustee shall not
assert any such claim or right in any such bankruptcy proceeding
or otherwise.
3. Rights in Lender Priority Collateral (a) Notwithstanding
anything to the contrary contained in any filing or agreement to
which the Trustee, the Senior Secured Lenders or the Borrowers
now or hereafter may be a party and irrespective of the time,
order or method of attachment or perfection of the security
interests created by the Loan Documents or the Subordinated
Security Documents, the rules for determining priority under the
Uniform Commercial Code or any other law governing the relative
priorities of secured creditors, (i) any security interest in any
BAI Lender Priority Collateral in favor of or for the benefit of
the Senior Secured Lenders pursuant to the BAI Loan Documents has
and shall have priority, to the extent of any unpaid BAI Loan
Obligations, over any security interest in such BAI Lender
Priority Collateral in favor of or for the benefit of the Trustee
pursuant to the Subordinated Security Documents; and (ii) any
security interest in any BIPCO Lender Priority Collateral in
favor of or for the benefit of the Senior Secured Lenders
pursuant to the BIPCO Loan Documents has and shall have priority,
to the extent of any unpaid BIPCO Loan Obligations, over any
security interest in such BIPCO Lender Priority Collateral in
favor of or for the benefit of the Trustee pursuant to the
Subordinated Security Documents.
(b) (i) So long as the BAI Obligations have not been paid
in full or the commitments under the BAI Credit Agreement have
not been terminated, whether or not any bankruptcy proceeding or
similar event or proceeding has been commenced by or against BAI
or any other BAI Loan Party, (i) the Trustee will not (A)
exercise or seek to exercise any rights or exercise any remedies
with respect to any BAI Lender Priority Collateral, (B) institute
any action or proceeding with respect to such rights or remedies,
including without limitation, any action of foreclosure, (C)
contest, protest or object to any foreclosure proceeding or
action brought by the BAI Agent or any BAI Lender, or any other
exercise by any such party, of any rights and remedies relating
to the BAI Lender Priority Collateral under the Subordinated
Security Documents or otherwise, or any release of any or all of
the BAI Lender Priority Collateral for any purpose, or (D) object
to the forbearance by the BAI Lenders from bringing or pursuing
any foreclosure proceeding or action or any other exercise of any
rights or remedies relating to the BAI Lender Priority
Collateral, and (ii) the BAI Lenders shall have the exclusive
right to enforce rights, exercise remedies and make
determinations regarding release, disposition, or restrictions
with respect to the Lender Priority Collateral; provided, that in
any bankruptcy proceeding or similar event or proceeding
commenced by or against BAI or any other BAI Loan Party, the
Trustee may file a claim or statement of interest with respect to
the Trustee Obligations.
(ii) So long as the BIPCO Obligations have not been paid in full
or the commitments under the BIPCO Credit Agreement have not been
terminated, whether or not any bankruptcy proceeding or similar
event or proceeding has been commenced by or against BIPCO or any
other BIPCO Loan Party, (i) the Trustee will not (A) exercise or
seek to exercise any rights or exercise any remedies with respect
to any BIPCO Lender Priority Collateral, (B) institute any action
or proceeding with respect to such rights or remedies, including
without limitation, any action of foreclosure, (C) contest,
protest or object to any foreclosure proceeding or action brought
by the BIPCO Agent or any BIPCO Lender, or any other exercise by
any such party, of any rights and remedies relating to the BIPCO
Lender Priority Collateral under the Subordinated Security
Documents or otherwise, or any release of any or all of the BIPCO
Lender Priority Collateral for any purpose, or (D) object to the
forbearance by the BIPCO Lenders from bringing or pursuing any
foreclosure proceeding or action or any other exercise of any
rights or remedies relating to the BIPCO Lender Priority
Collateral, and (ii) the BIPCO Lenders shall have the exclusive
right to enforce rights, exercise remedies and make
determinations regarding release, disposition, or restrictions
with respect to the Lender Priority Collateral; provided, that in
any bankruptcy proceeding or similar event or proceeding
commenced by or against BIPCO or any other BIPCO Loan Party, the
Trustee may file a claim or statement of interest with respect to
the Trustee Obligations.
(c) (i) In exercising rights and remedies with respect to
the BAI Lender Priority Collateral, the BAI Lenders may enforce
the provisions of the BAI Loan Documents and exercise remedies
thereunder, all in such order and in such manner as they may
determine in the exercise of their sole discretion. Such
exercise and enforcement shall include, without limitation, the
rights of an agent appointed by them to sell or otherwise dispose
of BAI Lender Priority Collateral upon foreclosure, to incur
expenses in connection with such sale or disposition, and to
exercise all the rights and remedies of a secured lender under
the Uniform Commercial Code of any applicable jurisdiction and of
a secured creditor under bankruptcy or similar laws of any
applicable jurisdiction.
(ii) In exercising rights and remedies with respect to the BIPCO
Lender Priority Collateral, the BIPCO Lenders may enforce the
provisions of the BIPCO Loan Documents and exercise remedies
thereunder, all in such order and in such manner as they may
determine in the exercise of their sole discretion. Such
exercise and enforcement shall include, without limitation, the
rights of an agent appointed by them to sell or otherwise dispose
of BIPCO Lender Priority Collateral upon foreclosure, to incur
expenses in connection with such sale or disposition, and to
exercise all the rights and remedies of a secured lender under
the Uniform Commercial Code of any applicable jurisdiction and of
a secured creditor under bankruptcy or similar laws of any
applicable jurisdiction.
(d) (i) BIPCO Lender Priority Collateral. Subject to the
provisions of paragraph 6 hereof, any money, property, securities
or other direct or indirect distributions of any nature
whatsoever received from the sale, disposition or other
realization upon a forclosure or other exercise of remedies upon
the occurrence and continuance of an Event of Default (as defined
in the Credit Agreements or the Indenture) by any Senior Secured
Party or the Trustee of all or any part of the BIPCO Lender
Priority Collateral (other than the BITCO Collateral and the
Soucy Collateral which constitute a part of the BIPCO Lender
Priority Collateral), regardless of whether such money, property,
securities or other distributions are received directly or
indirectly during the pendency of or in connection with any
bankruptcy, insolvency or other like proceeding or otherwise,
shall be delivered to the BIPCO Agent in the form received, duly
indorsed to such party, if required, and applied by the BIPCO
Agent in the following order:
First, to the payment in full of all costs and expenses
(including, without limitation, attorneys' fees and
disbursements) paid or incurred by the Senior Secured
Lenders in connection with such realization on the BIPCO
Lender Priority Collateral or the protection of any of their
rights and interests therein;
Second, to the payment in full of all BIPCO Obligations
in the order prescribed by Section 2.16 of the BIPCO Credit
Agreement;
Third, to the Trustee for application to the Trustee
Obligations to the full extent thereof at such time; and
Fourth, to pay the appropriate Loan Party or designee
thereof or as a court of competent jurisdiction may direct,
any surplus then remaining.
(ii) BITCO Collateral. Subject to the provisions of paragraph 6
hereof, any money, property, securities or other direct or
indirect distributions of any nature whatsoever received from the
sale, disposition or other realization upon a forclosure or other
exercise of remedies upon the occurrence and continuance of an
Event of Default (as defined in the Credit Agreements or the
Indenture) by any Senior Secured Party or the Trustee of all or
any part of the BITCO Collateral, regardless of whether such
money, property, securities or other distributions are received
directly or indirectly during the pendency of or in connection
with any bankruptcy, insolvency or other like proceeding or
otherwise, shall be delivered to the BAI Agent in the form
received, duly indorsed to such party, if required, and applied
by the BAI Agent in the following order:
First, to the payment in full of all costs and expenses
(including, without limitation, attorneys' fees and
disbursements) paid or incurred by the Senior Secured
Lenders in connection with such realization on the BITCO
Collateral or the protection of any of their rights and
interests therein;
Second, to the payment in full of all BAI Obligations
in the order prescribed by Section 2.13 of the BAI Credit
Agreement;
Third, to the payment in full of all BIPCO Obligations
in the order prescribed by Section 2.16 of the BIPCO Credit
Agreement shall provide;
Fourth, to the Trustee for application to the Trustee
Obligations to the full extent thereof at such time; and
Fifth, to pay to the appropriate Loan Party or designee
thereof or as a court of competent jurisdiction may direct,
any surplus then remaining.
(iii) Soucy Collateral. Subject to the provisions of paragraph
6 hereof, any money, property, securities or other direct or
indirect distributions of any nature whatsoever received from the
sale, disposition or other realization upon a forclosure or other
exercise of remedies upon the occurrence and continuance of an
Event of Default (as defined in the Credit Agreements or the
Indenture) by any Senior Secured Party or the Trustee of all or
any part of the Soucy Collateral, regardless of whether such
money, property, securities or other distributions are received
directly or indirectly during the pendency of or in connection
with any bankruptcy, insolvency or other like proceeding or
otherwise, shall be delivered to the BIPCO Agent or the BAI Agent
in the form received, duly indorsed to such party, if required,
and applied by the BIPCO Agent or the BAI Agent in the following
order:
First, to the payment in full of all costs and expenses
(including, without limitation, attorneys' fees and
disbursements) paid or incurred by the Senior Secured
Lenders in connection with such realization on the Soucy
Collateral or the protection of any of their rights and
interests therein;
Second, pro rata to the payment in full of all BAI
Obligations and BIPCO Obligations, in such order as each of
Section 2.13 of the BAI Credit Agreement and Section 2.16 of
the BIPCO Credit Agreement, respectively, shall provide;
Third, to the Trustee for application to the Trustee
Obligations to the full extent thereof at such time; and
Fourth, to pay to the appropriate Loan Party or
designee thereof or as a court of competent jurisdiction may
direct, any surplus then remaining.
(e) The BAI Lenders' rights with respect to the BAI Lender
Priority Collateral and the BIPCO Lenders' rights with respect to
the BIPCO Lender Priority Collateral shall include, without
limitation, the exclusive right to release at any time any or all
of such collateral from the liens under the Loan Documents and
the Subordinated Security Documents without the consent of the
Trustee and without any duty, obligation or liability arising
from any such action, provided, that such release is in
connection with the exercise of remedies in respect of the items
of Lender Priority Collateral so released. Upon any such sale,
release or other disposition of any Lender Priority Collateral,
the lien and security interest created for the benefit of the
Trustee pursuant to the Subordinated Security Documents in such
Lender Priority Collateral shall be automatically released, and
the Trustee shall execute or cause to be executed such release
documents and instruments and shall take such further actions as
the Senior Secured Lenders shall request.
(f) (A) Subject to the provisions of paragraph 6 hereof,
in the event that:
(i) the BAI Lenders, in exercise of their foreclosure or
similar remedies, have disposed of or otherwise realized
upon the BAI Lender Priority Collateral, or have been repaid
pursuant to a bankruptcy or similar proceeding at the
commencement of which the security interest securing the BAI
Obligations is in effect,
(ii) all of the BAI Obligations have been paid in full and
the commitments under the BAI Credit Agreement have been
terminated,
(iii) after giving effect thereto any BAI Lender Priority
Collateral remains that:
(x) never constituted BIPCO Lender Priority Collateral,
or has been released from the security interests
created by the BIPCO Loan Documents, and
(y) remains pledged pursuant to the Subordinated
Security Documents, and
(iv) at such time there are Trustee Obligations outstanding,
then the Trustee shall have the right to enforce the
provisions of the Subordinated Security Documents in respect
of BAI Lender Priority Collateral.
(B) Subject to the provisions of paragraph 6 hereof, in the
event that:
(i) the BIPCO Lenders, in exercise of their foreclosure or
similar remedies, have disposed of or otherwise realized
upon the BIPCO Lender Priority Collateral, or have been
repaid pursuant to a bankruptcy or similar proceeding at the
commencement of which the security interest securing the
BIPCO Obligations is in effect,
(ii) all of the BIPCO Obligations have been paid in full and
the commitments under the BIPCO Credit Agreement have been
terminated,
(iii) after giving effect thereto any BIPCO Lender Priority
Collateral remains that:
(x) never constituted BAI Lender Priority Collateral
or has been released from the security interests
created by the BAI Loan Documents, and
(y) remains pledged pursuant to the Subordinated
Security Documents, and
(iv) at such time there are Trustee Obligations outstanding,
then the Trustee shall have the right to enforce the
provisions of the Subordinated Security Documents in respect
of the BIPCO Lender Priority Collateral.
4. Obligations Unconditional. All rights, interests,
agreements and obligations of the Senior Secured Lenders and the
Trustee, respectively, hereunder shall remain in full force and
effect irrespective of:
(a) any lack of validity or enforceability of the Loan
Documents or any Trustee Documents;
(b) any change in the time, manner or place of payment of,
or in any other term of, all or any of the Lender Obligations or
Trustee Obligations, or any amendment or waiver or other
modification, including any increase in the amount thereof,
whether by course of conduct or otherwise, of the terms of either
Credit Agreement or any other Loan Document or of the terms of
the Trustee Documents;
(c) any exchange, release or nonperfection of any security
interest in any Lender Priority Collateral or any other
collateral, or any release, amendment, waiver or other
modification, whether in writing or by course of conduct or
otherwise, of all or any of the Lender Obligations or Trustee
Obligations or any guarantee thereof;
(d) the commencement of any bankruptcy or similar
proceeding in respect of either of the Borrowers or any other
Loan Party; or
(e) any other circumstances which otherwise might
constitute a defense available to, or a discharge of, any Loan
Party in respect of the Lender Obligations or of the Trustee in
respect of this Agreement.
5. Waiver of Claims; Waivers of Jury Trial. (a) To the
maximum extent permitted by law, the Trustee waives any claim it
might have against any Senior Secured Lender with respect to, or
arising out of, any action or failure to act or any error of
judgment or negligence on the part of any Senior Secured Lender
or its respective directors, officers, employees or agents with
respect to any exercise of rights or remedies in respect of the
Lender Priority Collateral or any transaction relating to the
Lender Priority Collateral. Neither the BAI Agent, the BIPCO
Agent, any Senior Secured Lender nor any of their respective
directors, officers, employees or agents shall be liable for
failure to demand, collect or realize upon any of the Collateral
or for any delay in doing so or shall be under any obligation to
sell or otherwise dispose of any Collateral upon the request of
any Loan Party, the Trustee or any other Person or to take any
other action whatsoever with regard to the Collateral or any part
thereof.
(b) THE BORROWERS, THE BAI AGENT (ON ITS OWN BEHALF AND ON
BEHALF OF THE BAI LENDERS), THE BIPCO AGENT (ON ITS OWN BEHALF
AND ON BEHALF OF THE BIPCO LENDERS) AND THE TRUSTEE HEREBY
IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL
ACTION OR PROCEEDING RELATING TO THIS AGREEMENT AND FOR
COUNTERCLAIM THEREIN.
6. Provisions Define Relative Rights. This Agreement is
intended solely for the purpose of defining the relative rights
of the BAI Lenders, the BAI Agent, the BIPCO Lenders, the BIPCO
Agent and the Trustee, and no other Person shall have any right,
benefit or other interest under this Agreement. Notwithstanding
anything to the contrary contained herein, this Agreement shall
not modify or amend the rights and obligations of the Borrowers
or any other Loan Party under any Loan Document.
7. Shared Lender Priority Collateral. The BIPCO Agent and
the BAI Agent acknowledge that the Timberlands Pledge Agreement
and the Soucy Pledge Agreement create, in favor of Toronto-
Dominion (Texas), Inc., as secured party thereunder (in such
capacity, the "Agent"), security interests in Collateral to
secure both the BAI Obligations and the BIPCO Obligations. The
BIPCO Agent, on behalf of the BIPCO Lenders, and the BAI Agent,
on behalf of the BAI Lenders, hereby (i) confirm that the Agent
has been appointed as agent of such parties to be the secured
party under the Timberlands Pledge Agreement and the Soucy Pledge
Agreement, (ii) agree with the Agent that in taking and
refraining from actions under the Timberlands Pledge Agreement
(including amendments and waivers with respect thereto), the
Agent shall follow the directions of the Required Lenders under
the BAI Credit Agreement so long as the BAI Credit Agreement
remains outstanding, and thereafter shall follow the directions
of the Required Lenders under the BIPCO Credit Agreement and
(iii) agree with the Agent that in taking and refraining from
actions under the Soucy Pledge Agreement (including amendments
and waivers with respect thereto), the Agent shall follow the
directions of the Required Lenders under the BAI Credit Agreement
and the Required Lenders under the BIPCO Credit Agreement.
8. Payments in Ordinary Course. Notwithstanding any
provision of this Agreement limiting the rights of the holders of
the Trustee Obligations in the Collateral, nothing in this
Agreement shall prohibit BIPCO and FinCo from making payments in
respect of the Trustee Obligations in the ordinary course of
business, whether or not the cash with which such payments are
made constitutes proceeds of Collateral.
9. Termination of Agreement; Acknowledgements. (a) The
rights of the Senior Secured Lenders under this Agreement in
respect of the Collateral securing only the BIPCO Obligations
shall terminate when the BIPCO Obligations have been paid in full
in cash and all commitments to extend credit under the BIPCO
Credit Agreement have terminated. The BIPCO Agent agrees that,
within 30 days after payment in cash of all principal, interest
and other amounts then outstanding under the BIPCO Obligations
and termination of all commitments to extend credit under the
BIPCO Credit Agreement, it will, upon the request of the Trustee,
provide a written acknowledgement of such payment to the Trustee,
which acknowledgement shall also acknowledge that the Senior
Secured Lenders have no further rights under this Agreement in
respect of the Collateral securing only the BIPCO Obligations.
Concurrently with such acknowledgement, the BIPCO Agent will
deliver to the Trustee if any of the Trustee Obligations shall be
outstanding, any items of such Collateral held in the possession
of the BIPCO Agent, provided that if no Trustee Obligations shall
be outstanding, the BIPCO Agent will deliver any such items of
Collateral to the appropriate Loan Party. The BIPCO Agent
acknowledges that prior to such delivery it holds such items of
Collateral for the Trustee in accordance with the terms of this
Agreement, for purposes of perfecting the Trustee's security
interest therein.
(b) The rights of the Senior Secured Lenders under this
Agreement in respect of the Collateral securing only the BAI
Obligations shall terminate when the BAI Obligations have been
paid in full in cash and all commitments to extend credit under
the BAI Credit Agreement have terminated. The BAI Agent agrees
that, within 30 days after payment of all principal, interest and
other amounts then outstanding under the BAI Obligations and
termination of all commitments to extend credit under the BAI
Credit Agreement, it will, upon the request of the Trustee,
provide a written acknowledgement of such payment to the Trustee,
which acknowledgement shall also acknowledge that the Senior
Secured Lenders have no further rights under this Agreement in
respect of the Collateral securing only the BAI Obligations.
Concurrently with such acknowledgement, the BAI Agent will
deliver to the Trustee if any Trustee Obligations shall be
outstanding any items of such Collateral held in the possession
of the BAI Agent, provided that if no Trustee Obligations are
outstanding, the BAI Agent will deliver any such items of
Collateral to the appropriate Loan Party. The BAI Agent
acknowledges that prior to such delivery it holds such items of
Collateral for the Trustee in accordance with the terms of this
Agreement for purposes of perfecting the Trustee's security
interest therein.
(c) The rights of the Senior Secured Lenders under this
Agreement in respect of all Collateral (to the extent not
previously terminated pursuant to paragraphs (a) and (b) above)
shall in any event terminate when all Lender Obligations have
been paid in full in cash and all commitments to extend credit
under the Loan Documents have terminated.
10. Powers Coupled With An Interest. All powers,
authorizations and agencies contained in this Agreement are
coupled with an interest and are irrevocable until the Lender
Obligations are paid in full and the commitments under the Credit
Agreements are terminated.
11. Notices. All notices, requests and demands to or upon
the parties to be effective shall be in writing (or by telex, fax
or similar electronic transfer confirmed in writing) and shall be
deemed to have been duly given or made (i) when delivered by hand
or (ii) if given by mail, when deposited in the mails by
certified mail, return receipt requested, or (iii) if by telex,
fax or similar electronic transfer, when sent and receipt has
been confirmed, addressed as follows:
If to the BAI Agent or
the BIPCO Agent: TORONTO-DOMINION (TEXAS), INC.
909 Fannin Street
Houston, Texas 77010
Attention: Jano Mott
Telecopy: (713) 951-9921
Telephone: (713) 653-8231
If to the Trustee: CRESTAR BANK
Attention: Corporate Trust Department
919 Main Street, 10th Floor
Richmond, Virginia 23219
Telecopy: (804) 782-7855
Telephone: (804) 782-5726
The parties hereto may change their addresses and transmission
numbers for notices by notice in the manner provided in this
Section.
12. Counterparts. This Agreement may be executed by one or
more of the parties on any number of separate counterparts, and
all of said counterparts taken together shall be deemed to
constitute one and the same instrument. A set of the
counterparts of this Agreement signed by all the parties shall be
lodged with the BAI Agent, the BIPCO Agent and the Trustee.
13. Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions
hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such
provision in any other jurisdiction.
14. Integration. This Agreement represents the entire
agreement of the Senior Secured Lenders and the Trustee with
respect to the subject matter hereof and there are no promises or
representations by any of them relative to the subject matter
hereof not reflected herein.
15. Amendments in Writing. None of the terms or provisions
of this Agreement may be waived, amended, supplemented or
otherwise modified except by a written instrument executed by the
BAI Agent, the BIPCO Agent, the Borrowers and the Trustee.
16. Successors and Assigns. (a) This Agreement shall be
binding upon and inure to the benefit of each of the Senior
Secured Lenders and the Trustee and their successors and assigns.
(b) Upon a successor administrative agent becoming the
Administrative Agent under the BAI Credit Agreement or the BIPCO
Credit Agreement, such successor Administrative Agent
automatically shall become the BAI Agent or the BIPCO Agent, as
the case may be, hereunder with all the rights and powers of such
party hereunder, and bound by the provisions hereof, without the
need for any further action on the part of any party hereto.
(c) Upon a successor trustee becoming the Trustee under the
Indenture, such successor Trustee automatically shall become the
Trustee hereunder with all the rights and powers of the Trustee
hereunder, and bound by the provisions hereof, without the need
for any further action on the part of any party hereto.
17. Governing Law; Jurisdiction. This Agreement shall be
governed by, and construed and interpreted in accordance with,
the law of the State of New York, excluding (to the greatest
extent permissible by law) any rule of law that would cause the
application of the laws of any jurisdiction other than the State
of New York. Each party hereto agrees that all judicial
proceedings brought against it arising out of or relating to this
Agreement or its obligations hereunder may be brought in any
federal court of competent jurisdiction in the State, County and
City of New York, and accepts generally and unconditionally the
nonexclusive jurisdiction and venue of such courts.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered as of the day and
year first above written.
TORONTO-DOMINION (TEXAS), INC., as
BAI Agent and as BIPCO Agent, and
as Agent for the BAI Agent and the
BIPCO Agent
By: /s/ Jano Mott
Title: Vice President
CRESTAR BANK, as Trustee
By: /s/ Sarah A. McMahon
Title: Vice President
Consented:
BRANT-ALLEN INDUSTRIES, INC., as Borrower
By: /s/ Edward D. Sherrick
Title: Vice President of Finance
BEAR ISLAND PAPER COMPANY, as Borrower
By: /s/ Edward D. Sherrick
Title: Vice President of Finance
BEAR ISLAND FINANCE COMPANY II
By: /s/ Edward D. Sherrick
Title: Vice President of Finance
EXHIBIT 10.2(G)
FORM OF COMPLIANCE CERTIFICATE
This Compliance Certificate is delivered to you pursuant to
Section 5.2(b) of the Credit Agreement, dated as of _______________, as
amended, supplemented or modified from time to time, (the "Credit
Agreement"), among Bear Island Paper Company, LLC (the "Borrower"), the
financial institutions or other entities from time to time party thereto as
lenders (the "Lenders"), TD Securities (USA) Inc., as advisor and arranger
(in such capacity, the "Arranger") and Toronto-Dominion (Texas), Inc., as
administrative agent for the Lenders (in such capacity, the "Administrative
Agent"). Terms defined in the Credit Agreement and not otherwise defined
herein are used herein with the meanings so defined.
1. I am the duly elected, qualified and acting Chief
Financial Officer of the Borrower.
2. I have reviewed and am familiar with the contents of
this Certificate.
3. I have reviewed the terms of the Credit Agreement and
the Loan Documents and have made or caused to be made under my supervision,
a review in reasonable detail of the transactions and condition of the
Borrower during the accounting period covered by the financial statements
attached hereto as Attachment 1 (the "Financial Statements"). Such review
did not disclose the existence during or at the end of the accounting
period covered by the Financial Statements, and I have no knowledge of the
existence, as of the date of this Certificate, of any condition or event
which constitutes a Default or Event of Default [, except as set forth
below].
4. Attached hereto as Attachment 2 are the computations
showing compliance with the covenants set forth in Sections 6.1,
6.2(c),(g),(i),(j),(l) and (m), 6.3(j),(k), 6.5(f), 6.6(c), 6.7, and
6.8(g),(h) and (i) of the Credit Agreement.
5. Attached hereto as Attachment 3 is a list of all counties
and states within the United States where any Loan Party keeps material
inventory or material equipment (other than motor vehicles) and any
Intellectual Property, as the case may be, acquired by any Loan Party since
the date of the most recent list delivered pursuant to Section
5.2(b)(ii)(y) of the Credit Agreement.
IN WITNESS WHEREOF, I execute this Certificate this _____ day
of _________, ____.
BEAR ISLAND PAPER COMPANY, LLC
By:
Title: Chief Financial Officer
Attachment 2
to Exhibit G
The information described herein is as of __________, ____, and
pertains to the period from __________, ___ to _________ __, ____.
[Set forth Covenant Calculations]
EXHIBIT 10.2(H)
FORM OF CLOSING CERTIFICATE
This Closing Certificate is delivered pursuant to
subsections 4.1(m) and 4.1(n) of the Credit Agreement dated as of
_______________ (the "Credit Agreement"; terms defined therein being used
herein as therein defined), among Bear Island Paper Company, LLC (the
"Borrower"), the financial institutions or other entities from time to time
party thereto as lenders (the "Lenders"), TD Securities (USA) Inc., as
advisor and arranger (in such capacity, the "Arranger") and
Toronto-Dominion (Texas), Inc., as administrative agent for the Lenders (in
such capacity, the "Administrative Agent").
The undersigned __________ of ___________ (the "Company")
certifies as of the date hereof, on behalf of the Company and solely with
respect to paragraphs 1 through 7 hereof, as follows:
1. The representations and warranties of the Company set
forth in each of the Loan Documents to which it is a party are true and
correct in all material respects on and as of the date hereof with the same
effect as if made on the date hereof, except for representations and
warranties expressly stated to relate to a specific earlier date, in which
case such representations and warranties were true and correct in all
material respects as of such earlier date.
2. No consent or authorization of, filing with, notice to or
other act by or in respect of, any Governmental Authority or any other
Person that has not been obtained is required in connection with the
Transaction and the borrowings under the Credit Agreement or with the
execution, delivery, performance, validity or enforceability under the
Credit Agreement or any of the Loan Documents to which the Company is a
party, except (i) consents, authorizations, filings and notices described
in Schedule 3.4 to the Credit Agreement and (ii) the filings referred to in
Section 3.19 of the Credit Agreement.
3. No Default or Event of Default has occurred and is
continuing as of the date hereof or after giving effect to the Loans to be
made on the date hereof. [Borrower only]
4. The Transaction has been consummated for a net cash
purchase price, paid to the Retiring Partners on the Closing Date, not
exceeding an aggregate total of $150,000,000 subject to post-closing
adjustments as described in the Credit Agreement.
5. The Borrower has received at least $100,000,000 in gross
proceeds from the issuance of the Second Priority Notes [Borrower only].
6. ___________________ is the duly elected and qualified
Corporate Secretary of the Company and the signature set forth for such
officer below is such officer's true and genuine signature.
7. There are no liquidation or dissolution proceedings
pending or to my knowledge threatened against the Company, nor has any
other event occurred materially adversely affecting or threatening the
continued corporate existence of
the Company.
The undersigned Corporate Secretary of the Company
certifies, as of the date hereof, on behalf of the Company and solely with
respect to paragraphs 8 through 13 hereof, as follows:
8. The Company is a limited liability company duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization.
9. Attached hereto as Exhibit II is a true and complete copy
of resolutions duly adopted by the Board of Directors of the Company on
_________________ authorizing the execution, delivery and performance of
the Loan Documents to which the Company is a party; such resolutions have
not in any way been amended, modified, revoked or rescinded since the date
of their adoption, have been in full force and effect since their adoption
to and including the date hereof and are now in full force and effect and
are the only corporate proceedings of the Company now in force relating to
or affecting the matters referred to therein.
10. Attached hereto as Exhibit III is a true and complete
copy of the By-Laws of the Company (or similar document) as in effect on
the date hereof.
11. Attached hereto as Exhibit IV is a true and complete
copy of the Certificate of Incorporation or Articles of Organization of the
Company as in effect on the date hereof, and such certificate or articles
have not been amended, repealed, modified or restated.
12. Attached hereto as Exhibit V is a true and correct copy
of each of the following documents: (i) the Acquisition Agreement; (ii) the
Second Priority Note Indenture; (iii) the John Hancock Credit Agreement and
(iv) the Timberlands Loan Agreement. [Borrower only]
13. The following persons are now duly elected, qualified
and acting officers of the Company holding the offices indicated next to
their respective names below, and the signatures appearing opposite their
respective names below are the true and genuine signatures of such
officers, and each of such officers is duly authorized to execute and
deliver on behalf of the Company each of the Loan Documents to which it is
a party and any certificate or other document to be delivered by the
Company pursuant to the Loan Documents to which it is a party:
Name Office Signature
- - ------------------------ ----------------------- ------------------------
- - ------------------------ ----------------------- ------------------------
- - ------------------------ ----------------------- ------------------------
IN WITNESS WHEREOF, the undersigned have hereunto set our
names as of the date set forth below.
[INSERT NAME OF COMPANY]
____________________________ ____________________________
Name: Name:
Title: Title:
Date: _______________, 1997
EXHIBIT 10.2 (I)
FORM OF
ASSIGNMENT AND ACCEPTANCE
Reference is made to the Credit Agreement, dated as of _______,
199_ (as amended, supplemented or otherwise modified from time to time, the
"Credit Agreement"), among Bear Island Paper Company, LLC (the "Borrower"),
the financial institutions or other entities from time to time party thereto
as lenders (the "Lenders"), TD Securities (USA) Inc.,as advisor and
arranger (in such capacity, the "Arranger") and Toronto-Dominion (Texas),
Inc., as administrative agent for the Lenders (in such capacity, the
"Administrative Agent"). Unless otherwise defined herein, terms defined
in the Credit Agreement and used herein shall have the meanings given to
them in the Credit Agreement.
The Assignor identified on Schedule 1 hereto (the "Assignor")
and the Assignee identified on Schedule l hereto (the "Assignee") agree
as follows, as of the Effective Date (as defined below):
1. The Assignor hereby irrevocably sells and assigns to the
Assignee without recourse to the Assignor, and the Assignee hereby
irrevocably purchases and assumes from the Assignor without recourse to
the Assignor, as of the Effective Date, the interest described in
Schedule 1 hereto (the "Assigned Interest") in and to the Assignor's
rights and obligations under the Credit Agreement with respect to those
credit facilities contained in the Credit Agreement as are set forth on
Schedule 1 hereto (individually, an "Assigned Facility"; collectively,
the "Assigned Facilities"), in a principal amount for each Assigned
Facility as set forth on Schedule 1 hereto.
2. The Assignor (a) makes no representation or warranty and
assumes no responsibility with respect to any statements, warranties or
representations made in or in connection with the Credit Agreement or
with respect to the execution, legality, validity, enforceability,
genuineness, sufficiency or value of the Credit Agreement, any other Loan
Document or any other instrument or document furnished pursuant thereto,
other than that the Assignor has not created any adverse claim upon the
Assigned Interest and that such Assigned Interest is free and clear of
any such adverse claim; (b) makes no representation or warranty and
assumes no responsibility with respect to the financial condition of the
Borrower, any of its Subsidiaries or any other obligor or the performance
or observance by the Borrower, any of its Subsidiaries or any other
obligor of any of their respective obligations under the Credit Agreement
or any other Loan Document or any other instrument or document furnished
pursuant hereto or thereto[; and (c) attaches any Notes held by it
evidencing the Assigned Facilities marked "cancelled" and (i) requests
that the Administrative Agent, upon request by the Assignee, exchange the
attached Notes marked "cancelled" for a new Note or Notes payable to the
Assignee in the principal amount for each Assigned Interest and (ii) if
the Assignor has retained any interest in the Assigned Facility, requests
that the Administrative Agent exchange the attached Notes for a new Note
or Notes payable to the Assignor, in each case in amounts which reflect
the Assignor's interest in the Assigned Facility after giving effect to
the assignment being made hereby (and after giving effect to any other
assignments which have become effective on the Effective Date).]
3. The Assignee (a) represents and warrants that it is
legally authorized to enter into this Assignment and Acceptance; (b)
confirms that it has received a copy of the Credit Agreement, together
with copies of the financial statements referred to in subsection 3.1
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; (c) agrees that it will, independently
and without reliance upon the Assignor, the Agents or any 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 the Credit Agreement, the other Loan Documents or any
other instrument or document furnished pursuant hereto or thereto; (d)
appoints and authorizes the Agents to take such action as the agents on
its behalf and to exercise such powers and discretion under the Credit
Agreement, the other Loan Documents or any other instrument or document
furnished pursuant hereto or thereto as are delegated to the Agents by
the terms thereof, together with such powers as are incidental thereto;
and (e) agrees that it will be bound by the provisions of the Credit
Agreement and will perform in accordance with its terms all the
obligations which by the terms of the Credit Agreement are required to be
performed by it as a Lender including, if it is organized under the laws
of a jurisdiction outside the United States, its obligation pursuant to
subsection 2.18(d) of the Credit Agreement.
4. The effective date of this Assignment and Acceptance shall
be the Effective Date of Assignment described in Schedule 1 hereto (the
"Effective Date"). Following the execution of this Assignment and
Acceptance, it will be delivered to the Administrative Agent for
acceptance by it and recording by the Administrative Agent pursuant to
the Credit Agreement, effective as of the Effective Date (which shall
not, unless otherwise agreed to by the Administrative Agent, be earlier
than five Business Days after the date of such acceptance and recording
by the Administrative Agent).
5. Upon such acceptance and recording, from and after the
Effective Date, the Administrative Agent shall make all payments in
respect of the Assigned Interest (including payments of principal,
interest, fees and other amounts) [to the Assignor for amounts which have
accrued to the Effective Date and to the Assignee for amounts which have
accrued subsequent to the Effective Date] [to the Assignee whether such
amounts have accrued prior to the Effective Date or accrue subsequent to
the Effective Date. The Assignor and the Assignee shall make all
appropriate adjustments in payments by the Agent for periods prior to the
Effective Date or with respect to the making of this assignment directly
between themselves.]
6. From and after the Effective Date, (a) 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
thereunder and under the other Loan Documents and shall be bound by the
provisions thereof and (b) 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.
7. This Assignment and Acceptance shall be governed by and
construed in accordance with the laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this
Assignment and Acceptance to be executed as of the date first above
written by their respective duly authorized officers.
[Name of Assignee]
By: ___________________________________
Title:
[Name of Assignor]
By: ___________________________________
Title:
Schedule 1
to Assignment and Acceptance
Name of Assignor: _________________________________
Name of Assignee: _________________________________
Effective Date of Assignment: _____________________
Credit Principal Commitment Percentage
Facility Assigned Amount Assigned Assigned (1)
----------------- --------------- ----------------------
$_______ __._______%
__________________
(1) Calculate the assigned Commitment Percentage to at least 15 decimal
places and show as a percentage of the aggregate commitments
of all Lenders.
Accepted:
Consented To:
TORONTO-DOMINION (TEXAS), INC.,
as Administrative Agent [Name of Borrower](2)
By:______________________________
By:_________________________________
Title:
Title:
TD SECURITIES (USA) INC., as Arranger
By: _________________________________
Title:
(2) The Borrower's consent is not required with respect to any
assignment to a Lender.
December 1, 1997
To: Toronto-Dominion (Texas), Inc., as Administrative Agent,
TD Securities (USA) Inc., as Arranger and
The Lenders listed on Schedule 1 hereto
Re: Brant-Allen Industries, Inc. and Bear Island Paper Company, LLC
Ladies and Gentlemen:
We have acted as special counsel to Brant-Allen Industries,
Inc., a Delaware corporation ("Brant-Allen") and Bear Island Paper
Company, LLC, a limited liability company organized under the laws of the
Commonwealth of Virginia ("Paper Company", and together with Brant-Allen,
the "Opinion Parties" and each an "Opinion Party"), in connection with
the preparation, execution and delivery of the Credit Agreement (the
"Paper Company Credit Agreement"), dated as of December 1, 1997, among
Paper Company, the several lenders parties thereto (the "Paper Company
Lenders"), TD Securities (USA) Inc., as arranger, and Toronto Dominion
(Texas), Inc., as administrative agent for the Paper Company Lenders (in
such capacity, the "Paper Company Agent"). This opinion is being
delivered pursuant to Section 4.1(o)(i) of the Paper Company Credit
Agreement. Capitalized terms used herein and not otherwise defined herein
shall have the respective mean ings assigned thereto in the Paper Company
Credit Agreement.
In rendering the opinions set forth herein, we have examined
and relied on originals or copies, certified or otherwise identified to
our satisfaction of the following:
(a) the Paper Company Credit Agreement;
(b) each of the Revolving Credit Notes, dated the date
hereof, executed by Paper Company and listed on Schedule 2 hereto (the
"Paper Company Revolving Notes");
(c) each of the term notes, dated the date hereof,
executed by Paper Company and listed on Schedule 2 hereto (the "Paper
Company Term Notes");
(d) the Security and Pledge Agreement;
(e) the Paper Company Pledge Agreement;
(f) the Timberlands Pledge Agreement;
(g) the Soucy Pledge Agreement, dated as of December 1,
1997, executed by Brant-Allen in favor of Toronto-Dominion (Texas), Inc.,
as Agent (as defined therein) (the "Soucy Pledge Agreement");
(h) the Brant-Allen Guarantee;
(i) a certificate executed by an officer of the Opinion
Parties in connection with this opinion (the "Opinion Certificate"), a
copy of which is at tached hereto as Exhibit A; and
(j) such other documents as we have deemed necessary or
appropriate as a basis for the opinions set forth below.
The documents listed in items (d) through (h) above are collectively
referred to herein as the "Security Documents" and the documents listed
in items (a) through (h) above are collectively referred to herein as the
"Opinion Documents."
In our examination we have assumed the genuineness of all
signatures including endorsements, the legal capacity of natural persons,
the authenticity of all documents submitted to us as originals, the
conformity to original documents of all documents submitted to us as
facsimile, conformed, certified or photostatic copies, and the
authenticity of the originals of such copies. As to any facts material to
this opinion (and in the case of public officials, legal conclusions as
well) which we did not independently establish or verify, we have relied
upon certificates, statements and representations of each of the Opinion
Parties and their respective officers and other representatives and of
public officials, including the facts set forth in the Opinion
Certificates.
Unless otherwise indicated, the following terms shall have
the following respective meanings when used herein:
"Applicable Laws" means those laws, rules and regulations of
the State of New York and the United States of America which, in our
experience, are normally applicable to transactions of the type
contemplated by the Opinion Documents and are not the subject of a
specific opinion herein referring expressly to a particular law or laws.
"Governmental Approval" means any consent, approval, license,
authorization or validation of, or filing, recording or registration
with, any Govern mental Authority pursuant to Applicable Laws.
"Governmental Authority" means any legislative, judicial,
administra tive or regulatory body of the State of New York or the United
States of America.
"Indenture" means that certain Indenture, dated as of
December 1, 1997, by and among Brant-Allen, Paper Company, Bear Island
Timberlands Company, L.L.C., Bear Island Finance Company II and Crestar
Bank, as trustee.
"New York UCC" means the Uniform Commercial Code as in effect
on the date hereof in the State of New York.
"Noteholder" means any holder of a Note (as defined in the
Indenture) issued under or pursuant to the Indenture.
"Trustee" means Crestar Bank, in its capacity as trustee under the
Indenture.
We express no opinion as to the laws of any jurisdiction
other than the laws of the State of New York and the federal laws of the
United States of America to the extent specifically referred to herein.
Our opinions set forth below are subject to the following
assumptions and qualifications:
(a) each of the Opinion Documents constitutes the
legal, valid and binding obligation of each party to such Opinion
Document (other than the Opinion Parties) enforceable against such party
in accordance with its terms;
(b) we express no opinion as to the effect on the
opinions ex pressed herein of (i) the compliance or non-compliance of any
party (other than the Opinion Parties) to the Opinion Documents with any
state, federal or other laws or regulations applicable to it or (ii) the
legal or regulatory status or the nature of the business of any such
party;
(c) enforcement of the Opinion Documents may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium or other
similar laws, whether statutory or decisional, affecting creditors'
rights generally and by general principles of equity (regardless of
whether enforcement is sought in equity or at law);
(d) we express no opinion as to the enforceability of
any rights to contribution or indemnification provided for in the Opinion
Documents which violate the public policy underlying any law, rule or
regulation (including, without limitation, any federal or state
securities law, rule or regulation);
(e) we express no opinion as to the enforceability of
any section of any Opinion Document to the extent that any recovery of
attorneys' fees is not limited to reasonable attorneys' fees;
(f) certain of the remedial provisions, including
waivers, with respect to the exercise of remedies against the collateral
contained in the Security Documents may be unenforceable in whole or in
part, but the inclusion of such provisions does not affect the validity
of the Security Documents, each taken as a whole, and each of the
Security Documents, taken as a whole, together with applica ble law,
contain adequate provisions for the practical realization of the benefits
of the security created thereby;
(g) we call to your attention that enforcement of the
Security and Pledge Agreement with respect to collateral consisting of
any Opinion Party's interest in instruments, leases, contracts and other
agreements between such Opinion Party and the other parties to such
agreements may be subject to the terms of such agreements, the rights of
the other parties thereto and any claims or defenses of such other
parties against such Opinion Party arising under or outside such
agreements;
(h) our security interest opinions are limited to
Articles 8 and 9 of the New York UCC with respect to our opinions in
paragraphs 6, 7 and 8 and, Article 9 of the New York UCC with respect to
our opinion in paragraph 5 and, therefore, such opinions do not address
(i) laws of any state other than the State of New York, and the laws of
the State of New York except for Article 8 and Article 9 of the New York
UCC, as applicable, (ii) collateral of a type not subject to Article 8 or
Article 9 of the New York UCC, as applicable, and (iii) what law governs
perfec tion of the security interests granted in the collateral covered
by this opinion;
(i) we express no opinion as to the enforceability of
any provision of any Opinion Document to the extent that it purports to
establish evidentiary standards;
(j) we express no opinion as to the applicability or
effect of any fraudulent conveyance or similar laws on the Opinion
Documents or any transactions contemplated thereby or on the opinions
herein stated; and
(k) we express no opinion as to the enforceability of any
provision of the Paper Company Credit Agreement to the extent that it
authorizes or permits any party to any Opinion Document or any purchaser
of a participation interest from any such party to set-off or apply any
deposit, property or indebtedness with respect to any participation
interest.
Based upon the foregoing and subject to the limitations,
qualifica tions, exceptions and assumptions set forth herein, we are of
the opinion that, as of the date hereof:
1. Each Opinion Document constitutes the valid and binding
obligation of the Opinion Party that is a party thereto, enforceable
against such Opinion Party in accordance with its terms.
2. The execution and delivery by each Opinion Party of each
Opinion Document to which it is a party and the performance by such
Opinion Party of its obligations thereunder, in accordance with its
terms, do not violate any provision of any Applicable Law.
3. Based on our review of Applicable Laws, no Governmental
Approval that has not been obtained is required to authorize, or is
required in con nection with, the execution and delivery by any Opinion
Party of the Opinion Documents to which it is a party and the performance
by such Opinion Party of its obligations thereunder (except for the
filings with the U.S. Patent and Trademark Office and the U.S. Copyright
Office with respect to the United States registrations and applications
set forth on the schedules to the Security and Pledge Agreement and with
respect to any after-acquired United States trademark, patent and
copyright registrations and applications and the registration of
unregistered United States copyrights in the U.S. Copyright Office and
other similar filings required under the Security and Pledge Agreement).
4. Neither of the Opinion Parties is, after giving effect to
the transactions contemplated by the Opinion Documents and the
application of the net proceeds from the making of the Loans under the
Paper Company Credit Agreement (i) an "investment company" required to
register as such under the Investment Company Act of 1940, as amended, or
(ii) a "holding company," or a "subsidiary company" of a "holding
company," or an "affiliate" of a "holding company" or of a "subsidiary
company" of a "holding company," within the meaning of the Public Utility
Holding Company Act of 1935, as amended.
5. The provisions of the Security and Pledge Agreement are
effec tive to create, in favor of the Paper Company Agent, a valid
security interest in Paper Company's rights in that portion of the
Collateral (as defined in the Security and Pledge Agreement) described
therein which is subject to Article 9 of the New York UCC (the "Article 9
Collateral") which security interest will secure the Obligations (as
defined in the Security and Pledge Agreement).
6. The provisions of the Paper Company Pledge Agreement are
effective to create in favor of the Paper Company Agent a valid security
interest in Brant-Allen's rights in the Pledged LLC Interests (as defined
in the Paper Company Pledge Agreement) (the "Paper Company Pledged
Securities") to secure the Secured Obligations (as defined in the Paper
Company Pledge Agreement).
7. The provisions of the Timberlands Pledge Agreement are
effec tive to create in favor of the Agent (as defined in the Timberlands
Pledge Agreement), a valid security interest in Brant-Allen's rights in
the Pledged LLC Interests (as defined in the Timberlands Pledge
Agreement) (the "Timberlands Pledged Securities") to secure the Secured
Obligations (as defined in the Timberlands Pledge Agreement).
8. The provisions of the Soucy Pledge Agreement are
effective to create in favor of the Agent (as defined in the Soucy Pledge
Agreement) a valid secu rity interest in Brant-Allen's rights in the
certificate identified on Schedule 3 hereto (the "Soucy Pledged
Securities," and together with the Paper Company Pledged Securities and
the Timberlands Pledged Securities, the "Pledged Collateral") to secure
the Secured Obligations (as defined in the Soucy Pledge Agreement). The
delivery of the Soucy Pledged Securities to the Agent in the State of New
York will perfect the security interest of the Agent in the Soucy Pledged
Securities. Upon such delivery, no other security interest of any other
creditor of Brant-Allen will be equal or prior to the security interest
of the Agent in the Soucy Pledged Securities.
Our opinions set forth in paragraphs 5 through 8 are subject
to the following qualifications:
(a) we have assumed that the Article 9 Collateral and
the Pledged Collateral exists and that each of the Opinion Parties has
sufficient rights in the Article 9 Collateral and the Pledged Collateral
pledged by it for the security inter ests to attach, and we express no
opinion as to the nature or extent of any Opinion Party's rights in, or
title to, any of the Article 9 Collateral or any of the Pledged
Collateral;
(b) we call to your attention that under the New York
UCC, events occurring subsequent to the date hereof may affect any
security interest subject to the New York UCC including, but not limited
to, factors of the type iden tified in Section 9-306 with respect to
proceeds; Section 9-402 with respect to changes in name, structure and
corporate identity of the debtor; Section 9-103 with respect to changes
in the location of the collateral and the location of the debtor; Section
9-316 with respect to subordination agreements; Section 9-403 with
respect to continuation statements; and Sections 9-307, 9-308 and 9-309
with respect to subsequent purchasers of the collateral. In addition,
actions taken by a secured party (e.g., releasing or assigning the
security interest, delivering possession of the collateral to the debtor
or another person and voluntarily subordinating a security interest) may
affect a security interest; and
(c) except as set forth in opinion paragraph 8,we
express no opinion with respect to the perfection or priority of the
security interest of the Paper Company Agent in any of the Article 9
Collateral or the Pledged Collateral or of the Agent (as defined in the
Timberlands Pledge Agreement) in any of the Pledged Collateral.
Our opinion set forth in paragraph 5 is also subject to the
following qualifications:
(a) in the case of instruments, chattel paper, accounts
or general intangibles, we call to your attention that the security
interests may be sub ject to the rights of account debtors, claims and
defenses of account debtors and the terms of agreements with account
debtors and we express no opinion with respect to such types of
collateral which contain any prohibition, restriction, or condition to
the assignment thereof;
(b) in the case of goods, we express no opinion in any
goods which are (i) an accession to, or commingled or processed with,
other goods to the extent that the security interests of the Paper
Company Agent are limited by Section 9-314 or 9-315 of the New York UCC
or (ii) subject to a certificate of title or a docu ment of title;
(c) we express no opinion regarding any items which are
sub ject to a statute, regulation or treaty of the United States of
America which provides for a national or international registration or a
national or international certificate of title for the perfection of a
security interest therein or which specifies a place of filing different
from the place specified in the New York UCC for filing to perfect such
security interest;
(d) we express no opinion regarding any of the Article
9 Coll ateral consisting of claims against any government or governmental
agency (includ ing, without limitation, the United States of America or
any state thereof or any agency or department of the United States of
America or any state thereof);
(e) in the case of any Article 9 Collateral consisting
of an instrument, account, chattel paper or general intangible which is
itself secured by other property, we express no opinion with respect to
the Paper Company Agent's rights in or to such underlying property;
(f) we express no opinion regarding the security
interest of the Paper Company Agent in any copyrights, patents,
trademarks, or other intellectual property, the proceeds thereof, or any
rights (including accounts or general intan gibles) with respect to the
lease, license or use thereof, except to the extent Article 9 of the New
York UCC may be applicable thereto;
(g) we call to your attention that, under Section 10 of
the United States Trademark Act (the "Lanham Act") (15 U.S.C. 1060), no
United States application to register a mark based on intent to use shall
be assignable prior to the filing of a verified statement of use with the
United States Patent and Trademark Office pursuant to Section 1(d) of the
Lanham Act, except to a successor to the business of the applicant, or
portion thereof, to which the mark pertains, if that business is ongoing
and existing;
(h) we call to your attention that, under United States
trade mark law, it is generally held that transfers of trademark rights
are invalid unless accompanied by the related goodwill and unless the
trademarks are used on substantially the same goods as those previously
represented by the trademarks. We express no opinion as to the assets or
goodwill that would have to accompany the transfer of any trademarks to
ensure the continued validity of such trademarks in the event of
foreclosure and ultimate disposition of the trademarks as a result of
default;
(i) we call to your attention that exercise of remedies
with respect to certain types of intellectual property may require
filings with the United States Patent and Trademark Office or filings and
registrations with the United States Copyright Office;
(j) we express no opinion with respect to the validity or
enforceability of any item of intellectual property; and
(k) we advise you that with respect to that portion of
the Article 9 Collateral in which the Paper Company Agent has been
granted a security interest by more than one agreement, a court may limit
the Paper Company Agent's right to choose among the remedies otherwise
given to it by such agreements with respect to such Article 9 Collateral.
Our opinions set forth in paragraphs 6 through 8 are also
subject to the following qualifications:
(a) we have assumed that none of the Agent, the
Timberlands Agent, the Lenders (each of the foregoing as defined in the
Soucy Pledge Agreement), the Paper Company Agent, the Trustee or the
Noteholders had notice prior to or on the date of delivery of the Soucy
Pledged Securities to the Agent of an adverse claim with respect to such
Soucy Pledged Securities;
(b) we express no opinion with respect to the priority
of any security interest in the Soucy Pledged Securities against a lien
creditor (as such term is defined in Section 9-301(3) of the New York
UCC) with respect to future advances to the extent set forth in Section
9-301(4) of the New York UCC;
(c) we call to your attention that the issuer of the
Soucy Pledged Securities is organized under the laws of Canada, and we
express no opinion as to the effect of the laws of Canada on the opinions
herein stated. Our opinion with respect to the security interest of the
Agent in the Soucy Pledged Securities is limited to the New York UCC and
the laws of the jurisdiction of the issuer of the securities may affect,
among other things, whether the security is characterized as a
certificated security, the exercise of remedies with respect to such
security and the exercise of voting or other rights with respect to such
security; and
(d) we advise you that with respect to that portion of
the Pledged Collateral in which the Agent has been granted a security
interest by more than one agreement, a court may limit the Agent's right
to choose among the remedies otherwise given to it by such agreements
with respect to such Pledged Collateral.
In rendering the foregoing opinions, we have also assumed,
without independent investigation and, with your consent, that:
(a) each of the Opinion Parties has been duly
incorporated or organized, as applicable, and is validly existing and in
good standing under the laws of the jurisdiction of its incorporation or
organization, as applicable;
(b) each of the Opinion Parties has the requisite power
and authority, corporate or otherwise, to execute and deliver all of the
Opinion Documents to which it is a party and to perform all of its
obligations thereunder, and the execution and delivery of such Opinion
Documents and the consummation by such Opinion Party of the transactions
contemplated thereby have been duly authorized by all requisite action,
corporate or otherwise, on the part of such Opinion Party;
(c) each of the Opinion Parties has duly executed and
delivered each Opinion Document to which it is a party;
(d) the execution and delivery by each of the Opinion
Parties of each of the Opinion Documents to which it is a party and the
performance of its obligations thereunder do not and will not conflict
with, contravene, violate or con stitute a default under: (i) the
Certificate of Incorporation, By-Laws or other organization documents of
such Opinion Party, (ii) any indenture, instrument or other agreement to
which such Opinion Party or its property is subject, (iii) any law, rule
or regulation to which such Opinion Party is subject (other than
Applicable Laws, as to which we express our opinion in paragraph 2
hereof), (iv) any judicial or administrative order or decree of any
governmental authority or (v) any consent, approval, license,
authorization or validation of, or filing, recording or registration
with, or notice to, any governmental authority; and
(e) no authorization, consent or other approval of, or
notice to or filing, recording or registration with, any court,
governmental authority or regula tory body that has not been obtained or
taken and is not in full force and effect is re quired to authorize, or
is required in connection with the execution, delivery and performance by
any Opinion Party of any Opinion Document or the transactions
contemplated thereby (other than Governmental Approvals as to which we
express our opinion in paragraph 3 hereof).
We understand that you are separately receiving an opinion
with respect to certain of the foregoing matters from Mays & Valentine
L.L.P., Virginia local counsel to the Opinion Parties (such opinion, the
"Local Counsel Opinion"). We are advised that the Local Counsel Opinion
contains certain qualifications. Our opinions herein stated are based
upon the assumptions set forth herein, and we express no opinion as to
the effect on the opinions herein stated of the qualifications stated in
the Local Counsel Opinion.
This opinion is being furnished only to you and is solely for
your benefit and is not to be used, circulated, quoted, relied upon or
otherwise referred to by any other Person or for any other purpose
without our prior written consent, except that any Person who becomes a
Paper Company Lender party to the Paper Company Credit Agreement pursuant
to Section 9.6(c) of the Paper Company Credit Agreement may rely on this
opinion as though it had been addressed to such Person and delivered to
such Person on the date hereof.
Very truly yours,
/s/ Skadden, Arps, Slate,
Meagher & Flom
_____________________________
SCHEDULE 1
Lenders
Toronto-Dominion (Texas), Inc.
Christiania Bank OG Kreditkass Asa
Keyport Life Insurance Company
Prime Income Trust
Deeprock & Company
Merrill Lynch Senior Floating Rate Fund, Inc.
Van Kampen American Capital Prime Rate Income Trust
SCHEDULE 2
Notes
I. Paper Company Term Notes
1. Term Note, dated as of December 1, 1997, by Bear Island Paper
Company, L.L.C. in favor of the Administrative Agent (as
defined therein) for the benefit of Toronto-Dominion (Texas),
Inc. in the maximum principal amount of $39,000,000.
2. Term Note, dated as of December 1, 1997, by Bear Island Paper
Company, L.L.C. in favor of the Administrative Agent (as
defined therein) for the benefit of Keyport Life Insurance
Company in the maximum principal amount of $5,000,000.
3. Term Note, dated as of December 1, 1997, by Bear Island Paper
Company, L.L.C. in favor of the Administrative Agent (as
defined therein) for the benefit of Prime Income Trust in the
maximum principal amount of $10,000,000.
4. Term Note, dated as of December 1, 1997, by Bear Island Paper
Company, L.L.C. in favor of the Administrative Agent (as
defined therein) for the benefit of Deeprock & Company in the
maximum principal amount of $1,000,000.
5. Term Note, dated as of December 1, 1997, by Bear Island Paper
Company, L.L.C. in favor of the Administrative Agent (as
defined therein) for the benefit of Merrill Lynch Senior
Floating Rate Fund, Inc. in the maximum principal amount of
$5,000,000.
6. Term Note, dated as of December 1, 1997, by Bear Island Paper
Company, L.L.C. in favor of the Administrative Agent (as
defined therein) for the benefit of Van Kampen American
Capital Prime Income Trust in the maximum principal amount of
$10,000,000.
II. Paper Company Revolving Notes
1. Revolving Credit Note, dated as of December 1, 1997, by Bear
Island Paper Company, L.L.C. in favor of the Administrative
Agent (as defined therein) for the benefit of
Toronto-Dominion (Texas), Inc. in the maximum principal
amount of $35,000,000.
2. Revolving Credit Note, dated as of December 1, 1997, by Bear
Island Paper Company, L.L.C. in favor of the Administrative
Agent (as defined therein) for the benefit of Christiania
Bank OG Kreditkasse ASA in the maximum principal amount of
$15,000,000.
SCHEDULE 3
Soucy Pledged Securities
- - ------------------------------------------------------------------------
Pledged Security Certificate Type of Shares Number of Shares
Number Issued
- - ------------------------------------------------------------------------
F.F. Soucy, Inc. C-5 Common Shares 271,479
- - --------------------- -------------- ----------------- -----------------
Exhibit A
CERTIFICATE OF
BRANT-ALLEN INDUSTRIES, INC.
AND
BEAR ISLAND PAPER COMPANY, LLC
I, Edward D. Sherrick, am the Vice President of Finance of
each of Brant-Allen Industries, Inc. ("Brant-Allen") and Bear Island
Paper Company, LLC ("Paper Company" and, together with Brant-Allen, the
"Opinion Parties"). I under stand that pursuant to Section 4.1(o)(i) of
that certain Credit Agreement, dated as of December 1, 1997, among Paper
Company, the several lenders parties thereto (the "Paper Company
Lenders"), TD Securities (USA) Inc., as arranger, and Toronto- Dominion
(Texas), Inc., as administrative agent for the Paper Company Lenders (the
"Paper Company Agent"), Skadden, Arps, Slate, Meagher & Flom LLP is
rendering an opinion dated the date hereof, (the "Opinion") to the Paper
Company Lenders and the Paper Company Agent. Capitalized terms used
herein but not otherwise defined shall have the meanings set forth in the
Paper Company Credit Agreement. I further understand that Skadden, Arps,
Slate, Meagher & Flom LLP is relying on this officer's certificate and
the statements made herein in rendering such Opinion.
With regard to the foregoing, on behalf of each of the
Opinion Parties I certify, that:
1. I am familiar with the business of each of the Opinion
Parties and their respective direct and indirect subsidiaries.
2. Less than 25 percent of the assets of each Opinion Party
on a consolidated basis and on an unconsolidated basis consists of margin
stock (as such term is defined in Regulation G or Regulation U of the
Board of Governors of the Federal Reserve System).
3. Each Opinion Party (a) is primarily engaged, directly or
indirectly through a wholly-owned subsidiary or subsidiaries, in a
business or businesses other than that of investing, reinvesting, owning,
holding or trading in Securities (as hereinafter defined), (b) is not and
does not hold itself out as being engaged primarily, nor does it propose
to engage, primarily, in the business of investing, reinvesting or
trading in Securities, (c) has not and is not engaged in, and does not
propose to engage in, the business of issuing Face-Amount Certificates of
the Install ment Type (as hereinafter defined), and has no such
certificate outstanding, and (d) is not engaged and does not propose to
engage in the business of investing, reinvesting, owning, holding or
trading in Securities, whether or not as its primary activity, and does
not own or propose to acquire Investment Securities (as hereinafter
defined) having a Value (as hereinafter defined) exceeding forty percent
(40%) of the Value of such Opinion Party's total assets (exclusive of
Government Securities (as hereinafter defined)) on an unconsolidated
basis.
4. Neither Opinion Party nor any subsidiary or Affiliate of
an Opinion Party owns or operates facilities used for the generation,
transmission or distribution of electric energy for sale ("Electric
Utility Facilities").
5. Neither Opinion Party nor any subsidiary or Affiliate of
an Opinion Party owns or operates facilities used for the distribution at
retail of natural or manufactured gas for heat, light or power ("Gas
Utility Facilities").
6. Neither Opinion Party nor any subsidiary or Affiliate of
an Opinion Party , directly or indirectly, or through one or more
intermediary companies, owns, controls or holds with power to vote (a)
five percent (5%) or more of the outstanding securities, such as notes,
drafts, stock, treasury stock, bonds, debentures, certificates of
interest or participations in any profit-sharing agreements or in oil,
gas, other mineral royalties or leases, collateral-trust certificates,
preorgani zation certificates or subscriptions, transferable shares,
investment contracts, voting-trust certificates, certificates of deposit
for a security, receiver's or trustee's certificates or any other
instruments commonly known as a "security" (including certificates of
interest or participation in, temporary or interim certificates for,
receipt for, guaranty of, assumption of liability on or warrants or
rights to subscribe to or purchase any of the foregoing) presently
entitling it to vote in the direction or management of, or any such
instrument issued under or pursuant to any trust, agreement or
arrangement whereby a trustee or trustees or agent or agents for the
owner or holder of such instrument is presently entitled to vote in the
direction or management of, any corporation, partnership, association,
joint-stock company, joint venture, trust, or organized group of persons
or any receiver, trustee or other liquidating agent of any of the
foregoing in his capacity as such that, directly or indirectly or through
one or more intermediary companies, owns or operates any Electric Utility
Facilities or Gas Utility Facilities or (b) any other interest, directly
or indirectly, or through one or more intermediary entities, in any
corporation, partner ship, association, joint-stock company, joint
venture, trust, or organized group of persons or any receiver, trustee or
other liquidating agent of any of the foregoing in his capacity as such
that owns or operates any Electric Utility Facilities or Gas Utility
Facilities.
7. Neither Opinion Party nor any subsidiary or Affiliate of
an Opinion Party has received notice that the Securities and Exchange
Commission has determined, or may determine, that such Person, directly
or indirectly, exercises, either alone or pursuant to an arrangement or
understanding with one or more persons, a controlling influence over the
management or policies of any corporation, partnership, association,
joint-stock company, joint-venture, trust, or organized group of persons,
or any receiver, trustee, or other liquidating agent of any of the
foregoing in his capacity or such that, directly or indirectly or through
one or more intermediaries, owns or operates any Electric Utility
Facilities or Gas Utility Facility as to make it necessary or appropriate
or in the public interest or for the protection of investors or consumers
that any Opinion Party or any subsidiary or Affiliate of an Opinion Party
be subject to the obligations, duties and liabilities imposed upon
holding companies by the Public Utility Holding Company Act of 1935, as
amended.
8. To the best of my knowledge, after due inquiry, there are
no ac tions, suits or proceedings pending or threatened against either
Opinion Party in any court or governmental department, commission, board,
bureau, agency or instru mentality, in the United States of America,
which relates to or places or may place in question the validity or
enforceability of any of the Opinion Documents.
9. As used in paragraph 3 of this Certificate, the following
terms shall have the following meanings:
"Affiliate" of a specified company means (A) any person that
directly or indirectly owns, controls or holds with power to vote, 5 per
centum or more of the outstanding voting securities of such specified
company; (B) any company 5 per centum or more of whose outstanding voting
securities are owned, controlled or held with power to vote, directly or
indirectly, by such specified company; (C) any individual who is an
officer or director of such specified company or of any company which is
an affiliate thereof under clause (A) of this paragraph; and (D) any
person or class of persons that the Commission (as defined in the Public
Utility Holding Company Act of 1935, as amended (the "Act") determines
after appropriate notice and opportunity for hearing, to stand in such
relation to such specified company that there is liable to be such an
absence of arm's-length bargaining in transactions between them as to
make it necessary or appropriate in the public interest or for the
protection of investors or consumers that such person be subject to the
obligations, duties and liabilities imposed by the Act upon affiliates of
a company.
"Control" means the power to exercise a controlling influence
over the management or policies of a company, unless such power is solely
the result of an official position with such company; any person who owns
beneficially, either directly or through one or more controlled
companies, more than 25 percent of the Voting Securities of a company is
presumed to Control such company;
"Face-Amount Certificate of the Installment Type" means any
certifi cate, investment contract, or other Security that represents an
obligation on the part of its issuer to pay a stated or determinable sum
or sums at a fixed or determinable date or dates more than 24 months
after the date of issuance, in consideration of the payment of periodic
installments of a stated or determinable amount;
"Government Securities" means all Securities issued or
guaranteed as to principal or interest by the United States, or by a
person controlled or supervised by and acting as an instrumentality of
the government of the United States pursuant to authority granted by the
Congress of the United States; or any certificate of deposit for any of
the foregoing;
"Investment Securities" includes all Securities except (A)
Government Securities, (B) Securities issued by employees' securities
companies, and (C) Securi ties issued by Majority-Owned Subsidiaries of
any Opinion Party which are not engaged and do not propose to be engaged
in activities within the scope of clause (b), (c) or (d) of paragraph 3
of this Certificate;
"Majority-Owned Subsidiary" of a person means a company 50%
or more of the outstanding Voting Securities of which are owned by such
person, or by a company which, within the meaning of this paragraph, is a
Majority-Owned Subsidiary of such person. Notwithstanding the foregoing,
a company shall not be considered a Majority-Owned Subsidiary of a person
if Control of such company rests with someone other than such person;
"Security" means any note, stock, treasury stock, bond,
debenture, evidence of indebtedness, certificate of interest or
participation in any profit-sharing agreement, collateral-trust
certificate, preorganization certificate or subscription, transferrable
share, investment contract, voting-trust certificate, certificate of
deposit for a security, fractional undivided interest in oil, gas, or
other mineral rights, any put, call, straddle, option, or privilege on
any security (including a certificate of deposit) or on any group or
index of securities (including any interest therein or based on the value
thereof), or any put, call, straddle, option, or privilege entered into
on a national securities exchange relating to foreign currency, or, in
general, any interest or instrument commonly known as a "security," or
any certificate of interest or participation in, temporary or interim
certificate for, receipt for, guarantee of, or warrant or right to
subscribe to or purchase, any of the foregoing;
"Value" means (i) with respect to Securities owned at the end
of the last preceding fiscal quarter for which market quotations are
readily available, the market value at the end of such quarter; (ii) with
respect to other Securities and assets owned at the end of the last
preceding fiscal quarter, fair value at the end of such quarter, as
determined in good faith by or under the direction of the board of
directors; and (iii) with respect to securities and other assets acquired
after the end of the last preceding fiscal quarter, the cost thereof; and
"Voting Security" means any security presently entitling the
owner or holder thereof to vote for the election of directors of a
company.
IN WITNESS WHEREOF I have executed this certificate this
1st day of December, 1997.
By: /s/ Edward D. Sherrick
_________________________________
Name: Edward D. Sherrick
Title: Vice President of Finance
EXHIBIT 10.2 (K-1)
FORM OF TERM NOTE
THIS NOTE AND THE OBLIGATIONS REPRESENTED HEREBY MAY NOT BE TRANSFERRED
EXCEPT IN COMPLIANCE WITH THE TERMS AND PROVISIONS OF THE CREDIT
AGREEMENT REFERRED TO BELOW. TRANSFERS OF THIS NOTE AND THE OBLIGATIONS
REPRESENTED HEREBY MUST BE RECORDED IN THE REGISTER MAINTAINED BY THE
ADMINISTRATIVE AGENT PURSUANT TO THE TERMS OF SUCH CREDIT AGREEMENT.
$____________ New York, New York
________ __, 199__
FOR VALUE RECEIVED, the undersigned, BEAR ISLAND PAPER
COMPANY, LLC, a Virginia limited liability company (the "Borrower"),
hereby unconditionally promises to pay to the Administrative Agent for
the benefit of (the "Lender") or its registered assigns at the Payment
Office specified in the Credit Agreement (as hereinafter defined) in
lawful money of the United States and in immediately available funds, the
principal amount of (a) DOLLARS ($ ), or, if less, (b) the unpaid
principal amount of the Term Loan made by the Lender pursuant to Section
2.1 of the Credit Agreement. The principal amount of the Term Loan made
by the Lender outstanding under this Note shall be paid in the amounts
and on the dates specified in Section 2.3 of the Credit Agreement. The
Borrower further agrees to pay interest in like money at such office on
the unpaid principal amount hereof from time to time outstanding at the
rates and on the dates specified in Section 2.13 of the Credit Agreement.
The holder of this Note is authorized to endorse on the
schedules annexed hereto and made a part hereof or on a continuation
thereof which shall be attached hereto and made a part hereof the date,
Type and amount of the Term Loan evidenced hereby and the date and amount
of each payment or prepayment of principal with respect thereto, each
conversion of all or a portion thereof to another Type, each continuation
of all or a portion thereof as the same Type and, in the case of
Eurodollar Loans, the length of each Interest Period with respect
thereto. Each such endorsement shall constitute, absent manifest error,
prima facie evidence of the accuracy of the information endorsed. The
failure to make any such endorsement or any error in any such endorsement
shall not affect the obligations of the Borrower in respect of the Term
Loans.
This Note (a) is one of the Term Notes referred to in the
Credit Agreement dated as of December 1, 1997 (as amended, supplemented
or otherwise modified from time to time, the "Credit Agreement"), among
the Borrower, the Lender, the other banks and financial institutions or
entities from time to time parties thereto, Toronto-Dominion (Texas),
Inc., as Administrative Agent, and TD Securities (USA) Inc., as Arranger,
(b) is subject to the provisions of the Credit Agreement and (c) is
subject to optional and mandatory prepayment in whole or in part as
provided in the Credit Agreement. This Note is secured and guaranteed as
provided in the Loan Documents. Reference is hereby made to the Loan Docu
ments for a description of the properties and assets in which a security
interest has been granted, the nature and extent of the security and the
guarantees, the terms and conditions upon which the security interests
and each guarantee were granted and the rights of the holder of this Note
in respect thereof.
Upon the occurrence of any one or more of the Events of
Default, all principal and all accrued interest then remaining unpaid on
this Note shall become, or may be declared to be, immediately due and
payable, all as provided in the Credit Agreement.
All parties now and hereafter liable with respect to this
Note, whether maker, principal, surety, guarantor, endorser or otherwise,
hereby waive presentment, demand, protest and all other notices of any
kind.
Unless otherwise defined herein, terms defined in the Credit
Agreement and used herein shall have the meanings given to them in the
Credit Agreement.
NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED HEREIN OR
IN THE CREDIT AGREEMENT, THIS NOTE MAY NOT BE TRANSFERRED BY THE LENDER
EXCEPT PURSUANT TO AND IN ACCORDANCE WITH THE REGISTRATION AND OTHER
PROVISIONS OF SECTION 9.6 OF THE CREDIT AGREEMENT.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED
IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
BEAR ISLAND PAPER COMPANY, LLC
By: _______________________________
Name:
Title:
<TABLE>
<CAPTION>
Schedule A
to Term Note
------------
LOANS, CONVERSIONS AND REPAYMENTS OF BASE RATE LOANS
- - -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Amount Amount of Principal Amount of Base Rate Unpaid Principal
Amount of Base Rate Converted to of Base Rate Loans Converted to Balance of Base Notation
Date Loans Base Rate Loans Loans Repaid Eurodollar Loans Rate Loans Made By
- - -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Schedule B
to Term Note
------------
LOANS, CONTINUATIONS, CONVERSIONS AND REPAYMENTS OF EURODOLLAR LOANS
<S> <C> <C> <C> <C> <C> <C> <C>
- - ----------------------------------------------------------------------------------------------------------------------------------
Interest Period Amount of Amount of Unpaid Principal
and Eurodollar Principal of Eurodolar Loans Balance of
Amount of Euro- Amount Converted Rate with Eurodollar Loans Converted to Base Eurodollar Notation
Date dollar Loans to Eurodollar Loans Respect Thereto Repaid Rate Loans Loans Made By
- - ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
EXHIBIT K-2
FORM OF REVOLVING CREDIT NOTE
THIS NOTE AND THE OBLIGATIONS REPRESENTED HEREBY MAY NOT BE TRANSFERRED
EXCEPT IN COMPLIANCE WITH THE TERMS AND PROVISIONS OF THE CREDIT AGREEMENT
REFERRED TO BELOW. TRANSFERS OF THIS NOTE AND THE OBLIGATIONS REPRESENTED
HEREBY MUST BE RECORDED IN THE REGISTER MAINTAINED BY THE ADMINISTRATIVE
AGENT PURSUANT TO THE TERMS OF SUCH CREDIT AGREEMENT.
$____________ New York, New York
_________ __, 199__
FOR VALUE RECEIVED, the undersigned, BEAR ISLAND PAPER
COMPANY, LLC, a Virginia limited liability company (the "Borrower"), hereby
unconditionally promises to pay to the Administrative Agent for the benefit
of ____________________ (the "Lender") or its registered assigns at the
Payment Office specified in the Credit Agreement (as hereinafter defined)
in lawful money of the United States and in immediately available funds, on
the Revolving Credit Termination Date the principal amount of (a) DOLLARS
($ ), or, if less, (b) the aggregate unpaid principal amount of all
Revolving Credit Loans made by the Lender to the Borrower pursuant to
Section 2.4 of the Credit Agree ment. The Borrower further agrees to pay
interest in like money at such Payment Office on the unpaid principal
amount hereof from time to time outstanding at the rates and on the dates
specified in Section 2.13 of the Credit Agreement.
The holder of this Note is authorized to endorse on the
schedules annexed hereto and made a part hereof or on a continuation
thereof which shall be attached hereto and made a part hereof the date,
Type and amount of each Revolving Credit Loan made pursuant to the Credit
Agreement and the date and amount of each payment or prepayment of
principal thereof, each continuation thereof, each conversion of all or a
portion thereof to another Type and, in the case of Eurodollar Loans, the
length of each Interest Period with respect thereto. Each such endorsement
shall constitute, absent manifest error, prima facie evidence of the
accuracy of the information endorsed. The failure to make any such endorse-
ment or any error in any such endorsement shall not affect the obligations
of the Borrower in respect of any Revolving Credit Loan.
This Note (a) is one of the Revolving Credit Notes referred
to in the Credit Agreement dated as of December 1, 1997 (as amended,
supplemented or otherwise modified from time to time, the "Credit
Agreement"), among the Borrower, the Lender, the other banks and financial
institutions or entities from time to time parties thereto,
Toronto-Dominion (Texas), Inc. , as Administrative Agent, and TD Securities
(USA) Inc., as Arranger, (b) is subject to the provisions of the Credit
Agreement and (c) is subject to optional and mandatory prepayment in whole
or in part as provided in the Credit Agreement. This Note is secured and
guaranteed as provided in the Loan Documents. Reference is hereby made to
the Loan Documents for a description of the properties and assets in which
a security interest has been granted, the nature and extent of the security
and the guarantees, the terms and conditions upon which the security
interests and each guarantee were granted and the rights of the holder of
this Note in respect thereof.
Upon the occurrence of any one or more of the Events of
Default, all principal and all accrued interest then remaining unpaid on
this Note shall become, or may be declared to be, immediately due and
payable, all as provided in the Credit Agreement.
All parties now and hereafter liable with respect to this
Note, whether maker, principal, surety, guarantor, endorser or otherwise,
hereby waive presentment, demand, protest and all other notices of any
kind.
Unless otherwise defined herein, terms defined in the Credit
Agreement and used herein shall have the meanings given to them in the
Credit Agreement.
NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED HEREIN OR
IN THE CREDIT AGREEMENT, THIS NOTE MAY NOT BE TRANSFERRED BY THE LENDER
EXCEPT PURSUANT TO AND IN ACCORDANCE WITH THE REGISTRATION AND OTHER
PROVISIONS OF SECTION 9.6 OF THE CREDIT AGREEMENT.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED
AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
BEAR ISLAND PAPER COMPANY, LLC
By: _______________________________
Name:
Title:
Schedule A
to Revolving Credit Note
LOANS, CONVERSIONS AND REPAYMENTS OF BASE RATE LOANS
<TABLE>
<CAPTION>
Amount Amount of Unpaid
Amount of Principal Base Rate Principal
Amount of Converted of Base Loans Converted Balance
Base Rate to Base Rate Loans to Euro- of Base Notation
Date Loans Rate Loans Repaid dollar Loans Rate Loans Made By
<S> <C> <C> <C> <C> <C> <C>
</TABLE>
Schedule B
to Revolving Credit Note
LOANS, CONTINUATIONS, CONVERSIONS AND REPAYMENTS OF EURODOLLAR LOANS
<TABLE>
<CAPTION>
Interest Period and Amount of Amount of Unpaid Principal
Amount of Amount Converted Eurodollar Rate Principal of Eurodollar Loans Balance of
Eurodollar to Eurodollar with Eurodollar Converted to Eurodollar Notation
Date Loans Loans Respect Thereto Loans Repaid Base Rate Loans Loans Made By
<S> <C> <C> <C> <C> <C> <C> <C>
</TABLE>
EXHIBIT L
FORM OF
PREPAYMENT OPTION NOTICE
Attention of [ ]
Telecopy No. [ ]
[Date]
Ladies and Gentlemen:
The undersigned, Toronto-Dominion (Texas), Inc., as
administrative agent (in such capacity, the "Administrative Agent") for
the Lenders, refers to the Credit Agreement, dated as of ________, 199__
(as amended, supplemented or otherwise modified from time to time, the
"Credit Agreement"), among Bear Island Paper Company, LLC, the Lenders
from time to time parties thereto, the Administrative Agent, and TD
Securities (USA) Inc., as Arranger. Capitalized terms used herein and not
otherwise defined herein shall have the meanings assigned to such terms
in the Credit Agreement. The Administrative Agent hereby gives notice of
an offer of prepayment made by the Borrower pursuant to subsec tion
2.16(d) of the Credit Agreement of the Prepayment Amount. Amounts applied
to prepay the Term Loans shall be applied pro rata to the Term Loan held
by you. The portion of the prepayment amount to be allocated to the Term
Loan held by you and the date on which such prepayment will be made to
you (should you elect to receive such prepayment) are set forth below:
(A) Total Term Loan Prepayment Amount ______________
(B) Portion of Term Loan Prepayment Amount to
be received by you ______________
(C) Prepayment Date (3 Business Days after the date
of this Prepayment Option Notice) ______________
IF YOU DO NOT WISH TO RECEIVE ALL OF THE TERM LOAN
PREPAYMENT AMOUNT TO BE ALLOCATED TO YOU ON THE PREPAYMENT DATE INDICATED
IN PARAGRAPH (C) ABOVE, please sign this notice in the space provided
below and indicate the percentage of the Term Loan Prepayment Amount
otherwise payable which you do not wish to receive. Please return this
notice as so completed via telecopy to the attention of
[___________________] at Toronto-Dominion (Texas), Inc., no later than
[10:00] a.m., New York City time, on the Prepayment Date, at Telecopy No.
[________________]. IF YOU DO NOT RETURN THIS NOTICE, YOU WILL RECEIVE
100% OF THE TERM LOAN PREPAYMENT ALLO CATED TO YOU ON THE PREPAYMENT
DATE.
TORONTO-DOMINION (TEXAS), INC.,
as Administrative Agent
By:__________________________________
Name:
Title:
[Lender]
By:_________________________________
Name:
Title:
Percentage of Prepayment
Amount Declined: ______%
EXHIBIT M
FORM OF EXEMPTION CERTIFICATE
Reference is made to the Credit Agreement, dated as of
___________________ (as amended, supplemented or otherwise modified from
time to time, the "Credit Agreement") among Bear Island Paper Company,
LLC, a Virginia limited liability company (the "Borrower"), the several
banks and other financial institutions from time to time parties thereto
(the "Lenders"), Toronto-Dominion (Texas), Inc., as administrative agent
for the Lenders thereunder (in such capacity, the "Administrative Agent")
and TD Securities (USA) Inc., as Arranger. Capitalized terms used herein
that are not defined herein shall have the meanings ascribed to them in
the Credit Agreement. ______________________ (the "Non- U.S. Lender") is
providing this certificate pursuant to subsection 2.18(d) of the Credit
Agreement. The Non-U.S. Lender hereby represents and warrants that:
1. The Non-U.S. Lender is the sole record and beneficial
owner of the Loans or the obligations evidenced by Note(s) in respect of
which it is providing this certificate.
2. The Non-U.S. Lender is not a "bank" for purposes of
Section 881(c)(3)(A) of the Internal Revenue Code of 1986, as amended
(the "Code"). In this regard, the Non-U.S. Lender further represents and
warrants that:
(a) the Non-U.S. Lender is not subject to regulatory or other
legal requirements as a bank in any jurisdiction; and
(b) the Non-U.S. Lender has not been treated as a bank for
purposes of any tax, securities law or other filing or
submission made to any Governmental Authority, any
application made to a rating agency or qualification for any
exemption from tax, securities law or other legal
requirements;
3. The Non-U.S. Lender is not a 10-percent shareholder of the
Borrower within the meaning of Section 881(c)(3)(B) of the Code; and
4. The Non-U.S. Lender is not a controlled foreign
corporation receiving interest from a related person within the meaning
of Section 881(c)(3)(C) of the Code.
IN WITNESS WHEREOF, the undersigned has duly executed this
certificate.
[NAME OF NON-U.S. LENDER]
By: ____________________________
Name:
Title:
Date: ____________________
EXHIBIT N
EXECUTIVE SUMMARY
This report summarizes the findings of a Phase I Environmental
Site Assessment (ESA) conducted by AWARE Environmental Inc.
(AEI) on the Bear Island Paper Company, L.P. (BIPCO) mill located
in Ashland, Virginia. The BIPCO facility produces newsprint
using a combination of Thermo-Mechanical Pulping (TMP) and
recycled paper pulping. This ESA was conducted on behalf of
Toronto Dominion Bank. The ESA included a site walk-through and
perimeter review of the subject site on October 7 and 8, 1997.
An evaluation of available maps, commercially available
environmental databases, select Virginia Department of
Environmental Quality (VDEQ) files, owner representative
interviews, an area reconnaissance, and a site walk-through
identified five (5) potential areas of environmental concern at
the subject property. These potential environmental concerns are
summarized below .
1. On September 29, 1994, the US EPA, Region III issued a
Notice of Violation (NOV) to BIPCO which stated that the
facility was operating in violation of applicable federally
enforceable air pollution control requirements. BIPCO
responded to the NOV by providing information that
demonstrated that the activities stated in the NOV had
either not occurred as specified in the NOV or had been
approved by the VDEQ. At the time of this Phase I ESA, this
NOV had not been resolved.
2. Based on the most recent groundwater data from the
wastewater treatment area, total organic carbon, total
organic halides, ammonia, chromium, cadmium, surface and
zinc were detected in downgradient monitoring wells at
levels exceeding the Virginia groundwater standards. The
VDEQ has not taken action regarding the groundwater
monitoring data at this time.
3. Following the confirmation of a statistically measured
significant increase in specific conductance in one (1)
monitoring well used to monitor groundwater quality
downgradient from the industrial landfill, BIPCO implemented
a Phase II monitoring program. The first round of samples
were collected in July 1997. A confirmatory sample was
collected in September 1997. Based on the analytical data
which indicated that no target organic constituents were in
the groundwater, BIPCO petitioned for a variance from the
Phase II sampling requirements by requesting that the
monitoring parameters be limited to inorganic compounds
only. The VDEQ had not provided a response at the time of
the site visit.
4. BIPCO is currently clarifying whether the existing 1977 air
permit allows BIPCO to burn WWTP sludge in the B&W boiler.
BIPCO is working with the VDEQ to clarify previous VDEQ
correspondence which indicate the 1977 air permit allows
burning of the WWTP sludge in the B&W boiler and/or modify
the 1977 permit as necessary to reflect sludge burning as an
acceptable fuel.
5. A 5,000-gallon unleaded gasoline UST was removed in 1990.
According to site personnel, the tank closure was clean.
However, no closure documentation was available for review.
AEI recommends that BIPCO develop and place in their files
documentation of the underground storage tank as required by
the VDEQ.
Based on AEI's review of the current known environmental
conditions at the BIPCO facility and given the complexity
and variety of operations, the mill is well operated and
maintained.
TABLE OF CONTENTS
Section Description
Page
EXECUTIVE SUMMARY . . . . . . . . . . . . . . . i
TABLE OF CONTENTS . . . . . . . . . . . . . . iii
LIST OF FIGURES . . . . . . . . . . . . . . . . v
LIST OF TABLES . . . . . . . . . . . . . . . . v
LIST OF APPENDICES . . . . . . . . . . . . . . . v
1.0 INTRODUCTION . . . . . . . . . . . . . . . . . . 1
1.1 Purpose . . . . . . . . . . . . . . . . . . 3
1.2 Limitations And Exceptions of Assessment . 3
2.0 SITE DESCRIPTION . . . . . . . . . . . . . . . . 5
2.1 Location And Legal Description . . . . . . 5
2.2 Site And Vicinity Characteristics . . . . . 5
2.3 Site Improvements . . . . . . . . . . . . . 6
2.4 Current Use Of Property . . . . . . . . . . 6
2.5 Past Use Of Property . . . . . . . . . . . 8
2.6 Current And Past Use Of Nearby Properties . 8
2.7 Public Water Supply Well Locations . . . . 9
3.0 RECORDS REVIEW . . . . . . . . . . . . . . . . 10
3.1 Physical Setting Sources . . . . . . . . 10
3.1.1 Current USGS Topographic Map . 10
3.1.2 Soil Survey . . . . . . . . . . 10
3.1.3 Bear Island Paper Company, L.P.
Master Site Plan . . . . . . 10
3.2 Historical Use Information . . . . . . . 11
3.2.1 Historical Topographic Maps . . 11
3.2.2 Aerial Photographs . . . . . . 11
3.2.3 Subject Site Deeds . . . . . . 11
3.3 Standard Environmental Federal And State
Record Sources . . . . . . . . . . . . 11
3.4 Subject Site . . . . . . . . . . . . . . 13
3.5 Virginia Department of Environmental
Quality . . . . . . . . . . . . . . . . 13
3.6 Potential Impact From Neighboring Sites . 14
4.0 SITE RECONNAISSANCE . . . . . . . . . . . . . 15
4.1 Hazardous Substances/Wastes Associated
With The Property . . . . . . . . . . 15
4.2 Solid Waste . . . . . . . . . . . . . . . 16
4.3 Current And Past Use Of Storage Tanks . . 16
4.4 Stormwater Discharges . . . . . . . . . . 18
4.5 Wastewater Treatment System . . . . . . . 18
4.6 Air Emissions Control System . . . . . . 21
4.6.1 Notice of Violation . . . . . . 23
4.7 Landfill Areas . . . . . . . . . . . . . 24
4.7.1 Former Turner Landfill . . . . 24
4.7.2 Ash Landfill . . . . . . . . . 25
4.7.3 Industrial Landfill . . . . . . 26
4.8 Polychlorinated Biphenyls . . . . . . . . 26
4.9 Asbestos . . . . . . . . . . . . . . . . 26
4.10 Miscellaneous . . . . . . . . . . . . . . 27
5.0 SUMMARY AND CONCLUSIONS . . . . . . . . . . . 28
6.0 SIGNATURE PAGE . . . . . . . . . . . . . . . . 30
LIST OF FIGURES
Figure Description
1 Site Location Map
2 Site Plan of the Developed Portion of the Facility
3 Drainage Map of the Developed Portion of the
Facility
LIST OF TABLES
Table Description
1 Non-Petroleum Product Storage
2 Petroleum Product Storage
LIST OF APPENDICES
Appendix Description
A Photographs
B Environmental Database Review
C Subject Site Deeds
D Master Site Plan and Maps of the Outlying Parcels
of Land Owned by BIPCO
E Doswell Combined Cycle Facility Spill Incident
Documentation
F Chemical Inventory List, SARA Title III Reporting,
RCRA Status and Manifests for the Safety Kleen
Part Cleaning Sinks
G Underground Storage Tank Documentation
H VPDES Stormwater Permit; Stormwater Pollution
Prevention Plan; and the 1996 and 1997 Annual
Inspection Reports
I Doswell Treatment Plant Discharge Permit and 1996
NOVs
J September 1997 WWTP Groundwater Monitoring
Results and Wastewater Treatment Inspection Report
for October 2, 1996
K Air Emissions Documentation
L Ash Landfill Documentation
M Industrial Landfill Documentation
N Beneficial Use of Ash
SECTION 1.0
INTRODUCTION
This report summarizes the findings of a Phase I Environmental
Site Assessment (ESA) conducted by AWARE Environmental Inc.
(AEI) on the Bear Island Paper Company, L.P. (BIPCO) mill located
in Ashland, Virginia. This ESA was conducted on behalf of
Toronto Dominion Bank. The ESA included a site walk-through and
perimeter review of the subject site on October 7 and 8, 1997.
Photographs considered important to the explanations contained in
this report are included in Appendix A.
This ESA was conducted in general conformance with ASTM E 1527-
97, Standard Practices for Environmental Site Assessments: Phase
I Environmental Site Assessment Process, third edition.
The following information was reviewed and/or obtained in
conducting this ESA.
ENVIRONMENTAL ASSESSMENT MATERIAL
* 1980 Bear Island Paper Co. Site Plan, Associated Engineers &
Surveyors Ltd., Project No. 80-059, last revised 10/26/94
* 1980 Bear Island Paper Co. Master Site Plan, Resource
International, LTD, Project No. 85003.18, last revised
11125/96
* Doswell, Virginia 15 Minute Topographic Quadrangle. dated
1918 (U.S. Geological Survey)
* Ashland, Virginia 7.5 Minute Topographic Quadrangle, dated
1951 (U.S. Geological Survey)
* Ashland, Virginia 7.5 Minute Topographic Quadrangle, dated
1969 and photorevised 1974 (U.S. Geological Survey)
* Ashland, Virginia 7.5 Minute Topographic Quadrangle, dated
1969 and photorevised 1985 (U.S. Geological Survey)
* Hanover County, Virginia, Soil Survey, 1974 (U.S. Department
of Agriculture, Soil Conservation Service)
Information from the following offices, agencies, or databases
was also reviewed and/or obtained as part of this ESA. The
database search and historical topographic quadrangle review were
performed by Environmental Data Resources, Inc. (EnR) (Appendix
B).
FILE RECORDS SEARCHED AND/OR REVIEWED
* Comprehensive Environmental Response, Compensation and
Liability Information System (CERCLIS) database (04/30/97).
* Emergency Response Notification System (ERNS) database
(03/01/97).
* National Priority List (NPL) database (04/01/97).
* Resource Conservation and Recovery Information System
(RCRIS) database (04/01/97).
* Corrective Action Report (CORRACTS) database (12/01/96).
* Biennial Reporting System (BRS) database ((12/31/93).
* Superfund (CERCLA) Consent Decrees (CONSENT) database
(varies).
* Facility Index System (FINDS) database (09/30/95).
* Hazardous Materials Information Reporting System (HMIRS)
database (12/31/95).
* Material Licensing Tracking System (MLTS) database
(01/15/97).
* Federal Superfund Liens (NPL LIENS) database (10/15/91).
* PCB Activity Database System (PADS) database (01/27/97).
* RCRA Administrative Action Tracking System (RAATS) database
(04/17/95).
* Records of Decision (ROD) database (03/31/95).
* Toxic Chemical Release Inventory System (TRIS) database
(12/31/92).
* Toxic Substances Control Act (TSCA) database (01/31/95).
* State Hazardous Waste Sites (SHWS) database (04/30/97).
* Solid Waste Management Facilities (SWF/LF) database
(05/01/97).
* Underground Storage Tank Data Notification Information (UST)
database (04/22/97).
* Voluntary Remediation Program (VRP) database (07/26/96).
* CEDS (CEDS) database (07/01/97).
* Virginia Aboveground Storage Tank Database (AST) database
(02/11/97).
* Virginia Pollution Complaint Database (SPILLS) database
(06/01/96).
* Virginia Department of Environmental Quality (DEQ) Piedmont
Regional Office
LUST Records (LUST Region 2) database (8/6/97).
* Former Manufactured Gas (Coal Gas) Sites database.
* Delisted NPL sites database.
* No Further Remedial Action Planned (NFRAP) database.
* Federal Reporting Data System (FRDS).
* National Radon Database.
* Oil/Gas Pipelines/Electrical Transmission Lines.
* Sensitive Receptors.
* USGS Water Wells.
* Flood Zone Data.
* Epicenter.
* Water Dams.
* Virginia Public Water Supplies
* Virginia Department of Environmental Quality (DEQ) Piedmont
Regional Office Records Review Section
* Hanover County Public Records.
1.1 PURPOSE
The purpose of this ESA was to gather information by inquiries,
reconnaissance and research that would aid in the identification
and evaluation of potential conditions of environmental concern.
This report is a collective record of facts and findings
discovered in the process of performing the ESA.
1.2 LIMITATIONS AND EXCEPTIONS OF ASSESSMENT
The limitations of this Phase I ESA are as follows:
* No asbestos, sediment, soil, air, water, groundwater,
radon or other media samples were collected and/or
analyzed;
* No evaluation of critical habitats for threatened or
endangered flora or fauna was conducted;
* No private properties were accessed during the
reconnaissance of the surrounding area; and
* The findings presented in this report are professional
opinions based on AEI's interpretation of information
currently available for evaluation.
A potential always remains for the presence of unknown,
unidentified, unexpected or unforeseen surface or subsurface
contamination. Further evidence to identify such potential site
contamination would require additional site investigation
activities including subsurface sampling, laboratory analyses and
interpretation.
No warranty, expressed or implied, is made. Use of this report
is strictly limited to Toronto Dominion Bank and its authorized
representatives. Any use of this report by other parties is
Toronto Dominion Bank's or its representatives' sole
responsibility.
SECTION 2.0
SITE DESCRIPTION
2.1 LOCATION AND LEGAL DESCRIPTION
The subject site is located on Old Ridge Road near the town of
Ashland, within Hanover County, Virginia (Figure 1). BIPCO owns
approximately 1500 acres of land that comprises the subject site.
The mill facility and its ancillary operations occupy a land
parcel consisting of approximately 500 acres. Approximately 250
acres of the subject site located east of the CSX Railroad are
undeveloped (Figure 2 and Photograph A). BIPCO also owns a large
tract of land northeast and east of the mill and across the North
Anna River that is referred to as the Meadows property which is
used to store water for mill operations. BIPCO recently
purchased tracts of land referred to as the North Anna Landfill
and North Fork Properties, previously referred to as the Turner
Property. The outlying parcels are discussed further in Section
2.4. A legal description of the land parcels which constitute
the developed portions of the subject property is included in
Appendix C.
2.2 SITE AND VICINITY CHARACTERISTICS
The developed portion of the subject property is located between
the Little River and Route 738 (Old Ridge Road), east of
Interstate 95 in Hanover County (Figure 1). The site varies in
elevation from approximately 100 feet to 50 feet above mean sea
level. The land surface in the developed area is fairly flat
with most of the relief occurring near the Little River. Surface
water drainage across the developed portion of the property is to
the north toward the Little River. Surface water drainage across
the adjoining eastern, undeveloped portion of the property is to
the north and east toward the North Anna River. The adjoining
developed and undeveloped site areas are physically separated by
the north-south trending CSX Railroad.
According to the Hanover County Soil Survey (1973), the sediments
occurring in the nearsurface in the general area of the subject
site are comprised of various types of fine sandy loams, sandy
loams and loams. Surficial sediments at the site are likely to
include construction fill and river deposits given the close
proximity to the Little and North Anna Rivers.
Groundwater beneath the developed portion of the site is expected
to flow generally northward toward the Little River located along
the northern boundary of the site. Groundwater beneath the
undeveloped portion of the site is expected to flow generally
eastward toward the North Anna River. Based on water level
measurements taken in on-site monitoring wells located near the
on-site wastewater treatment plant, the depth to groundwater is
approximately 5 to 15 feet below grade.
2.3 SITE IMPROVEMENTS
Development in the actively utilized portion of the subject site
includes the thermo-mechanical pulping (TMP) mill, recycle mill,
paper machine, office facilities, warehouse, woodyard, outdoor
chemical tank farm, fueling area and oil storage shed,
powerhouse, wastewater treatment plant (WWTP) facilities, ash
landfill and industrial landfill (Figure 2 and Photograph A).
Electricity is provided to the facility by Rappahannock Electric
Cooperative. Natural gas is provided to the site by Virginia
Natural Gas. Potable water is purchased from the County of
Hanover for both domestic and process use. BIPCO withdraws water
from the North Anna River to supplement its process water supply.
Site process wastewater is treated in the on-site wastewater
treatment plant and treated effluent is discharged to the Doswell
Wastewater Treatment System under NPDES #VA0029521. Domestic
sewage is treated by the Doswell Wastewater Treatment Plant.
2.4 CURRENT USE OF PROPERTY
BIPCO operates a TMP and recycled newsprint mill at the subject
site. The mill started production using the TNO process in late
December 1979. In the TMP process, the pulp is produced by
grinding wood chips into fiber through a mechanical grinding
process. Steam and energy supplied to the grinding process
provide heat to aid in the generation of cellulose fibers that
are ultimately used to manufacture paper. Due to the demand for
recycled newsprint, BIPCO expanded its facility to incorporate
the production of recycled newsprint. The recycling process,
which involves wetting old newspaper and magazines and separating
the fibers from the ink, contaminants and clays, was initiated in
April 1994. The pulp from both processes is dewatered and then
made into sheet form by pressing and drying operations performed
at the paper mill. The newsprint is wound into rolls and shipped
to customers.
Supporting plant operations are undertaken in the following
areas: woodyard; powerhouse; sludge dryer and wastewater
treatment system; and other miscellaneous operations. The
woodyard operations include the processing of logs into woodchips
that can be used to make pulp. Additional woodchips are
purchased from other outside sources and used to make pulp.
Facility process steam is generated in the powerhouse by burning
coal, natural gas, WWTP sludge, woodwaste, and propane. The WWTP
treats wastewater utilizing an activated sludge process. The
miscellaneous areas of the mill are comprised of maintenance
activities and other supporting operations including; air
conditioning, ventilation, chiller systems, parts washing, core
cutting, and process water cooling towers. The percentage of
site uses for the adjoining developed and undeveloped land
parcels (from Master Site Plan) includes building structures 4 %
- roads - 4 %, water bodies/ storage/ treatment basins - 7 %,
landfills - 6 %, storage areas (logs, coal, etc.) - 3 %, wetlands
- 42 %, and open/wooded - 34%.
BIPCO also owns a large tract of land northeast and east of the
mill and across the North Anna River that is referred to as the
Meadows property. BIPCO maintains two (2) large natural ponds on
this tract which are used to supplement the process water
purchased from the County of Hanover. Water at this location is
withdrawn from the North Anna River and stored in the natural
ponds prior to use by BIPCO. Portions of the Meadows property
are leased for farming. Appendix D contains a map of the Meadows
property.
BIPCO recently purchased tracts of land referred to as the North
Anna Landfill and North Fork Properties. These tracts were
previously referred to as the Turner Property. As discussed
further in Section 4.7, BIPCO has proposed to the Virginia
Department of Environmental Quality (VDEQ) to close the North
Anna Landfill in place as is and perform groundwater monitoring
as required by the VDEQ. The VDEQ has not responded to this
proposal as of yet. The Appendix D contains a map of the former
Turner Property.
2.5 PAST USE OF PROPERTY
BIPCO has operated the subject mill facility in the western,
developed portion of the subject site since late December 1979.
Based on information provided by a BIPCO representative, the
subject property was used for residential and agricultural
purposes through the 1900's prior to development by BIPCO.
A review of the USGS Ashland, VA 7.5 Minute Topographic
Quadrangle Maps dated 1918, 1951, 1969, 1969 (photorevised 1974),
1969 (photorevised 1981) and 1969 (photorevised 1985) indicate
the subject site was rural in nature. The topographic maps show
the subject site to be covered by densely forested areas and by
cleared areas used for farming prior to its development by BIPCO.
The CSX Railroad is visible and runs north/south across the
subject site on all the reviewed historic topographic maps.
Several small residential and/or farm related structures are
evident on the 1918, 1951, 1969 and 1969 (photorevised 1974)
maps. BIPCO's facility appears on the 1969 (photorevised 1981)
and 1969 (photorevised 1985) historic topographic maps.
A review of a 1957 aerial photograph provided by the Hanover
County Office of Revenue confirms the agricultural/residential
nature of the subject site property prior to 1957.
2.6 CURRENT AND PAST USE OF NEARBY PROPERTIES
Current land uses in the area are primarily agricultural and
residential. The developed portion of the subject property is
bordered to the north by the Little River, to the north and east
by the North Anna River, to the south by State Route 783 and to
the west by the Doswell Combined Cycle Facility. The County of
Hanover Wastewater Treatment Plant is located across the Little
River and north of the subject site. Past use of nearby
properties appears to have been primarily agricultural.
2.7 PUBLIC WATER SUPPLY WELL LOCATIONS
According to the Public Water Supply System Information database
provided by EDR, public water supply well PSW ID: VA6033613
operated by Frog Level Market is located greater than 2 miles
north of the site. This active well has been operational since
January, 1978 and serves less than 101 persons. Reportedly, the
well currently has or has in the past had major violation(s), but
additional information on the violation(s) was not available.
The EDR database search identified two (2) public water supply
wells on the Virginia State Database at a distance of greater
than two (2) miles from the site. Water well FRDS No. 6059270,
operated by Fairfax Public Schools, is located in the eastern
quadrant of the search radius. Well FRDS No. 4085343. operated
by Hanover Academy, is located in the southern quadrant of the
search radius, reportedly serves a population of 70.
The EDR database search identified one (1) water well on the
Federal Database at a distance of between one (1) mile and two
(2) miles from the site. Water well ID: 37503007726901 is
located in the northern quadrant of the search radius at a
distance of 1.0 to 2.0 miles north of the site. This well was
constructed in 1974 and is reportedly currently unused.
SECTION 3.0
RECORDS REVIEW
3.1 PHYSICAL SETTING SOURCES
3.1.1 CURRENT USGS TOPOGRAPHIC MAP
The current USGS topographic map covering the subject site and
surrounding area is the Ashland, Virginia quadrangle dated 1969
and photorevised in 1985 (Figure 1). Based on this map, the site
varies in elevation from approximately 100 feet to 50 feet above
mean sea level. The developed portion of the site and the former
Turner Property are fairly flat with most of the relief occurring
near the Little River. The outlying, undeveloped parcels of land
are generally low lying with elevations less than 50 feet above
sea level and with minimal relief.
3.1.2 SOIL SURVEY
The 1974 Hanover County Soil Survey Map of the subject site and
surrounding area was reviewed and is referenced in Section 1.0.
According to the Hanover County Soil Survey (1974), the sediments
occurring in the near-surface in the general area of the subject
site are comprised of various types of fine sandy loams, sandy
loams and loams.
3.1.3 BEAR ISLAND PAPER COMPANY, L.P. MASTER SITE PLAN
The BIPCO Master Site Plan indicates that approximately 42% of
the main parcel of property located east and west of the CSX
Railroad is wetlands (Appendix D). Portions of the land parcel
referred to as the Meadows property may potentially be considered
wetlands based on its relative topography and close proximity to
the North Anna River.
3.2 HISTORICAL USE INFORMATION
3.2.1 HISTORICAL TOPOGRAPHIC MAPS
AEI reviewed historical USGS Ashland, VA 7.5 Minute
Topographic Quadrangle
Maps dated 1951, 1969, 1969 (photorevised 1974), 1969
(photorevised 1981) and 1969 (photorevised 1985), and a USGS
Doswell, VA 15 Minute Topographic Quadrangle Map dated 1918
as referenced in Section 1.0. Review comments are discussed
in Sections 2.5 and 2.6.
3.2.2 AERIAL PHOTOGRAPHS
AEI reviewed a 1957 aerial photograph provided by the
Hanover County Office of
Revenue. Review continents are discussed in Section 2.5 and
2.6.
3.2.3 SUBJECT SITE DEEDS
A review of the subject property deeds was conducted for the
subject site on October 8, 1997 at the Hanover County
Courthouse. Select copies of deeds and a summary of the
limited chain-of-title search for the subject site are
included in Appendix C.
3.3 STANDARD ENVIRONMENTAL FEDERAL AND STATE RECORD SOURCES
Copies of the most recently available updated Federal and State
environmental databases have been compiled by EDR. Federal and
State environmental database listings provided by EDR for the
area within the ASTM-defined minimum search distance were
obtained for review (Appendix B).
The searched Federal databases include the following:
1. Comprehensive Environmental Response,
Compensation, and Liability Information System
(CERCLIS) (04/30/97);
2. Emergency Response Notification System (ERNS)
(03/01/97);
3. National Priority List (NPL) (04/01/97);
4. EPA Resource Conservation and Recovery Information
System (RCRIS)
(04/01/97);
5. Corrective Action Report (CORRACTS) (12/01/96);
6. Biennial Reporting System (BRS) (12/31/93);
7. Superfund (CERCLA) Consent Decrees (CONSENT)
database (varies);
8. Facility Index System (FINDS) (09/30/95);
9. Hazardous Materials Information Reporting System
(HMIRS) (12/31/95);
10. Material Licensing Tracking System (MLTS)
(01/15/97);
11. Federal Superfund Liens (NPL LIENS) (10/ 1 5/9 1);
12. PCB Activity Database System (PADS) (01/27/97);
13. RCRA Administration Action Tracking System (RAATS)
(04/17/95);
14. Records of Decision (ROD) (03/31/95);
15. Toxic Chemical Release Inventory System (TRIS)
(12/31/92); and
16. Toxic Substances Control Act (TSCA) (01/31/95).
A search of the Commonwealth of Virginia databases included the
following:
1. State Hazardous Waste Sites (SHWS) database
(04/30/97);
2. Solid Waste Management Facilities (SWF/LF)
database (05/01/97);
3. Underground Storage Tank Data Notification
Information (UST) database (04/22197);
4. Voluntary Remediation Program (VRP) database
(07/26/96);
5. CEDS (CEDS) database (07/01/97);
6. Virginia Aboveground Storage Tank Database (AST)
database (02/11/97);
7. Pollution Complaint Database (SPILLS) database
(06/01/96);
Miscellaneous federal, state and private agency databases include
the following:
1. Department of Environmental Quality (DEQ) LUST
Records (LUST Region 2, Piedmont Regional Office)
database (8/6/97);
2. Former Manufactured Gas (Coal Gas) Sites database;
3. Delisted NPL Sites (DELISTED NPL);
4. No Further Remedial Action Planned (NFRAP);
5. Federal Reporting Data System (FRDS);
6. National Radon Database;
7. United States Geological Survey (USGS) Oil/Gas
Pipelines/Electrical Transmission Lines;
8 Sensitive Receptors;
9. USGS Water Wells;
10. Federal Emergency Management Agency (FEMA) Flood
Zone Data;
11. Department of Commerce, National Oceanic and
Atmospheric Administration - Epicenters;
12. National Inventory of Dams - Water Dams;
13. Virginia Public Water Supplies.
A total of one (1) facility or site which had multiple listings
was identified in the aforementioned databases within the ASTM-
specified radii of the subject site (Appendix B).
Doswell Combined Cycle Facility located at 10098 Old Ridge Road
was listed in the UST, CEDS, and LUST databases. This facility
is situated west-northwest of the subject property, and is estimated
in the EDR report to be situated higher in elevation than the subject
property. Based on the available information, the facility has a
Virginia Pollution Abatement Permit #VPA00525 which became
effective 6/29/90. This permit expires 6/29/2000. No other
information, other than the pollution complaint number of 96-
4012, is given in the databases regarding the leaking underground
storage tank (LUST).
ORPHAN SITES
Eighteen (18) orphan sites were identified by EDR during the
Federal and State database searches. These orphan sites are
facilities whose location could not be determined accurately
during the database search by EDR, due to poor or limited
geographic information. The orphan sites listed appear on the
CERCLIS, FINDS, RCRIS-SQG, CERC-NFRAP. SWF/LF, UST, LUST, RCRIS-
LQG databases. Based on the limited address information
provided, all the orphan sites are located at least 1.5 miles
away from the subject site. None of the orphan sites listed were
observed during the area reconnaissance. Based on the
information provided in the EDR report and the information
gathered during the area reconnaissance, none of the facilities
listed on the orphan summary are expected to have a significant
adverse environmental impact on the subject property.
3.4 SUBJECT SITE
The subject site was listed in two (2) databases searched by EDR:
the ERNS and the SWF/LF databases. Based on the SWF/LF database,
the subject site has a permitted industrial landfill. A
facility I.D. # 573 has been assigned to the landfill and the
permit approval date is given as 5/5/95. A second industrial
landfill (the ash landfill) at the subject facility permitted in
10/21/88.
3.5 VIRGINIA DEPARTMENT OF ENVIRONMENTAL QUALITY
AEI personnel visited the VDEQ, Piedmont Regional Office to
review information regarding
1) the subject site and 2) surrounding properties for potential
environmental concerns identified in the EDR database search.
The regional office maintains several files concerning the subject
site. Pertinent information from these files is discussed in the
applicable subsections of Section 4.0.
File information regarding the orphan sites listed in the EDR
database search indicated that all of the orphan sites are
located at a distance greater than 1.5 miles from the subject
site. The aforementioned orphan sites are not expected to have a
significant environmental impact on the subject site due to their
separation distance.
Based on the files maintained by the VDEQ on the Doswell Combined
Cycle facility, the assigned LUST pollution complaint number 96-
4012 was for a July 5, 1995 release of approximately 800 gallons
of #2 fuel oil from the overflow vent due to temperature-related
expansion of the fuel. Cleanup efforts were documented in a
September 7, 1995 report by IMS Environmental. The VDEQ issued a
closure letter based on the cleanup documentation provided by IMS
(Appendix E). Based on the available information, this release
is not expected to have an impact on the BIPCO facility.
3.6 POTENTIAL IMPACT FROM NEIGHBORING SITES
Based on a review of available information on adjacent
properties, the potential for environmental impact to the subject
site from neighboring properties is low. No impacts to the
subject site from neighboring sites are known to exist nor were
identified as a result of this ESA.
SECTION 4.0
SITE RECONNAISSANCE
A site visit to the subject property was conducted on September
8, 1997. During the site visit, AEI personnel conducted
interviews with the following BIPCO personnel: Mr. Robert Ellis,
Manager of Engineering and Governmental Affairs and Ms. Lori
Bonds, Project Engineer. A reconnaissance of the subject
property was conducted by viewing the perimeter boundaries of the
site by truck and physically traversing portions of the perimeter
that were accessible. A walk-through of the interior of the
facility was conducted following the perimeter reconnaissance.
4.1 HAZARDOUS SUBSTANCES/WASTES ASSOCIATED WITH THE PROPERTY
BIPCO stores chemicals in above ground storage vessels or
containers. An inventory of chemicals currently used by BIPCO is
included in Appendix F. As discussed in Section 2.8, outdoor
storage tanks are maintained within curbed concrete containment
areas to contain stormwater runoff. A list of indoor and outdoor
storage tanks is included in Tables 1 and 2. BIPCO maintains a
Spill Control Plan for all hazardous materials stored at the
facility. As part of the Spill Control Plan, a Spill Prevention,
Control and Countermeasure Plan (SPCC) and a Oil Discharge
Contingency Plan have been prepared specifically for the
petroleum products stored and handled at the site. Table 2
summarizes the petroleum product storage at the site. BIPCO
currently reports ammonia, phosphoric acid, sulfuric acid and
hydrochloric acid under SARA Title III, Section 313 reporting
requirements (Appendix F).
BIPCO is a small quantity generator, generating less than 750
pounds of hazardous waste per month. The EPA ID number for the
facility is VAD049582919.
BIPCO uses five (5) Safety-Kleen, Inc. parts cleaning sinks on
site (Photo B). They are located in the following locations:
maintenance area (2); TNP area; woodyard area; and recycle area.
These sinks contain either petroleum naphtha or monoethanolamine
and are maintained by Safety-Kleen on a regular basis . Copies of
the 1997 manifests are included in Appendix F.
4.2 SOLID WASTE
Solid wastes generated at the subject site include general office
trash, cardboard, and wooden pallets. These solid wastes are
temporarily stored in an on-site dumpster and disposed of by
Browning-Ferris Industries (BFI) (Photo C).
Other wastes generated at the site that are recycled include
waste oil and scrap metal. Waste oil generated at the site is
picked up and recycled by Eastern Oil located in Rockville,
Virginia and scrap metal is recycled by CC Cullet located in
Ashland, Virginia.
4.3 CURRENT AND PAST USE OF STORAGE TANKS
AEI identified fourteen (14) above ground storage tanks (ASTs)
used for non-petroleum storage (Photo D) and eleven (11) ASTs
used for petroleum product storage (Photo E) located outdoors at
the BIPCO facility (Tables 1 and 2). Outdoor ASTs are located in
the chemical tank farm area, WWTP area, recycle mill area,
woodyard area, fueling area, warehouse area, powerhouse, paper
manufacturing area, at the fiber lift station and maintenance
area (Figure 2).
There are twenty (20) ASTs used for non-petroleum product storage
and nine (9) ASTs used for petroleum product storage located
inside roofed structures (Tables 1 and 2). Indoor tanks are
located in the paper manufacturing area, pulp manufacturing area,
WWTP, and the recycle mill (Figure 2).
Outdoor storage tanks are typically situated in curbed concrete
containment areas to contain stormwater runoff. The tank
containment areas are sized to provide adequate spill containment
in the event of a tank rupture. Most of the containment areas
drain to the WWTP. The containment areas of the oil tanks in the
woodyard are visually checked for floating oil prior to being
discharged to stormwater drainage ditch system connected to
Outfall 001 (Figure 3).
Each release of stormwater from this containment area is
documented using a Stormwater Release Form (Appendix G). The
diesel tank containment area located in the warehouse is
discharged to a stormwater drainage ditch system connected to
Outfall 002. An oil/water separator has been placed in the main
drain pipe to Outfall 002.
According to BIPCO personnel, all underground storage tanks have
been removed. In the past, BIPCO operated two (2) USTS; a
10,000-gallon diesel fuel tank and a 5,000-gallon unleaded
gasoline tank.
There are no septic tanks associated with the BIPCO facility.
There may have been septic tanks associated with the former
houses located at the site.
On June 14, 1994, Landscaping and Paving Company, under contract
with BIPCO, removed one (1) 10,000-gallon #2 diesel UST. Soil
samples collected from beneath the UST indicated the presence of
total petroleum hydrocarbons (TPH) ranging in concentration from
1,600 mg/kg to 8,300 mg/kg. In September 1994, four (4)
groundwater monitoring wells were installed around the former UST
area. On November 23, 1994, approximately 0.33 feet of free
product thickness was measured in one of the monitoring wells.
Approximately twenty-two (22) gallons of free product were
removed from the well using a total fluid recovery method
approximately three (3) times a week for approximately two (2)
years. Product thickness in the target monitoring well was
reduced to one-eighth of an inch. Based on this information and
the low risk for human exposure, the VDEQ Piedmont Regional
Office issued a "No Further Action Required" letter for this
incident (Appendix G).
The 5,000-gallon unleaded gasoline UST was removed in 1990.
According to site personnel, the tank closure was clean. AEI
recommends that BIPCO develop and place in their files closure
documentation for the gasoline UST on file at the facility.
4.4 STORMWATER DISCHARGES
The BIPCO facility was issued a Virginia Pollution Discharge
Elimination System (VPDES) Stormwater Permit No. VA0077763 in
1988 for the discharge of stormwater runoff from the woodyard area
(Outfall 001). This permit was renewed in 1994 and was modified to
include stormwater runoff from the entire facility in compliance
with the November 1990 EPA regulations. A copy of the reissued permit
is included in Appendix H. BIPCO maintains a Stormwater Pollution
Prevention Plan as required under the permit (Appendix H). The purpose
of this plan is to identify potential sources of impacted surface water
runoff and provide a means to be used to reduce or eliminate these
potential impacts.
Three (3) stormwater outfalls exist at the facility; Outfall 001,
Outfall 002 and Outfall 003. Surface water runoff from the
woodyard is collected in a retention basin prior to being
discharged to Outfall 001. Surface water runoff from buildings
and paved areas is passed through an oil/water separator (Photo
F) and collected in a natural pond prior to being
discharged to Outfall 002. Surface water runoff from the
landfill area discharges to Outfall 003 (Photo H). The
comprehensive site stormwater permit requires BIPCO to collect
and analyze stormwater samples monthly from Outfall 001, twice
per year from Outfall 002, and to collect one composite sample
from Outfall 003 within a year from the date that the permit was
renewed. The permit also requires BIPCO to perform annual
inspections. The 1996 and 1997 Annual Inspection Reports are
included in Appendix H. No violations for the stormwater system
were reported.
4.5 WASTEWATER TREATMENT SYSTEM
BIPCO treats its wastewaters in an on-site biological WWTP. The
treated effluent is discharged to the North Anna River using a
common outfall line with the Doswell Wastewater Treatment Plant
(Hanover County). The combined discharges from BIPCO and the
Doswell Waste Treatment Plant are regulated under VPDES Permit
No. VA0029521 issued by the Commonwealth of Virginia to Hanover
County.
Currently, low solid waste streams from the TMP and recycle mill
are pumped to one of the two on-site clarifiers where solids are
removed. The wastewater subsequently travels through two (2)
lined equalization basins (Photo I), the "Unox" activated sludge
area, and through three (3) secondary clarifiers before being
discharged to the North Anna River. An on-site lined emergency
holding pond is available to store wastewater. if needed, during
the treatment process. In addition, an on-site effluent storage
basin is available to store a portion of the wastewater, as
needed, during low flow conditions in the river. The sludges
from the clarifiers are transferred to the sludge holding tank
and dewatering facilities. The dewatered solids are burned as
fuel in the on-site B&W boiler, with the resulting ash going to
the landfill, or the dewatered sludge may be disposed directly in
the on-site landfill. The resulting wastewater from the
dewatering process is sent back to one of the primary clarifiers.
The high solid content waste streams from the TMP process,
recycling process and paper machine are pumped directly to the
dewatering equipment which includes a gravity table thickener
followed by two screw presses. Wastewater from the dewatering
process is sent to one of the primary clarifiers and treated with
the low solids wastewaters. Solids from the dewatering process
are either burned as fuel in the on-site B&W boiler or disposed
of in the on-site approved landfill.
There is a monitoring station on the BIPCO wastewater treatment
line located prior to the connection with the Doswell Treatment
Plant. The treated wastewater effluent from the BIPCO WWTP is
monitored by Hanover County at this point as required under their
permit (Appendix 1). If the treated effluent would cause the
Hanover County Doswell Treatment Plant to exceed their permit
limitations, then the effluent can be diverted to the lined on-
site effluent holding pond at BIPCO.
The Hanover County Doswell Treatment Plant was cited by the VDEQ
for the following violations to their permit in 1996 and 1997
(Appendix 1): 1) the instantaneous chlorine regulatory level was
exceeded once in May 1996, and 2) the biochemical oxygen demand
(BOD) regulatory level was exceeded twice and the total suspended
solids (TSS) regulatory level was exceeded twice in August 1996.
These violations were for Outfall 101, the discharge for the
Hanover County Doswell Treatment Plant only, prior to the
combination with the BIPCO discharge. No enforcement
recommendation was included with the Notice of Violation
(Appendix 1). According to plant personnel, BIPCO effluent has
not been diverted by Doswell Treatment Plant operators for any
reason.
In 1988, the BIPCO WWTP was upgraded in anticipation of a
proposed BIPCO mill expansion. This upgrade included the
addition of a 1.5 million gallon (MG) aeration basin, a 65-foot
diameter final clarifier and additional sludge handling
facilities. As a result of the proposed mill expansion, the
Doswell Wastewater Treatment Permit was modified and a quarterly
groundwater monitoring program for the existing BIPCO WWTP was
initiated. BIPCO initiated a groundwater monitoring program for
the existing wastewater holding ponds as specified under the 1988
VPDES permit modification. One (1) upgradient well, MW-2, and two (2)
downgradient wells, MW-15 and MW-25, are monitored quarterly.
Well MW-2 is located upgradient of the WWTP basins near the Bam
offices. Well MW-15 is situated downgradient of the 15 MG
capacity emergency holding basin. Well MW-25 is located
downgradient the 25 million gallon capacity effluent holding
basin. These wells are monitored for pH, conductivity, total
organic carbon (TOC), total organic halides (TOX), chemical
oxygen demand (COD), ammonia as nitrogen, total Kjeldahl nitrogen
(TKN), sulfate, lead, cadmium, chromium and zinc. The Virginia
groundwater standards for these constituents are as follows: pH
(5.5-8.5); TOC (10 mg/1); TOX (100 mg/1); COD (natural quality);
ammonia (0.025 mg/1); TKN (natural quality); sulfate (25 mg/1);
lead (0.05 mg/1); cadmium (0.0004 mg/1); and zinc (0.05 mg/1).
Conductivity is considered a indicator parameter only. The
latest groundwater monitoring event was conducted in September
1997 (Appendix J). The following parameters exceeded the
Virginia groundwater standards: in well MW-2, pH (5. 1) and
sulfate (86 mg/1); in well MW-5, TOC (47 mg/1), TOX (173 mg/1),
anunonia (0.68 mg/1), chromium (0.065mg/1), and zinc (0.084
mg/1); and in well MW-15, ammonia (0.14 mg/1), cadmium 0.002
mg/1) and sulfate (33 mg/1). BIPCO has not been cited by VDEQ
for parameters which exceed the Virginia groundwater standards.
The most recent VDEQ Piedmont Regional Office WWTP inspection was
conducted on July 25, 1996 (Appendix J). The inspection report
concluded that the BIPCO WWTP "was very well operated and
maintained."
4.6 AIR EMISSIONS CONTROL SYSTEM
The air emissions generated by BIPCO are regulated under both
State and Federal regulations. State air pollution regulations
are found in a Virginia Administration Code (VAC) 5. The Federal
regulations are found in the Code of Federal Regulations (CFR)
under 40 CFR 60 and 40 CFR 70. BIPCO first received a
construction and operating air permit for the TMP mill to
manufacture newsprint paper on June 7, 1977. BIPCO was permitted
to construct and operate a Babcock & Wilcox (B&W) boiler, a
Nebraska boiler in September 1984 and a Sludge Dryer/EPI
Atmospheric fluidized bed combustor in April 1991. The Nebraska
boiler was removed from service May 4, 1994 and was subsequently
replaced by a package boiler which began operation January 9,
1996. The Package Boiler was originally permitted by the
Prevention of Significant Air Quality Deterioration (PSD) permit
issued on October 30, 1992. The PSD Permit was issued for a
proposed mill expansion and amended several times with the most
recent amendment dated July 25, 1997 (Appendix K).
A review of the current air permits and the on-going Title V
permitting process at BIPCO identified the following
operations/equipment which are currently permitted and/or being
permitted under Title V of Clean Air Act Amendment (CAAA). Air
pollution control devices are listed where applicable. These
operations/equipment include:
* Woodyard operations;
* B&W boiler with a multicyclone and electrostatic
precipitator;
* Package boiler;
* Thermomechanical pulping mill (TMP) with four (4)
TMP lines and two (2) heat exchange systems for
heat recovery and VOC control;
* Sludge dryer and EPI Atmospheric fluidized bed
combustor with selective noncatalytic NOx
reduction, cyclone, venturi scrubber, and packed
bed scrubber;
* Wastewater treatment plant;
* Recycle mill;
* Paper machine; and
* Storage tanks.
In addition, according to the amended October 30, 1992 air permit,
the following emission units are permitted. but are not yet built:
* Two (2) additional TMP lines;
* One (1) gas turbine;
* One (1) heat recovery steam generator;
* One (1) circulating fluidized combustion boiler;
One (1) additional newsprint paper machine;
* One (1) additional ammonia storage tank; and
* One (1) turpentine storage tank.
In accordance with 9 VAC 5-80-10 and 9 VA 5-80-20, if
construction of the above emission units is not commenced within
eighteen (18) months of the date listed in the phased
construction schedule and/or construction is discontinued for a
period of eighteen (18) months, the permit will become invalid.
Based on continued phased construction and the issuing date of
the last amendment of the PSD permit, the 1992 PSD permit is
currently valid until January 25, 1999.
BIPCO is located in the Richmond, Virginia area which is
presently designated as an "Attainment" area for ozone. This
area was formerly designated as a "Non-Attainment" area that did
not meet the National Ambient Air Quality Standard (NAAQS) for
ozone. Since volatile organic compounds (VOC) and nitrous oxides
(NOx) are a precursor of ozone, these pollutants were regulated
in lieu of ozone. Reasonable Available Control Technology (RACT)
is required for major VOC emission sources (which emit more than
100 tons per year of VOC) in ozone non-attainment areas. On July
24, 1996, BIPCO signed a RACT consent agreement which required
certain VOC emission controls to meet RACT established by the
VDEQ (Appendix K). This RACT consent agreement remains in effect
even though the Richmond non-attainment area was redesignated as
an attainment area for ozone.
The 1990 Clean Air Act Amendment requires that a major source
facility obtain a Title V permit. A major source facility is
defined as a facility having a potential-to-emit 100 tons per
year (TPY) or more of any regulated air pollutant including
particulate matter with aerodynamic diameter of 10 m or less
(PM10), VOC, NOx, sulfur dioxide (SO2), or carbon monoxide (CO),
or 10 TPYor more of any single hazardous air pollutant (HAP); or
25 TPY or more of any combination of HAPS. Potential emissions
are calculated by assuming process equipment operates
continuously for 8760 hours a year at maximum capacity without
pollution control devices. HAPs are defined and regulated under
Title III of the CAAA.
BIPCO is a major source facility; therefore, a Title V permit is
required. BIPCO is required by the DEQ to file a permit application
by May 1998. A Title V permit application is being prepared
and it is anticipated that it will be submitted to the
VDEQ by end of 1997.
4.6.1 NOTICE OF VIOLATION
On September 29, 1994, the US EPA, Region III issued a
Notice of Violation (NOV) to BIPCO which stated that the
facility was operating in violation of applicable federally
enforceable air pollution control requirements (Appendix K).
This NOV charged: 1) that the sulfur content of the coal
burned in the Babcock and Wilcox (B&W) boiler exceeded the
1.2% limit specified in the air permit and 2) that a
continuous monitoring system for measuring and recording
sulfur dioxide emissions from the B&W boiler required by the
1977 air permit was not in place.
BIPCO responded to the NOV by providing information that
demonstrated that the activities stated in the NOV had
either not occurred as specified in the NOV or had been
approved by the VDEQ. At the time of this Phase I ESA, this
NOV had not been resolved. Available documentation is
summarized below.
With regard to the first issue presented in the NOV, BIPCO
notified the VDEQ Department of Air Pollution Control that
they had received some inferior coal over the last several
months that did not meet the 1.2 % sulfur content specified
in the air permit for the boiler. BIPCO also indicated that
they had immediately placed an order for high quality coal
with a sulfur content of 0.55 % to 0.65 % which they blended
with the off-spec coal to obtain a blend of less than 1.2 %
sulfur. In addition, BIPCO indicated that they mix wood
waste with the coal in the boiler at a ratio of 50:50 which
would also lower the overall sulfur emissions. BIPCO
requested a fuel variance for the offspec coal on-site and
permission to blend the new high quality coal with the off-
spec coal. The VDEQ responded by letter on April 22, 1994
that BIPCO could burn the off-spec coal if it was mixed with
the high quality coal at a ratio of 3 part high quality coal
to 1 part off-spec coal .
With regard to the second issue presented in the NOV, in a
letter to the VDEQ dated October 20, 1988, BIPCO had
requested exemption from the 1977 requirement of monitoring
sulfur dioxide. The VDEQ subsequently agreed with BIPCO's
request to use laboratory coal analysis in place of the
sulfur dioxide continuous emissions monitoring. When the
permit was reissued on October 30, 1992, the requirement for
sulfur dioxide emissions monitoring was removed and replaced
with a requirement to maintain records of all purchased coal
shipments indicating sulfur and ash content per shipment.
4.7 LANDFILL AREAS
BIPCO is permitted to operate an ash landfill covered by VDEQ
Permit Number 528 and an industrial landfill covered by VDEQ
Permit Number 573. The ash landfill has a clay liner and is
permitted for placement of inorganic flyash material. The
industrial landfill is lined with a 60 mil HDPE liner. Materials
permitted to be disposed of in the industrial landfill include
stabilized sludges containing no free liquids; ash; papermaking
fabrics; office wastes; pallets and other wood products;
packaging materials; metals; and discarded process equipment.
BIPCO has elected to dispose of only ash, a small volume of
stabilized sludges from the WWTP, and construction debris such as
concrete in the industrial landfill.
4.7.1 FORMER TURNER LANDFILL
Prior to 1988, BIPCO disposed of ash at the Peatross Turner
landfill located south of the BIPCO facility (Appendix L).
Recently, BIPCO purchased the Turner property (Photo J).
According to site personnel, BIPCO has proposed to the VDEQ
to close the landfill as is in place and perform groundwater
monitoring as required by the VDEQ. The VDEQ had not
responded to this proposal at the time of this Phase I ESA.
4.7.2 ASH LANDFILL
The on-site ash landfill has been operated since 1989.
Based on E.P. Toxicity tests for RCRA metals and reactivity
test performed on the ash (pressed wood fiber sludge), the
material is classified as non-hazardous (Appendix L).
Initial ash landfill permit requirements included the
quarterly sampling of groundwater monitoring wells. The
groundwater samples were analyzed for specific conductance,
pH, TOC, TOX, lead, cadmium, and chromium.
In September 1994, the VDEQ notified BIPCO that they were
required to implement a Phase II groundwater monitoring
program due to statistically significant changes in pH.
Subsequently, BIPCO met with the VDEQ and it was agreed that
Phase II monitoring was not warranted since the ash is
alkaline in pH and would not be likely to attribute to a
downgradient decrease in pH (Appendix L).
Following the confirmation of a statistically significant
measured specific conductance for well MN-R2, BIPCO proposed
to implement a Phase II monitoring program (Appendix L).
The first round of well samples were collected in July 1997.
Samples were analyzed for TPH by modified EPA Method 8015,
VOCs by EPA Method 8260, SVOCs by EPA Method 8270,
pesticides by EPA Method 8080, herbicides by EPA Method
8150, and total metals plus cyanide by various SW-846
Methods (Appendix L).
Following the confirmation of a statistically significant
measured specific conductance for well MN-R2, BIPCO proposed
to implement a Phase II monitoring program (Appendix L).
The first round of well samples were collected in July 1997.
Samples were analyzed for TPH by modified EPA Method 8015,
VOCs by EPA Method 8260, SVOCs by EPA Method 8270,
pesticides by EPA Method 8080, herbicides by EPA Method
8150, and total metals plus cyanide by various SW-846
Methods (Appendix L). No organic constituents were detected
with the exception of TPH SVOCs detected in well MW-9 at 0.6
mg/l. The TPH SVOCs in well MW-9 were not confirmed by the
SVOC analysis, therefore, a second sample from well MW-9 was
collected and analyzed for TPH SVOCs. No TPH SVOCs were
detected in this second confirmatory sample. Based on this
analytical data, on September 18, 1997, BIPCO petitioned for
a variance from the Phase II sampling requirements by
requesting that the monitoring requirements be limited to
inorganic compounds only. The VDEQ had not responded to
this petition at the time of the site visit.
4.7.3 INDUSTRIAL LANDFILL
The on-site industrial landfill is located to the east of
the BIPCO plant (Appendix X). The industrial landfill was
initially permitted by the VDEQ in 1995 and the original
permit was amended in June 1997 to allow for the
construction of a 60 mil HDPE liner and leachate collection
system. As part of the amended industrial landfill Permit #
573, Permit #528 for the ash landfill was revoked and
activities for closure and post closure care of the ash
landfill were incorporated into an amended comprehensive
landfill Permit #573 (Appendix L). The industrial landfill
consists of approximately 35 acres of which approximately 23
acres will be used for waste disposal purposes. No
violations were reported for this landfill.
In April 1997, BIPCO began to send the flyash from their
boiler to other companies for use with other material as a
potting soil. This beneficial use of the wood/wood sludge
ash is considered a major waste reduction success by the
VDEQ (Appendix L).
4.8 POLYCHLORINATED BIPHENYLS
According to site personnel, the on-site transformers do not
contain polychlorinated biphenyls (PCBs) at concentrations
requiring special management.
4.9 ASBESTOS
An asbestos survey was not included as part of this ESA.
According to site personnel, there are no asbestos containing
materials (ACMs) on the subject site.
In the mid-1970's, several major kinds of ACMs, such as spray-
applied insulation, fireproofing, and acoustical surfacing
material, were banned by the US EPA. Therefore, given the age of
facility (1979), these materials are not likely to be present at
the BIPCO facility.
4.10 MISCELLANEOUS
During the site reconnaissance, AEI personnel observed the
following additional items at the subject property:
* a large coal storage pile is located north of the
railway spur that services the BIPCO powerhouse
facility (Figure 2 and Photo K);
* gas pipeline traverses the western portion of the
subject site (Photo L);
* refuse, consisting of mainly metal objects and
demolition debris, were disposed of in undeveloped
fields located north of the developed portion of the
site (Photo M); and
* a partially full drum and an empty drum of RoundUp
were located outside of a storage shed near the old
farmhouse on the undeveloped portion of the site (Photo
N and 0). BIPCO personnel subsequently indicated after
AEI's site visit that the liquid in the partially full
drum was water and that both drums have since been
properly placarded.
These items are not expected to be of major environmental concern
to the property. BIPCO personnel indicated that an effort was
made to reduce the demolition debris. Some of this material has
been scrapped and some has been disposed.
SECTION 5.0
SUMMARY AND CONCLUSIONS
AEI conducted an ESA on the BIPCO facility located on of Old
Ridge Road in Ashland, Virginia in general conformance with ASTM
E 1527-97. Standard Practices for Environmental Site
Assessments: Phase I Environmental Site Assessment Process, third
edition. This assessment identified the following potential
environmental concerns.
1. On September 29, 1994, the US EPA, Region III issued a
Notice of Violation (NOV) to BIPCO which stated that the
facility was operating 'in violation of applicable federally
enforceable air pollution control requirements. BIPCO
responded to the NOV by providing information that
demonstrated that the activities stated in the NOV had
either not occurred as specified in the NOV or had been
approved by the VDEQ. At the time of this Phase I ESA, this
NOV had not been resolved.
2. Based on the most recent groundwater data from the
wastewater treatment area, total organic carbon. total
organic halides, ammonia, chromium, cadmium, surface and
zinc were detected in downgradient monitoring wells at
levels exceeding the Virginia Groundwater standards. The
VDEQ has not taken action regarding the groundwater
monitoring data at this time.
3. Following the confirmation of a statistically measured
significant increased in specific conductance in one (1)
monitoring well used to monitor groundwater quality
downgradient from the industrial landfill, BIPCO implemented
a Phase H monitoring program. The first round of samples
were collected in July 1997. A confirmatory sample was
collected in September 1997. Based on the analytical data
which indicated that no target organic constituents were in
the groundwater, BIPCO petitioned for a variance from the
Phase II sampling requirements by requesting that the
monitoring parameters be limited to inorganic compounds
only. The VDEQ had not provided a response at the time of
the site visit.
4) BIPCO is currently clarifying whether the existing 1977 air
permit allows BIPCO to burn WWTP sludge in the B&W boiler.
BIPCO is working with the VDEQ to clarify previous VDEQ
correspondence which indicate the 1977 air permit allows
burning of the WWTP sludge in the B&W boiler and/or modify
the 1977 permit as necessary to reflect sludge burning as an
acceptable fuel.
5) A 5,000-gallon unleaded gasoline UST was removed in 1990.
According to site personnel, the tank closure was clean.
However, no closure documentation was available for review.
AEI recommends that BIPCO develop and place in their files
documentation of the underground storage tank as required by
the VDEQ.
Based on AEI's review of the current known environmental
conditions at the BIPCO facility and given the complexity and
variety of operations, the mill is well operated and maintained.
SECTION 6.0
SIGNATURE PAGE
This Phase I Environmental Site Assessment was conducted on the
BIPCO facility located on Old Ridge Road in Ashland. Virginia in
general conformance with ASTM E 1527-97, Standard Practices for
Environmental Site Assessments: Phase I Environmental Site
Assessment Process, third edition by AEI for Toronto Dominion
Bank.
AWARE ENVIRONMENTAL INC.@
__________________________ ____________________
Kelly Boone Date
Project Engineer
__________________________ ____________________
Lisa Chisholm Date
Senior Geologist
__________________________ ____________________
Edward H. Stephens Date
Associate
__________________________ ____________________
Michael O. Smith Date
Manager, Resource Management Group
<PAGE>
Exhibit 10.3
EXECUTION COPY
$35,000,000
CREDIT AGREEMENT
AMONG
BRANT-ALLEN INDUSTRIES, INC.,
AS BORROWER,
THE SEVERAL LENDERS
FROM TIME TO TIME PARTIES HERETO,
TD SECURITIES (USA) INC.,
AS ARRANGER
AND
TORONTO-DOMINION (TEXAS), INC.,
AS ADMINISTRATIVE AGENT
DATED AS OF DECEMBER 1, 1997
TABLE OF CONTENTS
Page
SECTION 1. DEFINITIONS................................................ 2
1.1 Defined Terms........................................... 2
1.2 Other Definitional Provisions........................... 19
SECTION 2. AMOUNT AND TERMS OF COMMITMENTS............................ 19
2.1 Term Loan Commitments; Revolving Credit
commitments........................................... 19
2.2 Procedure for Borrowing................................. 20
2.3 Repayment of Loans...................................... 20
2.4 Repayment of Loans; Evidence of Debt.................... 21
2.5 Commitment Fees, etc. .................................. 21
2.6 Optional Termination of Revolving Credit Commitments;
Optional Prepayments.................................. 22
2.7 Mandatory Prepayments and Commitment Restrictions....... 22
2.8 Conversion and Continuation Options..................... 24
2.9 Minimum Amounts and Maximum Number of Eurodollar
Tranches.............................................. 24
2.10 Interest Rates and Payment Dates........................ 24
2.11 Computation of Interest and Fees........................ 25
2.12 Inability to Determine Interest Rate.................... 25
2.13 Pro Rata Treatment and Payments......................... 26
2.14 Requirements of Law..................................... 27
2.15 Taxes................................................... 28
2.16 Indemnity............................................... 30
2.17 Illegality.............................................. 30
2.18 Change of Lending Office................................ 30
SECTION 3. REPRESENTATIONS AND WARRANTIES............................. 31
3.1 Financial Condition..................................... 31
3.2 No Change............................................... 32
3.3 Existence; Compliance with Law.......................... 32
3.4 Power; Authorization; Enforceable Obligations........... 32
3.5 No Legal Bar............................................ 32
3.6 No Material Litigation.................................. 33
3.7 No Default.............................................. 33
3.8 Ownership of Property; Liens............................ 33
3.9 Intellectual Property................................... 33
3.10 Taxes................................................... 33
3.11 Federal Regulations..................................... 34
3.12 Labor Matters........................................... 34
3.13 ERISA................................................... 34
3.14 Investment Company Act; Other Regulations............... 34
3.15 Subsidiaries............................................ 34
3.16 Use of Proceeds......................................... 34
3.17 Environmental Matters................................... 35
3.18 Accuracy of Information, etc............................ 36
3.19 Security Documents...................................... 36
3.20 Solvency................................................ 37
SECTION 4. CONDITIONS PRECEDENT....................................... 37
4.1 Conditions to Initial Extension of Credit............... 37
4.2 Conditions to Each Loan................................. 40
SECTION 5. AFFIRMATIVE COVENANTS...................................... 40
5.1 Financial Statements.................................... 40
5.2 Certificates; Other Information......................... 41
5.3 Payment of Obligations.................................. 42
5.4 Conduct of Business and Maintenance of Existence, etc. . 42
5.5 Maintenance of Property; Insurance...................... 42
5.6 Inspection of Property; Books and Records; Discussions.. 43
5.7 Notices................................................. 43
5.8 Environmental Laws...................................... 44
SECTION 6. NEGATIVE COVENANTS......................................... 44
6.1 Asset Coverage Ratio.................................... 44
6.2 Limitation on Indebtedness.............................. 45
6.3 Limitation on Liens..................................... 46
6.4 Limitation on Fundamental Changes....................... 48
6.5 Limitation on Sale of Assets............................ 48
6.6 Limitation on Dividends................................. 49
6.7 [Reserved............................................... 49
6.8 Limitation on Investments, Loans and Advances........... 50
6.9 Limitation on Optional Payments and Modifications
of Debt Instruments, etc. ............................ 50
6.10 Limitation on Transactions with Affiliates.............. 51
6.11 Limitation on Sales and Leasebacks...................... 51
6.12 Limitation on Changes in Fiscal Periods................. 51
6.13 Limitation on Negative Pledge Clauses................... 51
6.14 Limitation on Restrictions on Subsidiary Distributions.. 51
6.15 Limitation on Lines of Business......................... 52
6.16 Limitation on Amendments to Acquisition Documents....... 52
6.17 Limitation on Leases.................................... 52
6.18 Limitation on Amendments to Management Contracts........ 52
SECTION 7. EVENTS OF DEFAULT.......................................... 53
SECTION 8. THE AGENTS................................................. 55
8.1 Appointment............................................. 55
8.2 Delegation of Duties.................................... 55
8.3 Exculpatory Provisions.................................. 55
8.4 Reliance by Agents...................................... 56
8.5 Notice of Default....................................... 56
8.6 Non-Reliance on Agents and Other Lenders................ 57
8.7 Indemnification......................................... 57
8.8 Agent in Its Individual Capacity........................ 57
8.9 Successor Administrative Agent.......................... 58
8.10 Authorization to Execute Intercreditor Agreement
and Security Documents................................ 58
8.11 The Arranger............................................ 58
SCHEDULES:
1.1A Commitments
3.1(b) Dividends and Distributions
3.4 Consents, Authorizations, Filings and Notices
3.15 Subsidiaries
3.19 UCC Filing Jurisdictions
6.2 Existing Indebtedness
6.3 Existing Liens
6.8(f) Existing Investments
X Calculation of Administrative Value
EXHIBITS:
A Form of Timberlands Guarantee
B Form of Timberlands Pledge Agreement
C-1 Form of Soucy Pledge Agreement
C-2 Form of Cash Collateral Agreement
D Form of Intercreditor Agreement
E Form of Compliance Certificate
F Form of Closing Certificate
G Form of Assignment and Acceptance
H Form of Legal Opinion of Skadden, Arps, Slate,
Meagher & Flom
I-1 Form of Term Note
I-2 Form of Revolving Credit Note
J Form of Exemption Certificate
CREDIT AGREEMENT, dated as of December 1, 1997, among
BRANT- ALLEN INDUSTRIES, INC., a Delaware corporation (the "Borrower" or
"Brant-Allen"), the several banks and other financial institutions or
entities from time to time parties to this Agreement (the "Lenders"), TD
SECURITIES (USA) INC., as advisor and arranger (in such capacity, the
"Arranger"), and TORONTO-DOMINION (TEXAS), INC., as administrative agent
(in such capacity, the "Administrative Agent").
W I T N E S S E T H:
WHEREAS, the Borrower holds partnership interests in
Bear Island Timberlands Company, L.P., a Virginia limited partnership
("Timberlands L.P."), and Dow Jones Virginia Company, Inc. and Newsprint,
Inc. (collectively, the "Retiring Partners") hold the remaining
partnership interests in Timberlands L.P.;
WHEREAS, the Borrower is a party to the Timberlands
Partnership Interest Sale Agreement, dated as of October 15, 1997 (the
"Acquisition Agreement"), with the Retiring Partners, pursuant to which
the Borrower will purchase the Retiring Partners' partnership interests
in Timberlands for cash in an aggregate amount of approximately
$35,000,000 on the Closing Date (the "Transaction");
WHEREAS, simultaneously with or prior to the closing
of the Transaction Timberlands L.P. will be converted into a Virginia
limited liability company known as Bear Island Timberlands Company,
L.L.C. ("Timberlands");
WHEREAS, in connection with the Transaction, the
Borrower has requested the Lenders to establish (i) a Term Loan Facility
in the aggregate amount of $32,000,000 and (ii) a Revolving Credit
Facility in the aggregate amount of $3,000,000;
WHEREAS, the proceeds of such credit facilities will
be used to finance the Transaction and to deposit into the Collateral
Account an amount equal to the interest that shall accrue on the Loans
from the Closing Date to the first anniversary thereof;
WHEREAS, the Lenders are willing to make such credit
facilities available upon and subject to the terms and conditions
hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the
agreements hereinafter set forth, the parties hereto hereby agree as follows:
SECTION 1. DEFINITIONS
1.1 Defined Terms. As used in this Agreement, the
terms listed in this Section 1.1 shall have the respective meanings set
forth in this Section 1.1.
"Acquired Indebtedness": Indebtedness of a Person
(a) existing at the time such Person becomes a
Subsidiary of Soucy or any of its Subsidiaries or (b)
assumed in connection with the acquisition by Soucy or
any of its Subsidiaries of assets from such Person.
"Acquisition Agreement": as defined in the recitals
hereto.
"Administrative Value": the value calculated in
accordance with Schedule
X.
"Affiliate": as to any Person, any other Person
that, directly or indirectly, is in control of, is
controlled by, or is under common control with, such
Person. For purposes of this definition, "control" of a
Person means the power, directly or indirectly, either
to (a) vote 10% or more of the securities having
ordinary voting power for the election of directors (or
persons performing similar functions) of such Person or
(b) direct or cause the direction of the management and
policies of such Person, whether by contract or
otherwise.
"Agents": the collective reference to the Arranger
and the Administrative Agent.
"Aggregate Exposure": with respect to any Lender, an
amount equal to (a) until the Closing Date, the
aggregate amount of such Lender's Commitments and (b)
thereafter, the sum of (i) the aggregate unpaid
principal amount of such Lender's Term Loans and (ii)
the amount of such Lender's Revolving Credit Commitment
or, if the Revolving Credit Commitments have been
terminated, the amount of such Lender's Revolving
Credit Loans.
"Aggregate Exposure Percentage" with respect to any
Lender, the ratio (expressed as a percentage) of such
Lender's Aggregate Exposure to the Aggregate Exposure
of all Lenders.
"Agreement": this Credit Agreement, as amended,
supplemented or otherwise modified from time to time.
"Applicable Margin": (i) with respect to a Loan
bearing interest based upon the Base Rate, 1.75%, and
(ii) with respect to a Loan bearing interest based upon
the Eurodollar Rate, 2.75%
"Applicable Subsidiaries": Timberlands and its
Subsidiaries and/or Soucy
and its Subsidiaries, as the case may be.
"Asset Sale": (a) in respect of Timberlands and its
Subsidiaries, any Disposition of Property or series of
related Dispositions of Property (excluding any such
Disposition permitted by clause (a), (b), (c), (d) or
(h) of Section 6.5) which yields gross proceeds (valued
at the initial principal amount thereof in the case of
non-cash proceeds consisting of notes or other debt
securities and valued at fair market value in the case
of other non-cash proceeds) in excess of $300,000 in
the aggregate in any fiscal year, (b) in respect of
Soucy and its Subsidiaries, any Disposition of Property
or series of related Dispositions of Property
(excluding any such Disposition permitted by clauses
(a), (b), (c) or (d) of Section 6.5) which yields gross
proceeds to Soucy or any of its Subsidiaries (valued at
the initial principal amount thereof in the case of
non-cash proceeds consisting of notes or other debt
securities and valued at fair market value in the case
of other non-cash proceeds) in excess of $1,000,000 in
the aggregate in any fiscal year and (c) in respect of
the Borrower, any sale by the Borrower of Capital Stock
of Timberlands or Soucy.
"Assignee": as defined in Section 9.6(c).
"Assignor": as defined in Section 9.6(c).
"Available Revolving Credit Commitment": as to any
Revolving Credit Lender at any time, an amount equal to
the excess, if any, of (a) the amount of such Lender's
Revolving Credit Commitment over (b) the aggregate
outstanding principal amount of such Lender's Revolving
Credit Loans.
"Base Rate": for any day, a rate per annum (rounded
upwards, if necessary, to the next 1/16 of 1%) equal to
the greatest of (a) the Prime Rate in effect on such
day, and (b) the Federal Funds Effective Rate in effect
on such day plus 1/2 of 1%. For purposes hereof: "Prime
Rate" shall mean the rate of interest per annum
publicly announced from time to time by The
Toronto-Dominion Bank as its prime or base rate in
effect at its principal office in New York City (the
Prime Rate not being intended to be the lowest rate of
interest charged by The Toronto-Dominion Bank in
connection with extensions of credit to debtors). Any
change in the Base Rate due to a change in the Prime
Rate or the Federal Funds Effective Rate shall be
effective as of the opening of business on the
effective day of such change in the Prime Rate or the
Federal Funds Effective Rate, respectively.
"Base Rate Loans": Loans the rate of interest
applicable to which is based upon the Base Rate.
"Board": the Board of Governors of the Federal
Reserve System of the United States (or any successor).
"Business": as defined in Section 3.17.
"Business Day": (i) for all purposes other than as
covered by clause (ii) below, a day other than a
Saturday, Sunday or other day on which commercial banks
in New York City are authorized or required by law to
close and (ii) with respect to all notices and
determinations in connection with, and payments of
principal and interest on, Eurodollar Loans, any day
which is a Business Day described in clause (i) and
which is also a day for trading by and between banks in
Dollar deposits in the interbank eurodollar market.
"C$": the lawful currency of Canada.
"Capital Expenditures": for any period, with respect
to any Person, the aggregate of all expenditures by
such Person and its Subsidiaries for the acquisition or
leasing (pursuant to a capital lease) of fixed or
capital assets or additions to equipment (including
replacements, capitalized repairs and improvements
during such period) which should be capitalized under
GAAP on a consolidated balance sheet of such Person and
its Subsidiaries.
"Capital Lease Obligations": as to any Person, the
obligations of such Person to pay rent or other amounts
under any lease of (or other arrangement conveying the
right to use) real or personal property, or a
combination thereof, which obligations are required to
be classified and accounted for as capital leases on a
balance sheet of such Person under GAAP, and, for the
purposes of this Agreement, the amount of such
obligations at any time shall be the capitalized amount
thereof at such time determined in accordance with
GAAP.
"Capital Stock": any and all shares, interests,
participations or other equivalents (however
designated) of capital stock of a corporation, any and
all equivalent ownership interests in a Person (other
than a corporation) and any and all warrants, rights or
options to purchase any of the foregoing.
"Cash Collateral Agreement": the cash collateral
agreement substantially in the form of Exhibit C-2 to
be executed and delivered by the Borrower in favor of
the Administrative Agent, as the same may be amended,
supplemented or otherwise modified from time to time.
"Cash Equivalents": (a) marketable direct
obligations issued by, or unconditionally guaranteed
by, the United States Government or issued by any
agency thereof and backed by the full faith and credit
of the United States, in each case maturing within one
year from the date of acquisition; (b) certificates of
deposit, time deposits, eurodollar time deposits or
overnight bank deposits having maturities of six months
or less from the date of acquisition issued by any
Lender or by any commercial bank organized under the
laws of the United States of America or any state
thereof having combined capital and surplus of not less
than $500,000,000; (c) commercial paper of an issuer
rated at least A-2 by Standard & Poor's Ratings
Services ("S&P") or P-2 by Moody's Investors Service,
Inc. ("Moody's"), or carrying an equivalent rating by a
nationally recognized rating agency, if both of the two
named rating agencies cease publishing ratings of
commercial paper issuers generally, and maturing within
six months from the date of acquisition; (d) repurchase
obligations of any Lender or of any commercial bank
satisfying the requirements of clause (b) of this
definition, having a term of not more than 30 days with
respect to securities issued or fully guaranteed or
insured by the United States government; (e) securities
with maturities of one year or less from the date of
acquisition issued or fully guaranteed by any state,
commonwealth or territory of the United States, by any
political subdivision or taxing authority of any such
state, commonwealth or territory or by any foreign
government, the securities of which state,
commonwealth, territory, political subdivision, taxing
authority or foreign government (as the case may be)
are rated at least A by S&P or A by Moody's; (f)
securities with maturities of six months or less from
the date of acquisition backed by standby letters of
credit issued by any Lender or any commercial bank
satisfying the requirements of clause (b) of this
definition; or (g) shares of money market mutual or
similar funds which invest exclusively in assets
satisfying the requirements of clauses (a) through (f)
of this definition.
"Change of Control": (a) if neither Peter M. Brant
nor Joseph Allen shall own at least 50% of the issued
and outstanding voting stock of the Borrower or (b) any
Person other than Peter M. Brant or Joseph Allen (or
their respective estates, heirs or beneficiaries, or
successive estates, heirs or beneficiaries) shall own
voting stock of the Borrower.
"Closing Date": the date on which the conditions
precedent set forth in Section 4.1 shall have been
satisfied.
"Code": the Internal Revenue Code of 1986, as
amended from time to time.
"Collateral": all Property of the Loan Parties, now
owned or hereafter acquired, upon which a Lien is
purported to be created by any Security Document.
"Collateral Account": the cash collateral account
established pursuant to the Cash Collateral Agreement.
"Commitment": as to any Lender, the sum of the Term
Loan Commitment and the Revolving Credit Commitment of
such Lender.
"Commonly Controlled Entity": an entity, whether or
not incorporated, which is under common control with
the Borrower within the meaning of Section 4001 of
ERISA or is part of a group which includes the Borrower
and which is treated as a single employer under Section
414 of the Code.
"Compliance Certificate": a certificate duly
executed by a Responsible Officer substantially in the
form of Exhibit E.
"Confidential Information Memorandum": the
Confidential Information Memorandum dated October 1997
and furnished to the Lenders in respect of the Term
Loan Facility and the Paper Company Loan.
"Consolidated Lease Expense": with respect to any
Person for any period, the aggregate amount of fixed
and contingent rentals payable by such Person and its
Subsidiaries, determined on a consolidated basis in
accordance with GAAP, for such period with respect to
leases of real and personal property; provided, that
Capital Lease Obligations shall not constitute
Consolidated Lease Expense.
"Consolidated Net Income": with respect to any
Person for any period, the consolidated net income (or
loss) of such Person and its Subsidiaries, determined
on a consolidated basis in accordance with GAAP;
provided that there shall be excluded (a) the income
(or deficit) of any Person accrued prior to the date it
becomes a Subsidiary of such Person or is merged into
or consolidated with such Person or any of its
Subsidiaries, (b) the income (or deficit) of any Person
(other than a Subsidiary of such Person) in which such
Person or any of its Subsidiaries has an ownership
interest, except to the extent that any such income is
actually received by such Person or such Subsidiary in
the form of dividends or similar distributions and (c)
the undistributed earnings of any Subsidiary of such
Person to the extent that the declaration or payment of
dividends or similar distributions by such Subsidiary
is not at the time permitted by the terms of any
Contractual Obligation (other than under any Loan
Document) or Requirement of Law applicable to such
Subsidiary.
"Consolidated Net Worth": with respect to any Person
at any date, all amounts which would, in conformity
with GAAP, be included on a consolidated balance sheet
of such Person and its Subsidiaries under stockholders'
equity at such date.
"Consolidated Tangible Net Worth": with respect to
any Person, as of any date, Consolidated Net Worth less
the sum of the net book amount of all assets, after
deducting any reserves applicable thereto, which would
be treated as intangible under GAAP, as presented on
the consolidated financial statements of such Person as
of such date.
"Consolidated Total Liabilities": with respect to
any Person at any date, all amounts which would, in
conformity with GAAP, be set forth opposite the caption
"total liabilities" (or any like caption) on a
consolidated balance sheet of such Person and its
Subsidiaries at such date.
"Contractual Obligation": as to any Person, any
provision of any security issued by such Person or of
any agreement, instrument or other undertaking to which
such Person is a party or by which it or any of its
Property is bound.
"Currency Swap Agreements": with respect to any
Person, any spot or forward foreign exchange agreements
and currency swap, currency option or other similar
financial agreements or arrangements entered into by
such Person or any of its Subsidiaries in the ordinary
course of business and designed to protect against or
manage exposure to fluctuations in foreign currency
exchange rates.
"Default": any of the events specified in Section 7,
whether or not any requirement for the giving of
notice, the lapse of time, or both, has been satisfied.
"Disposition": with respect to any Property, any
sale, lease, sale and leaseback, assignment (other than
the granting of a Lien or other encumbrance permitted
in accordance with the terms of this Agreement),
conveyance, transfer or other disposition thereof; and
the terms "Dispose" and "Disposed of" shall have
correlative meanings.
"Dollars" and "$": dollars in lawful currency of the
United States of America.
"Elebash Agreement": the agreement for certain
marketing and consulting services dated as of October
11, 1988 and effective as of July 12, 1988 between the
Borrower and Timberlands, as successors in interest,
and The Elebash Company.
"Environmental Laws": any and all foreign, Federal,
state, local or municipal laws, rules, orders,
regulations, statutes, ordinances, codes, decrees or
other Requirements of Law (including common law)
regulating, relating to or imposing liability or
standards of conduct concerning protection of human
health or the environment, as now or may at any time
hereafter be in effect.
"Environmental Permits": any and all permits,
licenses, registrations, notifications, exemptions and
any other authorizations required under any
Environmental Law.
"ERISA": the Employee Retirement Income Security Act
of 1974, as amended from time to time.
"Eurocurrency Reserve Requirements": for any day as
applied to a Eurodollar Loan, the aggregate (without
duplication) of the maximum rates (expressed as a
decimal fraction) of reserve requirements in effect on
such day (including, without limitation, basic,
supplemental, marginal and emergency reserves under any
regulations of the Board or other Governmental
Authority having jurisdiction with respect thereto)
dealing with reserve requirements prescribed for
eurocurrency funding (currently referred to as
"Eurocurrency Liabilities" in Regulation D of the
Board) maintained by a member bank of the Federal
Reserve System.
"Eurodollar Base Rate": with respect to each day
during each Interest Period pertaining to a Eurodollar
Loan, the rate per annum determined on the basis of the
rate for deposits in Dollars for a period equal to such
Interest Period commencing on the first day of such
Interest Period appearing on Page 3750 of the Telerate
screen as of 11:00 A.M., London time, two Business Days
prior to the beginning of such Interest Period. In the
event that such rate does not appear on Page 3750 of
the Telerate Service (or otherwise on such service),
the "Eurodollar Base Rate" for purposes of this
definition shall be determined by reference to such
other comparable publicly available service for
displaying eurodollar rates as may be selected by the
Administrative Agent or, in the absence of such
availability, by reference to the rate at which the
Administrative Agent is offered Dollar deposits at or
about 11:00 A.M., New York City time, two Business Days
prior to the beginning of such Interest Period in the
interbank eurodollar market where its eurodollar and
foreign currency and exchange operations are then being
conducted for delivery on the first day of such
Interest Period for the number of days comprised
therein.
"Eurodollar Loans": Loans the rate of interest
applicable to which is based upon the Eurodollar Rate.
"Eurodollar Rate": with respect to each day during
each Interest Period pertaining to a Eurodollar Loan, a
rate per annum determined for such day in accordance
with the following formula (rounded upward to the
nearest 1/100th of 1%):
Eurodollar Base Rate
-------------------------------
1.00 - Eurocurrency Reserve Requirements
"Eurodollar Tranche": the collective reference to
Eurodollar Loans the then current Interest Periods with
respect to all of which begin on the same date and end
on the same later date (whether or not such Loans shall
originally have been made on the same day).
"Event of Default": any of the events specified in
Section 7, provided that any requirement for the giving
of notice, the lapse of time, or both, has been
satisfied.
"Facility": each of (a) the Term Loan Commitments
and the Term Loans made thereunder (the "Term Loan
Facility") and (b) the Revolving Credit Commitments and
the Revolving Credit Loans made thereunder (the
"Revolving Credit Facility").
"Federal Funds Effective Rate": for any day, the
weighted average of the rates on overnight federal
funds transactions with members of the Federal Reserve
System arranged by federal funds brokers, as published
on the next succeeding Business Day by the Federal
Reserve Bank of New York, or, if such rate is not so
published for any day which is a Business Day, the
average of the quotations for the day of such
transactions received by the Administrative Agent from
three federal funds brokers of recognized standing
selected by it.
"Funding Office": the office of the Administrative
Agent set forth in Section 9.2.
"GAAP": generally accepted accounting principles in
the United States of America as in effect from time to
time, except that for purposes of Section 6.1, GAAP
shall be determined on the basis of such principles in
effect on the date hereof and consistent with those
used in the preparation of the most recent audited
financial statements delivered pursuant to Section
3.1(b). In the event that any "Accounting Change" (as
defined below) shall occur and such change results in a
change in the method of calculation of financial
covenants, standards or terms in this Agreement, then
the Borrower and the Administrative Agent agree to
enter into negotiations in order to amend such
provisions of this Agreement so as to equitably reflect
such Accounting Changes with the desired result that
the criteria for evaluating the financial condition of
any Person shall be the same after such Accounting
Changes as if such Accounting Changes had not been
made. Until such time as such an amendment shall have
been executed and delivered by the Borrower, the
Administrative Agent and the Required Lenders, all
financial covenants, standards and terms in this
Agreement shall continue to be calculated or construed
as if such Accounting Changes had not occurred.
"Accounting Changes" refers to changes in accounting
principles required by the promulgation of any rule,
regulation, pronouncement or opinion by the Financial
Accounting Standards Board of the American Institute of
Certified Public Accountants or, if applicable, the
Securities and Exchange Commission (or successors
thereto or agencies with similar functions).
"Governmental Authority": any nation or government,
any state or other political subdivision thereof and
any entity exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining
to government (including, without limitation, the
National Association of Insurance Commissioners).
"Guarantee Obligation": as to any Person (the
"guaranteeing person"), any obligation of (a) the
guaranteeing person or (b) another Person (including,
without limitation, any bank under any letter of
credit) to induce the creation of which the
guaranteeing person has issued a reimbursement, counter
indemnity or similar obligation, in either case
guaranteeing or in effect guaranteeing any
Indebtedness, leases, dividends or other obligations
(the "primary obligations") of any other third Person
(the "primary obligor") in any manner, whether directly
or indirectly, including, without limitation, any
obligation of the guaranteeing person, whether or not
contingent, (i) to purchase any such primary obligation
or any Property constituting direct or indirect
security therefor, (ii) to advance or supply funds (1)
for the purchase or payment of any such primary
obligation or (2) to maintain working capital or equity
capital of the primary obligor or otherwise to maintain
the net worth or solvency of the primary obligor, (iii)
to purchase Property, securities or services primarily
for the purpose of assuring the owner of any such
primary obligation of the ability of the primary
obligor to make payment of such primary obligation or
(iv) otherwise to assure or hold harmless the owner of
any such primary obligation against loss in respect
thereof; provided, however, that the term Guarantee
Obligation shall not include endorsements of
instruments for deposit or collection in the ordinary
course of business. The amount of any Guarantee
Obligation of any guaranteeing person shall be deemed
to be the lower of (a) an amount equal to the stated or
determinable amount of the primary obligation in
respect of which such Guarantee Obligation is made and
(b) the maximum amount for which such guaranteeing
person may be liable pursuant to the terms of the
instrument embodying such Guarantee Obligation, unless
such primary obligation and the maximum amount for
which such guaranteeing person may be liable are not
stated or determinable, in which case the amount of
such Guarantee Obligation shall be such guaranteeing
person's maximum reasonably anticipated liability in
respect thereof as determined by the Borrower in good
faith.
"Indebtedness": of any Person at any date, 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 current trade payables incurred in the
ordinary course of such Person's business), (c) all
obligations of such Person evidenced by notes, bonds,
debentures or other similar instruments, (d) all
indebtedness 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 Capital
Lease Obligations of such Person, (f) all obligations
of such Person, contingent or otherwise, as an account
party under acceptance, letter of credit or similar
facilities, (g) all obligations of such Person,
contingent or otherwise, to purchase, redeem, retire or
otherwise acquire for value any Capital Stock
(other than common stock) of such Person, (h) all
Guarantee Obligations of such Person in respect of
obligations of the kind referred to in clauses (a)
through (g) above; (i) all obligations of the kind
referred to in clauses (a) through (h) above secured by
(or for which the holder of such obligation 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, whether or not such Person has assumed or
become liable for the payment of such obligation, (j)
for the purposes of Section 7(e) only, all obligations
of such Person in respect of Interest Rate Protection
Agreements and (k) the liquidation value of any
preferred Capital Stock of such Person or its
Subsidiaries held by any Person other than such Person
and its Wholly Owned Subsidiaries.
"Insolvency": with respect to any Multiemployer
Plan, the condition that such Plan is insolvent within
the meaning of Section 4245 of ERISA.
"Insolvent": pertaining to a condition of Insolvency.
"Intellectual Property": the collective reference to
all rights, priorities and privileges of the Borrower
and the Applicable Subsidiaries relating to
intellectual property, whether arising under United
States, multinational or foreign laws or otherwise,
including, without limitation, copyrights, copyright
licenses, patents, patent licenses, trademarks (and the
goodwill of the business symbolized thereby), trademark
licenses, technology, know-how and processes, and all
rights to sue at law or in equity for any infringement,
dilution or misappropriation thereof, including the
right to receive all proceeds and damages therefrom.
"Intercreditor Agreement": the Intercreditor
Agreement, substantially in the form of Exhibit D, to
be entered into by the Administrative Agent, the
Trustee and Toronto-Dominion (Texas), Inc., as
administrative agent under the Paper Company Loan
Agreement.
"Interest Payment Date": (a) as to any Base Rate
Loan, the last day of each March, June, September and
December to occur while such Loan is outstanding and
the final maturity date of such Loan, (b) as to any
Eurodollar Loan having an Interest Period of three
months or less, the last day of such Interest Period,
(c) as to any Eurodollar Loan having an Interest Period
longer than three months, each day which is three
months, or a whole multiple thereof, after the first
day of such Interest Period and the last day of such
Interest Period and (d) as to any Loan, the date of any
repayment or prepayment made in respect thereof.
"Interest Period": as to any Eurodollar Loan, (a)
initially, the period commencing on the borrowing or
conversion date, as the case may be, with respect to
such Eurodollar Loan and ending one, two, three or six
months thereafter, as selected by the Borrower in its
notice of borrowing or notice of conversion, as the
case may be, given with respect thereto; and (b)
thereafter, each period commencing on the last day of
the next preceding Interest Period applicable to such
Eurodollar Loan and ending one, two, three or six, as
selected by the Borrower by irrevocable notice to the
Administrative Agent not less than three Business Days
prior to the last day of the then current Interest
Period with respect thereto; provided that, all of the
foregoing provisions relating to Interest Periods are
subject to the following:
(i) if any Interest Period would otherwise end on a day
that is not a Business Day, such Interest Period
shall be extended to the next succeeding Business
Day unless the result of such extension would be to
carry such Interest Period into another calendar
month in which event such Interest Period shall end
on the immediately preceding Business Day;
(ii) any Interest Period that would otherwise extend
beyond the date final payment is due on the Term
Loans shall end on such due date;
(iii) any Interest Period that begins on the last Business
Day of a calendar month (or on a day for which there
is no numerically corresponding day in the calendar
month at the end of such Interest Period) shall end
on the last Business Day of a calendar month; and
(iv) the Borrower shall select Interest Periods so as not
to require a payment or prepayment of any Eurodollar
Loan during an Interest Period for such Loan.
"Interest Rate Protection Agreement": any interest
rate protection agreement, interest rate futures
contract, interest rate option, interest rate cap or
other interest rate hedge arrangement, to or under
which the Borrower or any of its Subsidiaries is a
party or a beneficiary on the date hereof or becomes a
party or a beneficiary after the date hereof.
"John Hancock Credit Agreement": the Amended and
Restated Timberlands Loan and Maintenance Agreement,
dated as of November 24, 1997, between Timberlands and
John Hancock Mutual Life Insurance Company, as in
effect on amended through the Closing Date and as
further amended or otherwise modified in accordance
with the terms of this Agreement.
"Lien": any mortgage, pledge, hypothecation,
assignment, deposit arrangement, encumbrance, lien
(statutory or other), charge or other security interest
or any preference, priority or other security agreement
or preferential arrangement of any kind or nature
whatsoever (including, without limitation, any
conditional sale or other title retention agreement and
any capital lease having substantially the same
economic effect as any of the foregoing).
"Loan": any loan made by any Lender pursuant to this
Agreement.
"Loan Documents": this Agreement, the Timberlands
Guarantee, the Security Documents, the Intercreditor
Agreement and the Notes.
"Loan Party": each of the Borrower, Timberlands and
each Subsidiary of the Borrower and Timberlands that is
a party to a Loan Document (other than any such Person
which is only a party to an Acknowledgment and Consent
executed pursuant to a Security Document).
"Management Contracts": the collective reference to
(i) the Paper Company Management Contract and (ii) the
Soucy Management Contract.
"Material Adverse Effect": a material adverse effect
on (a) the Transaction, (b) the business, assets,
property, condition (financial or otherwise) or
prospects of (i) the Borrower and its Applicable
Subsidiaries taken as a whole or (ii) Timberlands and
Soucy and their respective Subsidiaries, taken as a
whole or (c) the validity or enforceability of any
material provision of this Agreement or any of the
other Loan Documents or the rights or remedies of the
Agents or the Lenders hereunder or thereunder.
"Material Environmental Amount": an amount or
amounts payable by Timberlands, Soucy and/or their
respective Subsidiaries in excess of $1,000,000 in the
aggregate during any fiscal quarter, $3,500,000 in the
aggregate during any four consecutive fiscal quarters
or $7,000,000 in the aggregate after the Closing Date
for remedial costs, compliance costs, compensatory
damages, punitive damages, fines, penalties or any
combination thereof.
"Materials of Environmental Concern": any gasoline
or petroleum (including crude oil or any fraction
thereof) or petroleum products or any hazardous or
toxic substances, materials or wastes, defined or
regulated as such in or under any Environmental Law,
including, without limitation, asbestos,
polychlorinated biphenyls and urea-formaldehyde
insulation, or that could result in liability under any
Environmental Law.
"Multiemployer Plan": a Plan which is a
multiemployer plan as defined in Section 4001(a)(3) of
ERISA.
"Net Cash Proceeds": (a) in connection with any
Asset Sale or any Recovery Event, the proceeds thereof
in the form of cash and Cash Equivalents (including any
such proceeds received by way of deferred payment of
principal pursuant to a note or installment receivable
or purchase price adjustment receivable or otherwise,
but only as and when received) of such Asset Sale or
Recovery Event, net of any amount required to be put
into escrow, or otherwise paid, under the John Hancock
Credit Agreement, attorneys' fees, accountants' fees,
investment banking fees, amounts required to be applied
to the repayment of Indebtedness secured by a Lien
expressly permitted hereunder on any asset which is the
subject of such Asset Sale or Recovery Event (other
than any Lien pursuant to a Security Document) and
other customary fees and expenses actually incurred in
connection therewith and net of any taxes of the entity
in respect of the Asset Sale or Recovery Event and any
Partner Taxes paid or reasonably estimated to be
payable as a result thereof and (b) in connection with
any issuance or sale of debt or equity securities in a
primary offering or instruments or the incurrence of
loans, the cash proceeds received from such issuance or
incurrence, net of attorneys' fees, investment banking
fees, accountants' fees, underwriting discounts and
commissions and other customary fees and expenses
actually incurred in connection therewith.
"Non-Excluded Taxes": as defined in Section 2.15(a).
"Non-U.S. Lender": as defined in Section 2.15(d).
"Notes": the collective reference to any promissory
note evidencing Loans.
"Obligations": the unpaid principal of and interest
on (including, without limitation, interest accruing
after the maturity of the Loans and interest accruing
after the filing of any petition in bankruptcy, or the
commencement of any insolvency, reorganization or like
proceeding, relating to the Borrower, whether or not a
claim for post-filing or post-petition interest is
allowed in such proceeding) the Loans and all other
obligations and liabilities of the Borrower to the
Administrative Agent or to any Lender (or, in the case
of Interest Rate Protection Agreements and Currency
Swap Agreements, any affiliate of any Lender), whether
direct or indirect, absolute or contingent, due or to
become due, or now existing or hereafter incurred,
which may arise under, out of, or in connection with,
this Agreement, any other Loan Document, any Interest
Rate Protection Agreement or Currency Swap Agreement
entered into with any Lender or any affiliate of any
Lender or any other document made, delivered or given
in connection herewith or therewith, whether on account
of principal, interest, reimbursement obligations,
fees, indemnities, costs, expenses (including, without
limitation, all fees, charges and disbursements of
counsel to the Administrative Agent or to any Lender
that are required to be paid by the Borrower pursuant
hereto) or otherwise.
"Other Taxes": any and all present or future stamp
or documentary taxes or any other excise or property
taxes, charges or similar levies arising from
any payment made hereunder or from the execution,
delivery or enforcement of, or otherwise with respect
to, this Agreement.
"Paper Company": Bear Island Paper Company, LLC, a
Virginia limited liability company.
"Paper Company Loan": the collective reference to
the loans made pursuant to the Paper Company Loan
Agreement.
"Paper Company Loan Agreement": the Credit
Agreement, dated as of December 1, 1997, among the
Paper Company, the lenders from time to time parties
thereto, and Toronto-Dominion (Texas), Inc., as
Administrative Agent, as amended, supplemented or
otherwise modified from time to time.
"Paper Company Loan Documents": the meaning ascribed
to "Loan Documents" in the Paper Company Loan
Agreement.
"Paper Company Management Contract": the Management
Services Agreement, dated as of December 1, 1997,
between the Borrower and the Paper Company, as in
effect on the Closing Date and as it may be amended,
supplemented or otherwise modified from time to time in
accordance with the Paper Company Loan Agreement.
"Paper Company Term Loan": the collective reference
to the Term Loans made pursuant to the Paper Company
Loan Agreement.
"Participant": as defined in Section 9.6(b).
"Partner Taxes": with respect to the Borrower or
Timberlands or any of their Subsidiaries, the amount
(without duplication) sufficient to permit the direct
and indirect owners of equity interests of such entity
to pay the federal, state and local income taxes and
any foreign taxes imposed on them as a result of their
ownership of interests in such entity.
"Payment Office": the office of the Administrative
Agent set forth in Section 9.2.
"PBGC": the Pension Benefit Guaranty Corporation
established pursuant to Subtitle A of Title IV of ERISA
(or any successor).
"Person": an individual, partnership, corporation,
limited liability company, business trust, joint stock
company, trust, unincorporated association, joint
venture, Governmental Authority or other entity of
whatever nature.
"Plan": at a particular time, any employee benefit
plan which is covered by ERISA and in respect of which
the Borrower or a Commonly Controlled Entity is (or, if
such plan were terminated at such time, would under
Section 4069 of ERISA be deemed to be) an "employer" as
defined in Section 3(5) of ERISA.
"Pro Forma Balance Sheet": as defined in Section 3.1(a).
"Projections": as defined in Section 5.2(c).
"Properties": as defined in Section 3.17.
"Property": any right or interest in or to property
of any kind whatsoever, whether real, personal or mixed
and whether tangible or intangible, including, without
limitation, Capital Stock.
"Recovery Event": any settlement of or payment in
excess of $250,000 in respect of any property or
casualty insurance claim or any condemnation proceeding
relating to any asset of Soucy or Timberlands, or any
of their Subsidiaries.
"Register": as defined in Section 9.6(d).
"Regulation G": Regulation G of the Board as in
effect from time to
time.
"Regulation U": Regulation U of the Board as in
effect from time to time.
"Reinvestment Deferred Amount": with respect to any
Reinvestment Event, the aggregate Net Cash Proceeds
received in connection therewith which are not applied
to prepay the Term Loans pursuant to Section 2.7(b) or
(d) as a result of the delivery of a Reinvestment
Notice.
"Reinvestment Event": any Recovery Event or
Disposition of land, equipment or obsolete or worn out
property in the ordinary course of business in respect
of which the Borrower has delivered a Reinvestment
Notice.
"Reinvestment Notice": a written notice executed by
a Responsible Officer stating that no Event of Default
has occurred and is continuing and that the Borrower,
Timberlands or Soucy or their Subsidiaries, as the case
may be (directly or indirectly through a Subsidiary),
intends and expects to use all or a specified portion
of the Net Cash Proceeds of a Recovery Event or
Disposition of land, equipment or obsolete or worn out
property in the ordinary course of business to acquire
assets, excluding the purchase of farm land.
"Reinvestment Prepayment Amount": with respect to
any Reinvestment Event, the Reinvestment Deferred
Amount relating thereto less any amount expended prior
to the relevant Reinvestment Prepayment Date to acquire
assets useful in the business of Timberlands or Soucy
or their Subsidiaries, as the case may be, excluding
the purchase of farm land.
"Reinvestment Prepayment Date": with respect to any
Reinvestment Event, the earlier of (a) the date
occurring 90 days after such Reinvestment Event and (b)
the date on which the Borrower shall have determined
not to, or shall have otherwise ceased to, acquire
assets useful in the business of Timberlands or Soucy
or their Subsidiaries, as the case may be, with all or
any portion of the relevant Reinvestment Deferred
Amount.
"Reorganization": with respect to any Multiemployer
Plan, the condition that such plan is in reorganization
within the meaning of Section 4241 of ERISA.
"Reportable Event": any of the events set forth in
Section 4043(c) of ERISA, other than those events as to
which the thirty day notice period is waived under
applicable regulations.
"Required Lenders": the holders of more than 66-2/3%
of (a) until the Closing Date, the Commitments and (b)
thereafter, the sum of (i) the aggregate unpaid
principal amount of the Term Loans and (ii) the Total
Revolving Credit Commitments or, if the Revolving
Credit Commitments have been terminated, the Total
Revolving Extensions of Credit.
"Requirement of Law": as to any Person, the
Certificate of Incorporation and By-Laws or other
organizational or governing documents of such Person,
and any law, treaty, rule or regulation or
determination of an arbitrator or a court or other
Governmental Authority, in each case applicable to or
binding upon such Person or any of its Property or to
which such Person or any of its Property is subject.
"Responsible Officer": the chief executive officer,
president, any vice president or chief financial
officer of the Borrower or of any Applicable
Subsidiary, as appropriate, but in any event, with
respect to financial matters, the chief financial
officer of the Borrower or of any Applicable
Subsidiary, as appropriate.
"Retiring Partners": as defined in the recitals hereto.
"Revolving Credit Commitment": as to any Lender, the
obligation of such Lender, if any, to make Revolving
Credit Loans in an aggregate principal amount not to
exceed the amount set forth under the heading
"Revolving Credit Commitment" opposite such Lender's
name on Schedule 1.1A, as the same may be changed from
time to time pursuant to the terms hereof. The original
amount of the Total Revolving Credit Commitments is
$3,000,000.
"Revolving Credit Commitment Period": the period
from and including the Closing Date to the Revolving
Credit Termination Date.
"Revolving Credit Lender": each Lender which has a
Revolving Credit Commitment or which has made Revolving
Credit Loans.
"Revolving Credit Loans": as defined in Section 2.4.
"Revolving Credit Percentage": as to any Revolving
Credit Lender at any time, the percentage which such
Lender's Revolving Credit Commitment then constitutes
of the Total Revolving Credit Commitments (or, at any
time after the Revolving Credit Commitments shall have
expired or terminated, the percentage which the
aggregate principal amount of such Lender's Revolving
Credit Loans then outstanding constitutes of the
aggregate principal amount of the Revolving Credit
Loans then outstanding).
"Revolving Credit Termination Date": December 31, 1999.
"Second Priority Note Indenture": the meaning
ascribed to such term in the Paper Company Loan
Agreement.
"Second Priority Note Security Documents": the
meaning ascribed to such term in the Paper Company Loan
Agreement.
"Second Priority Notes": the meaning ascribed to
such term in the Paper Company Loan Agreement.
"Security Documents": the collective reference to
the Cash Collateral Agreement, the Soucy Pledge
Agreement, the Timberlands Pledge Agreement and all
other security documents hereafter delivered to the
Administrative Agent granting a Lien on any Property of
any Person to secure the obligations and liabilities of
any Loan Party under any Loan Document.
"Single Employer Plan": any Plan which is covered by
Title IV of
ERISA, but which is not a Multiemployer Plan.
"Solvent": when used with respect to any Person,
means that, as of any date of determination, (a) the
amount of the "present fair saleable value" of the
assets of such Person will, as of such date, exceed the
amount of all "liabilities of such Person, contingent
or otherwise", as of such date, as such quoted terms
are determined in accordance with applicable federal
and state laws governing determinations of the
insolvency of debtors, (b) the present fair saleable
value of the assets of such Person will, as of such
date, be greater than the amount that will be required
to pay the liability of such Person on its debts as
such debts become absolute and matured, (c) such Person
will not have, as of such date, an unreasonably small
amount of capital with which to conduct its business,
and (d) such Person will be able to pay its debts as
they mature. For purposes of this definition, (i)
"debt" means liability on a "claim", and (ii) "claim"
means any (x) right to payment, whether or not such a
right is reduced to judgment, liquidated, unliquidated,
fixed, contingent, matured, unmatured, disputed,
undisputed, legal, equitable, secured or unsecured or
(y) right to an equitable remedy for breach of
performance if such breach gives rise to a right to
payment, whether or not such right to an equitable
remedy is reduced to judgment, fixed, contingent,
matured or unmatured, disputed, undisputed, secured or
unsecured.
"Soucy": F.F. Soucy, Inc., a Quebec corporation.
"Soucy Management Contract": the collective
reference to the Management and Administrative Services
Agreement dated January 1, 1990 and the Manufacturer's
Representative Agreement, dated January 1, 1990, in
each case between Brant-Allen and Soucy, as in effect
on the Closing Date and as it may be amended,
supplemented or otherwise modified from time to time in
accordance with the terms of this Agreement and the
Paper Company Loan Agreement.
"Soucy Partners": F.F. Soucy, Inc. & Partners,
Limited Partnership, a Subsidiary of Soucy.
"Soucy Pledge Agreement": collectively, the Soucy
Pledge Agreement to be executed and delivered by
Brant-Allen under New York law and the Soucy Hypothec
Agreement to be executed and delivered by Brant-Allen
under Quebec law, substantially in the form of Exhibit
C-1, as the same may be amended, supplemented or
otherwise modified from time to time.
"Subsidiary": as to any Person, a corporation,
partnership, limited liability company or other entity
of which shares of stock or other ownership interests
having ordinary voting power (other than stock or such
other ownership interests having such power only by
reason of the happening of a contingency) to elect a
majority of the board of directors or other managers of
such corporation, partnership or other entity are at
the time owned, or the management of which is otherwise
controlled, directly or indirectly through one or more
intermediaries, or both, by such Person. Unless
otherwise qualified, all references to a "Subsidiary"
or to "Subsidiaries" in this Agreement shall refer to a
Subsidiary or Subsidiaries of the Borrower.
"Term Loan": as defined in Section 2.1.
"Term Loan Commitment": as to any Lender, the
obligation of such Lender, if any, to make a Term Loan
to the Borrower hereunder in a principal amount not to
exceed the amount set forth under the heading "Term
Loan Commitment" opposite such Lender's name on
Schedule 1.1A. The initial aggregate amount of the Term
Loan Commitments is $32,000,000.
"Term Loan Lender": each Lender which has a Term
Loan Commitment or which has made a Term Loan.
"Term Loan Percentage": as to any Lender at any
time, the percentage which such Lender's Term Loan
Commitment then constitutes of the aggregate Term Loan
Commitments (or, at any time after the Closing Date,
the percentage which the aggregate principal amount of
such Lender's Term Loans then outstanding constitutes
of the aggregate principal amount of the Term Loans
then outstanding).
"Timberlands": as defined in the recitals hereto.
"Timberlands Guarantee": the Timberlands Guarantee
to be executed and delivered by Timberlands,
substantially in the form of Exhibit A, as the same may
be amended, supplemented or otherwise modified from
time to time.
"Timberlands Percentage": on any date, the ratio
(expressed as a percentage) of (i) the Aggregate
Exposure of all Lenders on such date to (ii) the sum of
(A) the Aggregate Exposure of all Lenders on such date
plus (B) the aggregate outstanding principal amount of
the Paper Company Loan on such date and the aggregate
undrawn amounts of the commitments under the Paper
Company Loan Agreement.
"Timberlands Pledge Agreement": the Timberlands
Pledge Agreement to be executed and delivered by the
Borrower, substantially in the form of Exhibit B, as
the same may be amended, supplemented or otherwise
modified from time to time.
"Timberlands Wood Supply Contract": the Wood Supply
Agreement between Timberlands and the Paper Company
dated as of December 1, 1997, as amended prior to the
Closing Date and provided to the Administrative Agent,
as amended or otherwise modified in the ordinary course
of business and on arms' length terms (notice of which
amendments will be given by the Borrower to the
Administrative Agent within 30 days after the execution
thereof).
"Total Revolving Credit Commitments": at any time,
the aggregate amount of the Revolving Credit
Commitments at such time.
"Total Revolving Extensions of Credit": at any time,
the aggregate outstanding principal amount of the
Revolving Credit Loans of the Revolving Credit Lenders
at such time.
"Trade Payables": with respect to any Person,
accounts payable incurred in the ordinary course of
such Person's business.
"Transaction": as defined in the preamble hereto.
"Transferee": as defined in Section 9.15.
"Trustee": Crestar Bank, a Virginia banking
corporation, as trustee under the Second Priority Note
Indenture.
"Type": as to any Loan, its nature as a Base Rate
Loan or a Eurodollar Loan.
"Wholly Owned Subsidiary": as to any Person, any
other Person all of the Capital Stock of which (other
than directors' qualifying shares required by law) is
owned by such Person directly and/or through other
Wholly Owned Subsidiaries.
1.2 Other Definitional Provisions. (a) Unless
otherwise specified therein, all terms defined in this Agreement shall
have the defined meanings when used in the other Loan Documents or any
certificate or other document made or delivered pursuant hereto or
thereto.
(b) As used herein and in the other Loan Documents,
and any certificate or other document made or delivered pursuant hereto
or thereto, accounting terms not defined in Section 1.1 and accounting
terms partly defined in Section 1.1, to the extent not defined, shall
have the respective meanings given to them under GAAP.
(c) The words "hereof", "herein" and "hereunder" and
words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this
Agreement, and Section, Schedule and Exhibit references are to this
Agreement unless otherwise specified.
(d) The meanings given to terms defined herein shall
be equally applicable to both the singular and plural forms of such
terms.
SECTION 2. AMOUNT AND TERMS OF COMMITMENTS
2.1 Term Loan Commitments; Revolving Credit
commitments. (a) Subject to the terms and conditions hereof, each Term
Loan Lender severally agrees to make a term loan (a "Term Loan") to the
Borrower on the Closing Date in an amount not to exceed the amount of the
Term Loan Commitment of such Lender. The Term Loans may from time to time
be Eurodollar Loans or Base Rate Loans, as determined by the Borrower and
notified to the Administrative Agent in accordance with Sections 2.2 and
2.8.
(b) Subject to the terms and conditions hereof, each
Revolving Credit Lender severally agrees to make revolving credit loans
("Revolving Credit Loans") to the Borrower from time to time during the
Revolving Credit Commitment Period in an aggregate principal amount at
any one time outstanding which does not exceed the amount of such
Lender's Revolving Credit Commitment. During the Revolving Credit
Commitment Period the Borrower may use the Revolving Credit Commitments
by borrowing, prepaying the Revolving Credit Loans in whole or in part,
and reborrowing, all in accordance with the terms and conditions hereof.
The Revolving Credit Loans may from time to time be Eurodollar Loans or
Base Rate Loans, as determined by the Borrower and notified to the
Administrative Agent in accordance with Sections 2.5 and 2.8, provided
that no Revolving Credit Loan shall be made as a Eurodollar Loan after
the day that is one month prior to the Revolving Credit Termination Date.
2.2 Procedure for Borrowing. (a) The Borrower shall
give the Administrative Agent irrevocable notice (which notice must be
received by the Administrative Agent prior to 10:00 A.M., New York City
time, one Business Day prior to the anticipated Closing Date) requesting
that the Lenders make the Term Loans on the Closing Date and specifying
the amount to be borrowed. The Term Loans made on the Closing Date shall
initially be Base Rate Loans and may thereafter be converted into
Eurodollar Loans in accordance with Section 2.8. Upon receipt of such
notice the Administrative Agent shall promptly notify each Lender
thereof. Not later than 12:00 Noon, New York City time, on the Closing
Date each Lender shall make available to the Administrative Agent at the
Funding Office an amount in immediately available funds equal to the Term
Loan or Term Loans to be made by such Lender. The Administrative Agent
shall make available to the Borrower the aggregate of the amounts made
available to the Administrative Agent by the Lenders in immediately
available funds.
(b) The Borrower may borrow under the Revolving
Credit Commitments during the Revolving Credit Commitment Period on any
Business Day, provided that the Borrower shall give the Administrative
Agent irrevocable notice (which notice must be received by the
Administrative Agent prior to 12:00 Noon, New York City time, (a) three
Business Days prior to the requested Borrowing Date, in the case of
Eurodollar Loans, or (b) one Business Day prior to the requested
Borrowing Date, in the case of Base Rate Loans), specifying (i) the
amount and Type of Revolving Credit Loans to be borrowed, (ii) the
requested Borrowing Date and (iii) in the case of Eurodollar Loans, the
respective amounts of each such Type of Loan and the respective lengths
of the initial Interest Period therefor. Any Revolving Credit Loans made
on the Closing Date shall initially be Base Rate Loans but thereafter may
be converted in accordance with Section 2.8. Each borrowing under the
Revolving Credit Commitments shall be in an amount equal to (x) in the
case of Base Rate Loans, $100,000 or a whole multiple of $100,000 in
excess thereof (or, if the then aggregate Available Revolving Credit
Commitments are less than $100,000, such lesser amount) and (y) in the
case of Eurodollar Loans, $100,000 or a whole multiple of $100,000 in
excess thereof. Upon receipt of any such notice from the Borrower, the
Administrative Agent shall promptly notify each Revolving Credit Lender
thereof. Each Revolving Credit Lender will make the amount of its pro
rata share of each borrowing available to the Administrative Agent for
the account of the Borrower at the Funding Office prior to 12:00 Noon,
New York City time, on the Borrowing Date requested by the Borrower in
funds immediately available to the Administrative Agent. Such borrowing
will then be made available to the Borrower by the Administrative Agent
in like funds as received by the Administrative Agent.
2.3 Repayment of Loans. (a) The entire outstanding
principal amount of each Term Loan shall mature on December 31, 1999.
(b) The Borrower shall repay all outstanding
Revolving Credit Loans on the Revolving Credit Termination Date.
2.4 Repayment of Loans; Evidence of Debt. (a) The
Borrower hereby unconditionally promises to pay to the Administrative
Agent for the account of the appropriate Lender (i) the then unpaid
principal amount of each Revolving Credit Loan of such Revolving Credit
Lender on the Revolving Credit Termination Date, or on such earlier date
on which the Loans become due and payable pursuant to Section 7, and (ii)
the principal amount of each Term Loan on December 31, 1999, or on such
earlier date on which the Term Loans become due and payable pursuant to
Section 7. The Borrower hereby further agrees to pay interest on the
unpaid principal amount of the Loans from time to time outstanding from
the date hereof until payment in full thereof at the rates per annum, and
on the dates, set forth in Section 2.10.
(b) Each Lender shall maintain in accordance with
its usual practice an account or accounts evidencing indebtedness of the
Borrower to such Lender resulting from each Loan of such Lender from time
to time, including the amounts of principal and interest payable and paid
to such Lender from time to time under this Agreement.
(c) The Administrative Agent, on behalf of the
Borrower, shall maintain the Register pursuant to Section 9.6(e), and a
subaccount therein for each Lender, in which shall be recorded (i) the
amount of each Loan made hereunder and any Note evidencing such Loan, the
Type thereof and each Interest Period applicable thereto, (ii) the amount
of any principal or interest due and payable or to become due and payable
from the Borrower to each Lender hereunder and (iii) both the amount of
any sum received by the Administrative Agent hereunder from the Borrower
and each Lender's share thereof.
(d) The entries made in the Register and the
accounts of each Lender maintained pursuant to Section 2.4(b) shall, to
the extent permitted by applicable law and absent manifest error, be
prima facie evidence of the existence and amounts of the obligations of
the Borrower therein recorded; provided, however, that the failure of any
Lender or the Administrative Agent to maintain the Register or any such
account, or any error therein, shall not in any manner affect the
obligation of the Borrower to repay (with applicable interest) the Loans
made to such Borrower by such Lender in accordance with the terms of this
Agreement.
(e) The Borrower agrees that, upon the request to
the Administrative Agent by any Lender, the Borrower will execute and
deliver to such Lender a promissory note of the Borrower evidencing any
Term Loans or Revolving Credit Loans, as the case may be, of such Lender,
substantially in the form of Exhibit I-1 or I-2, respectively, with
appropriate insertions as to date and principal amount.
2.5 Commitment Fees, etc. (a) The Borrower agrees to
pay to the Administrative Agent for the account of each Revolving Credit
Lender a commitment fee for the period from and including the Closing
Date to the last day of the Revolving Credit Commitment Period, computed
at the rate of .50% per annum on the average daily amount of the
Available Revolving Credit Commitment of such Lender during the period
for which payment is made, payable quarterly in arrears on the last day
of each March, June, September and December and on the Revolving Credit
Termination Date, commencing on the first of such dates to occur after
the date hereof.
(b) The Borrower agrees to pay to the Administrative
Agent the fees in the amounts and on the dates from time to time agreed
to in writing by the Borrower and the Administrative Agent.
2.6 Optional Termination of Revolving Credit
Commitments; Optional Prepayments. (a) The Borrower shall have the right,
upon not less than three Business Days' notice to the Administrative
Agent, to terminate the Revolving Credit Commitments or, from time to
time, to reduce the amount of the Revolving Credit Commitments; provided
that no such termination or reduction of Revolving Credit Commitments
shall be permitted if, after giving effect thereto and to any prepayments
of the Revolving Credit Loans made on the effective date thereof, the
Total Revolving Extensions of Credit would exceed the Total Revolving
Credit Commitments. Any such reduction shall be in an amount equal to
$1,000,000, or in increments of $500,000 in excess thereof, and shall
reduce permanently the Revolving Credit Commitments then in effect.
(b) The Borrower may at any time and from time to
time prepay the Loans, in whole or in part, without premium or penalty,
upon irrevocable written or telephonic (promptly confirmed in writing)
notice delivered to the Administrative Agent at least three Business Days
prior thereto in the case of Eurodollar Loans and at least one Business
Day prior thereto in the case of Base Rate Loans, which notice shall
specify the date and amount of prepayment and whether the prepayment is
of Eurodollar Loans or Base Rate Loans; provided, that if a Eurodollar
Loan is prepaid on any day other than the last day of the Interest Period
applicable thereto, the Borrower shall also pay any amounts owing
pursuant to Section 2.16. Upon receipt of any such notice the
Administrative Agent shall promptly notify each relevant Lender thereof.
If any such notice is given, the amount specified in such notice shall be
due and payable on the date specified therein, together with accrued
interest to such date on the amount prepaid. Partial prepayments of Term
Loans shall be in an aggregate principal amount of $500,000 or a whole
multiple thereof, and partial prepayments of Revolving Credit Loans shall
be in an aggregate amount of $100,000 or whole multiple thereof.
2.7 Mandatory Prepayments and Commitment
Restrictions. (a) If on any date any Capital Stock shall be issued (other
than to the Borrower or Timberlands or any of its Subsidiaries), or
Indebtedness shall be incurred, by Timberlands or any of its Subsidiaries
(excluding any Indebtedness incurred in accordance with Section 6.2(a)
through (f) and (h) through (m) as in effect on the date of this
Agreement), an amount equal to 100% of the Net Cash Proceeds thereof
shall be applied on the date of such issuance or incurrence toward the
prepayment of the Term Loans.
(b) If on any date the Borrower or any of its
Applicable Subsidiaries (other than Soucy and its Subsidiaries) shall
receive Net Cash Proceeds from any Asset Sale or Recovery Event then,
unless a Reinvestment Notice shall have been delivered in respect
thereof, such Net Cash Proceeds shall be applied within 30 days after
such date toward the prepayment of the Term Loans net of any federal,
state, local and foreign taxes required to be paid by the Borrower or any
direct or indirect owner of the Borrower as a result of any actual or
deemed distributions made by an Applicable Subsidiary in order to enable
the Borrower to make such application. In addition, on each Reinvestment
Prepayment Date, an amount equal to the Reinvestment Prepayment Amount
with respect to the relevant Reinvestment Event shall be applied toward
the prepayment of the Term Loans net of any federal, state, local and
foreign taxes required to be paid by the Borrower or any direct or
indirect owner of the Borrower as a result of any actual or deemed
distributions made by an Applicable Subsidiary in order to enable the
Borrower to make such application.
(c) If any dividends or distributions shall be made
by Timberlands to the Borrower, excluding distributions in an amount
equal to Partner Taxes in respect of the income of Timberlands, an amount
equal to 100% of such dividends or distributions net of any federal,
state, local and foreign taxes required to be paid by the Borrower or any
direct or indirect owner of the Borrower as a result of such dividend or
distribution shall be applied by the Borrower on the date of such
distribution toward the prepayment of the Term Loans.
(d) If on any date prior to the date on which the
Soucy Pledge Agreement shall have terminated in accordance with the terms
thereof any Capital Stock of Soucy shall be issued other than to
Brant-Allen, an amount shall be applied on the date of such issuance
toward the prepayment of the Term Loans equal to the Timberlands
Percentage of the Net Cash Proceeds thereof net of any federal, state,
local and foreign taxes required to be paid by the Borrower or any direct
or indirect owner of the Borrower as a result of any actual or deemed
distributions made by Soucy in order to enable the Borrower to make such
application. If on any date prior to the date on which the Soucy Pledge
Agreement shall have terminated in accordance with the terms thereof
Soucy or any of its Subsidiaries shall receive Net Cash Proceeds from any
Asset Sale or Recovery Event then, unless a Reinvestment Notice shall
have been delivered in respect thereof, an amount shall be applied within
30 days after such date toward the prepayment of the Term Loans equal to
the Timberlands Percentage of the Net Cash Proceeds thereof net of any
federal, state, local and foreign taxes required to be paid by the
Borrower or any direct or indirect owner of the Borrower as a result of
any actual or deemed distributions made by Soucy in order to enable the
Borrower to make such application; provided, that with respect to any
Asset Sale by Soucy Partners, the Net Cash Proceeds required to be
applied toward prepayment pursuant to this paragraph (d) shall also be
net of any portion thereof attributable to equity interests in Soucy
Partners held by Persons other than Soucy. In addition, on each
Reinvestment Prepayment Date with respect to Soucy, an amount shall be
applied toward the prepayment of the Term Loans equal to the Timberlands
Percentage of the Reinvestment Prepayment Amount with respect to the
relevant Reinvestment Event net of any federal, state, local and foreign
taxes required to be paid by the Borrower or any direct or indirect owner
of the Borrower as a result of any actual or deemed distributions made by
Soucy in order to enable the Borrower to make such application; provided,
that with respect to any Asset Sale by Soucy Partners, the Net Cash
Proceeds required to be applied toward prepayment pursuant to this
paragraph (d) shall also be net of any portion thereof attributable to
equity interests in Soucy Partners held by Persons other than Soucy.
(e) The application of any prepayment pursuant to
Section 2.7 shall be made first to Base Rate Loans and second to
Eurodollar Loans. Each prepayment of the Loans under Section 2.7 shall be
accompanied by accrued interest to the date of such prepayment on the
amount prepaid.
(f) After the Term Loans have been repaid in full,
all amounts required by this Section to be applied toward prepayment of
the Term Loans shall, instead, be applied to the automatic permanent
reduction of the Revolving Credit Commitments, accompanied by prepayment
of the Revolving Credit Loans by the amount, if any, by which the
outstanding principal amount thereof exceeds the Revolving Credit
Commitments as so reduced.
2.8 Conversion and Continuation Options. (a) The
Borrower may elect from time to time to convert Eurodollar Loans to Base
Rate Loans by giving the Administrative Agent at least one Business Day's
prior irrevocable telephonic notice (promptly confirmed in writing) of
such election, provided that any such conversion of Eurodollar Loans may
only be made on the last day of an Interest Period with respect thereto.
The Borrower may elect from time to time to convert Base Rate Loans to
Eurodollar Loans by giving the Administrative Agent at least three
Business Days' prior irrevocable notice of such election (which notice
shall specify the length of the initial Interest Period therefor),
provided that no Base Rate Loan may be converted into a Eurodollar Loan
(i) when any Event of Default has occurred and is continuing or (ii)
after the date that is one month prior to the maturity date of the Term
Loan Facility. Upon receipt of any such notice the Administrative Agent
shall promptly notify each relevant Lender thereof.
(b) Any Eurodollar Loan may be continued as such
upon the expiration of the then current Interest Period with respect
thereto by the Borrower giving irrevocable notice to the Administrative
Agent, in accordance with the applicable provisions of the term "Interest
Period" set forth in Section 1.1, of the length of the next Interest
Period to be applicable to such Loans, provided that no Eurodollar Loan
may be continued as such (i) when any Event of Default has occurred and
is continuing and the Administrative Agent has or the Required Lenders
have determined in its or their sole discretion not to permit such
continuations or (ii) after the date that is one month prior to the final
scheduled termination or maturity date of the Term Loan Facility, and
provided, further, that if the Borrower shall fail to give any required
notice as described above in this paragraph or if such continuation is
not permitted pursuant to the preceding proviso such Loans shall be
automatically converted to Base Rate Loans on the last day of such then
expiring Interest Period. Upon receipt of any such notice the
Administrative Agent shall promptly notify each relevant Lender thereof.
2.9 Minimum Amounts and Maximum Number of Eurodollar
Tranches. Notwithstanding anything to the contrary in this Agreement, all
borrowings, conversions, continuations and optional prepayments of
Eurodollar Loans hereunder and all selections of Interest Periods
hereunder shall be in such amounts and be made pursuant to such elections
so that, (a) after giving effect thereto, the aggregate principal amount
of the Eurodollar Loans comprising each Eurodollar Tranche shall be equal
to (i) with respect to Term Loans, $1,000,000 or a whole multiple of
$250,000 in excess thereof and (ii) with respect to Revolving Credit
Loans, $100,000 or whole multiples thereof and (b) no more than seven
Eurodollar Tranches shall be outstanding at any one time.
2.10 Interest Rates and Payment Dates. (a) Each
Eurodollar Loan shall bear interest for each day during each Interest
Period with respect thereto at a rate per annum equal to the Eurodollar
Rate determined for such day plus the Applicable Margin.
(b) Each Base Rate Loan shall bear interest at a
rate per annum equal to the Base Rate plus the Applicable Margin.
(c) (i) If all or a portion of the principal amount
of any Loan shall not be paid when due (whether at the stated maturity,
by acceleration or otherwise), all outstanding Loans (whether or not
overdue) shall bear interest at a rate per annum which is equal to the
rate that would otherwise be applicable thereto pursuant to the foregoing
provisions of this Section plus 2%, and (ii) if all or a portion of any
interest payable on any Loan or any commitment fee or other amount
payable hereunder shall not be paid when due (whether at the stated
maturity, by acceleration or otherwise), such overdue amount shall bear
interest at a rate per annum equal to the rate applicable to Base Rate
Loans plus 2% (or, in the case of any such other amounts, the Base Rate
plus 2%), in each case, with respect to clauses (i) and (ii) above, from
the date of such non-payment until such amount is paid in full (as well
after as before judgment).
(d) Interest shall be payable in arrears on each
Interest Payment Date, provided that interest accruing pursuant to
paragraph (c) of this Section shall be payable from time to time on
demand.
2.11 Computation of Interest and Fees. (a) Interest,
fees and commissions payable pursuant hereto shall be calculated on the
basis of a 360-day year for the actual days elapsed, except that, with
respect to Base Rate Loans the rate of interest on which is calculated on
the basis of the Prime Rate, the interest thereon shall be calculated on
the basis of a 365- (or 366-, as the case may be) day year for the actual
days elapsed. The Administrative Agent shall as soon as practicable
notify the Borrower and the relevant Lenders of each determination of a
Eurodollar Rate. Any change in the interest rate on a Loan resulting from
a change in the Base Rate or the Eurocurrency Reserve Requirements shall
become effective as of the opening of business on the day on which such
change becomes effective. The Administrative Agent shall as soon as
practicable notify the Borrower and the relevant Lenders of the effective
date and the amount of each such change in interest rate.
(b) Each determination of an interest rate by the
Administrative Agent pursuant to any provision of this Agreement shall be
conclusive and binding on the Borrower and the Lenders in the absence of
manifest error. The Administrative Agent shall, at the request of the
Borrower, deliver to the Borrower a statement showing the quotations used
by the Administrative Agent in determining any interest rate pursuant to
Section 2.10(a).
2.12 Inability to Determine Interest Rate. If prior
to the first day of any Interest Period:
(a) the Administrative Agent shall have determined
(which determination shall be conclusive and binding
upon the Borrower) that, by reason of circumstances
affecting the relevant market, adequate and reasonable
means do not exist for ascertaining the Eurodollar Rate
for such Interest Period, or
(b) the Administrative Agent shall have received
notice from the Required Lenders that the Eurodollar
Rate determined or to be determined for such Interest
Period will not adequately and fairly reflect the cost
to such Lenders (as conclusively certified by such
Lenders) of making or maintaining their affected Loans
during such Interest Period,
the Administrative Agent shall give telecopy or telephonic notice thereof
to the Borrower and the relevant Lenders as soon as practicable
thereafter. If such notice is given (x) any Eurodollar Loans requested to
be made on the first day of such Interest Period shall be made as Base
Rate Loans, (y) any Loans that were to have been converted on the first
day of such Interest Period to Eurodollar Loans shall be continued as
Base Rate Loans and (z) any outstanding Eurodollar Loans shall be
converted, on the first day of such Interest Period, to Base Rate Loans.
Until such notice has been withdrawn by the Administrative Agent, no
further Eurodollar Loans shall be continued as such, nor shall the
Borrower have the right to convert Loans to Eurodollar Loans.
2.13 Pro Rata Treatment and Payments. (a) Each
borrowing by the Borrower from the Lenders hereunder, each payment by the
Borrower on account of any commitment fee and any reduction of the
Commitments of the Lenders shall be made pro rata according to the
respective Term Loan Percentages or Revolving Credit Percentages, as the
case may be, of the relevant Lenders.
(b) Each payment (including each prepayment) by the
Borrower on account of principal of and interest on the Term Loans or
Revolving Credit Loans shall be made pro rata according to the respective
outstanding principal amounts of the Term Loans or Revolving Credit
Loans, as the case may be, then held by the Lenders. Amounts prepaid on
account of the Term Loans may not be reborrowed.
(c) All payments (including prepayments) to be made
by the Borrower hereunder, whether on account of principal, interest,
fees or otherwise, shall be made without setoff or counterclaim and shall
be made prior to 12:00 Noon, New York City time, on the due date thereof
to the Administrative Agent, for the account of the Lenders, at the
Payment Office, in Dollars and in immediately available funds. The
Administrative Agent shall distribute such payments to the Lenders
promptly upon receipt in like funds as received. If any payment hereunder
(other than payments on the Eurodollar Loans) becomes due and payable on
a day other than a Business Day, such payment shall be extended to the
next succeeding Business Day. If any payment on a Eurodollar Loan becomes
due and payable on a day other than a Business Day, the maturity thereof
shall be extended to the next succeeding Business Day unless the result
of such extension would be to extend such payment into another calendar
month, in which event such payment shall be made on the immediately
preceding Business Day. In the case of any extension of any payment of
principal pursuant to the preceding two sentences, interest thereon shall
be payable at the then applicable rate during such extension.
(d) Unless the Administrative Agent shall have been
notified in writing by any Lender prior to a borrowing that such Lender
will not make the amount that would constitute its share of the borrowing
available to the Administrative Agent, the Administrative Agent may
assume that such Lender is making such amount available to the
Administrative Agent, and the Administrative Agent may, in reliance upon
such assumption, make available to the Borrower a corresponding amount.
If such amount is not made available to the Administrative Agent by the
required time on the borrowing date, such Lender shall pay to the
Administrative Agent, on demand, such amount with interest thereon at a
rate equal to the daily average Federal Funds Effective Rate for the
period until such Lender makes such amount immediately available to the
Administrative Agent. A certificate of the Administrative Agent submitted
to any Lender with respect to any amounts owing under this Section
2.13(d) shall be conclusive in the absence of manifest error. If the
Administrative Agent makes the amount of such Lender's share of such
borrowing available to the Borrower and such Lender fails to make such
amount available to the Administrative Agent within three Business Days
of the Closing Date, the Administrative Agent shall also be entitled to
recover such amount with interest thereon at the rate per annum
applicable to Base Rate Loans, on demand, from the Borrower.
(e) Unless the Administrative Agent shall have been
notified in writing by the Borrower prior to the date of any payment
being made hereunder that the Borrower will not make such payment to the
Administrative Agent, the Administrative Agent may assume that the
Borrower is making such payment, and the Administrative Agent may, but
shall not be required to, in reliance upon such assumption, make
available to the Lenders their respective pro rata shares of a
corresponding amount. If such payment is not made to the Administrative
Agent by the Borrower within three Business Days of such required date,
the Administrative Agent shall be entitled to recover, on demand, from
each Lender to which any amount which was made available pursuant to the
preceding sentence, such amount with interest thereon at the rate per
annum equal to the daily average Federal Funds Effective Rate. Nothing
herein shall be deemed to limit the rights of the Administrative Agent or
any Lender against the Borrower.
2.14 Requirements of Law. (a) If the adoption of or
any change in any Requirement of Law or in the interpretation or
application thereof or compliance by any Lender with any request or
directive (whether or not having the force of law) from any central bank
or other Governmental Authority made subsequent to the date hereof:
(i) shall subject any Lender to any tax of any kind
whatsoever with respect to this Agreement or any
Eurodollar Loan made by it, or change the basis of
taxation of payments to such Lender in respect thereof
(except for Non- Excluded Taxes and Other Taxes covered
by Section 2.15 and changes in the rate of tax on the
overall net income of such Lender);
(ii) shall impose, modify or hold applicable any
reserve, special deposit, compulsory loan or similar
requirement against assets held by, deposits or other
liabilities in or for the account of, advances, loans
or other extensions of credit by, or any other
acquisition of funds by, any office of such Lender
which is not otherwise included in the determination of
the Eurodollar Rate hereunder; or
(iii) shall impose on such Lender any other condition;
and the result of any of the foregoing is to increase the cost to such
Lender, by an amount which such Lender deems to be material, of making,
converting into, continuing or maintaining Eurodollar Loans or to reduce
any amount receivable hereunder in respect thereof, then, in any such
case, upon receipt of a request certifying in reasonable detail the basis
therefor the Borrower shall promptly pay such Lender, upon its demand,
any additional amounts necessary to compensate such Lender for such
increased cost or reduced amount receivable. If any Lender becomes
entitled to claim any additional amounts pursuant to this Section 2.14,
it shall promptly notify the Borrower (with a copy to the Administrative
Agent) of the event by reason of which it has become so entitled. The
Lender shall deliver a copy of any such certificate to the Administrative
Agent.
(b) If any Lender shall have determined that the
adoption of or any change in any Requirement of Law regarding capital
adequacy or in the interpretation or application thereof or compliance by
such Lender or any corporation controlling such Lender with any request
or directive regarding capital adequacy (whether or not having the force
of law) from any Governmental Authority made subsequent to the date
hereof shall have the effect of reducing the rate of return on such
Lender's or such corporation's capital as a consequence of its
obligations hereunder or under to a level below that which such Lender or
such corporation could have achieved but for such adoption, change or
compliance (taking into consideration such Lender's or such corporation's
policies with respect to capital adequacy) by an amount deemed by such
Lender to be material, then from time to time, after submission by such
Lender to the Borrower (with a copy to the Administrative Agent) of a
written request certifying in reasonable detail the basis therefor, the
Borrower shall pay to such Lender such additional amount or amounts as
will compensate such Lender for such reduction.
(c) A certificate as to any additional amounts
payable pursuant to this Section 2.14 submitted by any Lender to the
Borrower (with a copy to the Administrative Agent) shall be conclusive in
the absence of manifest error. The obligations of the Borrower pursuant
to this Section 2.14 shall survive the termination of this Agreement and
the payment of the Loans and all other amounts payable hereunder.
2.15 Taxes. (a) All payments made by the Borrower
under this Agreement shall be made free and clear of, and without
deduction or withholding for or on account of, any present or future
income, stamp or other taxes, levies, imposts, duties, charges, fees,
deductions or withholdings, now or hereafter imposed, levied, collected,
withheld or assessed by any Governmental Authority, excluding net income
taxes, branch profit taxes and franchise taxes (imposed in lieu of net
income taxes) imposed on any Agent or any Lender as a result of a present
or former connection between such Agent or such Lender and the
jurisdiction of the Governmental Authority imposing such tax or any
political subdivision or taxing authority thereof or therein (other than
any such connection arising solely from such Agent or such Lender having
executed, delivered or performed its obligations or received a payment
under, or enforced, this Agreement or any other Loan Document). If any
such non-excluded taxes, levies, imposts, duties, charges, fees,
deductions or withholdings ("Non-Excluded Taxes") or Other Taxes are
required to be withheld from any amounts payable to any Agent or any
Lender hereunder, the amounts so payable to such Agent or such Lender
shall be increased to the extent necessary to yield to such Agent or such
Lender (after payment of all Non-Excluded Taxes and Other Taxes) interest
or any such other amounts payable hereunder at the rates or in the
amounts specified in this Agreement, provided, however, that the Borrower
shall not be required to increase any such amounts payable to any Lender
with respect to any Non-Excluded Taxes (i) that are attributable to such
Lender's failure to comply with the requirements of paragraph (d) or (e)
of this Section or (ii) that are United States withholding taxes imposed
with respect to amounts payable to such Lender at the time the Lender
becomes a party to this Agreement (except to the extent that such
Lender's assignor (if any) was entitled, at the time of assignment, to
receive additional amounts from the Borrower with respect to such
Non-Excluded Taxes pursuant to this Section) or are imposed as a result
of action taken by the Lender.
(b) In addition, the Borrower shall pay any Other
Taxes to the relevant Governmental Authority in accordance with
applicable law.
(c) Whenever any Non-Excluded Taxes or Other Taxes
are payable by the Borrower, as promptly as possible thereafter the
Borrower shall send to the Administrative Agent for the account of the
relevant Agent or Lender, as the case may be, a certified copy of an
original official receipt received by the Borrower showing payment
thereof. If the Borrower fails to pay any Non-Excluded Taxes or Other
Taxes when due to the appropriate taxing authority or fails to remit to
the Agents the required receipts or other required documentary evidence,
the Borrower shall indemnify the Administrative Agent and the Lenders for
any incremental taxes, interest or penalties that may become payable by
any Agent or any Lender as a result of any such failure. The agreements
in this Section 2.15 shall survive the termination of this Agreement and
the payment of the Loans and all other amounts payable hereunder.
(d) Each Lender (or Participant) that is not a
"United States person" as defined in Section 7701(a)(3) of the Code or
any successor provision thereto (a "Non-U.S. Lender") shall deliver to
the Borrower and the Administrative Agent (or, in the case of a
Participant, to the Lender from which the related participation shall
have been purchased or to the Borrower as required by law or regulation
in order to be eligible for an exemption from, or a reduced rate of,
withholding) two copies of either U.S. Internal Revenue Service Form 1001
or Form 4224, or, in the case of a Non-U.S. Lender claiming exemption
from U.S. federal withholding tax under Section 871(h) or 881(c) of the
Code with respect to payments of "portfolio interest" a statement
substantially in the form of Exhibit J and a Form W-8, or any subsequent
versions thereof or successors thereto properly completed and duly
executed by such Non-U.S. Lender claiming complete exemption from, or a
reduced rate of, U.S. federal withholding tax on all payments by the
Borrower under this Agreement and the other Loan Documents. Such forms
shall be delivered by each Non-U.S. Lender on or before the date it
becomes a party to this Agreement (or, in the case of any Participant, on
or before the date such Participant purchases the related participation).
In addition, each Non-U.S. Lender shall deliver such forms promptly upon
the obsolescence or invalidity of any form previously delivered by such
Non-U.S. Lender. Each Non-U.S. Lender shall promptly notify the Borrower
at any time it determines that it is no longer in a position to provide
any previously delivered certificate to the Borrower (or any other form
of certification adopted by the U.S. taxing authorities for such
purpose). Notwithstanding any other provision of this Section 2.15(d), a
Non-U.S. Lender shall not be required to deliver any form pursuant to
this Section 2.15(d) that such Non-U.S. Lender is not legally able to
deliver.
(e) A Lender that is entitled to an exemption from
or reduction of non-U.S. withholding tax under the law of the
jurisdiction in which the Borrower is located, or any treaty to which
such jurisdiction is a party, with respect to payments under this
Agreement shall deliver to the Borrower (with a copy to the
Administrative Agent), at the time or times prescribed by applicable law
or reasonably requested by the Borrower, such properly completed and
executed documentation prescribed by applicable law as will permit such
payments to be made without withholding or at a reduced rate, provided
that such Lender is legally entitled to complete, execute and deliver
such documentation and in such Lender's reasonable judgment such
completion, execution or submission would not materially prejudice the
legal position of such Lender.
2.16 Indemnity. The Borrower agrees to indemnify
each Lender and to hold each Lender harmless from any loss or expense
which such Lender may sustain or incur as a consequence of (a) default by
the Borrower in making a borrowing of, conversion into or continuation of
Eurodollar Loans after the Borrower has given a notice requesting the
same in accordance with the provisions of this Agreement, (b) default by
the Borrower in making any prepayment after the Borrower has given a
notice thereof in accordance with the provisions of this Agreement or (c)
the making of a prepayment of Eurodollar Loans on a day which is not the
last day of an Interest Period with respect thereto. Such indemnification
may include an amount equal to the excess, if any, of (i) the amount of
interest which would have accrued on the amount so prepaid, or not so
borrowed, converted or continued, for the period from the date of such
prepayment or of such failure to borrow, convert or continue to the last
day of such Interest Period (or, in the case of a failure to borrow,
convert or continue, the Interest Period that would have commenced on the
date of such failure) in each case at the applicable rate of interest for
such Loans provided for herein (excluding, however, the Applicable Margin
included therein, if any) over (ii) the amount of interest (as reasonably
determined by such Lender) which would have accrued to such Lender on
such amount by placing such amount on deposit for a comparable period
with leading banks in the interbank eurodollar market. A certificate as
to any amounts payable pursuant to this Section submitted to the Borrower
by any Lender shall be conclusive in the absence of manifest error. This
covenant shall survive the termination of this Agreement and the payment
of the Loans and all other amounts payable hereunder.
2.17 Illegality. Notwithstanding any other provision
herein, if the adoption of or any change in any Requirement of Law or in
the interpretation or application thereof shall make it unlawful for any
Lender to make or maintain Eurodollar Loans as contemplated by this
Agreement, (a) the commitment of such Lender hereunder to make Eurodollar
Loans, continue Eurodollar Loans as such and convert Base Rate Loans to
Eurodollar Loans shall forthwith be cancelled and (b) such Lender's Loans
then outstanding as Eurodollar Loans, if any, shall be converted
automatically to Base Rate Loans on the respective last days of the then
current Interest Periods with respect to such Loans or within such
earlier period as required by law. If any such conversion of a Eurodollar
Loan occurs on a day which is not the last day of the then current
Interest Period with respect thereto, the Borrower shall pay to such
Lender such amounts, if any, as may be required pursuant to Section 2.16.
2.18 Change of Lending Office. Each Lender agrees
that, upon the occurrence of any event giving rise to the operation of
Section 2.14, 2.15(a) or 2.17 with respect to such Lender, such Lender
will, if requested by the Borrower, use reasonable efforts (subject to
overall policy considerations of such Lender) to designate another
lending office for any Loans affected by such event with the object of
avoiding the consequences of such event; provided, that such designation
is made on terms that, in the sole judgment of such Lender, cause such
Lender and its lending office(s) to suffer no economic, legal or
regulatory disadvantage. Each Lender further agrees that (i) after the
occurrence of any such event or if such Lender defaults in its obligation
to make a Loan hereunder and (ii) upon the request of the Borrower such
Lender will, at the expense of the Borrower, assign its Commitments and
Loans hereunder to a new financial institution designated by the Borrower
and if not already a Lender, consented to by the Administrative Agent
(which consent shall not be unreasonably withheld) upon receipt by such
Lender of all amounts owing to it hereunder, including all amounts
payable pursuant to Section 2.16 if such assignment were deemed to be a
prepayment. Nothing in this Section shall in any event affect or postpone
any of the obligations of any Borrower or the rights of any Lender
pursuant to Section 2.14, 2.15(a) or 2.17.
SECTION 3. REPRESENTATIONS AND WARRANTIES
To induce the Agents and the Lenders to enter into
this Agreement and to make the Loans, the Borrower hereby represents and
warrants to each Agent and each Lender that:
3.1 Financial Condition. (a) The unaudited pro forma
consolidated balance sheet of Timberlands and its consolidated
Subsidiaries as at September 30, 1997 (including the notes thereto) (the
"Pro Forma Balance Sheet"), copies of which have heretofore been
furnished to each Lender, has been prepared giving effect (as if such
events had occurred on such date) to (i) the consummation of the
Transaction, (ii) the Loans to be made on the Closing Date and the use of
proceeds thereof and (iii) the payment of fees and expenses in connection
with the foregoing. The Pro Forma Balance Sheet has been prepared based
on the best information available to Timberlands as of the date of
delivery thereof, and presents fairly in all material respects on a pro
forma basis the estimated financial position of Timberlands and its
consolidated Subsidiaries as at September 30, 1997, assuming that the
events specified in the preceding sentence had actually occurred at such
date.
(b) The audited consolidated balance sheets of (i)
the Borrower and its Subsidiaries existing at the time, (ii) Soucy and
its Subsidiaries and (iii) Timberlands, in each case as at December 31,
1995 and December 31, 1996 and the related consolidated statements of
income and of cash flows for the fiscal years ended on such dates,
reported on by and accompanied by an unqualified report from Coopers &
Lybrand L.L.P., present fairly in all material respects the consolidated
financial condition of the Borrower, Soucy, Timberlands and their
respective Subsidiaries as at such date, and the consolidated results of
their operations and their consolidated cash flows for the respective
fiscal years then ended. Each of the unaudited consolidated balance sheet
of (i) the Borrower and its Subsidiaries, and (ii) Timberlands, and the
unaudited balance sheet of Soucy and F.F. Soucy, Inc. Partners, Limited
Partnership, in each case as at September 30, 1997, and the related
unaudited consolidated statements of income and cash flows for the
nine-month period ended on such date, certified by a Responsible Officer,
present fairly in all material respects and present fairly the
consolidated financial condition of the Borrower, Soucy, Timberlands and
their respective Subsidiaries as at such date, and the consolidated
results of their operations and their consolidated cash flows for the
nine-month period then ended (subject to normal year-end audit
adjustments). All such financial statements, including the related
schedules and notes thereto, have been prepared in accordance with GAAP
applied consistently throughout the periods involved (except as approved
by the aforementioned firm of accountants and disclosed therein). Except
for the Paper Company Loan, the Loan Documents and the Second Priority
Note Security Documents, neither the Borrower, Soucy, Timberlands nor any
of their Subsidiaries, individually or collectively, has any material
Guarantee Obligation, contingent liability, liability for taxes,
long-term lease or unusual forward or long-term commitments, including,
without limitation, any interest rate or foreign currency swap or
exchange transaction or other obligation in respect of derivatives, that
is not reflected in the most recent financial statements referred to in
this paragraph (b). Except as set forth on Schedule 3.1(b), during the
period from December 31, 1996 to and including the date hereof there has
been no Disposition by the Borrower, Soucy, Timberlands or any of their
Subsidiaries, individually or in the aggregate, of any material part of
their business or Property other than with respect to the payment of
dividends by Soucy and Timberlands prior to the Closing Date previously
disclosed to the Administrative Agent.
3.2 No Change. Except as set forth on Schedule
3.1(b), since December 31, 1996 there has been no development,
circumstance or event which has had or could reasonably be expected to
have a Material Adverse Effect.
3.3 Existence; Compliance with Law. Each of the
Borrower and its Applicable Subsidiaries (a) is duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization, (b) has the corporate or other power and authority, and the
legal right, to own and operate its Property, to lease the Property it
operates as lessee and to conduct the business in which it is currently
engaged, (c) is duly qualified as a foreign corporation and in good
standing under the laws of each jurisdiction where the failure so to
qualify, individually or in the aggregate, could reasonably be expected
to have a Material Adverse Effect and (d) is in compliance with all
Requirements of Law except to the extent that the failure to comply
therewith could not, in the aggregate, reasonably be expected to have a
Material Adverse Effect.
3.4 Power; Authorization; Enforceable Obligations.
Each Loan Party has the corporate or other power and authority, and the
legal right, to make, deliver and perform the Loan Documents to which it
is a party and, in the case of the Borrower, to borrow hereunder. Each
Loan Party has taken all necessary corporate or other action to authorize
the execution, delivery and performance of the Loan Documents to which it
is a party and, in the case of the Borrower, to authorize the borrowings
on the terms and conditions of this Agreement. No consent or
authorization of, filing with, notice to or other act by or in respect
of, any Governmental Authority or any other Person is required in
connection with the Transaction and the borrowings hereunder or with the
execution, delivery, performance, validity or enforceability of this
Agreement or any of the Loan Documents, except (i) consents,
authorizations, filings and notices which have been obtained or made and
are in full force and effect unless otherwise noted on Schedule 3.4 and
(ii) the filings referred to in Section 3.19. Each Loan Document has been
duly executed and delivered on behalf of each Loan Party party thereto.
This Agreement constitutes, and each other Loan Document upon execution
will constitute, a legal, valid and binding obligation of each Loan Party
party thereto, enforceable against each such Loan Party in accordance
with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors' rights generally and by general
equitable principles (whether enforcement is sought by proceedings in
equity or at law).
3.5 No Legal Bar. The execution, delivery and
performance of this Agreement and the other Loan Documents, the
borrowings hereunder and the use of the proceeds thereof will not violate
any Requirement of Law or any material Contractual Obligation of the
Borrower or any of its Applicable Subsidiaries and will not result in, or
require, the creation or imposition of any Lien on any of their
respective properties or revenues pursuant to any Requirement of Law or
any such Contractual Obligation (other than the Liens created by the
Security Documents). No Requirement of Law or Contractual Obligation
applicable to the Borrower or any of its Subsidiaries could reasonably be
expected to have a Material Adverse Effect.
3.6 No Material Litigation. No litigation,
investigation or proceeding of or before any arbitrator or Governmental
Authority is pending or, to the knowledge of the Borrower, threatened by
or against the Borrower or any of its Subsidiaries or against any of
their respective properties or revenues (a) with respect to any of the
Loan Documents or any of the transactions contemplated hereby or thereby,
or (b) which could reasonably be expected to have a Material Adverse
Effect.
3.7 No Default. Neither the Borrower nor any of its
Subsidiaries is in default under or with respect to any of its
Contractual Obligations in any respect which could reasonably be expected
to have a Material Adverse Effect. No Default or Event of Default has
occurred and is continuing.
3.8 Ownership of Property; Liens. Each of the
Borrower and its Applicable Subsidiaries has title in fee simple to, or a
valid leasehold interest in, all its real property, and good title to, or
a valid leasehold interest in, all its other Property, and none of such
Property is subject to any Lien except as permitted by Section 6.3.
3.9 Intellectual Property. The Borrower and each of
its Applicable Subsidiaries owns, or is licensed to use, all Intellectual
Property used in the conduct of its business as currently conducted. No
material claim has been asserted and is pending by any Person against the
Borrower or any Applicable Subsidiary challenging or questioning the use
of any such Intellectual Property of the Borrower or any of its
Applicable Subsidiaries or the validity or effectiveness of any such
Intellectual Property, nor does the Borrower know of any valid basis for
any such claim. The use of Intellectual Property, to the best of
Borrower's knowledge, by the Borrower and its Applicable Subsidiaries
does not infringe on the rights of any Person in any material respect.
3.10 Taxes. Each of the Borrower and each of its
Applicable Subsidiaries has filed or caused to be filed all Federal,
state and other material tax returns which are required to be filed and
has paid all taxes shown to be due and payable on said returns or on any
assessments made against it or any of its Property and all other taxes,
fees or other charges imposed on it or any of its Property by any
Governmental Authority (other than, in each case, any the amount or
validity of which are currently being contested in good faith by
appropriate proceedings and with respect to which reserves in conformity
with GAAP have been provided on the books of the Borrower or its
Subsidiaries, as the case may be). Except to the extent permitted by
Section 6.3(a), no tax Lien has been filed. To the knowledge of the
Borrower, no claim is being asserted with respect to any such tax, fee or
other charge (other than in each case, any the amount or validity of
which are currently being contested in good faith by appropriate
proceedings and with respect to which reserves in conformity with GAAP
have been provided on the books of the Borrower or its Subsidiaries, as
the case may be).
3.11 Federal Regulations. No part of the proceeds of
any Loans will be used for "purchasing" or "carrying" any "margin stock"
within the respective meanings of each of the quoted terms under
Regulation G or Regulation U as now and from time to time hereafter in
effect or for any purpose which violates the provisions of the
Regulations of the Board. If requested by any Lender or the
Administrative Agent, the Borrower will furnish to the Administrative
Agent and each Lender a statement to the foregoing effect in conformity
with the requirements of FR Form G-3 or FR Form U-1 referred to in
Regulation G or Regulation U, as the case may be. Neither the Borrower
nor any of its Subsidiaries owns any "margin stock" as of the date
hereof.
3.12 Labor Matters. There are no strikes or other
labor disputes against the Borrower or any of Applicable its Subsidiaries
pending or, to the knowledge of the Borrower, threatened that
(individually or in the aggregate) could reasonably be expected to have a
Material Adverse Effect.
3.13 ERISA. Neither a Reportable Event nor an
"accumulated funding deficiency" (within the meaning of Section 412 of
the Code or Section 302 of ERISA) has occurred during the five-year
period prior to the date on which this representation is made or deemed
made with respect to any Plan, and each Plan has complied in all material
respects with the applicable provisions of ERISA and the Code. No
termination of a Single Employer Plan has occurred other than pursuant to
the provision for standard terminations under ERISA ss. 404(b), and no
Lien in favor of the PBGC or a Plan has arisen, during such five-year
period. The present value of all accrued benefits under each Single
Employer Plan (based on those assumptions used to fund such Plans) did
not, as of the last annual valuation date prior to the date on which this
representation is made or deemed made, exceed the value of the assets of
such Plan allocable to such accrued benefits by a material amount.
Neither the Borrower nor any Commonly Controlled Entity has had a
complete or partial withdrawal from any Multiemployer Plan which has
resulted or could reasonably be expected to result in a material
liability under ERISA, and neither the Borrower nor any Commonly
Controlled Entity would become subject to any material liability under
ERISA if the Borrower or any such Commonly Controlled Entity were to
withdraw completely from all Multiemployer Plans as of the valuation date
most closely preceding the date on which this representation is made or
deemed made. To the best of the Borrower's knowledge as of the Closing
Date no such Multiemployer Plan is in Reorganization or Insolvent.
3.14 Investment Company Act; Other Regulations. No
Loan Party is an "investment company", or a company "controlled" by an
"investment company", within the meaning of the Investment Company Act of
1940, as amended. No Loan Party is subject to regulation under any
Requirement of Law (other than Regulation X of the Board) which limits
its ability to incur Indebtedness.
3.15 Subsidiaries. The Subsidiaries listed on
Schedule 3.15 constitute all the Subsidiaries of the Borrower as of the
Closing Date.
3.16 Use of Proceeds. The proceeds of the Term Loans
shall be used to finance the Transaction and the proceeds of the
Revolving Credit Loans shall be used to finance the Transaction, and for
working capital and general corporate purposes.
3.17 Environmental Matters. Other than exceptions to
any of the following that could not, individually or in the aggregate,
reasonably be expected to give rise to a Material Adverse Effect:
(a) The Borrower and its Applicable Subsidiaries:
(i) are, and within the period of all applicable statutes of limitation
have been, in compliance with all applicable Environmental Laws; (ii)
hold all Environmental Permits (each of which is in full force and
effect) required for any of their current operations or for any property
owned, leased, or otherwise operated by any of them (the "Properties");
(iii) are, and within the period of all applicable statutes of limitation
have been, in compliance with all of their Environmental Permits; and
(iv) reasonably believe that: each of their Environmental Permits will be
timely renewed and complied with, without material expense; any
additional Environmental Permits that may be required of any of them will
be timely obtained and complied with, without material expense; and
compliance with any Environmental Law that is or is expected to become
applicable to any of them will be timely attained and maintained, without
material expense.
(b) Materials of Environmental Concern are not
present at, on, under, in, or about any real property now or formerly
owned, leased or operated by the Borrower or any of its Applicable
Subsidiaries or at any other location (including, without limitation, any
location to which Materials of Environmental Concern have been sent for
re-use or recycling or for treatment, storage, or disposal) in
concentrations or conditions which could reasonably be expected to (i)
give rise to liability of the Borrower or any of its Applicable
Subsidiaries under any applicable Environmental Law or otherwise result
in any of them having to incur costs, or (ii) interfere with the
Borrower's or any of its Applicable Subsidiaries' continued operations,
or (iii) impair the fair saleable value of any real property owned or
leased by the Borrower or any of its Applicable Subsidiaries.
(c) There is no judicial, administrative, or
arbitral proceeding (including any notice of violation or alleged
violation) under or relating to any Environmental Law to which the
Borrower or any of its Applicable Subsidiaries is, or to the knowledge of
the Borrower will be, named as a party that is pending or, to the
knowledge of the Borrower, threatened.
(d) Neither the Borrower nor any of its Applicable
Subsidiaries has received any written request for information, or been
notified that it is a potentially responsible party under or relating to
the federal Comprehensive Environmental Response, Compensation, and
Liability Act or any similar Environmental Law, or with respect to any
Materials of Environmental Concern.
(e) Neither the Borrower nor any of its Applicable
Subsidiaries has entered into or agreed to any consent decree, order, or
settlement or other agreement, nor is subject to any judgment, decree, or
order or other agreement, in any judicial, administrative, arbitral, or
other forum, relating to compliance with or liability under any
Environmental Law.
(f) Neither the Borrower nor any of its Applicable
Subsidiaries has assumed or retained, by contract, any liabilities of any
kind, fixed or contingent, known or unknown, of any other person under
any Environmental Law or with respect to any Material of Environmental
Concern.
3.18 Accuracy of Information, etc. No statement or
information contained in this Agreement, any other Loan Document, the
Confidential Information Memorandum and the other documents, certificates
or statements furnished in writing to the Administrative Agent or the
Lenders or any of them, by or on behalf of any Loan Party for use in
connection with the transactions contemplated by this Agreement or the
other Loan Documents taken as a whole as of the date such statement,
information, document or certificate was so furnished (or, in the case of
the Confidential Information Memorandum, as of the Closing Date),
contained any untrue statement of a material fact or omitted to state a
material fact necessary in order to make the statements contained herein
or therein not misleading. The projections and pro forma financial
information contained in the materials referenced above are based upon
good faith estimates and assumptions believed by management of the
Borrower to be reasonable at the time made, it being recognized by the
Lenders that such financial information as it relates to future events is
not to be viewed as fact and that actual results during the period or
periods covered by such financial information may differ from the
projected results set forth therein by a material amount and such results
are not warranted to be obtained and no representation is made as to
disclosure of matters of a general economic nature or matters of public
knowledge that generally affect the industry in which Brant-Allen or any
of its Subsidiaries is involved. As of the Closing Date, the
representations and warranties of the Borrower, and to the best of the
Borrower's knowledge, the other parties to the Acquisition Agreement,
contained in the Acquisition Agreement are true and correct in all
material respects. There is no fact known to any Loan Party that could
reasonably be expected to have a Material Adverse Effect that has not
been expressly disclosed herein, in the other Loan Documents, in the
Confidential Information Memorandum or in any other documents,
certificates and statements furnished to the Administrative Agent and the
Lenders for use in connection with the transactions contemplated hereby
and by the other Loan Documents.
3.19 Security Documents. (a) The Cash Collateral
Agreement is effective to create in favor of the Administrative Agent,
for the benefit of the Lenders, a legal, valid and enforceable security
interest in the Collateral described therein and proceeds thereof. When
such Collateral is deposited in the Cash Collateral Account, the Cash
Collateral Agreement shall constitute a fully perfected Lien on, and
security interest in, all right, title and interest of the Loan Parties
in such Collateral and the proceeds thereof, as security for the
Obligations (as defined in the Cash Collateral Agreement), in each case
prior and superior in right to any other Person.
(b) Each of the Soucy Pledge Agreement and the
Timberlands Pledge Agreement is effective to create in favor of the
Administrative Agent, for the benefit of the Lenders, a legal, valid and
enforceable security interest in the Collateral described therein and
proceeds thereof. In the case of the Pledged Stock described in such
Pledge Agreements which constitutes certificated securities, when stock
certificates representing such Pledged Stock are delivered to the
Administrative Agent, and in the case of the other Collateral described
in such Pledge Agreements, when financing statements in appropriate form
are filed in the offices specified on Schedule 3.19, such Pledge
Agreements shall constitute a fully perfected Lien on, and security
interest in, all right, title and interest of the Loan Parties in such
Collateral and the proceeds thereof, as security for the Secured
Obligations (as defined in such Pledge Agreements), in each case in favor
of the Agent (as defined in such Pledge Agreements) prior and superior in
right to any other Person.
3.20 Solvency. Each Loan Party is, and after giving
effect to the Transaction and the incurrence of all Indebtedness and
obligations being incurred in connection herewith and therewith will be
and will continue to be, Solvent as of the Closing Date.
SECTION 4. CONDITIONS PRECEDENT
4.1 Conditions to Initial Extension of Credit. The
agreement of each Lender to make the Loans requested to be made by it on
the Closing Date is subject to the satisfaction, prior to or concurrently
with the making of such Loan on the Closing Date, of the following
conditions precedent:
(a) Loan Documents. The Administrative Agent shall
have received (i) this Agreement, executed and
delivered by a duly authorized officer of the Borrower,
(ii) the Timberlands Guarantee, executed and delivered
by a duly authorized officer of Timberlands, (iii) the
Cash Collateral Agreement, executed and delivered by a
duly authorized officer of the Borrower, (iv) the Soucy
Pledge Agreement and the Timberlands Pledge Agreement,
in each case executed and delivered by a duly
authorized officer of the Borrower and (vi) for the
account of any Lender requesting Notes in accordance
with Section 2.6(e), Notes conforming to the
requirements hereof and executed and delivered by a
duly authorized officer of the Borrower.
(b) Intercreditor Agreement. The Administrative
Agent shall have received the Intercreditor Agreement,
executed and delivered by the Trustee, the
Administrative Agent and Toronto-Dominion (Texas),
Inc., as administrative agent under the Paper Company
Loan Agreement.
(c) Acquisition, etc. The following transactions
shall have been consummated, in each case on terms and
conditions reasonably satisfactory to the Lenders:
(i) the Transaction shall have been consummated, and
no material provision of the Acquisition Agreement
or any related document shall have been waived,
amended, supplemented or otherwise modified without
the consent of the Administrative Agent;
(ii) the Borrower shall have paid the Retiring
Partners on the Closing Date cash in an amount not
exceeding an aggregate total of $35,000,000; and
(iii) the Borrower shall have deposited an amount no
less than the amount designated in the Cash
Collateral Agreement into the Cash Collateral
Account.
(d) Pro Forma Balance Sheet; Financial Statements.
The Lenders shall have received (i) the Pro Forma
Balance Sheet, (ii) audited consolidated financial
statements of the Borrower and its Subsidiaries
existing at the time for the 1995 and 1996 fiscal
years, (iii) unaudited interim consolidated financial
statements of the Borrower and its Subsidiaries
existing at the time, certified by a Responsible
Officer for the month of October 1997 and for the
ten-month period ended October 31, 1997, and such
financial statements shall not, in the reasonable
judgment of the Lenders, reflect any material adverse
change in the consolidated financial condition of the
Borrower and its Subsidiaries, as reflected in the
financial statements or projections contained in the
Confidential Information Memorandum except for items
described on Schedule 3.1(b), (iv) audited consolidated
financial statements of Soucy and its Subsidiaries and
Timberlands, in each case for the 1995 and 1996 fiscal
years and (v) unaudited interim financial statements of
Soucy and F.F. Soucy, Inc. & Partners, Limited
Partnership, and Timberlands, in each case certified by
a Responsible Officer, for the month of October 1997
and for the ten month period ended October 31, 1997,
and such financial statements shall not, in the
reasonable judgment of the Lenders, reflect any
material adverse change in the financial condition of
Soucy, F.F. Soucy, Inc. & Partners, Limited
Partnership, or Timberlands, as reflected in the
financial statements or projections contained in the
Confidential Information Memorandum except as set forth
on Schedule 3.1(b).
(e) Approvals. Except as disclosed on Schedule 3.4
all governmental and third party approvals (including
consents) necessary in connection with the Transaction,
the continuing operations of the Borrower, its
Applicable Subsidiaries and the transactions
contemplated hereby shall have been obtained and 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 which
would restrain, prevent or otherwise impose adverse
conditions on the Transaction or the financing
contemplated hereby.
(f) Related Agreements. The Administrative Agent
shall have received (in a form reasonably satisfactory
to the Administrative Agent), with a copy for each
Lender, true and correct copies, certified as to
authenticity by the Borrower, of the Acquisition
Agreement, the Second Priority Note Indenture, the John
Hancock Credit Agreement, the Paper Company Loan
Agreement and such other documents or instruments as
may be reasonably requested by the Administrative
Agent, including, without limitation, a copy
of any material debt instrument, security agreement or
other material contract to which any Loan Party may be
a party.
(g) Paper Company Loan. All conditions precedent to
the making of the Paper Company Loan under the Paper
Company Loan Agreement shall have been satisfied, and
the Paper Company Term Loans shall be made concurrently
with the Term Loans on the Closing Date.
(h) Fees. The Lenders, the Administrative Agent
shall have received all fees required to be paid, and
all expenses for which invoices have been presented, on
or before the Closing Date.
(i) Business Plan. The Lenders shall have received a
satisfactory business plan for fiscal year 1997 and
satisfactory projections for Soucy, Timberlands and
their Subsidiaries for the period from the Closing Date
through December 31, 1999.
(j) Lien Searches. The Administrative Agent shall
have received the results of a recent lien search in
each jurisdiction where any asset of any Loan Party is
located, and such search shall reveal no Liens on any
Collateral, including Liens granted to any other Loan
Party, except Liens permitted by Section 6.3 or Liens
to be discharged on or prior to the Closing Date.
(k) Closing Certificate. The Administrative Agent
shall have received, with a counterpart for each
Lender, a certificate of each Loan Party, dated the
Closing Date, substantially in the form of Exhibit F,
with appropriate insertions and attachments.
(l) Corporate and Other Proceedings and Corporate
and Other Documents. The Administrative Agent shall
have received, with a counterpart for each Lender, (i)
true and complete copies of the certificate of
incorporation and by-laws (or equivalents thereof) of
each Loan Party, together with a good standing
certificate from the Secretary of State (or similar
official) of its jurisdictions of incorporation
(provided that the good standing certificate for
Timberlands shall be received promptly after the
Closing Date), (ii) a certificate of each Loan Party,
dated the Closing Date, as to the incumbency and
signature of the officers of each Loan Party executing
any Loan Document, satisfactory in form and substance
to the Administrative Agent, (iii) a copy of the
resolutions, in form and substance reasonably
satisfactory to the Administrative Agent, of the Board
of Directors (or an equivalent thereof) of each Loan
Party authorizing the execution, delivery and
performance of the Loan Documents to which it is a
party (including, but not limited to, the granting of
any liens provided for therein) and in the case of the
Borrower, the borrowings contemplated hereunder,
certified by the Secretary of such Loan Party as of the
Closing Date, which certificate shall be in form and
substance reasonably satisfactory to the Administrative
Agent, and shall state that the resolutions thereby
certified have not been amended, modified, revoked or
rescinded.
(m) Legal Opinions. The Lenders shall have received
the following executed legal opinions:
(i) the legal opinion of Skadden, Arps, Slate,
Meagher & Flom L.L.P. counsel to the Loan Parties,
substantially in the form of Exhibit H; and
(ii) the legal opinion of local counsel in each
of the State of Virginia, Connecticut and Canada
and of such other special and local counsel as may be
required by the Administrative Agent.
Each such legal opinion shall cover such other matters
incident to the transactions contemplated by this
Agreement as the Administrative Agent may reasonably
require.
(n) Pledged Stock; Stock Power. The Administrative
Agent shall have received the certificates representing
the shares of Capital Stock of Soucy pledged pursuant
to the Security Documents, together with an undated
stock power for each such certificate executed in blank
by a duly authorized officer of the pledgor thereof.
(o) Filings, Registrations and Recordings. Each
document (including, without limitation, any Uniform
Commercial Code financing statement) required by the
Security Documents or under law or reasonably requested
by the Administrative Agent to be filed, registered or
recorded in order to create in favor of the
Administrative Agent, for the benefit of the Lenders, a
perfected Lien on the Collateral described therein,
prior and superior in right to any other Person (other
than with respect to Liens expressly permitted by
Section 6.3) shall be in proper form for filing,
registration or recordation.
(p) Appraisal. The Administrative Agent shall have
received a satisfactory appraisal from F&W Forestry
Services, Inc. of the assets of Timberlands.
(q) Management Contracts. The Lenders shall have
received copies of the Paper Company Management
Contract, which shall be in form and substance
satisfactory to the Lenders and the Soucy Management
Contract (which shall be in the form reviewed by the
Administrative Agent prior to October 1, 1997).
(r) Timberlands Wood Supply Contract. The
Administrative Agent shall have received copies of the
Timberlands Wood Supply Contract which shall be in form
and substance satisfactory to the Administrative Agent.
4.2 Conditions to Each Loan. The agreement of each
Lender to make any Loan requested to be made by it on any date
(including, without limitation, its initial Loan) is subject to the
satisfaction of the following conditions precedent:
(a) Representations and Warranties. Each of the
representations and warranties made by any Loan Party
in or pursuant to the Loan Documents shall be true and
correct in all material respects on and as of such date
as if made on and as of such date.
(b) No Default. No Default or Event of Default shall
have occurred and be continuing on such date or after
giving effect to the Loans requested to be made on such
date.
Each borrowing by the Borrower hereunder shall constitute a
representation and warranty by the Borrower as of the date of such Loan
that the conditions contained in this Section 4.2 have been satisfied.
SECTION 5. AFFIRMATIVE COVENANTS
The Borrower hereby agrees that, so long as any Loan
or other amount is owing to any Lender or any Agent hereunder, the
Borrower shall and shall cause Timberlands, Soucy and each of the
Subsidiaries of Timberlands and Soucy, as applicable, to:
5.1 Financial Statements. Furnish to the
Administrative Agent, with sufficient copies for each Lender:
(a) as soon as available, but in any event within 90
days after the end of each fiscal year of the Borrower,
Timberlands and Soucy, a copy of the audited
consolidated balance sheet of (i) the Borrower and its
consolidated Subsidiaries, (ii) Soucy and its
consolidated Subsidiaries and (iii) Timberlands, in
each case as at the end of such year and the related
audited consolidated statements of income and of cash
flows for such year, setting forth in each case in
comparative form the figures for the previous year,
reported on without a "going concern" or like
qualification or exception, or qualification arising
out of the scope of the audit, by Coopers & Lybrand
L.L.P. or other independent certified public
accountants of nationally recognized standing; and
(b) as soon as available, but in any event not later
than 45 days after the end of each month occurring
during each fiscal year of the Borrower, Timberlands
and Soucy, the unaudited balance sheets of (i) the
Borrower and its Subsidiaries, (ii) Soucy and its
Subsidiaries and (iii) Timberlands, in each
case as at the end of such month and the related
unaudited statements of income and of cash flows for
such month and the portion of the fiscal year through
the end of such month, presented with or without
footnotes, setting forth in each case in comparative
form the figures for the previous year, certified by a
Responsible Officer as being fairly stated in all
material respects (subject to normal year-end audit
adjustments);
all such financial statements shall present fairly in all material
respects the financial condition of such parties and shall be prepared in
reasonable detail and in accordance with GAAP applied consistently
throughout the periods reflected therein and with prior periods (except
as approved by such accountants or officer, as the case may be, and
disclosed therein).
5.2 Certificates; Other Information. Furnish to the
Administrative Agent, with sufficient copies for each Lender, or, in the
case of clause (g), to the relevant Lender:
(a) concurrently with the delivery of the financial
statements referred to in Section 5.1(a), a certificate
of the independent certified public accountants
reporting on such financial statements stating that in
making the examination necessary therefor no knowledge
was obtained of any Default or Event of Default, except
as specified in such certificate;
(b) concurrently with the delivery of any financial
statements pursuant to Section 5.1, (i) a certificate
of a Responsible Officer stating that, to the best of
each such Responsible Officer's knowledge, such
Responsible Officer has obtained no knowledge of any
Default or Event of Default except as specified in such
certificate and (ii) in the case of quarterly or annual
financial statements, a Compliance Certificate
containing all information necessary for determining
compliance by the Borrower and its Subsidiaries with
the provisions of this Agreement referred to therein as
of the last day of the fiscal quarter or fiscal year of
the Borrower, as the case may be;
(c) as soon as available, and in any event no later
than 45 days after the end of each fiscal year of the
Borrower and Timberlands, a detailed consolidated
budget for each of the Borrower and Timberlands for the
following fiscal year (including consolidated
statements of projected cash flow, projected changes in
financial position, projected income and a capital
spending plan setting forth in detail projected
maintenance expenditures and projected related
expenditures), and, as soon as available, significant
revisions, if any, of such budget and projections with
respect to such fiscal year (collectively, the
"Projections"), which Projections shall in each case be
accompanied by a certificate of a Responsible Officer
stating that such Projections are based on reasonable
estimates, information and assumptions and that such
Responsible Officer has no reason to believe that such
Projections are incorrect or misleading in any material
respect;
(d) (i) concurrently with the delivery thereof to
John Hancock Mutual Life Insurance Company, copies of
all reports and notices required to be delivered by
Timberlands under the John Hancock Credit Agreement
(other than collateral release requests and similar
information), (ii) within 45 days after the end of each
month, a mill manager's report in respect of Soucy
substantially in the form customary prior to the date
of this Agreement and (iii) on or before January 31 and
July 31 in each calendar year, a report containing
information necessary to calculate the Administrative
Value of Timberlands;
(e) no later than 10 Business Days prior to the
effectiveness thereof, copies of substantially final
drafts of any proposed amendment, supplement, waiver or
other modification with respect to the Second Priority
Note Indenture or the Acquisition Agreement;
(f) within five days after the same are sent, copies
of all financial statements and reports that the
Borrower, Timberlands or Soucy sends to the holders of
any class of its debt securities or public equity
securities and within five days after the same are
filed, copies of all financial statements and reports
which the Borrower, Timberlands or Soucy may make to,
or file with, the Securities and Exchange Commission or
any successor or analogous Governmental Authority; and
(g) promptly, such additional financial and other
information as any Lender may from time to time
reasonably request.
5.3 Payment of Obligations. Pay, discharge or
otherwise satisfy, at or before maturity or before they become
delinquent, as the case may be, all its material obligations of whatever
nature, except where the amount or validity thereof is currently being
contested in good faith by appropriate proceedings and reserves in
conformity with GAAP with respect thereto have been provided on the books
of the Borrower or any of its Applicable Subsidiaries, as the case may
be.
5.4 Conduct of Business and Maintenance of
Existence, etc. (a) (i) Preserve, renew and keep in full force and effect
its corporate existence and (ii) take all reasonable action to maintain
all rights, privileges and franchises necessary or desirable in the
normal conduct of its business, except, in each case, as otherwise
permitted by Section 6.4 and except, in the case of clause (ii) above, to
the extent that failure to do so could not reasonably be expected to have
a Material Adverse Effect; and (b) comply with all Contractual
Obligations and Requirements of Law except to the extent that failure to
comply therewith could not, in the aggregate, reasonably be expected to
have a Material Adverse Effect.
5.5 Maintenance of Property; Insurance. (a) Keep all
Property useful and necessary in its business in good working order and
condition, ordinary wear and tear excepted and (b) maintain with
financially sound and reputable insurance companies insurance on all its
Property in at least such amounts and against at least such risks (but
including in any event public liability, product liability and business
interruption) as are usually insured against in the same general area by
companies engaged in the same or a similar business.
5.6 Inspection of Property; Books and Records;
Discussions. (a) Keep proper books of records and account in which full,
true and correct entries in conformity with GAAP and all Requirements of
Law shall be made of all dealings and transactions in relation to its
business and activities and (b) permit representatives of any Lender to
visit and inspect any of its properties and examine and make abstracts
from any of its books and records at any reasonable time upon reasonable
notice and as often as may reasonably be desired and to discuss the
business, operations, properties and financial and other condition of the
Borrower and its Applicable Subsidiaries with officers and employees of
the Borrower and its Applicable Subsidiaries and with its independent
certified public accountants.
5.7 Notices. Promptly give notice to the
Administrative Agent and each Lender of:
(a) the occurrence of any Default or Event of Default;
(b) any (i) default or event of default under any
material Contractual Obligation of the Borrower,
Timberlands, Soucy or any of their Applicable
Subsidiaries or (ii) litigation, investigation or
proceeding which may exist at any time between the
Borrower, Timberlands, Soucy or any of their Applicable
Subsidiaries and any Governmental Authority, which in
either case, if not cured or if adversely determined,
as the case may be, could reasonably be expected to
have a Material Adverse Effect;
(c) any litigation or proceeding affecting the
Borrower, Timberlands, Soucy or any of their Applicable
Subsidiaries in which the amount involved is $2,000,000
or more and not covered by insurance or in which
injunctive or similar relief is sought;
(d) the following events, as soon as possible and in
any event within 30 days after the Borrower or
Timberlands knows or has reason to know thereof: (i)
the occurrence of any Reportable Event with respect to
any Single Employer Plan, a failure to make any
required contribution to a Single Employer Plan, the
creation of any Lien in favor of the PBGC or a Single
Employer Plan or any withdrawal from, or the
termination, Reorganization or Insolvency of, any
Multiemployer Plan or (ii) the institution of
proceedings or the taking of any other action by the
PBGC or the Borrower or any Commonly Controlled Entity
or any Multiemployer Plan with respect to the
withdrawal from, or the termination, Reorganization or
Insolvency of, any Plan;
(e) any development, event, or condition relating to
any Environmental Law that, individually or in the
aggregate with other developments, events or conditions
relating to any Environmental Law, could reasonably be
expected to result in the payment by Borrower and its
Applicable Subsidiaries, in the aggregate, of a Material
Environmental Amount; and provided that, with respect
to costs required to maintain operations of the
Borrower and its Applicable Subsidiaries in compliance
with Environmental Laws, this Section 5.7(e) refers
only to the increases in such costs over the levels the
Borrower and its Applicable Subsidiaries incurred, in
the aggregate, during fiscal year 1997; and
(f) any development or event which has had or could
reasonably be expected to have a Material Adverse
Effect.
Each notice pursuant to this Section 5.7 shall be accompanied by a
statement of a Responsible Officer setting forth details of the
occurrence referred to therein and stating what action the Borrower or
the relevant Subsidiary proposes to take with respect thereto.
5.8 Environmental Laws. (a) (i) Comply with all
Environmental Laws applicable to it, and obtain, comply with and maintain
any and all Environmental Permits necessary for its operations as
conducted and as planned; and (ii) take all reasonable efforts to ensure
that all of its tenants, subtenants, contractors, subcontractors, and
invitees comply with all Environmental Laws, and obtain, comply with and
maintain any and all Environmental Permits, applicable to any of them
insofar as any failure to so comply, obtain or maintain reasonably could
be expected to adversely affect the Borrower. For purposes of this
5.8(a), noncompliance by the Borrower or any of its Subsidiaries with any
applicable Environmental Law or Environmental Permit shall be deemed not
to constitute a breach of this covenant provided that, upon learning of
any actual or suspected noncompliance, the Borrower or Subsidiary, as the
case may be, shall promptly undertake all reasonable efforts to achieve
compliance, and provided further that, in any case, such non-compliance,
and any other noncompliance with Environmental Law, individually or in
the aggregate, could not reasonably be expected to give rise to a
Material Adverse Effect or materially and adversely affect the value of
any Mortgaged Property.
(b) Conduct and complete all investigations,
studies, sampling and testing, and all remedial, removal and other
actions required under Environmental Laws and promptly comply in all
material respects with all lawful orders and directives of all
Governmental Authorities regarding Environmental Laws.
(c) With respect to any development, event, or
condition that is (or should have been) the subject of a notice pursuant
to Section 5.7(e), provide such information as may be necessary to give
the Administrative Agent reasonable assurance that such development,
event, or condition could not reasonably be expected to result in a
Material Adverse Effect.
SECTION 6. NEGATIVE COVENANTS
The Borrower hereby agrees that, so long as any Loan
or other amount is owing to any Lender or any Agent hereunder, the
Borrower shall not, and shall not permit Timberlands, Soucy or any of the
Subsidiaries of Timberlands or Soucy, as applicable, to directly or
indirectly:
6.1 Asset Coverage Ratio. Permit the ratio, at any
time, of the Administrative Value (as determined in accordance with
Schedule X) of Timberlands to the sum of the outstanding principal
balance of the Term Loans and the outstanding principal balance under the
John Hancock Credit Agreement at such time to be less than 1.30 to 1.00.
6.2 Limitation on Indebtedness. Create, incur,
assume or suffer to exist any Indebtedness, except:
(a) Indebtedness of any Loan Party pursuant to any
Loan Document;
(b) Indebtedness of the Borrower to any Subsidiary
of the Borrower arising out of the Borrower's
activities as collection agent for such Subsidiary;
provided, that the amount of collected funds received
by the Borrower and owing to any Subsidiary at the end
of any Business Day shall not exceed the sum of (i) the
collected funds received by the Borrower for the
account of such Subsidiary during such Business Day and
the immediately preceding Business Day plus (ii) an
additional amount not exceeding $100,000;
(c) Indebtedness of Soucy and its Subsidiaries in an
amount such that the sum of Consolidated Total
Liabilities (other than deferred tax liabilities) of
Soucy and its Subsidiaries shall not exceed
C$85,000,000 in the aggregate at any time;
(d) Indebtedness of Soucy and its Subsidiaries,
including Capital Lease Obligations, secured by Liens
permitted by Section 6.3(g) in an aggregate principal
amount not to exceed $5,000,000 at any one time
outstanding, and of Timberlands and its Subsidiaries
including Capital Lease Obligations, secured by Liens
permitted by Section 6.3(g) in an aggregate principal
amount not to exceed $750,000 of any one time
outstanding;
(e) Indebtedness outstanding on the date hereof and
listed on Schedule 6.2 and any refinancings,
refundings, renewals or extensions thereof (without any
increase in the principal amount thereof);
(f) guarantees made in the ordinary course of
business by the Borrower or any of its Subsidiaries of
obligations of Soucy or Timberlands or their
Subsidiaries;
(g) unsecured Indebtedness of the Borrower or any of
its Applicable Subsidiaries on terms and conditions
acceptable to the Required Lenders; provided that (i)
the proceeds of such Indebtedness are used to repay the
Term Loans hereunder pursuant to Section 2.7(a) and
(ii) the weighted average life to maturity of such
Indebtedness is greater than the remaining life of the
Term Loans being prepaid;
(h) Indebtedness of Soucy in respect of deferred
commissions and management fees owing under the Soucy
Management Contract;
(i) Indebtedness of (A) Timberlands not to exceed
$1,000,000 and (B) of the Borrower not to exceed,
individually or in the aggregate, $3,000,000 (all of
which Indebtedness referred to in this clause (i),
except in the case of Indebtedness secured pursuant to
Section 6.3(j), shall be unsecured);
(j) the incurrence of Indebtedness by Soucy Partners
owed to Soucy and to the other partners of Soucy
Partners for cash borrowed from such entities; provided
that such Indebtedness (A) shall bear no interest, (B)
shall not require principal payments of any kind on
such Indebtedness to be repaid prior to the final
maturity date of the Term Loans, and (C) shall contain
no provision for remedies (including, without
limitation, any defaults or any other provisions that
would result in the acceleration of the maturity of
such Indebtedness); provided, that such Indebtedness
may contain provisions for an acceleration of the
maturity of such Indebtedness upon the acceleration of
the Term Loans;
(k) Indebtedness, in an aggregate principal amount
not exceeding $2,000,000, in the form of purchase price
adjustments owing to the Retiring Partners in respect
of the Acquisition Agreement;
(l) Indebtedness of Timberlands and its Subsidiaries
(i) for the purpose of financing all or any part of the
purchase price of timber deeds or (ii) in respect of
performance bonds of Timberlands and its Subsidiaries
or surety bonds provided by Timberlands and its
Subsidiaries received in the ordinary course of
business in connection with the operation of its
business (which Indebtedness shall be measured as the
exposure of Timberlands and such Subsidiaries under
such bonds); provided that the aggregate amount of
Indebtedness incurred pursuant to this sub-clause (l)
shall not exceed $1,500,000 outstanding at any time
outstanding; and
(m) Indebtedness of Timberlands for the purchase by
it of timberlands acreage not to exceed $2,000,000 in
the aggregate at any time outstanding.
6.3 Limitation on Liens. Create, incur, assume or
suffer to exist any Lien upon any Capital Stock of Timberlands, Soucy or
their Subsidiaries directly or indirectly owned by it or on any of the
Property or revenues of Timberlands, Soucy or any such Subsidiary,
whether now owned or hereafter acquired, except for:
(a) Liens for taxes not yet due or which are being
contested in good faith by appropriate proceedings,
provided that adequate reserves with respect thereto
are maintained on the books of the Borrower or its
Subsidiaries, as the case may be, in conformity with GAAP;
(b) carriers', warehousemen's, mechanics',
materialmen's, repairmen's or other like Liens arising
in the ordinary course of business which are not
overdue for a period of more than 30 days or which are
being contested in good faith by appropriate
proceedings;
(c) pledges or deposits in connection with workers'
compensation, unemployment insurance and other social
security legislation;
(d) deposits to secure the performance of bids,
trade contracts (other than for borrowed money),
leases, statutory obligations, surety and appeal bonds,
performance bonds and other obligations of a like
nature incurred in the ordinary course of business;
(e) easements, rights-of-way, restrictions and other
similar encumbrances incurred in the ordinary course of
business which, in the aggregate, are not substantial
in amount and which do not in any case materially
detract from the value of the Property subject thereto
or materially interfere with the ordinary conduct of
the business of the Borrower or any of its
Subsidiaries;
(f) Liens in existence on the date hereof listed on
Schedule 6.3 securing Indebtedness permitted by Section
6.2(e) (including refinancings, refundings, renewals or
extensions of Indebtedness permitted by Section
6.2(e)), provided that no such Lien is spread to cover
any additional Property after the Closing Date and that
the amount of Indebtedness secured thereby is not
increased;
(g) Liens securing Indebtedness of Soucy and its
Subsidiaries or Timberlands and its Subsidiaries
incurred pursuant to Section 6.2(d) to finance the
acquisition of fixed or capital assets, provided that
(i) such Liens shall be created substantially
simultaneously with the acquisition of such fixed or
capital assets, (ii) such Liens do not at any time
encumber any Property other than the Property financed
by such Indebtedness and (iii) the amount of
Indebtedness secured thereby is not increased;
(h) Liens created pursuant to the Security Documents,
the Paper Company Loan Documents, the Second Priority
Note Security Documents and the John Hancock Credit Agreement;
(i) any interest or title of a lessor under any
lease entered into by the Borrower or any other
Subsidiary in the ordinary course of its business and
covering only the assets so leased;
(j) Liens not otherwise permitted by this Section
6.3 so long as neither (i) the aggregate outstanding
principal amount of the obligations secured thereby nor
(ii) the aggregate fair market value (determined as of
the date such Lien is incurred) of the assets subject
thereto exceeds (as to the Borrower and all
Subsidiaries) $1,500,000 at any one time;
(k) Liens arising under or in connection with
Environmental Laws which are being contested in good
faith by appropriate proceedings provided that adequate
reserves with respect thereto are maintained on the
books of the Borrower and its Subsidiaries, as the case
may be, in conformity with GAAP and that such Liens
relate to potential liabilities that are not reasonably
expected to exceed, individually or in the aggregate,
$3,000,000;
(l) Liens securing reimbursement obligations of the
Borrower or any Applicable Subsidiary with respect to
letters of credit that encumber documents and other
property relating to such letters of credit and the
products and proceeds thereof;
(m) Liens arising by reason of any judgment, decree
or order of any court so long as such Lien is
adequately bonded and any appropriate legal proceedings
that may have been duly initiated for the review of
such judgment, decree or order shall not have been
finally terminated or the period within which such
proceedings may be initiated shall not have expired;
(n) Liens securing Indebtedness of Timberlands
incurred pursuant to Section 6.2(m) to finance the
purchase of timberlands acreage; and
(o) Liens securing Indebtedness permitted under
Section 6.2(c).
6.4 Limitation on Fundamental Changes. Enter into
any merger, consolidation or amalgamation, or liquidate, wind up or
dissolve itself (or suffer any liquidation or dissolution), or Dispose of
all or substantially all of its Property or business except:
(a) any Subsidiary of the Borrower may be merged or
consolidated with or into the Borrower (provided that
the Borrower shall be the continuing or surviving
corporation) or with or into any Wholly Owned
Subsidiary (provided that if such transaction involves
Soucy or Timberlands, Soucy or Timberlands, as the case
may be, shall be the continuing or surviving
corporation);
(b) any Subsidiary of the Borrower other than Soucy
or Timberlands may Dispose of any or all of its assets
(upon voluntary liquidation or otherwise) to the
Borrower or any Wholly Owned Subsidiary;
(c) the Transactions may be consummated; and
(d) the Borrower may dissolve or wind up immaterial
Subsidiaries;
6.5 Limitation on Sale of Assets. Dispose of any of
its Property or business (including, without limitation, receivables and
leasehold interests), whether now owned or hereafter acquired, or, in the
case of any Applicable Subsidiary, issue or sell any shares of such
Subsidiary's Capital Stock to any Person, except:
(a) the Disposition of obsolete or worn out property
in the ordinary course of business;
(b) the sale of inventory in the ordinary course of
business;
(c) Dispositions permitted by Section 6.4(b);
(d) the sale or issuance of any Subsidiary's Capital
Stock to the Borrower or (except for Capital Stock of
Soucy or Timberlands) any Wholly Owned Subsidiary;
(e) the transfer of the Borrower's interest in the
Management Contracts to an Affiliate;
(f) the Disposition by the Borrower of any of its
Property other than Capital Stock of Timberlands, Soucy
and the Paper Company owned by the Borrower;
(g) Dispositions of land, equipment and timberlands
by Timberlands, provided that Net Proceeds of such
Dispositions shall be used to repay the Loans hereunder
pursuant to Section 2.7; and
(h) Disposition by Timberlands of up to 10 acres of
unimproved real estate, sold in order to settle highway
or borderline disputes.
6.6 Limitation on Dividends. Declare or pay any
dividend (other than dividends payable solely in common stock of the
Person making such dividend) on, or make any payment on account of, or
set apart assets for a sinking or other analogous fund for, the purchase,
redemption, defeasance, retirement or other acquisition of, any shares of
any class of Capital Stock of any Applicable Subsidiary or any warrants
or options to purchase any such Capital Stock, whether now or hereafter
outstanding, or make any other distribution in respect thereof, either
directly or indirectly, whether in cash or property or in obligations of
any such Applicable Subsidiary (collectively, "Restricted Payments"),
except that:
(a) Timberlands may make Restricted Payments in
respect of the Partner Taxes in respect of Timberlands
and its Subsidiaries;
(b) the payment by Timberlands or Soucy of any
dividend or distribution to Brant-Allen (A) to enable
Brant-Allen to repay or prepay all or a portion of the
Term Loan or (B) from the proceeds of any Asset Sale by
Timberlands or Soucy to enable Brant-Allen to repay or
prepay all or a portion of the Term Loan;
(c) Soucy may make Restricted Payments if,
immediately after giving effect to such Restricted
Payment, the Consolidated Tangible Net Worth of Soucy
will be equal to or greater than C$28.0 million plus
50% of Consolidated Net Income of Soucy from January 1,
1998 to the date of such Restricted Payment; provided
that this restriction shall not apply to any actual or
deemed dividends or distributions by Soucy to
Brant-Allen in order to repay Term Loans or to fund
equity contributions by Brant-Allen in the Paper
Company;
(d) Brant-Allen may make Restricted Payments;
(e) Subsidiaries of Soucy may make Restricted
Payments to Soucy, and Subsidiaries of Timberlands may
make Restricted Payments to Timberlands;
(f) the payment of a distribution by Timberlands on
or after the Closing Date to Brant-Allen (A) to recover
expenses incurred on behalf of the Borrower and its
Affiliates in connection with the Transactions (as
defined in this Agreement and the Paper Company Credit
Agreement) and the related financings and (B) in an
amount equal to the total federal, state, local and
foreign tax liabilities of Brant-Allen, Peter Brant and
Joseph Allen arising as a result of their direct and
indirect ownership of equity interests in Timberlands
L.P. during the first eleven months of 1997, as
calculated by Timberlands' Vice President of Finance
and recalculated by Timberlands' independent
accountants; provided that such distribution shall not
exceed an aggregate of $5,300,000; and
(g) Soucy may pay a dividend on or after the Closing
Date in an amount not to exceed C $6,000,000.
6.7 [Reserved].
6.8 Limitation on Investments, Loans and Advances.
Other than with respect to the Borrower, make any advance, loan,
extension of credit (by way of guaranty or otherwise) or capital
contribution to, or purchase any stock, bonds, notes, debentures or other
securities of or any assets constituting all or a material part of a
business unit of, or make any other investment in, any Person
("Investments"), except:
(a) extensions of trade credit in the ordinary
course of business;
(b) Investments in Cash Equivalents;
(c) Guarantee Obligations permitted by Section 6.2;
(d) any Applicable Subsidiary may make Investments
in any Wholly Owned Subsidiary of such Applicable
Subsidiary;
(e) Investments in the form of promissory notes
(having a tenor not exceeding 5 years), in an aggregate
principal amount not exceeding $5,000,000 at any time
outstanding, constituting up to 70% of the sale price
of land Disposed of by Timberlands;
(f) Investments existing as of the Closing Date,
listed on Schedule 6.8(f);
(g) loans and advances to employees in the ordinary
course of business in respect of travel, business and
relocation expenses up to an aggregate of $50,000 at
any time outstanding, provided, however, that the
Borrower shall not be deemed to have defaulted in
respect of this provision as of the last day of any
fiscal quarter as long as (i) the addition of the
amount in excess of the $50,000 permitted above to the
amount outstanding under Section 6.2(i) would not
result in a violation of such Section and (ii) the
Borrower was in compliance with this Section 6.8(g) as
of the end of the immediately preceding fiscal quarter;
(h) Investments in Brant-Allen arising from
Indebtedness permitted by Section 6.2(b); and
(i) advances to loggers by Timberlands in an amount
not to exceed $300,000 in the aggregate at any time
outstanding.
6.9 Limitation on Optional Payments and
Modifications of Debt Instruments, etc. (a) With respect to Timberlands
and its Subsidiaries only, make or offer to make any optional payment,
prepayment, repurchase or redemption of or otherwise defease or segregate
funds with respect to any Indebtedness, (b) with respect to Timberlands
and its Subsidiaries only, amend, modify, waive or otherwise change, or
consent or agree to any amendment, modification, waiver or other change
to, any of the terms any Indebtedness, other than any such amendment,
modification, waiver or other change which (i) would extend the maturity
or reduce the amount of any payment of principal thereof or which would
reduce the rate or extend the date for payment of interest thereon or
which would provide for payment in kind in lieu of cash for any interest,
provide more flexibility in financial covenants or waive any defaults and
(ii) does not involve the payment of a consent fee), or (c) amend its
certificate of incorporation, operating agreement or other organizational
documents in any manner determined by the Administrative Agent to be
materially adverse to the Lenders without the prior written consent of
the Required Lenders.
6.10 Limitation on Transactions with Affiliates.
Enter into any transaction, including, without limitation, any purchase,
sale, lease or exchange of Property, the rendering of any service or the
payment of any management, advisory or similar fees, with any Affiliate
(other than any Wholly Owned Subsidiary) unless such transaction is (a)
otherwise permitted under this Agreement, (b) in the ordinary course of
business of the Borrower or such Subsidiary, as the case may be, and (c)
upon fair and reasonable terms no less favorable to the Borrower or such
Subsidiary, as the case may be, than it would obtain in a comparable
arm's length transaction with a Person which is not an Affiliate.
Notwithstanding the foregoing, this Section 6.10 shall not apply to (i)
the Borrower's or Soucy's obligations under the Management Contracts and
the consummation of the transactions contemplated thereby, (ii)
obligations of the Borrower and Timberlands under the Timberlands Wood
Supply Contract or the Elebash Agreement, (iii) the payment of fees to
Soucy by Soucy Partners in an amount per annum not in excess of 3% of
total annual net sales of Soucy Partners and (iv) dividends permitted by
Section 6.6.
6.11 Limitation on Sales and Leasebacks. Enter into
any arrangement with any Person providing for the leasing by Timberlands,
Soucy or any of their Subsidiaries of real or personal property which has
been or is to be sold or transferred by Timberlands, Soucy or any of
their Subsidiaries or such party to such Person or to any other Person to
whom funds have been or are to be advanced by such Person on the security
of such property or rental obligations of Timberlands, Soucy or any of
their Subsidiaries.
6.12 Limitation on Changes in Fiscal Periods. Permit
the fiscal year of the Borrower to end on a day other than December 31 or
change the Borrower's method of determining fiscal quarters.
6.13 Limitation on Negative Pledge Clauses. Enter
into or suffer to exist or become effective any agreement which prohibits
or limits the ability of Timberlands to create, incur, assume or suffer
to exist any Lien upon any of its assets, whether now owned or hereafter
acquired, to secure the Obligations or its obligations under the
Timberlands Guarantee, other than (a) this Agreement, the other Loan
Documents, and Second Priority Note Indenture, the Second Priority Note
Security Documents and the John Hancock Credit Agreement, (b) any
agreements governing any purchase money Liens or Capital Lease
Obligations otherwise permitted hereby (in which case, any prohibition or
limitation shall only be effective against the assets financed thereby)
and (c) any prohibition on assignment of any general intangible contract
in the instrument under which such general intangible arises.
6.14 Limitation on Restrictions on Subsidiary
Distributions. Enter into or suffer to exist or become effective any
consensual encumbrance or restriction on the ability of Timberlands,
Soucy or any of their Subsidiaries to (a) pay dividends or make any other
distributions in respect of any Capital Stock of such Subsidiary held by,
or pay any Indebtedness owed to, the Borrower, (b) make loans or advances
to the Borrower or (c) transfer any of its assets to the Borrower, except
for such encumbrances or restrictions existing under or by reason of (i)
any restrictions existing under the Loan Documents, (ii) any restrictions
with respect to Timberlands, Soucy or any of their Subsidiaries imposed
pursuant to an agreement which has been entered into in connection with
the Disposition of all or substantially all of the Capital Stock or
assets of such party, (iii) customary non-assignment or net worth
provisions in any lease governing a leasehold interest, license or other
contract, (iv) any agreement or other instrument of a Person existing at
the time it becomes a Subsidiary of the Borrower; provided that such
encumbrance or restriction is not applicable to any other Person, or any
property of any other Person, other than such person becoming a
Subsidiary of the Borrower and was not entered into in contemplation of
such Person becoming a Subsidiary of the Borrower, (v) any agreement of a
Loan Party or any of its Subsidiaries in effect as of the Closing Date
governing Indebtedness of a Loan Party or any of its Subsidiaries
outstanding as of the Closing Date (including, without limitation, the
Second Priority Note Documents) and, if such Indebtedness is renewed,
extended or refinanced in accordance with the terms of this Agreement,
such other restrictions in the agreements governing the renewed, extended
or refinanced Indebtedness (and successive renewals, extensions and
refinancing thereof in accordance with the terms of this Agreement)
provided such restrictions are no more restrictive in any material
respect than those contained in the agreements governing such outstanding
Indebtedness being renewed, extended or refinanced, (vi) any agreement
governing Indebtedness permitted by Section 6.2(c), (d), (e), (f), (g),
(i), (k) and (l), provided such restrictions are no more restrictive in
any material respect than those contained in the Loan Documents or (vii)
restrictions required by applicable law.
6.15 Limitation on Lines of Business. Enter into any
business, either directly or through any Subsidiary, except for those
businesses in which the Borrower and its Subsidiaries are engaged on the
date of this Agreement or which are reasonably related thereto.
6.16 Limitation on Amendments to Acquisition
Documents. (a) Amend, supplement or otherwise modify (pursuant to a
waiver or otherwise) the terms and conditions of the indemnities and
licenses furnished to the Borrower or any of its Subsidiaries pursuant to
the Acquisition Agreement or any other document delivered by the Retiring
Partners or any of their affiliates in connection therewith such that
after giving effect thereto such indemnities or licenses shall be
materially less favorable to the interests of the Loan Parties or the
Lenders with respect thereto or (b) otherwise amend, supplement or
otherwise modify the terms and conditions of the Acquisition Agreement or
any such other documents except to the extent that any such amendment,
supplement or modification could not reasonably be expected to have a
Material Adverse Effect.
6.17 Limitation on Leases. Permit Consolidated Lease
Expense of Soucy and its Subsidiaries for any fiscal year to exceed
$500,000.
6.18 Limitation on Amendments to Management
Contracts. Amend, supplement or otherwise modify (pursuant to a waiver or
otherwise) the terms and conditions of the Management Contracts if the
effect of such modification would be to change any provision of such
Management Contract relating to the payment or method of calculation of
fees thereunder or to materially reduce the functions required to be
performed by Brant-Allen thereunder; provided, that this Section 6.18
shall cease to apply to the Soucy Management Contract upon termination of
the Soucy Pledge Agreement in accordance with the terms thereof.
SECTION 7. EVENTS OF DEFAULT
If any of the following events shall occur and be
continuing:
(a) The Borrower shall fail to pay any principal of
any Term Loan when due in accordance with the terms
hereof; or the Borrower shall fail to pay any interest
on any Loan or any other amount payable hereunder or
under any other Loan Document, within five days after
any such interest or other amount becomes due in
accordance with the terms hereof; or
(b) Any representation or warranty made or deemed
made by any Loan Party herein or in any other Loan
Document or which is contained in any certificate,
document or financial or other statement furnished by
it at any time under or in connection with this
Agreement or any such other Loan Document shall prove
to have been inaccurate in any material respect on or
as of the date made or deemed made; or
(c) Any Loan Party shall default in the observance
or performance of any agreement contained in clause (i)
or (ii) of Section 5.4(a), Section 5.7(a) or Section 6;
or
(d) Any Loan Party shall default in the observance
or performance of any other agreement contained in this
Agreement or any other Loan Document (other than as
provided in paragraphs (a) through (c) of this
Section), and such default shall continue unremedied
for a period of 30 days; or
(e) Any Loan Party or any of its Applicable
Subsidiaries shall (i) default in making any payment of
any principal of any Indebtedness (including, without
limitation, any Guarantee Obligation, but excluding the
Term Loans) beyond the applicable grace period, if any,
with respect thereto; or (ii) default in making any
payment of any interest on any such Indebtedness beyond
the period of grace, if any, provided in the instrument
or agreement under which such Indebtedness was created;
or (iii) default in the observance or performance of
any other agreement or condition relating to any such
Indebtedness or contained in any instrument or
agreement evidencing, securing or relating thereto, or
any other event shall occur or condition exist, the
effect of which default or other event or condition is
to cause, or to permit the holder or beneficiary of
such Indebtedness (or a trustee or agent on behalf of
such holder or beneficiary) to cause, with the giving
of notice if required, such Indebtedness to become due
prior to its stated maturity or (in the case of any
such Indebtedness constituting a Guarantee Obligation)
to become payable; provided, that a default, event or
condition described in clause (i), (ii) or (iii) of
this paragraph (e) shall not at any time constitute an
Event of Default unless, at such time, one or more
defaults, events or conditions of the type described in
clauses (i), (ii) and (iii) of this paragraph (e) shall
have occurred and be continuing with respect to
Indebtedness the outstanding principal amount of which
exceeds in the aggregate $5,000,000; or
(f) (i) Any Loan Party or any of its Applicable
Subsidiaries shall commence any case, proceeding or
other action (A) under any existing or future law of
any jurisdiction, domestic or foreign, relating to
bankruptcy, insolvency, reorganization or relief of
debtors, seeking to have an order for relief entered
with respect to it, or seeking to adjudicate it a
bankrupt or insolvent, or seeking reorganization,
arrangement, adjustment, winding-up, liquidation,
dissolution, composition or other relief with respect
to it or its debts, or (B) seeking appointment of a
receiver, trustee, custodian, conservator or other
similar official for it or for all or any substantial
part of its assets, or any Loan Party or any of its
Subsidiaries shall make a general assignment for the
benefit of its creditors; or (ii) there shall be
commenced against any Loan Party or any of its
Subsidiaries any case, proceeding or other action of a
nature referred to in clause (i) above which (A)
results in the entry of an order for relief or any such
adjudication or appointment or (B) remains undismissed,
undischarged or unbonded for a period of 60 days; or
(iii) there shall be commenced against any Loan Party
or any of its Subsidiaries any case, proceeding or
other action seeking issuance of a warrant of
attachment, execution, distraint or similar process
against all or any substantial part of its assets which
results in the entry of an order for any such relief
which shall not have been vacated, discharged, or
stayed or bonded pending appeal within 60 days from the
entry thereof; or (iv) any Loan Party or any of its
Subsidiaries shall take any action in furtherance of,
or indicating its consent to, approval of, or
acquiescence in, any of the acts set forth in clause
(i), (ii), or (iii) above; or (v) any Loan Party or any
of its Subsidiaries shall generally not, or shall be
unable to, or shall admit in writing its inability to,
pay its debts as they become due; or
(g) (i) Any Person shall engage in any "prohibited
transaction" (as defined in Section 406 of ERISA or
Section 4975 of the Code) involving any Plan, (ii) any
"accumulated funding deficiency" (as defined in Section
302 of ERISA), whether or not waived, shall exist with
respect to any Plan or any Lien in favor of the PBGC or
a Plan shall arise on the assets of the Borrower or any
Commonly Controlled Entity, (iii) a Reportable Event
shall occur with respect to, or proceedings shall
commence to have a trustee appointed, or a trustee
shall be appointed, to administer or to terminate, any
Single Employer Plan, which Reportable Event or
commencement of proceedings or appointment of a trustee
is, likely to result in the termination of such Plan
for purposes of Title IV of ERISA, (iv) any Single
Employer Plan shall terminate for purposes of Title IV
of ERISA, (v) the Borrower or any Commonly Controlled
Entity shall incur any liability in connection with a
withdrawal from, or the Insolvency or Reorganization
of, a Multiemployer Plan or (vi) any other event or
condition shall occur or exist with respect to a Plan;
and in each case in clauses (i) through (vi) above,
such event or condition, together with all other such
events or conditions, if any, could, in the reasonable
judgment of the Required Lenders, reasonably be
expected to have a Material Adverse Effect; or
(h) One or more judgments or decrees shall be
entered against any Loan Party involving in the
aggregate a liability (not paid or fully covered by
insurance as to which the relevant insurance company
has acknowledged coverage) of $5,000,000 or more, and
all such judgments or decrees shall not have been
vacated, discharged, stayed or bonded pending appeal
within 30 days from the entry thereof; or
(i) Any of the Security Documents shall cease, for
any reason, to be in full force and effect, or any Loan
Party or any Affiliate of any Loan Party shall so
assert, or any Lien created by any of the Security
Documents shall cease to be enforceable and of the same
effect and priority purported to be created thereby
except as provided in such Security Document; or
(j) The Timberlands Guarantee or any guarantee made
in favor of the Administrative Agent in respect of the
Term Loans shall cease, for any reason, to be in full
force and effect or any Loan Party or any Affiliate of
any Loan Party shall so assert; or
(k) A Change of Control shall occur;
then, and in any such event, (A) if such event is an Event of Default
specified in clause (i) or (ii) of paragraph (f) above with respect to
the Borrower, automatically the Commitments shall immediately terminate
and the Loans hereunder (with accrued interest thereon) and all other
amounts owing under this Agreement and the other Loan Documents shall
immediately become due and payable, and (B) if such event is any other
Event of Default, either or both of the following actions may be taken:
with the consent of the Required Lenders, the Administrative Agent may,
or upon the request of the Required Lenders, the Administrative Agent
shall, by notice to the Borrower, declare the Loans hereunder (with
accrued interest thereon) and all other amounts owing under this
Agreement and the other Loan Documents to be due and payable forthwith,
whereupon the same shall immediately become due and payable.
SECTION 8. THE AGENTS
8.1 Appointment. Each Lender hereby irrevocably
designates and appoints the Agents as the agents of such Lender under
this Agreement and the other Loan Documents including acting as agent and
fonde de pouvoir for the Lenders under the Soucy Pledge Agreement, and
each such Lender irrevocably authorizes each Agent, in such capacity, to
take such action on its behalf under the provisions of this Agreement and
the other Loan Documents and to exercise such powers and perform such
duties as are expressly delegated to the such Agent by the terms of this
Agreement and the other Loan Documents, together with such other powers
as are reasonably incidental thereto. Notwithstanding any provision to
the contrary elsewhere in this Agreement, no Agent shall have any duties
or responsibilities, except those expressly set forth herein, or any
fiduciary relationship with any Lender, and no implied covenants,
functions, responsibilities, duties, obligations or liabilities shall be
read into this Agreement or any other Loan Document or otherwise exist
against any Agent.
8.2 Delegation of Duties. Each Agent may execute any
of its duties under this Agreement and the other Loan Documents by or
through agents or attorneys-in-fact and shall be entitled to advice of
counsel concerning all matters pertaining to such duties. No Agent shall
be responsible for the negligence or misconduct of any agents or
attorneys in-fact selected by it with reasonable care.
8.3 Exculpatory Provisions. Neither any Agent nor
any of their respective officers, directors, employees, agents,
attorneys-in-fact or affiliates shall be (i) liable for any action
lawfully taken or omitted to be taken by it or such Person under or in
connection with this Agreement or any other Loan Document (except to the
extent that any of the foregoing are found by a final and nonappealable
decision of a court of competent jurisdiction to have resulted from its
or such Person's own gross negligence or willful misconduct) or (ii)
responsible in any manner to any of the Lenders for any recitals,
statements, representations or warranties made by any Loan Party or any
officer thereof contained in this Agreement or any other Loan Document or
in any certificate, report, statement or other document referred to or
provided for in, or received by the Agents under or in connection with,
this Agreement or any other Loan Document or for the value, validity,
effectiveness, genuineness, enforceability or sufficiency of this
Agreement or any other Loan Document or for any failure of any Loan Party
a party thereto to perform its obligations hereunder or thereunder. The
Agents shall not be under any obligation to any Lender to ascertain or to
inquire as to the observance or performance of any of the agreements
contained in, or conditions of, this Agreement or any other Loan
Document, or to inspect the properties, books or records of any Loan
Party.
8.4 Reliance by Agents. Each Agent shall be entitled
to rely, and shall be fully protected in relying, upon any instrument,
writing, resolution, notice, consent, certificate, affidavit, letter,
telecopy, telex or teletype message, statement, order or other document
or conversation believed by it to be genuine and correct and to have been
signed, sent or made by the proper Person or Persons and upon advice and
statements of legal counsel (including, without limitation, counsel to
the Loan Parties), independent accountants and other experts selected by
an Agent. The Agents may deem and treat the payee of any Note as the
owner thereof for all purposes unless a written notice of assignment,
negotiation or transfer thereof shall have been filed with the
Administrative Agent. Each Agent shall be fully justified in failing or
refusing to take any action under this Agreement or any other Loan
Document unless it shall first receive such advice or concurrence of the
Required Lenders (or, if so specified by this Agreement, all Lenders) as
it deems appropriate or it shall first be indemnified to its satisfaction
by the Lenders against any and all liability and expense which may be
incurred by it by reason of taking or continuing to take any such action.
Each Agent shall in all cases be fully protected in acting, or in
refraining from acting, under this Agreement and the other Loan Documents
in accordance with a request of the Required Lenders (or, if so specified
by this Agreement, all Lenders), and such request and any action taken or
failure to act pursuant thereto shall be binding upon all the Lenders and
all future holders of the Loans.
8.5 Notice of Default. No Agent shall be deemed to
have knowledge or notice of the occurrence of any Default or Event of
Default hereunder unless such Agent has received notice from a Lender or
the Borrower referring to this Agreement, describing such Default or
Event of Default and stating that such notice is a "notice of default".
In the event that the Administrative Agent receives such a notice, the
Administrative Agent shall give notice thereof to the Lenders. The
Administrative Agent shall take such action with respect to such Default
or Event of Default as shall be reasonably directed by the Required
Lenders (or, if so specified by this Agreement, all Lenders); provided
that unless and until the Administrative Agent shall have received such
directions, the Administrative Agent may (but shall not be obligated to)
take such action, or refrain from taking such action, with respect to
such Default or Event of Default as it shall deem advisable in the best
interests of the Lenders.
8.6 Non-Reliance on Agents and Other Lenders. Each
Lender expressly acknowledges that neither the Agents nor any of their
respective officers, directors, employees, agents, attorneys-in-fact or
affiliates have made any representations or warranties to it and that no
act by any Agent hereinafter taken, including any review of the affairs
of a Loan Party or any affiliate of a Loan Party, shall be deemed to
constitute any representation or warranty by any Agent to any Lender.
Each Lender represents to the Agents that it has, independently and
without reliance upon any Agent or any other Lender, and based on such
documents and information as it has deemed appropriate, made its own
appraisal of and investigation into the business, operations, property,
financial and other condition and creditworthiness of the Loan Parties
and their affiliates and made its own decision to make its Loans
hereunder and enter into this Agreement. Each Lender also represents 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 analysis,
appraisals and decisions in taking or not taking action under this
Agreement and the other Loan Documents, and to make such investigation as
it deems necessary to inform itself as to the business, operations,
property, financial and other condition and creditworthiness of the Loan
Parties and their affiliates. Except for notices, reports and other
documents expressly required to be furnished to the Lenders by the
Administrative Agent hereunder, no Agent shall have any duty or
responsibility to provide any Lender with any credit or other information
concerning the business, operations, property, condition (financial or
otherwise), prospects or creditworthiness of any Loan Party or any
affiliate of a Loan Party which may come into the possession of such
Agent or any of its officers, directors, employees, agents,
attorneys-in-fact or affiliates.
8.7 Indemnification. The Lenders agree to indemnify
each Agent in its capacity as such (to the extent not reimbursed by the
Borrower and without limiting the obligation of the Borrower to do so),
ratably according to their respective Aggregate Exposure Percentages in
effect on the date on which indemnification is sought under this Section
8.7 (or, if indemnification is sought after the date upon which the
Commitments shall have terminated and the Loans shall have been paid in
full, ratably in accordance with such Percentages immediately prior to
such date), from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind whatsoever which may at any time (including,
without limitation, at any time following the payment of the Loans) be
imposed on, incurred by or asserted against such Agent in any way
relating to or arising out of, the Commitments, this Agreement, any of
the other Loan Documents or any documents contemplated by or referred to
herein or therein or the transactions contemplated hereby or thereby or
any action taken or omitted by such Agent under or in connection with any
of the foregoing; provided that no Lender shall be liable for the payment
of any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements
which are found by a final and nonappealable decision of a court of
competent jurisdiction to have resulted from such Agent's gross
negligence or willful misconduct. The agreements in this Section 8.7
shall survive the payment of the Loans and all other amounts payable
hereunder.
8.8 Agent in Its Individual Capacity. Each Agent and
its affiliates may make loans to, accept deposits from and generally
engage in any kind of business with any Loan Party as though such Agent
was not an Agent. With respect to its Loans made or renewed by it, each
Agent shall have the same rights and powers under this Agreement and the
other Loan Documents as any Lender and may exercise the same as though it
were not an Agent, and the terms "Lender" and "Lenders" shall include
each Agent in its individual capacity.
8.9 Successor Administrative Agent. The
Administrative Agent may resign as Administrative Agent upon 10 days'
notice to the Lenders and the Borrower. If the Administrative Agent shall
resign as Administrative Agent under this Agreement and the other Loan
Documents, then the Required Lenders shall appoint from among the Lenders
a successor agent for the Lenders, which successor agent shall (unless an
Event of Default under Section 7(a) or Section 7(f) with respect to the
Borrower shall have occurred and be continuing) be subject to approval by
the Borrower (which approval shall not be unreasonably withheld or
delayed), whereupon such successor agent shall succeed to the rights,
powers and duties of the Administrative Agent, and the term
"Administrative Agent" shall mean such successor agent effective upon
such appointment and approval, and the former Administrative Agent's
rights, powers and duties as Administrative Agent shall be terminated,
without any other or further act or deed on the part of such former
Administrative Agent or any of the parties to this Agreement or any
holders of the Loans. If no successor agent has accepted appointment as
Administrative Agent by the date that is 10 days following a retiring
Administrative Agent's notice of resignation, the retiring Administrative
Agent's resignation shall nevertheless thereupon become effective, and
the Lenders shall assume and perform all of the duties of the
Administrative Agent hereunder until such time, if any, as the Required
Lenders appoint a successor agent as provided for above. After any
retiring Agent's resignation as Agent, the provisions of this Section 8
shall inure to its benefit as to any actions taken or omitted to be taken
by it while it was Agent under this Agreement and the other Loan
Documents.
8.10 Authorization to Execute Intercreditor
Agreement and Security Documents and Release Liens. The Administrative
Agent is hereby irrevocably authorized by each of the Lenders to execute
and deliver the Intercreditor Agreement and each of the Security
Documents, to release any Lien covering any Property of any Loan Party
(a) which is the subject of a Disposition which is permitted by this
Agreement, (b) which has been consented to in accordance with Section 9.1
or (c) which is required to be released pursuant to the terms of any
Security Document. Each Lender confirms the appointments and agreements
contained in Section 7 of the Intercreditor Agreement and agrees that in
acting as secured party under the Soucy Pledge Agreement and the
Timberlands Pledge Agreement Toronto-Dominion (Texas), Inc. shall have
the benefit of the provisions of this Section 8 to the same extent as it
does in its capacity as Administrative Agent.
8.11 The Arranger. The Arranger, in its capacity as
such, shall have no duties or responsibilities, and shall incur no
liability, under this Agreement and the other Loan Documents.
SECTION 9. MISCELLANEOUS
9.1 Amendments and Waivers. Neither this Agreement,
any other Loan Document, nor any terms hereof or thereof may be amended,
supplemented or modified except in accordance with the provisions of this
Section 9.1. The Required Lenders and each Loan Party party to the
relevant Loan Document may, or (with the written consent of the Required
Lenders) the Administrative Agent and each Loan Party party to the
relevant Loan Document may, from time to time, (a) enter into written
amendments, supplements or modifications hereto and to the other Loan
Documents for the purpose of adding any provisions to this Agreement or
the other Loan Documents or changing in any manner the rights of the
Lenders or of the Loan Parties hereunder or thereunder or (b) waive, on
such terms and conditions as the Required Lenders, or the Administrative
Agent, as the case may be, may specify in such instrument, any of the
requirements of this Agreement or the other Loan Documents or any Default
or Event of Default and its consequences; provided, however, that no such
waiver and no such amendment, supplement or modification shall (i)
forgive the principal amount or extend the final scheduled date of
maturity of any Loan, extend the scheduled date of any amortization
payment in respect of any Loan, reduce the stated rate of any interest or
fee payable hereunder or extend the scheduled date of any payment
thereof, in each case without the consent of each Lender directly
affected thereby; (ii) amend, modify or waive any provision of this
Section 9.1 or reduce any percentage specified in the definition of
Required Lenders, consent to the assignment or transfer by the Borrower
of any of its rights and obligations under this Agreement and the other
Loan Documents, release all or substantially all of the Collateral,
release Timberlands or any additional Subsidiary Guarantor from its
obligations under the Timberlands Guarantee or other guarantee of the
Loans, in each case without the written consent of all Lenders; (iv)
reduce the percentage specified in the definition of Required Lenders
without the written consent of all Lenders; (v) amend, modify or waive
any provision of Section 9 without the written consent of the Agents; or
(vi) modify the provisions of Section 2.13(a), (b), (c) or (d) without
the consent of each Lender affected thereby. Any such waiver and any such
amendment, supplement or modification shall apply equally to each of the
Lenders and shall be binding upon the Loan Parties, the Lenders, the
Administrative Agent and all future holders of the Loans. In the case of
any waiver, the Loan Parties, the Lenders and the Administrative Agent
shall be restored to their former position and rights hereunder and under
the other Loan Documents, and any Default or Event of Default waived
shall be deemed to be cured and not continuing; but no such waiver shall
extend to any subsequent or other Default or Event of Default, or impair
any right consequent thereon.
9.2 Notices. All notices, requests and demands to or
upon the respective parties hereto to be effective shall be in writing
(including by telecopy), and, unless otherwise expressly provided herein,
shall be deemed to have been duly given or made when delivered, or three
Business Days after being deposited in the mail, postage prepaid, or, in
the case of telecopy notice, when received, addressed as follows in the
case of the Borrower and the Administrative Agent, and as set forth in an
administrative questionnaire delivered to the Administrative Agent in the
case of the Lenders, or to such other address as may be hereafter
notified by the respective parties hereto:
The Borrower: Brant-Allen Industries, Inc.
Post Office Box 3443
80 Field Point Road
Greenwich, Connecticut 07830
The Arranger: TD SECURITIES (USA) INC.
31 West 52nd Street
New York, New York 10019
Attention: John Lawson
Telecopy: (212) 397-4135
Telephone: (212) 827-7708
The Administrative
Agent: TORONTO-DOMINION (TEXAS), INC.
909 Fannin Street
Houston, TX 77010
Attention: Jano Mott
Telecopy: (713) 951-9921
Telephone:(713) 653-8231
with a copy to: THE TORONTO-DOMINION BANK
31 West 52nd Street
New York, New York 10019
Attention: John Lawson
Telecopy: (212) 397-4135
Telephone:(212) 827-7708
provided that any notice, request or demand to or upon the either Agent
or the Lenders shall not be effective until received.
9.3 No Waiver; Cumulative Remedies. No failure to
exercise and no delay in exercising, on the part of the either Agent or
any Lender, any right, remedy, power or privilege hereunder or under the
other Loan Documents shall operate as a waiver thereof; nor shall any
single or partial exercise of any right, remedy, power or privilege
hereunder preclude any other or further exercise thereof or the exercise
of any other right, remedy, power or privilege. The rights, remedies,
powers and privileges herein provided are cumulative and not exclusive of
any rights, remedies, powers and privileges provided by law.
9.4 Survival of Representations and Warranties. All
representations and warranties made hereunder, in the other Loan
Documents and in any document, certificate or statement delivered
pursuant hereto or in connection herewith shall survive the execution and
delivery of this Agreement and the making of the Loans hereunder.
9.5 Payment of Expenses. The Borrower agrees (a) to
pay or reimburse the Agents for all their reasonable out-of-pocket costs
and expenses incurred in connection with the initial syndication,
development, preparation and execution of, and any amendment, supplement
or modification to, this Agreement and the other Loan Documents and any
other documents prepared in connection herewith or therewith, and the
consummation and administration of the transactions contemplated hereby
and thereby, including, without limitation, the reasonable fees and
disbursements of counsel to the Administrative Agent, (b) to pay or
reimburse each Lender and the Agents for all its costs and expenses
incurred in connection with the enforcement or preservation of any rights
under this Agreement, the other Loan Documents and any such other
documents, including, without limitation, the reasonable fees and
disbursements of counsel (including the allocated fees and expenses of
in-house counsel) to each Lender and of counsel to the Agents, (c) to
pay, indemnify, and hold each Lender and the Agents harmless from, any
and all recording and filing fees or any amendment, supplement or
modification of, or any waiver or consent under or in respect of, this
Agreement, the other Loan Documents and any such other documents, and (d)
to pay, indemnify, and hold each Lender and the Agents and their
respective officers, directors, employees, affiliates, agents and
controlling persons (each, an "indemnitee") harmless from and against any
and all other liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind
or nature whatsoever with respect to any pending or threatened litigation
or proceeding arising in respect of the execution, delivery, enforcement,
performance and administration of this Agreement, the other Loan
Documents and any such other documents, including, without limitation,
any of the foregoing relating to the use of proceeds of the Loans or the
violation of, noncompliance with or liability under, any Environmental
Law applicable to the operations of Brant-Allen, the Borrower any of its
Subsidiaries or any of the Properties (all the foregoing in this clause
(d), collectively, the "indemnified liabilities"), provided, that the
Borrower shall have no obligation hereunder to any indemnitee with
respect to indemnified liabilities to the extent such indemnified
liabilities result from the gross negligence or willful misconduct of
such indemnitee. Without limiting the foregoing, and to the extent
permitted by applicable law, the Borrowers agree not to assert and to
cause its Subsidiaries not to assert, and hereby waive and agree to cause
their Subsidiaries to so waive, all rights for contribution or any other
rights of recovery with respect to all claims, demands, penalties, fines,
liabilities, settlements, damages, costs and expenses of whatever kind or
nature, under or related to Environmental Laws applicable to the Borrower
or any of its Subsidiaries or any of the Properties, that any of them
might have by statute or otherwise against any indemnitee, except to the
extent arising from the gross negligence or willful misconduct of such
indemnitee. The agreements in this Section shall survive repayment of the
Loans and all other amounts payable hereunder.
9.6 Successors and Assigns; Participations and
Assignments. (a) This Agreement shall be binding upon and inure to the
benefit of the Borrower, the Lenders, the Agents, all future holders of
the Loans and their respective successors and assigns, except that the
Borrower may not assign or transfer any of its rights or obligations
under this Agreement without the prior written consent of the Agents and
each Lender.
(b) Any Lender may, without the consent of the
Borrower, in accordance with applicable law, at any time sell to one or
more banks, financial institutions or other entities (each, a
"Participant") participating interests in any Loan owing to such Lender,
any Commitment of such Lender or any other interest of such Lender
hereunder and under the other Loan Documents. In the event of any such
sale by a Lender of a participating interest to a Participant, such
Lender's obligations under this Agreement to the other parties to this
Agreement shall remain unchanged, such Lender shall remain solely
responsible for the performance thereof, such Lender shall remain the
holder of any such Loan for all purposes under this Agreement and the
other Loan Documents, and the Borrower and the Agents shall continue to
deal solely and directly with such Lender in connection with such
Lender's rights and obligations under this Agreement and the other Loan
Documents. In no event shall any Participant under any such participation
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 affect the Participant as described in (i) of the proviso in
Section 9.1, in each case to the extent subject to such participation.
The Borrower agrees that at any time that an Event of Default has
occurred and is occurring, each Participant shall, to the maximum extent
permitted by applicable law, be deemed to have the right of setoff in
respect of its participating interest in amounts owing under this
Agreement to the same extent as if the amount of its participating
interest were owing directly to it as a Lender under this Agreement,
provided that, in purchasing such participating interest, such
Participant shall be deemed to have agreed to share with the Lenders the
proceeds thereof as provided in Section 9.7(a) as fully as if it were a
Lender hereunder. The Borrower also agrees that each Participant shall be
entitled to the benefits of Sections 2.14, 2.15 and 2.16 with respect to
its participation in the Commitments and the Loans outstanding from time
to time as if it was a Lender; provided that, in the case of Section
2.15, such Participant shall have complied with the requirements of said
Section and provided, further, that no Participant shall be entitled to
receive any greater amount pursuant to any such Section than the
transferor Lender would have been entitled to receive in respect of the
amount of the participation transferred by such transferor Lender to such
Participant had no such transfer occurred.
(c) Any Lender (an "Assignor") may, in accordance
with applicable law, at any time and from time to time upon three
Business Days notice to the Administrative Agent assign to any Lender or
any affiliate thereof or, with the consent of the Borrower, and the
Agents (which, in each case, shall not be unreasonably withheld or
delayed) (provided the consent of the Borrower need not be obtained with
respect to any assignment to a Lender), to an additional bank, financial
institution or other entity (an "Assignee") all or any part of its rights
and obligations under this Agreement pursuant to an Assignment and
Acceptance, substantially in the form of Exhibit G, executed by such
Assignee, such Assignor and the Administrative Agent (and, where the
consent of the Borrower is required pursuant to the foregoing provisions,
by the Borrower) and delivered to the Administrative Agent for its
acceptance and recording in the Register; provided that no such
assignment to an Assignee (other than any Lender or any affiliate
thereof) shall be in an aggregate principal amount of less than
$5,000,000 (other than in the case of an assignment of all of a Lender's
interests under this Agreement), and that after giving effect to any
partial assignment, the Assignor shall remain the Lender in respect of
Loans in an aggregate principal amount of no less than $5,000,000, unless
otherwise agreed by the Borrower and the Administrative Agent and that no
such assignment shall be effective until executed by the Administrative
Agent. Any such assignment need not be ratable as among the Facilities.
Upon such execution, delivery, acceptance and recording, from and after
the effective date determined pursuant to such Assignment and Acceptance,
(x) the Assignee thereunder shall be a party hereto and, to the extent
provided in such Assignment and Acceptance, have the rights and
obligations of a Lender hereunder with a Commitment and/or Loans as set
forth therein, and (y) the Assignor thereunder shall, to the extent
provided in such Assignment and Acceptance, be released from its
obligations under this Agreement (and, in the case of an Assignment and
Acceptance covering all of an Assignor's rights and obligations under
this Agreement, such assigning Lender shall cease to be a party hereto).
Notwithstanding any provision of this Section 9.6, the consent of the
Borrower shall not be required for any assignment which occurs at any
time when any Event of Default shall have occurred and be continuing.
(d) The Administrative Agent shall maintain at its
address referred to in Section 9.2 a copy of each Assignment and
Acceptance delivered to it and a register (the "Register") for the
recordation of the names and addresses of the Lenders and the Commitment
of, and principal amount of the Loans owing to, each Lender from time to
time and any Notes evidencing such Loans. The entries in the Register
shall be conclusive, in the absence of manifest error, and the Borrower,
the Administrative Agent and the Lenders shall treat each Person whose
name is recorded in the Register as the owner of the Loan and any Note
evidencing such Loan recorded therein for all purposes of this Agreement.
Any assignment of any Loan whether or not evidenced by a Note shall be
effective only upon appropriate entries with respect thereto being made
in the Register (and each Note shall expressly so provide). Any
assignment or transfer of all or part of a Loan evidenced by a Note shall
be registered on the Register only upon surrender for registration of
assignment or transfer of the Note evidencing such Loan, accompanied by a
duly executed Assignment and Acceptance, and thereupon one or more new
Notes in the same aggregate principal amount shall be issued to the
designated Assignee and the old Notes shall be returned by the
Administrative Agent to the Borrower marked "cancelled". The Register
shall be available for inspection by the Borrower or any Lender at any
reasonable time and from time to time upon reasonable prior notice.
(e) Upon its receipt of an Assignment and Acceptance
executed by an assigning Lender and an Assignee (and, in the case of an
Assignee that is not then a Lender or an affiliate thereof or a Person
under common management with such Lender, by the Borrower or the
Administrative Agent) together with payment to the Administrative Agent
of a registration and processing fee of $3,500 (except that no such
registration and processing fee shall be payable (y) in connection with
an assignment by The Toronto-Dominion Bank or (z) in the case of an
Assignee which is already a Lender or is an affiliate of a Lender or a
Person under common management with a Lender), the Administrative Agent
shall (i) promptly accept such Assignment and Acceptance and (ii) on the
effective date determined pursuant thereto record the information
contained therein in the Register and give notice of such acceptance and
recordation to the Lenders and the Borrower. On or prior to such
effective date, the Borrower, at its own expense, upon request, shall
execute and deliver to the Administrative Agent (in exchange for the
Notes of the assigning Lender, a new Note, to the order of such Assignee
in an amount equal to the amount assumed or acquired by it pursuant to
such Assignment and Acceptance and, if the assigning Lender has retained
Term Loans, upon request, a new Term Note, to the order of the assigning
Lender in an amount equal to the applicable Term Loans, retained by it
hereunder. Such new Notes shall be dated the Closing Date and shall
otherwise be in the form of the Note replaced thereby.
(f) For avoidance of doubt, the parties to this
Agreement acknowledge that the provisions of this Section concerning
assignments of Loans and Notes relate only to absolute assignments and
that such provisions do not prohibit assignments creating security
interests, including, without limitation, any pledge or assignment by a
Lender of any Loan or Note to any Federal Reserve Bank in accordance with
applicable law.
9.7 Adjustments; Set-off. (a) If any Lender (a
"Benefitted Lender") shall at any time receive any payment of all or part
of its Loans owing to it, or interest thereon, or receive any collateral
in respect thereof (whether voluntarily or involuntarily, by set-off,
pursuant to events or proceedings of the nature referred to in Section
7(f), or otherwise), in a greater proportion than any such payment to or
collateral received by any other Lender, if any, in respect of such other
Lender's Loans owing to such other Lender, or interest thereon, such
Benefitted Lender shall purchase for cash from the other Lenders a
participating interest in such portion of each such other Lender's Loan
owing to each such other Lender, or shall provide such other Lenders with
the benefits of any such collateral, or the proceeds thereof, as shall be
necessary to cause such Benefitted Lender to share the excess payment or
benefits of such collateral or proceeds ratably with each of the Lenders;
provided, however, that if all or any portion of such excess payment or
benefits is thereafter recovered from such Benefitted Lender, such
purchase shall be rescinded, and the purchase price and benefits
returned, to the extent of such recovery, but without interest.
(b) In addition to any rights and remedies of the
Lenders provided by law, each Lender shall have the right, without prior
notice to the Borrower, any such notice being expressly waived by the
Borrower to the extent permitted by applicable law, at any time when an
Event of Default has occurred and is continuing, to set off and
appropriate and apply against such amount any and all deposits (general
or special, time or demand, provisional or final), in any currency, and
any other credits, indebtedness or claims, in any currency, in each case
whether direct or indirect, absolute or contingent, matured or unmatured,
at any time held or owing by such Lender or any branch or agency thereof
to or for the credit or the account of the Borrower. Each Lender agrees
promptly to notify the Borrower and the Administrative Agent after any
such setoff and application made by such Lender, provided that the
failure to give such notice shall not affect the validity of such setoff
and application.
9.8 Counterparts. This Agreement may be executed by
one or more of the parties to this Agreement on any number of separate
counterparts (including by telecopy), and all of said counterparts taken
together shall be deemed to constitute one and the same instrument. A set
of the copies of this Agreement signed by all the parties shall be lodged
with the Borrower and the Administrative Agent.
9.9 Severability. Any provision of this Agreement
which is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof,
and any such prohibition or unenforceability in any jurisdiction shall
not invalidate or render unenforceable such provision in any other
jurisdiction.
9.10 Integration. This Agreement and the other Loan
Documents represent the agreement of the Borrower, the Administrative
Agent and the Lenders with respect to the subject matter hereof, and
there are no promises, undertakings, representations or warranties by the
Administrative Agent or any Lender relative to subject matter hereof not
expressly set forth or referred to herein or in the other Loan Documents.
9.11 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS
AND OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT SHALL BE GOVERNED BY,
AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF
NEW YORK.
9.12 Submission To Jurisdiction; Waivers. The
Borrower hereby irrevocably and unconditionally:
(a) submits for itself and its Property in any legal
action or proceeding relating to this Agreement and the
other Loan Documents to which it is a party, or for
recognition and enforcement of any judgment in respect
thereof, to the non-exclusive general jurisdiction of
the Courts of the State of New York, the courts of the
United States of America for the Southern District of
New York, and appellate courts from any thereof;
(b) consents that any such action or proceeding may
be brought in such courts and waives any objection that
it may now or hereafter have to the venue of any such
action or proceeding in any such court or that such
action or proceeding was brought in an inconvenient
court and agrees not to plead or claim the same;
(c) agrees that service of process in any such
action or proceeding may be effected by mailing a copy
thereof by registered or certified mail (or any
substantially similar form of mail), postage prepaid,
the Borrower, its address set forth in Section 9.2 or
at such other address of which the Administrative Agent
shall have been notified pursuant thereto;
(d) agrees that nothing herein shall affect the
right to effect service of process in any other manner
permitted by law or shall limit the right to sue in any
other jurisdiction; and
(e) waives, to the maximum extent not prohibited by
law, any right it may have to claim or recover in any
legal action or proceeding referred to in this Section
9.12 any special, exemplary, punitive or consequential
damages.
9.13 Acknowledgements. The Borrower hereby
acknowledges that:
(a) it has been advised by counsel in the
negotiation, execution and delivery of this Agreement
and the other Loan Documents;
(b) neither the Administrative Agent nor any Lender
has any fiduciary relationship with or duty to the
Borrower arising out of or in connection with this
Agreement or any of the other Loan Documents, and the
relationship between Administrative Agent and Lenders,
on one hand, and the Borrower, on the other hand, in
connection herewith or therewith is solely that of
debtor and creditor; and
(c) no joint venture is created hereby or by the
other Loan Documents or otherwise exists by virtue of
the transactions contemplated hereby among the Lenders
or among the Borrower and the Lenders.
9.14 WAIVERS OF JURY TRIAL. THE BORROWER, THE
AGENTS AND THE LENDERS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL
BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR
ANY OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.
9.15 Confidentiality. Each of the Agents and each
Lender agrees to keep confidential all non-public information provided to
it by any Loan Party pursuant to this Agreement that is designated by
such Loan Party as confidential; provided that nothing herein shall
prevent any Agent or any Lender from disclosing any such information (a)
to the Administrative Agent, any other Lender or any affiliate of any
Lender, (b) to any Participant or Assignee (each, a "Transferee") or
prospective Transferee which agrees to comply with the provisions of this
Section, (c) to the employees, directors, agents, attorneys, accountants
and other professional advisors of such Lender or its affiliates provided
they agree to comply with the provisions of this Section, (d) upon the
request or demand of any Governmental Authority having jurisdiction over
the such Agent or such Lender, (e) in response to any order of any court
or other Governmental Authority or as may otherwise be required pursuant
to any Requirement of Law, (f) if requested or required to do so in
connection with any litigation or similar proceeding, (g) which has been
publicly disclosed other than in breach of this Section 9.15, (h) to the
National Association of Insurance Commissioners or any similar
organization or any nationally recognized rating agency that requires
access to information about a Lender's investment portfolio in connection
with ratings issued with respect to such Lender, or (i) in connection
with the exercise of any remedy hereunder or under any other Loan
Document.
IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be duly executed and delivered by their proper and duly
authorized officers as of the day and year first above written.
BRANT-ALLEN INDUSTRIES, INC., as
Borrower
By: /s/ Edward D. Sherrick
Title: Vice President of Finance
TD SECURITIES (USA) INC.,
as Arranger
By: /s/ John Lawson
Title: Vice President and Director
TORONTO-DOMINION (TEXAS), INC., as
Administrative Agent
By: /s/ Jano Mott
Title: Vice President
TORONTO-DOMINION (TEXAS), INC.,
By: /s/ Jano Mott
Title: Vice-President
Exhibit 10.3(A)
EXECUTION COPY
TIMBERLANDS GUARANTEE
TIMBERLANDS GUARANTEE, dated as of December 1, 1997, made by
BEAR ISLAND TIMBERLAND COMPANY, L.L.C., a Virginia limited liability
company (the "Guarantor"), in favor of TORONTO-DOMINION (TEXAS), INC., as
Administrative Agent (in such capacity, the "Administrative Agent") for
the lenders (the "Lenders") parties to the Credit Agreement, dated as of
December 1, 1997 (as amended, supplemented or otherwise modified from
time to time, the "Credit Agreement"), among BRANT-ALLEN INDUSTRIES,
INC., (the "Borrower"), the Lenders, the Arranger named therein and the
Administrative Agent.
W I T N E S S E T H:
WHEREAS, pursuant to the Credit Agreement, the Lenders have
severally agreed to make Loans to the Borrower upon the terms and subject
to the conditions set forth therein;
WHEREAS, the Borrower owns directly or indirectly all of the issued
and outstanding equity interests of the Guarantor;
WHEREAS, the Borrower and the Guarantor are engaged in
related businesses, and the Guarantor will derive substantial direct and
indirect benefit from the making of the Loans; and
WHEREAS, it is a condition precedent to the obligation of the
Lenders to make their respective Loans to the Borrower under the Credit
Agreement that the Guarantor shall have executed and delivered this
Guarantee to the Administrative Agent for the ratable benefit of the
Lenders.
NOW, THEREFORE, in consideration of the premises and to
induce the Administrative Agent and the Lenders to enter into the Credit
Agreement and to induce the Lenders to make their respective Loans to the
Borrower under the Credit Agreement, the Guarantor hereby agrees with the
Administrative Agent, for the ratable benefit of the Lenders, as follows:
1. Defined Terms. (a) Unless otherwise defined herein, terms
defined in the Credit Agreement and used herein shall have the meanings
given to them in the Credit Agreement.
(b) The words "hereof," "herein" and "hereunder" and words of
similar import when used in this Guarantee shall refer to this Guarantee
as a whole and not to any particular provision of this Guarantee, and
section and paragraph references are to this Guarantee unless otherwise
specified.
(c) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
2. Guarantee. (a) Subject to the provisions of paragraph 2(b), the
Guarantor hereby, jointly and severally, unconditionally and irrevocably,
guarantees to the Administrative Agent, for the ratable benefit of the
Lenders and their respective permitted successors, indorsees, transferees
and assigns, the prompt and complete payment and performance by the
Borrower when due (whether at the stated maturity, by acceleration or
otherwise) of the Obligations.
(b) Anything herein or in any other Loan Document to the
contrary notwithstanding, the maximum liability of the Guarantor
hereunder and under the other Loan Documents shall in no event exceed the
amount which can be guaranteed by the Guarantor under applicable federal
and state laws relating to the insolvency of debtors.
(c) The Guarantor further agrees to pay any and all reasonable
out-of-pocket expenses (including, without limitation, all reasonable
fees and disbursements of counsel) which may be paid or incurred by the
Administrative Agent or any Lender in enforcing, or obtaining advice of
counsel in respect of, any rights with respect to, or collecting, any or
all of the Obligations and/or enforcing any rights with respect to, or
collecting against, the Guarantor under this Guarantee. This Guarantee
shall remain in full force and effect until the Obligations are paid in
full and the Commitments are terminated, notwithstanding that from time
to time prior thereto the Borrower may be free from any Obligations.
(d) The Guarantor agrees that the Obligations may at any time
and from time to time exceed the amount of the liability of the Guarantor
hereunder without impairing this Guarantee or affecting the rights and
remedies of the Administrative Agent or any Lender hereunder.
(e) No payment or payments made by the Borrower, the Guarantor,
any other guarantor or any other Person or received or collected by the
Administrative Agent or any Lender from the Borrower, the Guarantor, any
other guarantor or any other Person by virtue of any action or proceeding
or any set-off or appropriation or application at any time or from time
to time in reduction of or in payment of the Obligations other than
payments made by the Guarantor in respect of the Obligations or payments
received or collected from the Guarantor in respect of the Obligations
shall be deemed to modify, reduce, release or otherwise affect the
liability of the Guarantor hereunder which shall, notwithstanding any
such payment or payments remain liable for the Obligations up to the
maximum liability of the Guarantor hereunder until the Obligations are
paid in full and the Commitments are terminated.
(f) The Guarantor agrees that whenever, at any time, or from
time to time, it shall make any payment to the Administrative Agent or
any Lender on account of its liability hereunder, it will notify the
Administrative Agent in writing that such payment is made under this
Guarantee for such purpose.
3. Right of Set-off. The Guarantor hereby irrevocably authorizes
each Lender at any time and from time to time when an Event of Default
has occurred and is continuing, without notice to the Guarantor, any such
notice being expressly waived by the Guarantor, to set-off and
appropriate and apply any and all deposits (general or special, time or
demand, provisional or final), in any currency, and any other credits,
indebtedness or claims, in any currency, in each case whether direct or
indirect, absolute or contingent, matured or unmatured, at any time held
or owing by such Lender to or for the credit or the account of the
Guarantor, or any part thereof in such amounts as such Lender may elect,
against and on account of the obligations and liabilities of the
Guarantor to such Lender hereunder and claims of every nature and
description of such Lender against the Guarantor, in any currency,
whether arising hereunder, under the Credit Agreement, any Note, any
other Loan Documents or otherwise, as such Lender may elect, whether or
not the Administrative Agent or any Lender has made any demand for
payment and although such obligations, liabilities and claims may be
contingent or unmatured. The Administrative Agent and each Lender shall
notify the Guarantor promptly of any such set-off and the application
made by the Administrative Agent or such Lender, provided that the
failure to give such notice shall not affect the validity of such set-off
and application. The rights of the Administrative Agent and each Lender
under this Section are in addition to other rights and remedies
(including, without limitation, other rights of set-off) which the
Administrative Agent or such Lender may have.
4. No Subrogation. Notwithstanding any payment or payments made
by the Guarantor hereunder or any set-off or application of funds of the
Guarantor by any Lender, the Guarantor shall not be entitled to be
subrogated to any of the rights of the Administrative Agent or any Lender
against the Borrower or any collateral security or guarantee or right of
offset held by any Lender for the payment of the Obligations, nor shall
the Guarantor seek or be entitled to seek any contribution or
reimbursement from the Borrower in respect of payments made by the
Guarantor hereunder, until all amounts owing to the Administrative Agent
and the Lenders by the Borrower on account of the Obligations are paid in
full and the Commitments are terminated. If any amount shall be paid to
the Guarantor on account of such subrogation rights at any time when all
of the Obligations shall not have been paid in full, such amount shall be
held by the Guarantor in trust for the Administrative Agent and the
Lenders, segregated from other funds of the Guarantor, and shall,
forthwith upon receipt by the Guarantor, be turned over to the
Administrative Agent in the exact form received by the Guarantor (duly
indorsed by the Guarantor to the Administrative Agent, if required), to
be applied against the Obligations, whether matured or unmatured, in such
order as the Credit Agreement shall provide.
5. Amendments, etc. with respect to the Obligations; Waiver of
Rights. The Guarantor shall remain obligated hereunder notwithstanding
that, without any reservation of rights against the Guarantor and without
notice to or further assent by the Guarantor, any demand for payment of
any of the Obligations made by the Administrative Agent or any Lender may
be rescinded by such party and any of the Obligations continued, and the
Obligations, or the liability of any other party upon or for any part
thereof, or any collateral security or guarantee therefor or right of
offset with respect thereto, may, from time to time, in whole or in part,
be renewed, extended, amended, modified, accelerated, compromised,
waived, surrendered or released by the Administrative Agent or any
Lender, and the Credit Agreement, the Notes and the other Loan Documents
and any other documents executed and delivered in connection therewith
may be amended, modified, supplemented or terminated, in whole or in
part, as the Administrative Agent (or the Required Lenders, as the case
may be) may deem advisable from time to time, and any collateral
security, guarantee or right of offset at any time held by the
Administrative Agent or any Lender for the payment of the Obligations may
be sold, exchanged, waived, surrendered or released. Neither the
Administrative Agent nor any Lender shall have any obligation to protect,
secure, perfect or insure any Lien at any time held by it as security for
the Obligations or for this Guarantee or any property subject thereto.
When making any demand hereunder against the Guarantor, the
Administrative Agent or any Lender may, but shall be under no obligation
to, make a similar demand on the Borrower or any other guarantor, and any
failure by the Administrative Agent or any Lender to make any such demand
or to collect any payments from the Borrower or any such other guarantor
or any release of the Borrower or such other guarantor shall not relieve
the Guarantor in respect of which a demand or collection is not made or
the Guarantor not so released of its several obligations or liabilities
hereunder, and shall not impair or affect the rights and remedies,
express or implied, or as a matter of law, of the Administrative Agent or
any Lender against the Guarantor. For the purposes hereof "demand" shall
include the commencement and continuance of any legal proceedings.
6. Guarantee Absolute and Unconditional. The Guarantor waives
any and all notice of the creation, renewal, extension or accrual of any
of the Obligations and notice of or proof of reliance by the
Administrative Agent or any Lender upon this Guarantee or acceptance of
this Guarantee, the Obligations, and any of them, shall conclusively be
deemed to have been created, contracted or incurred, or renewed,
extended, amended or waived, in reliance upon this Guarantee; and all
dealings between the Borrower and the Guarantor, on the one hand, and the
Administrative Agent and the Lenders, on the other hand, likewise shall
be conclusively presumed to have been had or consummated in reliance upon
this Guarantee. The Guarantor waives diligence, presentment, protest,
demand for payment and notice of default or nonpayment to or upon the
Borrower with respect to the Obligations. The Guarantor understands and
agrees that this Guarantee shall be construed as a continuing, absolute
and unconditional guarantee of payment without regard to (a) the
validity, regularity or enforceability of the Credit Agreement, any Note
or any other Loan Document, any of the Obligations or any other
collateral security therefor or guarantee or right of offset with respect
thereto at any time or from time to time held by the Administrative Agent
or any Lender (b) any defense, set-off or counterclaim (other than a
defense of payment or performance) which may at any time be available to
or be asserted by the Borrower against the Administrative Agent or any
Lender, or (c) any other circumstance whatsoever (with or without notice
to or knowledge of the Borrower or the Guarantor) which constitutes, or
might be construed to constitute, an equitable or legal discharge of the
Borrower for the Obligations, or of the Guarantor under this Guarantee,
in bankruptcy or in any other instance. When pursuing its rights and
remedies hereunder against the Guarantor, the Administrative Agent and
any Lender may, but shall be under no obligation to, pursue such rights
and remedies as it may have against the Borrower or any other Person or
against any collateral security or guarantee for the Obligations or any
right of offset with respect thereto, and any failure by the
Administrative Agent or any Lender to pursue such other rights or
remedies or to collect any payments from the Borrower or any such other
Person or to realize upon any such collateral security or guarantee or to
exercise any such right of offset, or any release of the Borrower or any
such other Person or any such collateral security, guarantee or right of
offset, shall not relieve the Guarantor of any liability hereunder, and
shall not impair or affect the rights and remedies, whether express,
implied or available as a matter of law, of the Administrative Agent and
the Lenders against the Guarantor. This Guarantee shall remain in full
force and effect and be binding in accordance with and to the extent of
its terms upon the Guarantor and the successors and assigns thereof, and
shall inure to the benefit of the Administrative Agent and the Lenders,
and their respective successors, indorsees, transferees and assigns,
until all the Obligations and the obligations of the Guarantor under this
Guarantee shall have been satisfied by payment in full and the
Commitments shall be terminated, notwithstanding that from time to time
during the term of the Credit Agreement the Borrower may be free from any
Obligations.
7. Reinstatement. This Guarantee shall continue to be effective,
or be reinstated, as the case may be, if at any time payment, or any part
thereof, of any of the Obligations is rescinded or must otherwise be
restored or returned by the Administrative Agent or any Lender upon the
insolvency, bankruptcy, dissolution, liquidation or reorganization of the
Borrower or the Guarantor, or upon or as a result of the appointment of a
receiver, intervenor or conservator of, or trustee or similar officer
for, the Borrower or the Guarantor or any substantial part of its
property, or otherwise, all as though such payments had not been made.
8. Payments. The Guarantor hereby guarantees that payments
hereunder will be paid to the Administrative Agent without set-off or
counterclaim in U.S. Dollars at the office of the Administrative Agent
located at 31 West 52nd Street, New York, New York 10019.
9. Representations and Warranties. The Guarantor hereby
represents and warrants that:
(a) it is a limited liability company duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization and has the power and authority and the legal right to own
and operate its property, to lease the property it operates and to
conduct the business in which it is currently engaged;
(b) it has the corporate or other power and authority and the
legal right to execute and deliver, and to perform its obligations under,
this Guarantee, and has taken all necessary action to authorize its
execution, delivery and performance of this Guarantee;
(c) this Guarantee constitutes a legal, valid and binding
obligation of the Guarantor enforceable in accordance with its terms,
except as affected by bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws relating to or
affecting the enforcement of creditors' rights generally, general
equitable principles and an implied covenant of good faith and fair
dealing;
(d) the execution, delivery and performance of this Guarantee
will not violate any provision of any material Requirement of Law or
material Contractual Obligation of the Guarantor and will not result in
or require the creation or imposition of any Lien on any of the
properties or revenues of the Guarantor pursuant to any such Requirement
of Law or Contractual Obligation of the Guarantor;
(e) no consent or authorization of, filing with, or other act by
or in respect of, any arbitrator or Governmental Authority and no consent
of any other Person (including, without limitation, any stockholder or
creditor of the Guarantor) is required in connection with the execution,
delivery, performance, validity or enforceability of this Guarantee
except as described in Section 3.4 of the Credit Agreement; and
(f) no litigation, investigation or proceeding of or before any
arbitrator or Governmental Authority is pending or, to the knowledge of
the Guarantor, threatened by or against the Guarantor or against any of
its properties or revenues (1) with respect to this Guarantee or any of the
transactions contemplated hereby, or (2) which could reasonably be expected
to have a material adverse effect on the business, operations, property
or financial or other condition of the Guarantor.
The Guarantor agrees that the foregoing representations and
warranties shall be deemed to have been made by the Guarantor on the date
of each borrowing by the Borrower under the Credit Agreement on and as of
such date of borrowing as though made hereunder on and as of such date.
10. Authority of Administrative Agent. The Guarantor
acknowledges that the rights and responsibilities of the Administrative
Agent under this Guarantee with respect to any action taken by the
Administrative Agent or the exercise or non-exercise by the
Administrative Agent of any option, right, request, judgment or other
right or remedy provided for herein or resulting or arising out of this
Guarantee shall, as between the Administrative Agent and the Lenders, be
governed by the Credit Agreement, but, as between the Administrative
Agent and the Guarantor, the Administrative Agent shall be conclusively
presumed to be acting as agent for the Lenders with full and valid
authority so to act or refrain from acting, and the Guarantor shall not
be under any obligation, or entitlement, to make any inquiry respecting
such authority.
11. Notices. All notices, requests and demands to or upon the
Administrative Agent, any Lender or the Guarantor to be effective shall
be in writing (including by telecopy) and, unless otherwise expressly
provided herein, shall be deemed to have been duly given or made when
delivered or deposited in the mails, postage prepaid or in the case of
telecopy notice, when received, addressed as follows:
(a) if to the Administrative Agent, at its address or
transmission number for notices provided in subsection 9.2 of the Credit
Agreement; and
(b) if to the Guarantor, at its address or transmission number
for notices set forth under its signature below.
Each of the Administrative Agent and the Guarantor may change its
address and transmission numbers for notices by notice in the manner
provided in this Section.
12. Counterparts. This Guarantee may be executed by the
Guarantor on any number of separate counterparts, and all of said
counterparts taken together shall be deemed to constitute one and the
same instrument. A set of the counterparts of this Guarantee signed by
the Guarantor shall be lodged with the Administrative Agent.
13. Severability. Any provision of this Guarantee which is
prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof,
and any such prohibition or unenforceability in any jurisdiction shall
not invalidate or render unenforceable such provision in any other
jurisdiction.
14. Integration. This Guarantee represents the agreement of the
Guarantor with respect to the subject matter hereof and there are no
promises or representations by the Administrative Agent or any Lender
relative to the subject matter hereof not reflected herein.
15. Amendments in Writing; No Waiver; Cumulative Remedies. (a) None
of the terms or provisions of this Guarantee may be waived, amended,
supplemented or otherwise modified except by a written instrument
executed by the Guarantor and the Administrative Agent, provided that any
provision of this Guarantee may be waived by the Administrative Agent and
the Lenders in a letter or agreement executed by the Administrative Agent
or by telex or facsimile transmission from the Administrative Agent.
(b) Neither the Administrative Agent nor any Lender shall by
any act (except by a written instrument pursuant to paragraph hereof),
delay, indulgence, omission or otherwise be deemed to have waived any
right or remedy hereunder or to have acquiesced in any Default or Event
of Default or in any breach of any of the terms and conditions hereof. No
failure to exercise, nor any delay in exercising, on the part of the
Administrative Agent or any Lender, any right, power or privilege
hereunder shall operate as a waiver thereof. No single or partial
exercise of any right, power or privilege hereunder shall preclude any
other or further exercise thereof or the exercise of any other right,
power or privilege. A waiver by the Administrative Agent or any Lender of
any right or remedy hereunder on any one occasion shall not be construed
as a bar to any right or remedy which the Administrative Agent or such
Lender would otherwise have on any future occasion.
(c) The rights and remedies herein provided are cumulative, may
be exercised singly or concurrently and are not exclusive of any other
rights or remedies provided by law.
16. Section Headings. The section headings used in this
Guarantee are for convenience of reference only and are not to affect the
construction hereof or be taken into consideration in the interpretation
hereof.
17. Successors and Assigns. This Guarantee shall be binding upon
the successors and assigns of the Guarantor and shall inure to the
benefit of the Administrative Agent and the Lenders and their respective
permitted successors and assigns.
18. Governing Law. This Guarantee shall be governed by, and
construed and interpreted in accordance with, the law of the State of New
York.
19. Submission To Jurisdiction; Waivers. The Guarantor hereby
irrevocably and unconditionally:
(a) submits for itself and its Property in any legal action or
proceeding relating to this Guarantee and the other Loan Documents to
which it is a party, or for recognition and enforcement of any judgment
in respect thereof, to the non-exclusive general jurisdiction of the
Courts of the State of New York, the courts of the United States of
America for the Southern District of New York, and appellate courts from
any thereof;
(b) consents that any such action or proceeding may be brought
in such courts and waives any objection that it may now or hereafter have
to the venue of any such action or proceeding in any such court or that
such action or proceeding was brought in an inconvenient court and agrees
not to plead or claim the same;
(c) agrees that service of process in any such action or
proceeding may be effected by mailing a copy thereof by registered or
certified mail (or any substantially similar form of mail), postage
prepaid, the Guarantor, its address set forth under its signature below
or at such other address of which the Administrative Agent shall have
been notified pursuant thereto;
(d) agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by law or shall limit
the right to sue in any other jurisdiction; and
(e) waives, to the maximum extent not prohibited by law, any
right it may have to claim or recover in any legal action or proceeding
referred to in this Section 19 any special, exemplary, punitive or
consequential damages.
20. Acknowledgements. The Guarantor hereby acknowledges that:
(a) it has been advised by counsel in the negotiation, execution
and delivery of this Agreement and the other Loan Documents to which it
is a party;
(b) neither the Administrative Agent nor any Lender has any
fiduciary relationship with or fiduciary duty to the Guarantor arising
out of or in connection with this Agreement or any of the other Loan
Documents, and the relationship between Administrative Agent and Lenders,
on the one hand, and the Guarantor, on the other hand, in connection
herewith or therewith is solely that of debtor and creditor; and
(c) no joint venture is created hereby or by the other Loan
Documents or otherwise exists by virtue of the transactions contemplated
hereby among the Lenders or among the Guarantor and the Lenders.
21. WAIVERS OF JURY TRIAL. THE GUARANTOR HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING
RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT TO WHICH IT IS A
PARTY AND FOR ANY COUNTERCLAIM THEREIN.
22. Term of this Guarantee. This Guarantee shall continue in
full force and effect until the Obligations and the obligations of the
Guarantor hereunder shall be paid in full and the Commitments shall have
been terminated. Upon such payment and termination, this Guarantee shall
automatically terminate and the guarantee hereunder released and the
Administrative Agent and the Lenders shall, upon the request of the
Guarantor and at the expense of the Guarantor, execute such documents and
instruments evidencing such termination and release.
23. No Liability of Retiring Partners. Notwithstanding anything
herein to the contrary, the Retiring Partners shall have no liability
under this Guarantee.
IN WITNESS WHEREOF, the undersigned has caused this Guarantee
to be duly executed and delivered by its duly authorized officer as of
the day and year first above written.
BEAR ISLAND TIMBERLAND COMPANY, L.L.C.
By:/s/ Edward D. Sherrick
Title: Vice President of Finance
Address for Notices:
Bear Island Timberland Company, L.L.C
c/o Brant-Allen Industries, Inc.
Post Office Box 3443
80 Field Point Road
Greenwich, Connecticut 07830
EXHIBIT 10.3 (B)
EXECUTION COPY
TIMBERLANDS PLEDGE AGREEMENT
TIMBERLANDS PLEDGE AGREEMENT, dated as of December 1,
1997, made by BRANT-ALLEN INDUSTRIES, INC., a Delaware corporation
(the "Pledgor") in favor of TORONTO-DOMINION (TEXAS), INC., as agent
(in such capacity, the "Agent") for (i) the Timberlands Agent for the
benefit of the Timberlands Lenders and (ii) the Paper Company Agent
for the benefit of the Paper Company Lenders (as such terms are
hereinafter defined).
W I T N E S S E T H :
WHEREAS, pursuant to the Paper Company Credit Agreement, the
Paper Company Lenders have severally agreed to make loans to the Paper
Company (the "Paper Company Loans") upon the terms and subject to the
conditions set forth therein and as a condition precedent thereof, the
Pledgor has guaranteed payment and performance of the obligations of
the Paper Company thereunder pursuant to a Guarantee of even date
herewith (as amended modified and otherwise supplemented from time to
time (the "Brant-Allen Guarantee");
WHEREAS pursuant to the Timberlands Credit Agreement, the
Timberlands Lenders have severally agreed to make loans to the Pledgor
(the "Timberlands Loans") upon the terms and subject to the conditions
set forth therein; and
WHEREAS, it is a condition precedent to the obligation of the
Paper Company Lenders to make the Paper Company Loans under the Paper
Company Credit Agreement and the Timberlands Lenders to make the
Timberlands Loans under the Timberlands Credit Agreement that the
Pledgor shall have executed and delivered this Agreement to (i) secure
payment and performance of the obligations of the Paper Company under
the Paper Company Credit Agreement and the Pledgor under the
Brant-Allen Guarantee and (ii) secure payment and performance of the
obligations of the Pledgor under the Timberlands Credit Agreement.
NOW, THEREFORE, in consideration of the premises and to
induce (i) the Paper Company Agent and the Paper Company Lenders to
enter into the Paper Company Credit Agreement and to induce the Paper
Company Lenders to make the Paper Company Loans and (ii) the
Timberlands Agent and the Timberlands Lenders to enter into the
Timberlands Credit Agreement and to induce the Timberlands Lenders to
make the Timberlands Loans, the Pledgor hereby agrees with the Agent,
for the benefit of (i) the Paper Company Agent for the benefit of the
Paper Company Lenders and (ii) the Timberlands Agent for the benefit
of the Timberlands Lenders, as follows:
1. Defined Terms. (a) Unless otherwise defined herein, terms
defined in the Paper Company Credit Agreement and used herein shall
have the meanings given to them in the Paper Company Credit Agreement.
(b) The following terms shall have the following meanings:
"Agreement": this Pledge Agreement, as the same may be amended,
modified or otherwise supplemented from time to time.
"Code": the Uniform Commercial Code from time to time in effect
in the State of New York.
"Collateral": the Pledged LLC Interests and all Proceeds.
"Collateral Account": any account established to hold cash
Proceeds, maintained under the sole dominion and control of the Agent,
subject to withdrawal by the Agent for the account of the Lenders only as
provided in paragraph 7(a).
"Credit Agreements": the collective reference to the Paper
Company Credit Agreement and the Timberlands Credit Agreement.
"Issuer": the company identified on Schedule 1 attached hereto as
the issuer of the Pledged LLC Interests.
"Lenders": the collective reference to the Paper Company Lenders
and the Timberlands Lenders.
"Loans": the collective reference to the Paper Company Loans and
the Timberlands Loans.
"Obligations": as defined in the Brant-Allen Guarantee.
"Paper Company": as defined in the definition of the Paper
Company Credit Agreement.
"Paper Company Agent": as defined in the definition of the Paper
Company Credit Agreement.
"Paper Company Credit Agreement": the credit agreement, dated
as of December 1, 1997 (as amended, supplemented or otherwise modified
from time to time) among Bear Island Paper Company, LLC (the "Paper
Company"), Toronto-Dominion (Texas), Inc., as administrative agent (in
such capacity, the "Paper Company Agent"), the arranger party thereto
and the Lenders parties thereto (the "Paper Company Lenders").
"Paper Company Lenders": as defined in the definition of the
Paper Company Credit Agreement.
"Paper Company Loans": as defined in the recitals hereto.
"Pledged LLC Interests": in each case, whether now existing or
hereafter acquired, all of the Pledgor's right, title and interest in and
to:
(a) equity interests of the Issuer, but not the
Pledgor's obligations from time to time as a holder of equity
interests in such Issuer (unless the Agent or its designee, on
behalf of the Agent and the Lenders, shall elect to become a
holder of interests in any such Issuer in connection with its
exercise of remedies pursuant to the terms hereof);
(b) any and all moneys due and to become due to the
Pledgor now or in the future by way of a distribution made to
the Pledgor in its capacity as a holder of equity interests in
the Issuer or otherwise in respect of the Pledgor's interest
as a holder of equity interests in the Issuer;
(c) any other property of the Issuer to which the
Pledgor now or in the future may be entitled in respect of its
equity interests in the Issuer by way of distribution, return
of capital or otherwise;
(d) any other claim or right which the Pledgor now has
or may in the future acquire in respect of its equity
interests in the Issuer;
(e) all certificates, options or rights of any nature
whatsoever that may be issued or granted by the Issuer with
respect to the equity interests of the Issuer to the Pledgor
while this Agreement is in effect; and
(f) to the extent not otherwise included, all Proceeds
of any or all of the foregoing.
"Proceeds": all "proceeds" as such term is defined in Section
9-306(1) of the Uniform Commercial Code in effect in the State of New
York on the date hereof and, in any event, shall include, without
limitation, all dividends or other income from the Pledged LLC
Interests, collections thereon or distributions with respect thereto.
"Secured Obligations": the collective reference to (a) the
Obligations, (b) any and all unpaid principal of and interest on any
obligations of the Pledgor to the Timberlands Agent and the
Timberlands Lenders (or, in the case of Interest Rate Protection
Agreements and Currency Swap Agreements, any affiliate of any Lender)
(including, without limitation, interest accruing at the then
applicable rate provided in the Timberlands Credit Agreement after the
filing of any petition in bankruptcy, or the commencement of any
insolvency, reorganization or like petition, relating to the Pledgor
whether or not a claim for post-filing or post-petition interest is
allowed in such proceeding), whether direct or indirect, absolute or
contingent, due or to become due, or now existing or hereafter
incurred, which may arise under, out of, or in connection with, the
Timberlands Credit Agreement, the notes thereunder, any Interest Rate
Protection Agreement or Currency Swap Agreement entered into with any
Timberlands Lender or any affiliate thereof or any other document
made, delivered or given in connection therewith, in each case whether
on account of principal, interest, fees, indemnities, costs, expenses
or otherwise (including, without limitation, all reasonable fees and
disbursements of counsel to the Timberlands Agent or to the
Timberlands Lenders that are required to be paid by the Pledgor
pursuant to the terms of the Timberlands Credit Agreement or any other
document made, delivered or given in connection therewith), and (c)
all obligations and liabilities of the Pledgor which may arise under
or in connection with this Agreement, the Brant-Allen Guarantee or any
other Loan Document to which the Pledgor is a party, whether on
account of fees, indemnities, costs, expenses or otherwise that are
required to be paid by the Pledgor pursuant to the terms thereof
(including, without limitation, all reasonable fees and disbursements
of counsel to the Administrative Agent or to the Lenders that are
required to be paid by the Pledgor pursuant to the terms of this
Agreement or any other Loan Document to which the Pledgor is a party).
"Securities Act": the Securities Act of 1933, as amended.
"Timberlands Agent": as defined in the definition of the
Timberlands Credit Agreement.
"Timberlands Credit Agreement": the credit agreement, dated as
of December 1, 1997 (as amended, supplemented or otherwise modified
from time to time) among the Pledgor, Toronto-Dominion (Texas), Inc.,
as administrative agent (in such capacity, the "Timberlands Agent")
and the Lenders parties thereto (the "Timberlands Lenders").
"Timberlands Lenders": as defined in the definition of the
Timberlands Credit Agreement.
"Timberlands Loans": as defined in the recitals hereto.
(c) The words "hereof," "herein" and "hereunder" and words of
similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this
Agreement, and section and paragraph references are to this Agreement
unless otherwise specified.
(d) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
2. Pledge; Grant of Security Interest. The Pledgor hereby
grants to the Agent, for the benefit of (i) the Paper Company Agent
for the benefit of the Paper Company Lenders and (ii) the Timberlands
Agent for the benefit of the Timberlands Lenders, a first priority
security interest in the Collateral, as collateral security for the
prompt and complete payment and performance when due (whether at the
stated maturity, by acceleration or otherwise) of the Secured
Obligations (for the benefit of the Paper Company Lenders and the
Timberlands Lenders in the respective priorities established pursuant
to the Intercreditor Agreement).
3. Representations and Warranties. The Pledgor represents
and warrants that:
(a) The Pledgor has the corporate power and authority and
the legal right to execute and deliver, to perform its obligations
under, and to grant the security interests in the Collateral pursuant
to, this Agreement and has taken all necessary corporate action to
authorize its execution, delivery and performance of, and grant of the
security interests in the Collateral pursuant to, this Agreement.
(b) This Agreement constitutes a legal, valid and binding
obligation of the Pledgor, enforceable in accordance with its terms,
and upon the filing of a UCC-1 financing statement in appropriate form
in the office of the Secretary of State of Connecticut, the security
interests created pursuant to this Agreement will constitute a valid,
perfected first priority security interest in the Collateral in favor
of the Agent for the benefit of (i) the Paper Company Agent for the
benefit of the Paper Company Lenders and (ii) the Timberlands Agent
for the benefit of the Timberlands Lenders, respectively, enforceable
in accordance with its terms against all creditors of the Pledgor and
any Persons purporting to purchase any Collateral from the Pledgor,
except in each case as enforceability may be affected by bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and
other similar laws relating to or affecting creditors' rights
generally, general equitable principles (whether considered in a
proceeding in equity or at law) and an implied covenant of good faith
and fair dealing.
(c) The execution, delivery and performance of this
Agreement will not violate any provision of any material Requirement
of Law or material Contractual Obligation of the Pledgor and will not
result in the creation or imposition of any Lien on any of the
properties or revenues of the Pledgor pursuant to any such Requirement
of Law or Contractual Obligation of the Pledgor, except the security
interest created by this Agreement.
(d) No consent or authorization of, filing with, or other
act by or in respect of, any arbitrator or Governmental Authority and
no consent of any other Person (including, without limitation, any
equity holder or creditor of the Pledgor), is required in connection
with the execution, delivery, performance, validity or enforceability
of this Agreement, except as described in Section 3.4 of the Paper
Company Credit Agreement.
(e) No litigation, investigation or proceeding of or before
any arbitrator or Governmental Authority is pending or, to the
knowledge of the Pledgor, threatened by or against the Pledgor or
against any of its properties or revenues with respect to this
Agreement or any of the transactions contemplated hereby.
(f) The Pledged LLC Interests constitute all of the issued
and outstanding equity interests of the Issuer.
(g) All of the Pledged LLC Interests have been duly and
validly issued.
(h) The Pledgor is the owner of, and has title to, the
Pledged LLC Interests, free of any and all Liens or options in favor
of, or claims of, any other Person, except the security interests
created by this Agreement and Liens pursuant to the Second Priority
Note Security Documents.
4. Covenants. The Pledgor covenants and agrees with the
Agent and the Lenders that, from and after the date of this Agreement
until this Agreement is terminated and the security interests created
hereby are released in accordance with the terms hereof:
(a) If the Pledgor shall, as a result of its ownership of
the Pledged LLC Interests, become entitled to receive or shall receive
any certificate (including, without limitation, any certificate
representing a stock dividend or a distribution in connection with any
reclassification, increase or reduction of capital or any certificate
issued in connection with any reorganization), option or rights,
whether in addition to, in substitution of, as a conversion of, or in
exchange for any equity interests of the Pledged LLC Interests, or
otherwise in respect thereof, the Pledgor shall accept the same as the
agent of the Agent and the Lenders, hold the same in trust for the
Agent and the Lenders and deliver the same forthwith to the Agent in
the exact form received, duly indorsed by the Pledgor to the Agent, if
required, together with an undated power covering such certificate
duly executed in blank by the Pledgor and with, if the Agent so
requests, signature guaranteed, to be held by the Agent, subject to
the terms hereof, as additional collateral security for the Secured
Obligations. Any sums paid upon or in respect of the Pledged LLC
Interests upon the liquidation or dissolution of the Issuer shall be
paid over to the Agent to be held by it hereunder as additional
collateral security for the Secured Obligations, and in case any
distribution of capital shall be made on or in respect of the Pledged
LLC Interests or any property shall be distributed upon or with
respect to the Pledged LLC Interests, in each case pursuant to the
recapitalization or reclassification of the capital of the Issuer or
pursuant to the reorganization thereof, the property so distributed
shall be delivered to the Agent to be held by it hereunder as
additional collateral security for the Secured Obligations. If any
sums of money or property so paid or distributed in respect of the
Pledged LLC Interests (other than distributions permitted to be made
or received pursuant to the Credit Agreements) shall be received by
the Pledgor, the Pledgor shall, until such money or property is paid
or delivered to the Agent, hold such money or property in trust for
the Lenders, segregated from other funds of the Pledgor, as additional
collateral security for the Secured Obligations.
(b) Except as permitted by the Credit Agreements, without
the prior written consent of the Agent, the Pledgor will not (1) vote to
enable, or take any other action to permit, the Issuer to issue any
stock or other equity securities of any nature or to issue any other
securities convertible into or granting the right to purchase or
exchange for any stock or other equity securities of any nature of the
Issuer except issuances of equity interests to the Pledgor which
constitute Collateral hereunder, (2) sell, assign, transfer, exchange, or
otherwise dispose of, or grant any option with respect to, the
Collateral, (3) create, incur or permit to exist any Lien or option in
favor of, or any claim of any Person with respect to, any of the
Collateral, or any interest therein, except for the security interests
created by this Agreement or (4) enter into any agreement or undertaking
restricting the right or ability of the Pledgor or the Agent (after
foreclosure) to sell, assign or transfer any of the Collateral other
than such restrictions under the Credit Agreements, the Second
Priority Notes and the Second Priority Indenture.
(c) The Pledgor shall maintain the security interest created
by this Agreement as a first priority perfected security interest, and
shall defend such security interests against claims and demands of all
Persons whomsoever except for permitted liens. At any time and from
time to time, upon the written request of the Agent, and at the sole
expense of the Pledgor, the Pledgor will promptly and duly execute and
deliver such further instruments and documents and take such further
actions as the Agent may reasonably request for the purposes of
obtaining or preserving the full benefits of this Agreement and of the
rights and powers herein granted, including, without limitation, the
filing of any financing or continuation statements under the Uniform
Commercial Code (or similar laws) in effect in any jurisdiction with
respect to the security interests created hereby. If any amount
payable under or in connection with any of the Collateral (to the
extent such amounts are otherwise required by this Agreement to be
paid to the Agent) shall be or become evidenced by any promissory
note, other instrument or chattel paper, such note, instrument or
chattel paper in excess of $500,000 shall promptly upon receipt by the
Pledgor be delivered to the Agent, duly endorsed in a manner
satisfactory to the Agent, to be held as Collateral pursuant to this
Agreement.
(d) With respect to the Pledged LLC Interests, the Pledgor
shall and shall cause the Issuer to, directly or indirectly, (i)
perform and comply in all material respects with all the terms and
provisions of any limited liability company agreement then in effect
with respect thereto and required to be performed or complied by it
and (ii) enforce any limited liability company agreement then in
effect in accordance with its terms.
(e) The Pledgor shall pay, and save the Agent and the
Lenders harmless from, any and all liabilities with respect to, or
resulting from any delay in paying, any and all stamp, excise, sales
or other similar taxes which may be payable or determined to be
payable with respect to any of the Collateral or in connection with
any of the transactions contemplated by this Agreement, other than
taxes covered by Section 2.18 of the Paper Company Credit Agreement or
Section 2.15 of the Timberlands Credit Agreement.
(f) The Pledgor shall not, directly or indirectly, create,
incur, assume or suffer to exist any Indebtedness, except as permitted
by the Timberlands Credit Agreement.
(g) The Pledgor shall not permit the Issuer to, directly or
indirectly, create, incur, assume or suffer to exist any Indebtedness,
except as permitted by the Timberlands Credit Agreement.
(h) The Pledgor shall not (i) directly or indirectly,
create, incur, assume or suffer to exist any Lien on the Capital Stock
of the Issuer or (ii) permit the Issuer to create, incur, assume or
suffer to exist any Lien on any Property of the Issuer except, in each
case, as permitted by the Timberlands Credit Agreement.
To the extent that the provisions of this Section 4
refer to the Timberlands Credit Agreement, if the Timberlands Credit
Agreement shall terminate, such references shall be deemed to refer to
the Timberlands Credit Agreement immediately prior to such
termination.
5. Voting Rights. No vote shall be cast or corporate right
exercised or other action taken which, in the Agent's reasonable
judgment, would impair in any material respect the Collateral or which
would be inconsistent with or result in any violation of any provision
of the Credit Agreements, the notes thereunder, this Agreement or any
other Loan Document.
6. Rights of the Lenders and the Agent. (a) All money Proceeds
received by the Agent hereunder shall be held by the Agent for the
ratable benefit of the Lenders in a Collateral Account. All Proceeds
while held by the Agent in a Collateral Account (or by the Pledgor in
trust for the Agent and the Lenders) shall continue to be held as
collateral security for all the Secured Obligations and shall not
constitute payment thereof until applied as provided in paragraph 7(a).
(b) If an Event of Default shall occur and be continuing and
the Agent shall give notice of its intent to exercise such rights to
the Pledgor, (1) the Agent shall have the right to receive any and all
cash dividends and distributions paid in respect of the Pledged LLC
Interests and make application thereof to the Secured Obligations in
such order as the Agent may determine, and (2) all equity interests of the
Pledged LLC Interests shall be registered in the name of the Agent or
its nominee, and the Agent or its nominee may thereafter exercise all
voting, corporate and other rights pertaining to such Pledged LLC
Interests at any meeting of shareholders of the Issuer or otherwise
and any and all rights of conversion, exchange, subscription and any
other rights, privileges or options pertaining to such Pledged LLC
Interests as if it were the absolute owner thereof (including, without
limitation, the right to exchange at its discretion any and all of the
Pledged LLC Interests upon the merger, consolidation, reorganization,
recapitalization or other fundamental change in the corporate
structure of the Issuer, or upon the exercise by the Pledgor or the
Agent of any right, privilege or option pertaining to such Pledged LLC
Interests, and in connection therewith, the right to deposit and
deliver any and all of the Pledged LLC Interests with any committee,
depositary, transfer agent, registrar or other designated agency upon
such terms and conditions as the Agent may determine), all without
liability except to account for property actually received by it, but
the Agent shall have no duty to the Pledgor to exercise any such
right, privilege or option and shall not be responsible for any
failure to do so or delay in so doing.
7. Remedies.(a) If an Event of Default shall have occurred and
be continuing, at any time at the Agent's election, the Agent may
apply all or any part of Proceeds held in any Collateral Account in
payment of the Secured Obligations in accordance with the
Intercreditor Agreement and as permitted by law.
(b) If an Event of Default shall occur and be continuing,
the Agent, on behalf of the Lenders, may exercise, in addition to all
other rights and remedies granted in this Agreement and in any other
instrument or agreement securing, evidencing or relating to the
Secured Obligations, all rights and remedies of a secured party under
the Code. Without limiting the generality of the foregoing, the Agent,
without demand of performance or other demand, presentment, protest,
advertisement or notice of any kind (except any notice required by law
referred to below) to or upon the Pledgor or any other Person (all and
each of which demands, defenses, advertisements and notices are hereby
waived), may in such circumstances forthwith collect, receive,
appropriate and realize upon the Collateral, or any part thereof,
and/or may forthwith sell, assign, give option or options to purchase
or otherwise dispose of and deliver the Collateral or any part thereof
(or contract to do any of the foregoing), in one or more parcels at
public or private sale or sales, in the over-the-counter market, at
any exchange, broker's board or office of the Agent or any Lender or
elsewhere upon such terms and conditions as it may deem advisable and
at such prices as it may deem best, for cash or on credit or for
future delivery without assumption of any credit risk. The Agent or
any Lender shall have the right upon any such public sale or sales,
and, to the extent permitted by law, upon any such private sale or
sales, to purchase the whole or any part of the Collateral so sold,
free of any right or equity of redemption in the Pledgor, which right
or equity is waived or released upon the consummation of such sale.
The Agent shall apply any Proceeds from time to time held by it and
the net proceeds of any such collection, recovery, receipt,
appropriation, realization or sale, after deducting all reasonable
costs and expenses of every kind incurred in respect thereof or
incidental to the care or safekeeping of any of the Collateral or in
any way relating to the Collateral or the rights of the Agent and the
Lenders hereunder, including, without limitation, reasonable
attorneys' fees and reasonable disbursements of counsel to the Agent,
to the payment in whole or in part of the Secured Obligations, in
accordance with the Intercreditor Agreement and as permitted by law,
and only after such application and after the payment by the Agent of
any other amount required by any provision of law, including, without
limitation, Section 9-504(1)(c) of the Code, need the Agent account
for the surplus, if any, to the Pledgor. To the extent permitted by
applicable law, the Pledgor waives all claims, damages and demands it
may acquire against the Agent or any Lender arising out of the
exercise by them of any rights hereunder except to the extent arising
out of gross negligence or willful misconduct of the Agent or such
Lender. If any notice of a proposed sale or other disposition of
Collateral shall be required by law, such notice shall be deemed
reasonable and proper if given at least 10 days before such sale or
other disposition.
8. Registration Rights; Private Sales. (a) If the Agent shall
determine to exercise its right to sell any or all of the Pledged LLC
Interests pursuant to paragraph hereof, and if in the reasonable
opinion of the Agent it is necessary or advisable to have the Pledged
LLC Interests, or that portion thereof to be sold, registered under
the provisions of the Securities Act, the Pledgor will cause the
Issuer thereof to execute and deliver, and cause the directors and
officers of the Issuer to (1) execute and deliver, all such instruments
and documents, and do or cause to be done all such other acts as may
be, in the reasonable opinion of the Agent, necessary or advisable to
register the Pledged LLC Interests, or that portion thereof to be
sold, under the provisions of the Securities Act, (2) to use its
reasonable efforts to cause the registration statement relating
thereto to become effective and to remain effective for a period of
one year from the date of the first public offering of the Pledged LLC
Interests, or that portion thereof to be sold, and (3) to make all
amendments thereto and/or to the related prospectus which, in the
reasonable opinion of the Agent, are necessary or advisable, all in
conformity with the requirements of the Securities Act and the rules
and regulations of the Securities and Exchange Commission applicable
thereto. The Pledgor agrees to cause the Issuer to comply with the
provisions of the securities or "Blue Sky" laws of any and all
jurisdictions of the United States which the Agent shall designate and
to make available to its security holders, as soon as practicable, an
earnings statement (which need not be audited) which will satisfy the
provisions of Section 11(a) of the Securities Act.
(b) The Pledgor recognizes that the Agent may be unable to
effect a public sale of any or all the Pledged LLC Interests, by
reason of certain prohibitions contained in the Securities Act and
applicable state securities laws or otherwise, and may be compelled to
resort to one or more private sales thereof to a restricted group of
purchasers which will be obliged to agree, among other things, to
acquire such securities for their own account for investment and not
with a view to the distribution or resale thereof. The Pledgor
acknowledges and agrees that any such private sale may result in
prices and other terms less favorable than if such sale were a public
sale and, notwithstanding such circumstances, agrees that any such
private sale shall be deemed to have been made in a commercially
reasonable manner. The Agent shall be under no obligation to delay a
sale of any of the Pledged LLC Interests for the period of time
necessary to permit the Issuer thereof to register such securities for
public sale under the Securities Act, or under applicable state
securities laws of the United States, even if the Issuer would agree
to do so.
(c) The Pledgor further agrees to use its reasonable efforts
to do or cause to be done all such other acts as may be necessary to
make such sale or sales of all or any portion of the Pledged LLC
Interests pursuant to this Section valid and binding and in compliance
with any and all other applicable Requirements of Law. The Pledgor
further agrees that a breach of any of the covenants contained in this
Section will cause irreparable injury to the Agent and the Lenders,
that the Agent and the Lenders have no adequate remedy at law in
respect of such breach and, as a consequence, that each and every
covenant contained in this Section shall be specifically enforceable
against the Pledgor, and the Pledgor hereby waives and agrees not to
assert any defenses against an action for specific performance of such
covenants except for a defense that no Event of Default has occurred
under the Credit Agreement.
9. Irrevocable Authorization and Instruction to Issuer. The
Pledgor hereby authorizes and instructs the Issuer to comply with any
instruction received by it from the Agent in writing that (a) states
that an Event of Default has occurred and is continuing and (b) is
otherwise in accordance with the terms of this Agreement, without any
other or further instructions from the Pledgor, and the Pledgor agrees
that the Issuer shall be fully protected in so complying.
10. Agent's Appointment as Attorney-in-Fact. (a) The Pledgor
hereby irrevocably constitutes and appoints the Agent and any officer
or agent of the Agent, with full power of substitution, as its true
and lawful attorney-in-fact with full irrevocable power and authority
in the place and stead of the Pledgor and in the name of the Pledgor
or in the Agent's own name, from time to time in the Agent's
discretion, for the purpose of carrying out the terms of this
Agreement, to take any and all appropriate action and to execute any
and all documents and instruments which may be necessary or desirable
to accomplish the purposes of this Agreement, including, without
limitation, any financing statements, endorsements, assignments or
other instruments of transfer, which power of attorney is only
exercisable if an Event of Default shall have occurred and be
continuing.
(b) The Pledgor hereby ratifies all that said attorneys
shall lawfully do or cause to be done pursuant to the power of
attorney granted in paragraph 10(a). 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 in accordance with the terms
hereof.
11. Duty of Agent. The Agent's sole duty with respect to the
custody, safekeeping and physical preservation of the Collateral in
its possession, under Section 9-207 of the Code or otherwise, shall be
to deal with it in the same manner as the Agent deals with similar
securities and property for its own account, except that after the
occurrence and during the continuance of an Event of Default the Agent
shall have no obligation to invest funds held in any Collateral
Account and may hold the same as demand deposits. Neither the Agent,
any Lender nor any of their respective directors, officers, employees
or agents shall be liable for failure to demand, collect or realize
upon any of the Collateral or for any delay in doing so (unless the
same shall result from the gross negligence or willful misconduct of
such Person) or shall be under any obligation to sell or otherwise
dispose of any Collateral upon the request of the Pledgor or any other
Person or to take any other action whatsoever with regard to the
Collateral or any part thereof.
12. Execution of Financing Statements. Pursuant to Section
9-402 of the Code, the Pledgor authorizes the Agent to file financing
statements with respect to the Collateral without the signature of the
Pledgor in such form and in such filing offices as the Agent
reasonably determines appropriate to perfect the security interests of
the Agent under this Agreement. A carbon, photographic or other
reproduction of this Agreement shall be sufficient as a financing
statement for filing in any jurisdiction.
13. Authority of Agent. The Pledgor acknowledges that the
rights and responsibilities of the Agent under this Agreement with
respect to any action taken by the Agent or the exercise or
non-exercise by the Agent of any option, voting right, request,
judgment or other right or remedy provided for herein or resulting or
arising out of this Agreement shall, as between the Agent, the Paper
Company Agent and the Timberlands Agent, be governed by the Credit
Agreements and the Intercreditor Agreement, but, as between the Agent
and the Pledgor, the Agent shall be conclusively presumed to be acting
as agent for the Paper Company Agent and the Timberlands Agent with
full and valid authority so to act or refrain from acting, and neither
the Pledgor nor the Issuer shall be under any obligation, or
entitlement, to make any inquiry respecting such authority.
14. Notices. All notices, requests and demands to or upon the
Agent or the Pledgor to be effective shall be in writing (including by
telecopy) and, unless otherwise expressly provided herein, shall be
deemed to have been duly given or made when delivered or three
Business Days after being deposited in the mails, postage prepaid, or
in the case of telecopy notice, when received, addressed as follows:
(1) if to the Agent, at its address or transmission number
for notices provided below:
Toronto-Dominion (Texas), Inc.
909 Fannin Street
Houston, TX 77010
Attention: Jano Mott
Phone: (713) 951-9921
Telecopy: (713) 653-8283
with a copy to: The Toronto-Dominion Bank
31 West 52nd Street
New York, New York 10019
Attention: John Lawson
Phone: (212) 468-0708
Telecopy: (212) 397-4135
(2) if to the Pledgor, at its address or transmission number
for notices set forth under its signature below.
The Agent and the Pledgor may change their addresses and transmission
numbers for notices by notice in the manner provided in this Section.
15. Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof,
and any such prohibition or unenforceability in any jurisdiction shall
not invalidate or render unenforceable such provision in any other
jurisdiction.
16. Amendments in Writing; No Waiver; Cumulative Remedies.
(a) None of the terms or provisions of this Agreement may be waived,
amended, supplemented or otherwise modified except by a written
instrument executed by the Pledgor and the Agent, provided that any
provision of this Agreement may be waived by the Agent and the Lenders
in a letter or agreement executed by the Agent or by telex or
facsimile transmission from the Agent.
(b) Neither the Agent nor any Lender shall by any act
(except by a written instrument pursuant to paragraph 16(a) hereof),
delay, indulgence, omission or otherwise be deemed to have waived any right
or remedy hereunder or to have acquiesced in any Default or Event of
Default or in any breach of any of the terms and conditions hereof. No
failure to exercise, nor any delay in exercising, on the part of the
Agent or any Lender, any right, power or privilege hereunder shall
operate as a waiver thereof. No single or partial exercise of any
right, power or privilege hereunder shall preclude any other or
further exercise thereof or the exercise of any other right, power or
privilege. A waiver by the Agent or any Lender of any right or remedy
hereunder on any one occasion shall not be construed as a bar to any
right or remedy which the Agent or such Lender would otherwise have on
any future occasion.
(c) The rights and remedies herein provided are cumulative,
may be exercised singly or concurrently and are not exclusive of any
other rights or remedies provided by law.
(d) The Pledgor agrees that it will not permit any amendment
or other modification of any of the covenants in the Timberlands
Credit Agreement that are incorporated by reference or referred to
herein unless such amendment or other modification has been consented
to in writing by the Required Lenders under the Paper Company Credit
Agreement.
17. Section Headings. The section headings used in this
Agreement are for convenience of reference only and are not to affect
the construction hereof or be taken into consideration in the
interpretation hereof.
18. Term of this Agreement. This Agreement shall continue in
full force and effect until the Obligations and the obligations of the
Pledgor hereunder shall be paid in full and the Commitments shall have
been terminated. Upon such payment and termination, this Agreement
shall automatically terminate and the security interests, pledges and
liens hereunder released and the Agent and the Lenders shall, upon the
request of the Pledgor and at the Pledgor's expense, execute and
deliver to the Pledgor such documents and instruments evidencing such
termination and release.
19. Limitation on Recourse. Anything herein to the contrary
notwithstanding, from and after the date on which the Brant-Allen
Guarantee shall have terminated in accordance with Section 11 thereof,
the Agent and the Lenders shall have recourse in respect of the
Pledgor's obligations hereunder solely to the Collateral and not to
the Pledgor personally or to other assets of the Pledgor other than
the Collateral.
20. Successors and Assigns. This Agreement shall be binding
upon the successors and assigns of the Pledgor and shall inure to the
benefit of the Agent and the Lenders and their successors and assigns.
21. Governing Law. This Agreement shall be governed by, and
construed and interpreted in accordance with, the law of the State of New
York.
IN WITNESS WHEREOF, the undersigned has caused this Agreement
to be duly executed and delivered as of the date first above written.
BRANT-ALLEN INDUSTRIES, INC.
By: /s/ Edward D. Sherrick
Title: Vice President of Finance
Address for Notices:
Post Office Box 3443
80 Field Point Road
Greenwich, Connecticut 06830
Phone: 203-661-3344
Fax: 203-661-3349
ACKNOWLEDGEMENT AND CONSENT
The undersigned hereby acknowledges receipt of a copy of the
Pledge Agreement dated December 1, 1997, made by Brant-Allen
Industries, Inc. for the benefit of Toronto-Dominion (Texas), Inc., as
Administrative Agent (the "Pledge Agreement"). The undersigned agrees
for the benefit of the Agent and the Lenders as follows:
1. The undersigned will be bound by the terms of the Pledge
Agreement and will comply with such terms insofar as such terms are
applicable to the undersigned.
2. The undersigned will notify the Administrative Agent
promptly in writing of the occurrence of any of the events described
in paragraph 4(a) of the Pledge Agreement.
3. The terms of paragraph 9 of the Pledge Agreement shall apply
to it, mutatis mutandis, with respect to all actions that may be
required of it under or pursuant to or arising out of Section 8 of the
Pledge Agreement.
4. The undersigned agrees that it will not take any action or
fail to take any action that will permit the Pledged LLC Interests to
become "securities" within the meaning of Article 8 of the Uniform
Commercial Code of the State of New York unless (i) the Issuer shall
have provided 30 days prior written notice to the Administrative Agent
and (ii) at the sole expense of the Issuer, the Issuer shall promptly
and duly execute and deliver such further instruments and documents
and take such further actions as the Administrative Agent may
reasonably request to ensure that the Administrative Agent has
"control" of such securities within the meaning of Article 8 of the
Uniform Commercial Code of the State of New York for the purposes of
obtaining or preserving the full benefits of the Pledge Agreement and
of the rights and powers granted therein.
BEAR ISLAND TIMBERLANDS COMPANY, LLC
By: /s/ Edward D. Sherrick
Title: Vice President of Finance
Address for Notices
Post Office Box 3443
80 Field Point Road
Greenwich, Connecticut 06830
Phone: 203-661-3344
Fax: 203-661-3349
SCHEDULE 1
TO TIMBERLANDS PLEDGE AGREEMENT
DESCRIPTION OF PLEDGED LLC INTERESTS
------------------------------------
Issuer Type of Interest Percentage Interest
- - ------ ---------------- -------------------
Bear Island Timberlands Membership 100%
Company, LLC, a Virginia Interest
limited liability Company
EXHIBIT (C-1)
SOUCY PLEDGE AGREEMENT
SOUCY PLEDGE AGREEMENT, dated as of December 1, 1997,
made by BRANT-ALLEN INDUSTRIES, INC., a Delaware corporation (the
"Pledgor") in favor of (i) TORONTO-DOMINION (TEXAS), INC., as
agent (in such capacity, the "Agent") for (i) the Timberlands
Agent for the benefit of the Timberlands Lenders and (ii) the
Paper Company Agent for the benefit of the Paper Company Lenders
(as such terms are hereinafter defined).
W I T N E S S E T H :
WHEREAS, pursuant to the Paper Company Credit Agreement, the
Paper Company Lenders have severally agreed to make loans to the
Paper Company (the "Paper Company Loans") upon the terms and
subject to the conditions set forth therein and as a condition
precedent thereof, the Pledgor has guaranteed payment and
performance of the obligations of the Paper Company thereunder
pursuant to a Guarantee of even date herewith (as amended
modified and otherwise supplemented from time to time (the
"Brant-Allen Guarantee");
WHEREAS pursuant to the Timberlands Credit Agreement, the
Timberlands Lenders have severally agreed to make loans to the
Pledgor (the "Timberlands Loans") upon the terms and subject to
the conditions set forth therein; and
WHEREAS, it is a condition precedent to the obligation of
the Paper Company Lenders to make the Paper Company Loans under
the Paper Company Credit Agreement and the Timberlands Lenders to
make the Timberlands Loans under the Timberlands Credit Agreement
that the Pledgor shall have executed and delivered this Agreement
to (i) secure payment and performance of the obligations of the
Paper Company under the Paper Company Credit Agreement and the
Pledgor under the Brant-Allen Guarantee and (ii) secure payment
and performance of the obligations of the Pledgor under the
Timberlands Credit Agreement.
NOW, THEREFORE, in consideration of the premises and to
induce (i) the Paper Company Administrative Agent and the Paper
Company Lenders to enter into the Paper Company Credit Agreement
and to induce the Paper Company Lenders to make the Paper Company
Loans and (ii) the Timberlands Administrative Agent and the
Timberlands Lenders to enter into the Timberlands Credit
Agreement and to induce the Timberlands Lenders to make the
Timberlands Loans, the Pledgor hereby agrees with the Agent, for
the ratable benefit of (i) the Paper Company Agent for the
benefit of the Paper Company Lenders and (ii) the Timberlands
Agent for the benefit of the Timberlands Lenders, as follows:
1. Defined Terms. (a) The following terms shall have
the following meanings:
"Agreement": this Pledge Agreement, as the same may be
amended, modified or otherwise supplemented from time to time.
"Capital Stock": as defined in the Paper Company Credit
Agreement.
"Closing Date": as defined in the Paper Company Credit
Agreement.
"Code": the Uniform Commercial Code from time to time in
effect in the State of New York.
"Collateral": the Pledged Stock and all Proceeds.
"Collateral Account": any account established to hold cash
Proceeds, maintained under the sole dominion and control of the
Agent, subject to withdrawal by the Agent for the account of the
Lenders only as provided in paragraph 8(a).
"Commitment": as defined in the Paper Company Credit
Agreement.
"Contractual Obligation": as defined in the Paper Company
Credit Agreement.
"Credit Agreements": the collective reference to the Paper
Company Credit Agreement and the Timberlands Credit Agreement.
"Default": any of the events specified in either Section 7
of the Paper Company Credit Agreement or Section 7 of the
Timberlands Credit Agreement , whether or not any requirement for
the giving of notice, the lapse of time, or both, has been
satisfied.
"Disposition": as defined in the Paper Company Credit
Agreement.
"Event of Default": any of the events specified in Section
7 of the Paper Company Credit Agreement or Section 7 of the
Timberlands Credit Agreement, provided that any requirement for
the giving of notice, the lapse of time, or both, has been
satisfied.
"Governmental Authority": as defined in the Paper Company
Credit Agreement.
"Guarantee Obligation": as defined in the Paper Company
Credit Agreement.
"Brant-Allen Guarantee": as defined in the recitals hereto.
"Issuer": the company identified on Schedule 1 attached
hereto as the issuer of the Pledged Stock.
"Lenders": the collective reference to the Paper Company
Lenders and the Timberlands Lenders.
"Lien": as defined in the Paper Company Credit Agreement.
"Loans": the collective reference to the Paper Company
Loans and the Timberlands Loans.
"Material Adverse Effect": as defined in the Timberlands
Credit Agreement.
"Paper Company": as defined in the definition of the Paper
Company Credit Agreement.
"Paper Company Agent": as defined in the definition of the
Paper Company Credit Agreement.
"Paper Company Credit Agreement": the Credit Agreement,
dated as of December 1, 1997 (as amended, supplemented or
otherwise modified from time to time) among Bear Island Paper
Company, LLC (the "Paper Company"), Toronto-Dominion (Texas),
Inc., as administrative agent (in such capacity, the "Paper
Company Agent"), the arranger party thereto and the Lenders
parties thereto (the "Paper Company Lenders").
"Paper Company Lenders": as defined in the definition of
the Paper Company Credit Agreement.
"Paper Company Loans": as defined in the recitals hereto.
"Paper Company Obligations": the "Obligations" as defined
in the Paper Company Credit Agreement.
"Person": as defined in the Paper Company Credit Agreement.
"Pledged Stock": the shares of Capital Stock listed on
Schedule 1 hereto, together with all stock certificates, options
or rights of any nature whatsoever that may be issued or granted
by the Issuer to the Pledgor while this Agreement is in effect.
"Proceeds": all "proceeds" as such term is defined in
Section 9-306(1) of the Uniform Commercial Code in effect in the
State of New York on the date hereof and, in any event, shall
include, without limitation, all dividends or other income from
the Pledged Stock, collections thereon or distributions with
respect thereto.
"Property": as defined in the Paper Company Credit
Agreement.
"Requirement of Law": as defined in the Paper Company
Credit Agreement.
"Responsible Officer": as defined in the Paper Company
Credit Agreement.
"Secured Obligations": the collective reference to (a) the
Paper Company Obligations, (b) Timberlands Obligations and (c)
all obligations and liabilities of the Pledgor which may arise
under or in connection with this Agreement, the Brant-Allen
Guarantee or any other Loan Document to which the Pledgor is a
party, whether on account of fees, indemnities, costs, expenses
or otherwise that are required to be paid by the Pledgor pursuant
to the terms thereof (including, without limitation, all
reasonable fees and disbursements of counsel to the
Administrative Agent or to the Lenders that are required to be
paid by the Pledgor pursuant to the terms of this Agreement or
any other Loan Document to which the Pledgor is a party).
"Securities Act": the Securities Act of 1933, as amended,
together with the securities laws of any other jurisdiction in
which the Pledged Stock may be sold.
"Soucy Management Contract": as defined in the Paper
Company Credit Agreement.
"Subsidiary": as defined in the Paper Company Credit
Agreement.
"Timberlands Agent": as defined in the definition of the
Timberlands Credit Agreement.
"Timberlands Credit Agreement": the Credit Agreement, dated
as of December 1, 1997 (as amended, supplemented or otherwise
modified from time to time) among the Pledgor, Toronto-Dominion
(Texas), Inc., as administrative agent (in such capacity, the
"Timberlands Agent") and the Lenders parties thereto (the
"Timberlands Lenders").
"Timberlands Lenders": as defined in the definition of the
Timberlands Credit Agreement.
"Timberlands Loans": as defined in the recitals hereto.
"Timberlands Obligations": the "Obligations" as defined in
the Timberlands Credit Agreement.
"Total Committed Debt": as defined in the Paper Company
Credit Agreement.
(b) The words "hereof," "herein" and "hereunder" and words
of similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this
Agreement, and section and paragraph references are to this
Agreement unless otherwise specified.
(c) The meanings given to terms defined herein shall be
equally applicable to both the singular and plural forms of such
terms.
2. Pledge; Grant of Security Interest. The Pledgor hereby
delivers to the Agent, for the benefit of (i) the Paper Company
Agent for the benefit of the Paper Company Lenders and (ii) the
Timberlands Agent for the benefit of the Timberlands Lenders, all
the Pledged Stock and hereby pledges in favor of and grants to
the Agent, for the benefit of the Paper Company Lenders and the
Timberlands Lenders, a first security interest in the Collateral,
as collateral security for the prompt and complete payment and
performance when due (whether at the stated maturity, by
acceleration or otherwise) of the Secured Obligations (for the
benefit of the Paper Company Lenders and the Timberlands Lenders
in the respective priorities established pursuant to the
Intercreditor Agreement).
3. Stock Powers. Concurrently with the delivery to the
Agent of each certificate representing one or more shares of
Pledged Stock, the Pledgor shall deliver an undated stock power
covering such certificate, duly executed in blank by the Pledgor
with, if the Agent so requests, signature guaranteed.
4. Representations and Warranties. The Pledgor represents
and warrants that:
(a) The Pledgor has the corporate power and authority and
the legal right to execute and deliver, to perform its
obligations under, and to grant the security interest in the
Collateral pursuant to, this Agreement and has taken all
necessary corporate action to authorize its execution, delivery
and performance of, and grant of the security interest in the
Collateral pursuant to, this Agreement.
(b) This Agreement constitutes a legal, valid and binding
obligation of the Pledgor, enforceable in accordance with its
terms, and upon delivery to the Agent of the stock certificates
evidencing the Pledged Stock and completion of the registration
actions required under Quebec Law, the security interest created
pursuant to this Agreement will constitute a valid, perfected
first priority security interest in the Collateral in favor of
the Agent for the benefit of (i) the Paper Company Agent for the
benefit of the Paper Company Lenders and (ii) the Timberlands
Agent for the benefit of the Timberlands Lenders, respectively,
enforceable in accordance with its terms against all creditors of
the Pledgor and any Persons purporting to purchase any Collateral
from the Pledgor, except in each case as enforceability may be
affected by bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws relating to or
affecting creditors' rights generally, general equitable
principles (whether considered in a proceeding in equity or at
law) and an implied covenant of good faith and fair dealing.
(c) The execution, delivery and performance of this
Agreement will not violate any provision of any material
Requirement of Law or material Contractual Obligation of the
Pledgor and will not result in the creation or imposition of any
Lien on any of the properties or revenues of the Pledgor pursuant
to any such Requirement of Law or Contractual Obligation of the
Pledgor, except the security interest created by this Agreement.
(d) No consent or authorization of, filing with, or other
act by or in respect of, any arbitrator or Governmental Authority
and no consent of any other Person (including, without
limitation, any stockholder or creditor of the Pledgor), is
required in connection with the execution, delivery, performance,
validity or enforceability of this Agreement, except as described
in Section 3.4 of the Paper Company Credit Agreement.
(e) No litigation, investigation or proceeding of or before
any arbitrator or Governmental Authority is pending or, to the
knowledge of the Pledgor, threatened by or against the Pledgor or
against any of its properties or revenues with respect to this
Agreement or any of the transactions contemplated hereby.
(f) The shares of Pledged Stock constitute 65% of all the
issued and outstanding shares of all classes of the capital stock
of the Issuer.
(g) All the shares of the Pledged Stock have been duly and
validly issued and are fully paid and nonassessable.
(h) The Pledgor is the record and beneficial owner of, and
has title to, the Pledged Stock, free of any and all Liens or
options in favor of, or claims of, any other Person, except the
security interest created by this Agreement and Liens pursuant to
the Second Priority Note Security Documents.
5. Covenants. The Pledgor covenants and agrees with the
Agent and the Lenders that, from and after the date of this
Agreement until this Agreement is terminated and the security
interests created hereby are released in accordance with the
terms hereof:
(a) If the Pledgor shall, as a result of its ownership of
the Pledged Stock, become entitled to receive or shall receive
any stock certificate (including, without limitation, any
certificate representing a stock dividend or a distribution in
connection with any reclassification, increase or reduction of
capital or any certificate issued in connection with any
reorganization), option or rights, whether in addition to, in
substitution of, as a conversion of, or in exchange for any
shares of the Pledged Stock, or otherwise in respect thereof, the
Pledgor shall accept the same as the agent of the Agent and the
Lenders, hold the same in trust for the Agent and the Lenders and
deliver the same forthwith to the Agent in the exact form
received, duly indorsed by the Pledgor to the Agent, if required,
together with an undated stock power covering such certificate
duly executed in blank by the Pledgor and with, if the Agent so
requests, signature guaranteed, to be held by the Agent, subject
to the terms hereof, as additional collateral security for the
Secured Obligations. Any sums paid upon or in respect of the
Pledged Stock upon the liquidation or dissolution of any Issuer
shall be paid over to the Agent to be held by it hereunder as
additional collateral security for the Secured Obligations, and
in case any distribution of capital shall be made on or in
respect of the Pledged Stock or any property shall be distributed
upon or with respect to the Pledged Stock, in each case pursuant
to the recapitalization or reclassification of the capital of the
Issuer or pursuant to the reorganization thereof, the property so
distributed shall be delivered to the Agent to be held by it
hereunder as additional collateral security for the Secured
Obligations. If any sums of money or property so paid or
distributed in respect of the Pledged Stock (other than
distributions permitted to be made or received pursuant to the
Credit Agreements) shall be received by the Pledgor, the Pledgor
shall, until such money or property is paid or delivered to the
Agent, hold such money or property in trust for the Lenders,
segregated from other funds of the Pledgor, as additional
collateral security for the Secured Obligations.
(b) Except as permitted by the Credit Agreements, without
the prior written consent of the Agent, the Pledgor will not (1)
vote to enable, or take any other action to permit, the Issuer to
issue any stock or other equity securities of any nature or to
issue any other securities convertible into or granting the right
to purchase or exchange for any stock or other equity securities
of any nature of the Issuer except issuances of equity interests
to the Pledgor which constitute Collateral hereunder, (2) sell,
assign, transfer, exchange, or otherwise dispose of, or grant any
option with respect to, the Collateral or any other shares of
Capital Stock of the Issuer owned by the Pledgor, (3) create,
incur or permit to exist any Lien or option in favor of, or any
claim of any Person with respect to, any of the Collateral or any
other shares of Capital Stock of the Issuer owned by the Pledgor,
or any interest therein, except for the security interests
created by this Agreement or (4) enter into any agreement or
undertaking restricting the right or ability of the Pledgor or
the Agent (after foreclosure) to sell, assign or transfer any of
the Collateral other than such restrictions under the Credit
Agreements, the Second Priority Notes and the Second Priority
Note Indenture (as each such term is defined in the Paper Company
Credit Agreement).
(c) The Pledgor shall maintain the security interest
created by this Agreement as a first, perfected security interest
and shall defend such security interest against claims and
demands of all Persons whomsoever except for permitted liens. At
any time and from time to time, upon the written request of the
Agent, and at the sole expense of the Pledgor, the Pledgor will
promptly and duly execute and deliver such further instruments
and documents and take such further actions as the Agent may
reasonably request for the purposes of obtaining or preserving
the full benefits of this Agreement and of the rights and powers
herein granted. If any amount payable under or in connection
with any of the Collateral (to the extent such amounts are
otherwise required by this Agreement to be paid to the Agent)
shall be or become evidenced by any promissory note, other
instrument or chattel paper, such note, instrument or chattel
paper in excess of $500,000 shall promptly upon receipt be
delivered to the Agent, duly endorsed in a manner satisfactory to
the Agent, to be held as Collateral pursuant to this Agreement.
(d) The Pledgor shall pay, and save the Agent and the
Lenders harmless from, any and all liabilities with respect to,
or resulting from any delay in paying, any and all stamp, excise,
sales or other similar taxes which may be payable or determined
to be payable with respect to any of the Collateral or in
connection with any of the transactions contemplated by this
Agreement, other than taxes covered by Section 2.18 of the Paper
Company Credit Agreement or Section 2.15 of the Timberlands
Credit Agreement.
(e) The Pledgor shall not permit the Issuer to, directly or
indirectly, create, incur, assume or suffer to exist any
Indebtedness except as permitted by the Timberlands Credit
Agreement.
(f) The Pledgor shall not directly or indirectly, create,
incur, assume or suffer to exist any Lien on the Capital Stock of
the Issuer owned by the Pledgor except as permitted by the
Timberlands Credit Agreement.
(g) The Pledgor shall not permit the Issuer to, directly or
indirectly, declare or pay any dividend (other than dividends
payable solely in common stock of the Person making such
dividend) on, or make any payment on account of, or set apart
assets for a sinking or other analogous fund for, the purchase,
redemption, defeasance, retirement, or other acquisition of, any
shares of any class of Capital Stock of the Issuer or any of its
Subsidiaries or any warrants or options to purchase any such
Capital Stock, whether now or hereafter outstanding, or make any
other distribution in respect thereof, either directly or
indirectly, whether in cash or property or in obligations of the
Issuer or any of its Subsidiaries, except as permitted by the
Timberlands Credit Agreement.
(h) The Pledgor shall not and shall not permit the Issuer
to, directly or indirectly, amend, supplement or otherwise modify
(pursuant to a waiver or otherwise) the terms and conditions of
the Soucy Management Contract except as permitted by the
Timberlands Credit Agreement; provided, however, that the Pledgor
may transfer its interest thereunder to an Affiliate of the
Pledgor.
To the extent that the provisions of this Section 5
refer to the Timberlands Credit Agreement, if the Timberlands
Credit Agreement shall terminate, such references shall be deemed
to refer to the Timberlands Credit Agreement immediately prior to
such termination.
6. Voting Rights. No vote shall be cast or corporate right
exercised or other action taken which, in the Agent's reasonable
judgment, would impair in any material respect the Collateral or
which would be inconsistent with or result in any violation of
any provision of the Credit Agreements, the notes thereunder,
this Agreement or any other Loan Document.
7. Rights of the Lenders and the Agent. (a) All money
Proceeds received by the Agent hereunder shall be held by the
Agent for the ratable benefit of the Lenders in a Collateral
Account. All Proceeds while held by the Agent in a Collateral
Account (or by the Pledgor in trust for the Agent and the
Lenders) shall continue to be held as collateral security for all
the Secured Obligations and shall not constitute payment thereof
until applied as provided in paragraph 8(a).
(b) If an Event of Default shall occur and be continuing
and the Agent shall give notice of its intent to exercise such
rights to the Pledgor, (1) the Agent shall have the right to
receive any and all cash dividends paid in respect of the Pledged
Stock and make applications thereof to the Secured Obligations in
such order as the Agent may determine, and (2) all shares of the
Pledged Stock shall be registered in the name of the Agent or its
nominee, and the Agent or its nominee may thereafter exercise (A)
all voting, corporate and other rights pertaining to such shares
of the Pledged Stock at any meeting of shareholders of the Issuer
or otherwise and (B) any and all rights of conversion, exchange,
subscription and any other rights, privileges or options
pertaining to such shares of the Pledged Stock as if it were the
absolute owner thereof (including, without limitation, the right
to exchange at its discretion any and all of the Pledged Stock
upon the merger, consolidation, reorganization, recapitalization
or other fundamental change in the corporate structure of the
Issuer, or upon the exercise by the Pledgor or the Agent of any
right, privilege or option pertaining to such shares of the
Pledged Stock, and in connection therewith, the right to deposit
and deliver any and all of the Pledged Stock with any committee,
depositary, transfer agent, registrar or other designated agency
upon such terms and conditions as the Agent may determine), all
without liability except to account for property actually
received by it, but the Agent shall have no duty to the Pledgor
to exercise any such right, privilege or option and shall not be
responsible for any failure to do so or delay in so doing.
8. Remedies. (a) If an Event of Default shall have
occurred and be continuing, at any time at the Agent's election,
the Agent may apply all or any part of Proceeds held in any
Collateral Account in payment of the Secured Obligations ratably
in accordance with the Intercreditor Agreement and as permitted
by law.
(b) If an Event of Default shall occur and be continuing,
the Agent, on behalf of the Lenders, may exercise, in addition to
all other rights and remedies granted in this Agreement and in
any other instrument or agreement securing, evidencing or
relating to the Secured Obligations, all rights and remedies of a
secured party under the Code. Without limiting the generality of
the foregoing, the Agent, without demand of performance or other
demand, presentment, protest, advertisement or notice of any kind
(except any notice required by law referred to below) to or upon
the Pledgor or any other Person (all and each of which demands,
defenses, advertisements and notices are hereby waived), may in
such circumstances forthwith collect, receive, appropriate and
realize upon the Collateral, or any part thereof, and/or may
forthwith sell, assign, give option or options to purchase or
otherwise dispose of and deliver the Collateral or any part
thereof (or contract to do any of the foregoing), in one or more
parcels at public or private sale or sales, in the over-the-
counter market, at any exchange, broker's board or office of the
Agent or any Lender or elsewhere upon such terms and conditions
as it may deem advisable and at such prices as it may deem best,
for cash or on credit or for future delivery without assumption
of any credit risk. The Agent or any Lender shall have the right
upon any such public sale or sales, and, to the extent permitted
by law, upon any such private sale or sales, to purchase the
whole or any part of the Collateral so sold, free of any right or
equity of redemption in the Pledgor, which right or equity is
waived or released upon the consummation of such sale. The Agent
shall apply any Proceeds from time to time held by it and the net
proceeds of any such collection, recovery, receipt,
appropriation, realization or sale, after deducting all
reasonable costs and expenses of every kind incurred in respect
thereof or incidental to the care or safekeeping of any of the
Collateral or in any way relating to the Collateral or the rights
of the Agent and the Lenders hereunder, including, without
limitation, reasonable attorneys' fees and disbursements of
counsel to the Agent, to the payment in whole or in part of the
Secured Obligations ratably in accordance with the Intercreditor
Agreement and as permitted by law, and only after such
application and after the payment by the Agent of any other
amount required by any provision of law, including, without
limitation, Section 9-504(1)(c) of the Code, need the Agent
account for the surplus, if any, to the Pledgor. To the extent
permitted by applicable law, the Pledgor waives all claims,
damages and demands it may acquire against the Agent or any
Lender arising out of the exercise by them of any rights
hereunder except to the extent arising out of gross negligence or
willful misconduct of the Agent or such Lender. If any notice of
a proposed sale or other disposition of Collateral shall be
required by law, such notice shall be deemed reasonable and
proper if given at least 10 days before such sale or other
disposition.
9. Registration Rights; Private Sales. (a) If the Agent
shall determine to exercise its right to sell any or all of the
Pledged Stock pursuant to paragraph 8(b) hereof, and if in the
reasonable opinion of the Agent it is necessary or advisable to
have the Pledged Stock, or that portion thereof to be sold,
registered under the provisions of the Securities Act, the
Pledgor will cause the Issuer thereof to (1) execute and deliver,
and cause the directors and officers of the Issuer to execute and
deliver, all such instruments and documents, and do or cause to
be done all such other acts as may be, in the reasonable opinion
of the Agent, necessary or advisable to register the Pledged
Stock, or that portion thereof to be sold, under the provisions
of the Securities Act, (2) to use its reasonable efforts to cause
the registration statement relating thereto to become effective
and to remain effective for a period of one year from the date of
the first public offering of the Pledged Stock, or that portion
thereof to be sold, and (3) to make all amendments thereto and/or
to the related prospectus which, in the reasonable opinion of the
Agent, are necessary or advisable, all in conformity with the
requirements of the Securities Act and the rules and regulations
of the Securities and Exchange Commission applicable thereto.
The Pledgor agrees to cause the Issuer to comply with the
provisions of the securities or "Blue Sky" laws of any and all
jurisdictions of the United States and Canada which the Agent
shall designate and to make available to its security holders, as
soon as practicable, an earnings statement (which need not be
audited) which will satisfy the provisions of Section 11(a) of
the Securities Act.
(b) The Pledgor recognizes that the Agent may be unable to
effect a public sale of any or all the Pledged Stock, by reason
of certain prohibitions contained in the Securities Act and
applicable state securities laws or otherwise, and may be
compelled to resort to one or more private sales thereof to a
restricted group of purchasers which will be obliged to agree,
among other things, to acquire such securities for their own
account for investment and not with a view to the distribution or
resale thereof. The Pledgor acknowledges and agrees that any
such private sale may result in prices and other terms less
favorable than if such sale were a public sale and,
notwithstanding such circumstances, agrees that any such private
sale shall be deemed to have been made in a commercially
reasonable manner. The Agent shall be under no obligation to
delay a sale of any of the Pledged Stock for the period of time
necessary to permit the Issuer thereof to register such
securities for public sale under the Securities Act, or under
applicable state securities laws of the United States and Canada,
even if the Issuer would agree to do so.
(c) The Pledgor further agrees to use its reasonable
efforts to do or cause to be done all such other acts as may be
necessary to make such sale or sales of all or any portion of the
Pledged Stock pursuant to this Section valid and binding and in
compliance with any and all other applicable Requirements of Law.
The Pledgor further agrees that a breach of any of the covenants
contained in this Section will cause irreparable injury to the
Agent and the Lenders, that the Agent and the Lenders have no
adequate remedy at law in respect of such breach and, as a
consequence, that each and every covenant contained in this
Section shall be specifically enforceable against the Pledgor,
and the Pledgor hereby waives and agrees not to assert any
defenses against an action for specific performance of such
covenants except for a defense that no Event of Default has
occurred under the Credit Agreement.
10. Irrevocable Authorization and Instruction to Issuer.
The Pledgor hereby authorizes and instructs the Issuer to comply
with any instruction received by it from the Agent in writing
that (a) states that an Event of Default has occurred and is
continuing and (b) is otherwise in accordance with the terms of
this Agreement, without any other or further instructions from
the Pledgor, and the Pledgor agrees that the Issuer shall be
fully protected in so complying.
11. Agent's Appointment as Attorney-in-Fact. (a) The
Pledgor hereby irrevocably constitutes and appoints the Agent and
any officer or agent of the Agent, with full power of
substitution, as its true and lawful attorney-in-fact with full
irrevocable power and authority in the place and stead of the
Pledgor and in the name of the Pledgor or in the Agent's own
name, from time to time in the Agent's discretion, for the
purpose of carrying out the terms of this Agreement, to take any
and all appropriate action and to execute any and all documents
and instruments which may be necessary or desirable to accomplish
the purposes of this Agreement, including, without limitation,
any financing statements, endorsements, assignments or other
instruments of transfer, which power of attorney is only
exercisable if an Event of Default shall have occurred and be
continuing.
(b) The Pledgor hereby ratifies all that said attorneys
shall lawfully do or cause to be done pursuant to the power of
attorney granted in paragraph 11(a). 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 in
accordance with the terms hereof.
12. Duty of Agent. The Agent's sole duty with respect to
the custody, safekeeping and physical preservation of the
Collateral in its possession, under Section 9-207 of the Code or
otherwise, shall be to deal with it in the same manner as the
Agent deals with similar securities and property for its own
account, except that after the occurrence and during the
continuance of an Event of Default the Agent shall have no
obligation to invest funds held in any Collateral Account and may
hold the same as demand deposits. Neither the Agent, any Lender
nor any of their respective directors, officers, employees or
agents shall be liable for failure to demand, collect or realize
upon any of the Collateral or for any delay in doing so (unless
the same shall result from the gross negligence or willful
misconduct of such Person) or shall be under any obligation to
sell or otherwise dispose of any Collateral upon the request of
the Pledgor or any other Person or to take any other action
whatsoever with regard to the Collateral or any part thereof.
13. Execution of Financing Statements. Pursuant to Section
9-402 of the Code, the Pledgor authorizes the Agent to file
financing statements with respect to the Collateral without the
signature of the Pledgor in such form and in such filing offices
as the Agent reasonably determines appropriate to perfect the
security interests of the Agent under this Agreement. A carbon,
photographic or other reproduction of this Agreement shall be
sufficient as a financing statement for filing in any
jurisdiction.
14. Authority of Agent. The Pledgor acknowledges that the
rights and responsibilities of the Agent under this Agreement
with respect to any action taken by the Agent or the exercise or
non-exercise by the Agent of any option, voting right, request,
judgment or other right or remedy provided for herein or
resulting or arising out of this Agreement shall, as between the
Agent, the Paper Company Agent and the Timberlands Agent, be
governed by the Credit Agreements and the Intercreditor
Agreement, but, as between the Agent and the Pledgor, the Agent
shall be conclusively presumed to be acting as agent for the
Paper Company Agent and the Timberlands Agent with full and valid
authority so to act or refrain from acting, and neither the
Pledgor nor the Issuer shall be under any obligation, or
entitlement, to make any inquiry respecting such authority.
15. Release of Pledge Agreement. The Pledgor shall be
automatically released from its obligations under this Agreement
and this Agreement shall automatically terminate on the earlier
of (a) the date on which all the Secured Obligations are paid in
full and all the Commitments thereunder are terminated, and (b)
the later of (i) the date upon which the Timberlands Loans have
been repaid in full and (ii) the date on which Total Committed
Debt is less than $145,000,000; and at the time of such release
the Agent shall deliver the Collateral to the Pledgor.
16. Notices. All notices, requests and demands to or upon
the Agent or the Pledgor to be effective shall be in writing
(including by telecopy) and, unless otherwise expressly provided
herein, shall be deemed to have been duly given or made when
delivered three Business Days after being deposited in the mails,
postage prepaid, or in the case of telecopy notice, when
received, addressed as follows:
(1) if to the Agent, at its address or transmission number
for notices provided below:
Toronto-Dominion (Texas), Inc.
909 Fannin Street
Houston, TX 77010
Attention: Jano Mott
Phone: (713) 951-9921
Telecopy: (713) 653-8283
with a copy to: The Toronto-Dominion Bank
31 West 52nd Street
New York, New York 10019
Attention: John Lawson
Phone: (212) 468-0708
Telecopy: (212) 397-4135
(2) if to the Pledgor, at its address or transmission
number for notices set forth under its signature below.
The Agent and the Pledgor may change their addresses and
transmission numbers for notices by notice in the manner provided
in this Section.
17. Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions
hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such
provision in any other jurisdiction.
18. Amendments in Writing; No Waiver; Cumulative Remedies.
(a) None of the terms or provisions of this Agreement may be
waived, amended, supplemented or otherwise modified except by a
written instrument executed by the Pledgor and the Agent,
provided that any provision of this Agreement may be waived by
the Agent and the Lenders in a letter or agreement executed by
the Agent or by telex or facsimile transmission from the Agent.
(b) Neither the Agent nor any Lender shall by any act
(except by a written instrument pursuant to paragraph 18(a)
hereof), delay, indulgence, omission or otherwise be deemed to
have waived any right or remedy hereunder or to have acquiesced
in any Default or Event of Default or in any breach of any of the
terms and conditions hereof. No failure to exercise, nor any
delay in exercising, on the part of the Agent or any Lender, any
right, power or privilege hereunder shall operate as a waiver
thereof. No single or partial exercise of any right, power or
privilege hereunder shall preclude any other or further exercise
thereof or the exercise of any other right, power or privilege.
A waiver by the Agent or any Lender of any right or remedy
hereunder on any one occasion shall not be construed as a bar to
any right or remedy which the Agent or such Lender would
otherwise have on any future occasion.
(c) The rights and remedies herein provided are cumulative,
may be exercised singly or concurrently and are not exclusive of
any other rights or remedies provided by law.
(d) The Pledgor agrees that it will not permit any
amendment or other modification of any of the covenants in the
Timberlands Credit Agreement that are incorporated by reference
or referred to herein unless such amendment or other modification
has been consented to in writing by the Required Lenders under
the Paper Company Credit Agreement.
19. Section Headings. The section headings used in this
Agreement are for convenience of reference only and are not to
affect the construction hereof or be taken into consideration in
the interpretation hereof.
20. Successors and Assigns. This Agreement shall be
binding upon the successors and assigns of the Pledgor and shall
inure to the benefit of the Agent and the Lenders and their
respective permitted successors and assigns.
21. Governing Law. This Agreement shall be governed by,
and construed and interpreted in accordance with, the law of the
State of New York.
22. Notwithstanding any other provision of this Agreement,
at no time shall the Pledgor be required to pledge more than 65%
of all of the voting stock of all classes of the capital stock of
the Issuer.
IN WITNESS WHEREOF, the undersigned has caused this
Agreement to be duly executed and delivered as of the date first
above written.
BRANT-ALLEN INDUSTRIES, INC.
By: /s/ Edward D. Sherrick
Title: Vice President of Finance
Address for Notices:
Post Office Box 3443
80 Field Point Road
Greenwich, Connecticut 06830
Phone: 203-661-3344
Fax: 203-661-3349
ACKNOWLEDGEMENT AND CONSENT
The undersigned hereby acknowledges receipt of a copy of the
Pledge Agreement dated December 1, 1997, made by Brant-Allen
Industries, Inc. for the benefit of Toronto-Dominion (Texas),
Inc., as Agent (the "Pledge Agreement"). The undersigned agrees
for the benefit of the Agent and the Lenders as follows:
1. The undersigned will notify the Agent promptly in
writing of the occurrence of any of the events described in
paragraph 5(a) of the Pledge Agreement.
2. The terms of paragraph 9(c) of the Pledge Agreement
shall apply to it, mutatis mutandis, with respect to all actions
that may be required of it under or pursuant to or arising out of
Section 9 of the Pledge Agreement.
F.F. SOUCY, INC.
By: /s/ Edward D. Sherrick
Title: Vice President of Finance
Address for Notices:
Post Office Box 3443
80 Field Point Road
Greenwich, Connecticut 06830
Phone: 203-661-3344
Fax: 203-661-3349
SCHEDULE 1
TO SOUCY PLEDGE AGREEMENT
DESCRIPTION OF PLEDGED STOCK
Stock
Class of Certificate No. of
Issuer Stock No. Shares
F.F. Soucy, Inc., a Common C-5 271,479
corporation organized
under the laws of
Quebec, Canada
EXHIBIT C-2
CASH COLLATERAL AGREEMENT
CASH COLLATERAL AGREEMENT dated as of December 1, 1997,
between BRANT-ALLEN INDUSTRIES, INC., a Delaware corporation (the
"Borrower") and TORONTO-DOMINION (TEXAS), INC., as Administrative
Agent (in such capacity, the "Administrative Agent") for the
Lenders parties to the Credit Agreement, dated as of the date
hereof (as amended, supplemented or otherwise modified from time
to time, the "Credit Agreement"), among the Borrower, the
Lenders, the Arranger named therein and the Administrative Agent.
W I T N E S S E T H :
WHEREAS, pursuant to the Credit Agreement, the Lenders have
severally agreed to make Loans to the Borrower upon the terms and
subject to the conditions set forth therein; and
WHEREAS, it is a condition precedent to the obligations of
the Lenders to make their respective Loans to the Borrower under
the Credit Agreement that the Borrower shall have executed and
delivered this Agreement to the Administrative Agent for the
ratable benefit of the Lenders.
NOW, THEREFORE, in consideration of the premises and to
induce the Administrative Agent and the Lenders to enter into the
Credit Agreement and to induce the Lenders to make their
respective Loans to the Borrower under the Credit Agreement, the
Borrower hereby agrees with the Administrative Agent, for the
ratable benefit of the Lenders, as follows:
1. Defined Terms. (a) Unless otherwise defined herein,
terms defined in the Credit Agreement and used herein shall have
the meanings given to them in the Credit Agreement.
(b) The following terms shall have the following meanings:
"Agreement": this Cash Collateral Agreement, as the same
may be amended, modified or otherwise supplemented from time to
time.
"Cash Collateral": the collective reference to:
(i) all cash, instruments, securities and funds deposited
from time to time in the Cash Collateral Account, including,
without limitation, all cash or other money proceeds of any
collateral subject to a security interest for the benefit of the
Administrative Agent under any Security Document;
(ii) all investments of funds in the Cash Collateral
Account and all instruments and securities evidencing such
investments; and
(iii) all interest, dividends, cash, instruments,
securities and other property received in respect of, or as
proceeds of, or in substitution or exchange for, any of the
foregoing.
"Cash Collateral Account": account no. 222-7539 established
at the office of The Toronto-Dominion Bank at its New York
branch, designated "Brant-Allen Cash Collateral Account, c/o
Toronto-Dominion (Texas), Inc., as Agent."
"Code": the Uniform Commercial Code from time to time in
effect in the State of New York.
"Collateral": the collective reference to the Cash
Collateral and the Cash Collateral Account.
"Required Amount": on any date, an amount equal to the sum
of all interest (calculated at the weighted average interest rate
in effect in respect of the Loans on such date) payable on the
then unpaid principal amount of Loans (assuming for this purpose
that the Revolving Credit Commitments will be fully drawn during
such period) pursuant to Section 2.10 of the Credit Agreement
calculated from and including such date to the earlier of (i) the
date that is one year after such date and (ii) December 31, 1999.
(c) The words "hereof," "herein" and "hereunder" and words
of similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this
Agreement, and section and paragraph references are to this
Agreement unless otherwise specified.
(d) The meanings given to terms defined herein shall be
equally applicable to both the singular and plural forms of such
terms.
2. Grant of Security Interest. As collateral security for
the prompt and complete payment and performance when due (whether
at the stated maturity, by acceleration or otherwise) of the
Obligations, the Borrower hereby grants to the Administrative
Agent, for the ratable benefit of the Lenders, a security
interest in the Collateral.
3. Maintenance of Cash Collateral Account. (a) The Cash
Collateral Account shall be maintained until the Obligations have
been paid and performed in full.
(b) The Collateral shall be subject to the exclusive
dominion and control of the Administrative Agent, which shall
hold the Cash Collateral and administer the Cash Collateral
Account subject to the terms and conditions of this Agreement.
The Borrower shall have no right of withdrawal from the Cash
Collateral Account nor any other right or power with respect to
the Collateral, except as expressly provided herein.
4. Deposit of Funds. Contemporaneously with the Closing
Date, the Borrower shall deposit in the Cash Collateral Account
immediately available funds in an amount equal to the Required
Amount calculated after giving effect to the borrowings to be
made on the Closing Date. Thereafter, on any date on which the
amount of Cash Collateral on deposit in the Cash Collateral
Account is less than the Required Amount, the Borrower shall
deposit an amount equal to the amount of such deficiency in the
Cash Collateral Account in immediately available funds.
5. Representation and Warranty. The Borrower represents
and warrants to the Administrative Agent that this Agreement
creates in favor of the Administrative Agent a perfected, first
priority security interest in the Collateral, enforceable in
accordance with its terms, except as affected by bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and
other similar laws relating to or affecting creditors' rights
generally, general equitable principles (whether considered in a
proceeding in equity or at law) and an implied covenant of good
faith and fair dealing.
6. Covenants. The Borrower covenants and agrees with the
Administrative Agent that:
(a) The Borrower will not (1) sell, assign, transfer,
exchange, or otherwise dispose of, or grant any option with
respect to, the Collateral, or (2) create, incur or permit to
exist any Lien or option in favor of, or any claim of any Person
with respect to, any of the Collateral, or any interest therein,
except for the security interest created by this Agreement.
(b) The Borrower will maintain the security interest
created by this Agreement as a first, perfected security interest
and defend the right, title and interest of the Administrative
Agent and the Lenders in and to the Collateral against the claims
and demands of all Persons whomsoever. At any time and from time
to time, upon the written request of the Administrative Agent,
and at the sole expense of the Borrower, the Borrower will
promptly and duly execute and deliver such further instruments
and documents and take such further actions as the Administrative
Agent reasonably may request for the purposes of obtaining or
preserving the full benefits of this Agreement and of the rights
and powers herein granted, including, without limitation, of
financing statements under the Uniform Commercial Code.
(c) The Borrower will at all times be required to maintain
Cash Collateral in the Cash Collateral Account in an amount no
less than the Required Amount.
7. Investment of Cash Collateral. (a) Subject to the
provisions of paragraph 7(b), collected funds on deposit in the
Cash Collateral Account shall be invested by the Administrative
Agent from time to time in Cash Equivalents with overnight
maturities. All investments shall be made in the name of the
Administrative Agent or a nominee of the Administrative Agent and
in a manner, determined by the Administrative Agent in its sole
discretion, that preserves the Administrative Agent's perfected,
first priority security interest in such investments.
(b) The Administrative Agent shall have no obligation to
invest collected funds during the first night after their
collection.
(c) The Administrative Agent shall have no responsibility
to the Borrower for any loss or liability arising in respect of
such investments of the Cash Collateral (including, without
limitation, as a result of the liquidation of any thereof before
maturity), except to the extent that such loss or liability
arises from the Administrative Agent's gross negligence or
willful misconduct.
(d) The Borrower will pay or reimburse the Administrative
Agent for any and all reasonable out-of-pocket costs, expenses
and liabilities of the Administrative Agent incurred in
connection with this Agreement, the maintenance and operation of
the Cash Collateral Account and the investment of the Cash
Collateral, including, without limitation, any reasonable and
customary investment, brokerage or placement commissions and fees
incurred by the Administrative Agent in connection with the
investment or reinvestment of Cash Collateral, and any reasonable
and customary investment charges or other fees of The Toronto-
Dominion Bank in connection with maintenance of the Cash
Collateral Account.
8. Release of Cash Collateral. (a) The Administrative
Agent shall, from time to time, upon the request of the Borrower,
release to the Borrower Cash Collateral in an amount equal to the
excess, if any, of the Cash Collateral on deposit in the Cash
Collateral Account over the Cash Collateral required to be
maintained by the Borrower pursuant to Section 6(c).
(b) Notwithstanding any other provision of this paragraph,
the Administrative Agent shall have no obligation to release Cash
Collateral unless each of the following conditions is satisfied
at the time of such release:
(1) No Default or Event of Default shall have occurred
and be continuing; and
(2) Such release shall not require termination of any
investment prior to its maturity.
9. Remedies. (a) Upon the occurrence of an Event of
Default if such Event of Default shall be continuing, the
Administrative Agent may, without notice of any kind, except for
notices required by law which may not be waived, apply the
Collateral, after deducting all reasonable costs and expenses of
every kind incurred in respect thereof or incidental to the care
or safekeeping of any of the Collateral or in any way relating to
the Collateral or the rights of the Administrative Agent and the
Lenders hereunder, including, without limitation, reasonable
attorneys' fees and disbursements of counsel to the
Administrative Agent, to the payment in whole or in part of the
Obligations, in such order as the Administrative Agent in its
sole discretion may elect and as permitted by law, and only after
such application and after the payment by the Administrative
Agent of any other amount required by any provision of law,
including, without limitation, Section 9-504(1)(c) of the Code,
need the Administrative Agent account for the surplus, if any, to
the Borrower. In addition to the rights, powers and remedies
granted to it under this Agreement and in any other agreement
securing, evidencing or relating to the Obligations, the
Administrative Agent shall have all the rights, powers and
remedies available at law, including, without limitation, the
rights and remedies of a secured party under the Code. To the
extent permitted by law, the Borrower waives presentment, demand,
protest and all notices of any kind and all claims, damages and
demands it may acquire against the Administrative Agent or any
Lender arising out of the exercise by them of any rights
hereunder except for gross negligence or willful misconduct of
the Administrative Agent or such Lender.
(b) The Borrower shall remain liable for any deficiency if
the proceeds of any sale or other disposition of the Collateral
are insufficient to pay the Obligations and the fees and
disbursements of any attorneys employed by the Administrative
Agent or any Lender to collect such deficiency.
10. Administrative Agent's Appointment as Attorney-in-Fact.
(a) The Borrower hereby irrevocably constitutes and appoints the
Administrative Agent and any officer or agent of the
Administrative Agent, with full power of substitution, as its
true and lawful attorney-in-fact with full irrevocable power and
authority in the place and stead of the Borrower and in the name
of the Borrower or in the Administrative Agent's own name, from
time to time in the Administrative Agent's discretion, for the
purpose of carrying out the terms of this Agreement, to take any
and all appropriate action and to execute any and all documents
and instruments which may be necessary or desirable to accomplish
the purposes of this Agreement, including, without limitation,
any financing statements, endorsements, assignments or other
instruments of transfer which power of attorney shall only be
exercisable upon the occurrence and during the continuance of an
Event of Default.
(b) The Borrower hereby ratifies all that said attorneys
shall lawfully do or cause to be done pursuant to the power of
attorney granted in paragraph 10(a). 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.
11. Duty of Administrative Agent. The Administrative
Agent's sole duty with respect to the custody, safekeeping and
physical preservation of the Collateral in its possession, under
Section 9-207 of the Code or otherwise, shall be to comply with
the specific duties and responsibilities set forth herein. The
powers conferred on the Administrative Agent in this Agreement
are solely for the protection of the Administrative Agent's and
the Lenders' interests in the Collateral and shall not impose any
duty upon the Administrative Agent or any Lender to exercise any
such powers. Neither the Administrative Agent nor any Lender nor
its or their directors, officers, employees or agents shall be
liable for any action lawfully taken or omitted to be taken by
any of them under or in connection with the Collateral or this
Agreement, except for its or their gross negligence or willful
misconduct.
12. Execution of Financing Statements. Pursuant to Section
9-402 of the Code, the Borrower authorizes the Administrative
Agent to file financing statements with respect to the Collateral
without the signature of the Borrower in such form and in such
filing offices as the Administrative Agent reasonably determines
appropriate to perfect the security interests of the
Administrative Agent under this Agreement. A carbon,
photographic or other reproduction of this Agreement shall be
sufficient as a financing statement for filing in any
jurisdiction.
13. Authority of Administrative Agent. The Borrower
acknowledges that the rights and responsibilities of the
Administrative Agent under this Agreement with respect to any
action taken by the Administrative Agent or the exercise or non-
exercise by the Administrative Agent of any option, right,
request, judgment or other right or remedy provided for herein or
resulting or arising out of this Agreement shall, as between the
Administrative Agent and the Lenders, be governed by the Credit
Agreement, but, as between the Administrative Agent and the
Borrower, the Administrative Agent shall be conclusively presumed
to be acting as agent for the Lenders with full and valid
authority so to act or refrain from acting, and the Borrower
shall not be under any obligation, or entitlement, to make any
inquiry respecting such authority.
14. Notices. All notices, requests and demands to or upon
the respective parties hereto to be effective shall be in writing
(including by telecopy), and, unless otherwise expressly provided
herein, shall be deemed to have been duly given or made when
delivered, or three Business Days after being deposited in the
mail, postage prepaid, or, in the case of telecopy notice, when
received, addressed to the Administrative Agent or the Borrower
at its address or transmission number for notices provided in
subsection 9.2 of the Credit Agreement.
15. Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions
hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such
provision in any other jurisdiction.
16. Amendments in Writing; No Waiver; Cumulative Remedies.
(a) None of the terms or provisions of this Agreement may be
waived, amended, supplemented or otherwise modified except by a
written instrument executed by the Borrower and the
Administrative Agent, provided that any provision of this
Agreement may be waived by the Administrative Agent and the
Lenders in a letter or agreement executed by the Administrative
Agent and delivered to the Borrower in accordance with Section
14.
(b) Neither the Administrative Agent nor any Lender shall
by any act (except by a written instrument pursuant to paragraph
16(a) hereof), delay, indulgence, omission or otherwise be deemed
to have waived any right or remedy hereunder or to have
acquiesced in any Default or Event of Default or in any breach of
any of the terms and conditions hereof. No failure to exercise,
nor any delay in exercising, on the part of the Administrative
Agent or any Lender, any right, power or privilege hereunder
shall operate as a waiver thereof. No single or partial exercise
of any right, power or privilege hereunder shall preclude any
other or further exercise thereof or the exercise of any other
right, power or privilege. A waiver by the Administrative Agent
or any Lender of any right or remedy hereunder on any one
occasion shall not be construed as a bar to any right or remedy
which the Administrative Agent or such Lender would otherwise
have on any future occasion.
(c) The rights and remedies herein provided are cumulative,
may be exercised singly or concurrently and are not exclusive of
any other rights or remedies provided by law.
17. Section Headings. The section headings used in this
Agreement are for convenience of reference only and are not to
affect the construction hereof or be taken into consideration in
the interpretation hereof.
18. Successors and Assigns. This Agreement shall be
binding upon the successors and assigns of the Borrower and shall
inure to the benefit of the Administrative Agent and the Lenders
and their successors and assigns.
19. Governing Law. This Agreement shall be governed by,
and construed and interpreted in accordance with, the law of the
State of New York.
IN WITNESS WHEREOF, the Borrower and the Administrative
Agent have caused this Cash Collateral Agreement to be duly
executed and delivered as of the date first above written.
BRANT-ALLEN INDUSTRIES, INC.
By: /s/ Edward D. Sherrick
Title: Vice President of Finance
TORONTO-DOMINION (TEXAS), INC., as
Administrative Agent
By: /s/ Jano Mott
Title: Vice President
EXHIBIT D
EXECUTION COPY
INTERCREDITOR AGREEMENT
INTERCREDITOR AGREEMENT, dated as of December 1, 1997,
among CRESTAR BANK (the "Trustee"), under the Indenture dated
December 1, 1997 made by Bear Island Paper Company, LLC ("BIPCO")
and Bear Island Finance Company ("FinCo") in favor of the Trustee
(the "Indenture"); TORONTO-DOMINION (TEXAS), INC., as
Administrative Agent under the BIPCO Credit Agreement
(capitalized terms having the definitions set forth in Section 1
below; in such capacity, the "BIPCO Agent"); TORONTO-DOMINION
(TEXAS), INC., in its capacity as Administrative Agent under the
BAI Credit Agreement (in such capacity, the "BAI Agent"); and
BEAR ISLAND PAPER COMPANY, LLC ("BIPCO") and BRANT-ALLEN
INDUSTRIES, INC. ("BAI"; together with BIPCO, the "Borrowers").
W I T N E S S E T H :
WHEREAS, BIPCO, a wholly owned subsidiary of BAI,
intends to make secured borrowings under the BIPCO Credit
Agreement;
WHEREAS, BAI intends to make secured borrowings under
the BAI Credit Agreement;
WHEREAS, BIPCO and its wholly owned subsidiary FinCo
intend to issue secured notes under the Indenture;
WHEREAS, BAI and its affiliates have pledged certain
collateral ("Collateral") to secure their obligations under more
than one of the foregoing agreements;
WHEREAS, the parties hereto desire to set forth their
relative rights in respect of such shared collateral and the
security interests granted therein;
NOW, THEREFORE, in consideration of the premises, the
parties hereto hereby agree as follows:
1. Definitions. (a) Unless otherwise defined herein,
terms defined in the Credit Agreements and the Loan Documents
have the meanings given to them in such documents.
(b) The following terms shall have the following meanings:
"Agreement": this Intercreditor Agreement, as the same
may be amended, supplemented or otherwise modified from time
to time.
"BAI Credit Agreement": the Credit Agreement, dated as
of the date hereof, among the BAI Agent, the BAI Lenders and
BAI, as amended, supplemented or otherwise modified from
time to time; for the purposes hereof, "BAI Credit
Agreement" shall also be deemed to refer to any credit
agreement or similar document entered into by BAI and any
lenders to replace the BAI Credit Agreement in whole or in
part.
"BAI Lenders": the lenders parties from time to time
to the BAI Credit Agreement in their capacity as lenders
thereunder, and their respective successors and assigns.
"BAI Lender Priority Collateral": any and all Lender
Priority Collateral pledged to secure the BAI Obligations.
"BAI Loan Documents": the collective reference to the
BAI Credit Agreement, each "Loan Document" as defined
therein and all other documents that from time to time
evidence the BAI Obligations or secure or support payment or
performance thereof or of any guarantee thereof.
"BAI Loan Parties": BAI and each other Loan Party
under (and as defined in) the BAI Loan Documents, and each
successor and assign of the foregoing.
"BAI Obligations": the Lender Obligations in respect
of the BAI Loan Documents.
"BIPCO Credit Agreement": the Credit Agreement, dated
as of the date hereof, among the BIPCO Agent, the BIPCO
Lenders and BIPCO, as amended, supplemented or otherwise
modified from time to time; for the purposes hereof, "BIPCO
Credit Agreement" shall also be deemed to refer to any
credit agreement or similar document entered into by BIPCO
and any lenders to replace the BIPCO Credit Agreement in
whole or in part.
"BIPCO Lenders": the lenders parties from time to time
to the BIPCO Credit Agreement in their capacity as lenders
thereunder, and their respective successors and assigns.
"BIPCO Lender Priority Collateral": any and all Lender
Priority Collateral pledged to secure the BIPCO Obligations.
"BIPCO Loan Documents": the collective reference to
the BIPCO Credit Agreement, each "Loan Document" as defined
therein and all other documents that from time to time
evidence the BIPCO Obligations or secure or support payment
or performance thereof or of any guarantee thereof.
"BIPCO Loan Parties": BIPCO and each other Loan Party
under (and as defined in) the BIPCO Loan Documents, and each
successor and assign of the foregoing.
"BIPCO Obligations": the Lender Obligations in respect
of the BIPCO Loan Documents.
"BITCO": Bear Island Timberlands Company, LLC, a
Virginia limited liability company.
"BITCO Collateral": the membership interests of BITCO
identified on Schedule 1 of the Timberlands Pledge
Agreement.
"Credit Agreements": the BAI Credit Agreement and the
BIPCO Credit Agreement.
"Lender Obligations": the collective reference to the
unpaid principal of and interest owing under the Credit
Agreements and all other obligations and liabilities of the
Borrowers thereunder, including, without limitation,
interest accruing at the applicable rate provided in the
Credit Agreements after the filing of any petition in
bankruptcy or the commencement of any insolvency,
reorganization or like proceeding, relating to the Borrower
or any other party specified therein, whether or not a claim
for post-filing or post-petition interest is allowed in such
proceeding), whether direct or indirect, absolute or
contingent, due or to become due, or now existing or
hereafter incurred, which may arise under, out of, or in
connection with, the Credit Agreements (including, without
limitation, any obligations under any Interest Rate
Protection Agreement referred to in a Credit Agreement),
this Agreement, the BAI Loan Documents, the BIPCO Loan
Documents or any other document made, delivered or given in
connection therewith, in each case whether on account of
principal, interest, reimbursement obligations, fees,
indemnities, costs, expenses or otherwise, including,
without limitation, all fees and disbursements of counsel
that are required to be paid by the Borrowers pursuant to
the terms of the Credit Agreements, this Agreement or, the
BAI Loan Documents or the BIPCO Loan Documents.
"Lender Priority Collateral": the collective reference
to any and all property from time to time subject to a
security interest to secure payment or performance of the
Lender Obligations or the Trustee Obligations.
"Loan Documents": the BAI Loan Documents and the BIPCO
Loan Documents.
"Loan Parties": the BAI Loan Parties and the BIPCO
Loan Parties.
"Senior Secured Lender": each of the BAI Agent, the
BIPCO Agent, each BAI Lender and each BIPCO Lender.
"Soucy Collateral": the "Pledged Stock" as defined in
the Soucy Pledge Agreement.
"Soucy Pledge Agreement": the Soucy Pledge Agreement
dated as of the date hereof, made by BAI in favor of the
BIPCO Agent and the BAI Agent and, for the purposes of this
Agreement, the notarial deed of hypothec granted on the
Collateral (as defined in the Soucy Pledge Agreement)
pursuant to the laws of the province of Quebec (Canada).
"Subordinated Security Documents": the collective
reference to any and all documents providing for collateral
security, guarantees or negative pledges in connection with
the notes issued under the Indenture as the same may be
amended, supplemented or otherwise modified from time to
time in accordance with Section 6.9 of the BIPCO Credit
Agreement.
"Timberlands Pledge Agreement": the meaning ascribed
in the BAI Credit Agreement.
"Trustee Documents": the collective reference to the
Indenture, the notes issued thereunder and the Subordinated
Security Documents.
"Trustee Obligations": the collective reference to the
unpaid principal of and interest owing under the Indenture
and the notes issued thereunder and all other obligations
and liabilities of BIPCO and FinCo thereunder (including,
without limitation, interest accruing at the then applicable
rate provided in the Indenture and the notes issued
thereunder after the maturity of the principal obligations
owing thereunder and interest accruing at the then
applicable rate provided in the Indenture and the notes
issued thereunder after the filing of any petition in
bankruptcy, or the commencement of any insolvency,
reorganization or like proceeding, relating to BIPCO or
FinCo, whether or not a claim for post-filing or post-
petition interest is allowed in such proceeding), whether
direct or indirect, absolute or contingent, due or to become
due, or now existing or hereafter incurred, which may arise
under, out of, or in connection with, the Indenture, the
notes issued thereunder, this Agreement, or any other
Subordinated Security Document, in each case whether on
account of principal, interest, reimbursement obligations,
fees, indemnities, costs, expenses or otherwise (including,
without limitation, all fees and disbursements of counsel to
the Trustee that are required to be paid by the Borrower or
FinCo pursuant to the terms of the Indenture or this
Agreement or any other Subordinated Security Document).
(c) The words "hereof," "herein" and "hereunder" and words
of similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this
Agreement, and section and paragraph references are to this
Agreement unless otherwise specified.
(d) The meanings given to terms defined herein shall be
equally applicable to both the singular and plural forms of such
terms.
2. Acknowledgements The Trustee (a) acknowledges that the
Borrowers and the other Loan Parties have granted senior priority
security interests in the Lender Priority Collateral to secure
the Lender Obligations and that such security interests are prior
in all respects to the junior security interests in the Lender
Priority Collateral granted to the Trustee, (b) agrees that the
Trustee shall not have any claim to or in respect of the BAI
Lender Priority Collateral, or any proceeds of or realization on
such BAI Lender Priority Collateral, on a parity with or prior to
the claim of the BAI Obligations, nor any claim to or in respect
of the BIPCO Lender Priority Collateral, or any proceeds of or
realization on such BIPCO Lender Priority Collateral, on a parity
with or prior to the claim of the BIPCO Obligations, and (c)
agrees that, notwithstanding such junior security interests and
any rights of the Trustee in respect thereof, (i) so long as the
BAI Obligations have not been paid in full or the commitments
under the BAI Credit Agreement have not been terminated, the
Trustee shall not have any right or claim in respect of the
exercise of rights and remedies of the Senior Secured Lenders in
respect of the BAI Lender Priority Collateral nor shall any
Senior Secured Lender have any obligation regarding any such
exercise or any other obligation or duty in respect of the
interests of the Trustee except as set forth in paragraph 3(d)
hereof, and that the Trustee shall not assert any such claim or
right in any such bankruptcy proceeding or otherwise, and (ii) so
long as the BIPCO Obligations have not been paid in full or the
commitments under the BIPCO Credit Agreement have not been
terminated, the Trustee shall not have any right or claim in
respect of the exercise of rights and remedies of the Senior
Secured Lenders in respect of the BIPCO Lender Priority
Collateral nor shall any Senior Secured Lender have any
obligation regarding any such exercise or any other obligation or
duty in respect of the interests of the Trustee except as set
forth in paragraph 3(d) hereof, and that the Trustee shall not
assert any such claim or right in any such bankruptcy proceeding
or otherwise.
3. Rights in Lender Priority Collateral (a) Notwithstanding
anything to the contrary contained in any filing or agreement to
which the Trustee, the Senior Secured Lenders or the Borrowers
now or hereafter may be a party and irrespective of the time,
order or method of attachment or perfection of the security
interests created by the Loan Documents or the Subordinated
Security Documents, the rules for determining priority under the
Uniform Commercial Code or any other law governing the relative
priorities of secured creditors, (i) any security interest in any
BAI Lender Priority Collateral in favor of or for the benefit of
the Senior Secured Lenders pursuant to the BAI Loan Documents has
and shall have priority, to the extent of any unpaid BAI Loan
Obligations, over any security interest in such BAI Lender
Priority Collateral in favor of or for the benefit of the Trustee
pursuant to the Subordinated Security Documents; and (ii) any
security interest in any BIPCO Lender Priority Collateral in
favor of or for the benefit of the Senior Secured Lenders
pursuant to the BIPCO Loan Documents has and shall have priority,
to the extent of any unpaid BIPCO Loan Obligations, over any
security interest in such BIPCO Lender Priority Collateral in
favor of or for the benefit of the Trustee pursuant to the
Subordinated Security Documents.
(b) (i) So long as the BAI Obligations have not been paid
in full or the commitments under the BAI Credit Agreement have
not been terminated, whether or not any bankruptcy proceeding or
similar event or proceeding has been commenced by or against BAI
or any other BAI Loan Party, (i) the Trustee will not (A)
exercise or seek to exercise any rights or exercise any remedies
with respect to any BAI Lender Priority Collateral, (B) institute
any action or proceeding with respect to such rights or remedies,
including without limitation, any action of foreclosure, (C)
contest, protest or object to any foreclosure proceeding or
action brought by the BAI Agent or any BAI Lender, or any other
exercise by any such party, of any rights and remedies relating
to the BAI Lender Priority Collateral under the Subordinated
Security Documents or otherwise, or any release of any or all of
the BAI Lender Priority Collateral for any purpose, or (D) object
to the forbearance by the BAI Lenders from bringing or pursuing
any foreclosure proceeding or action or any other exercise of any
rights or remedies relating to the BAI Lender Priority
Collateral, and (ii) the BAI Lenders shall have the exclusive
right to enforce rights, exercise remedies and make
determinations regarding release, disposition, or restrictions
with respect to the Lender Priority Collateral; provided, that in
any bankruptcy proceeding or similar event or proceeding
commenced by or against BAI or any other BAI Loan Party, the
Trustee may file a claim or statement of interest with respect to
the Trustee Obligations.
(ii) So long as the BIPCO Obligations have not been paid in full
or the commitments under the BIPCO Credit Agreement have not been
terminated, whether or not any bankruptcy proceeding or similar
event or proceeding has been commenced by or against BIPCO or any
other BIPCO Loan Party, (i) the Trustee will not (A) exercise or
seek to exercise any rights or exercise any remedies with respect
to any BIPCO Lender Priority Collateral, (B) institute any action
or proceeding with respect to such rights or remedies, including
without limitation, any action of foreclosure, (C) contest,
protest or object to any foreclosure proceeding or action brought
by the BIPCO Agent or any BIPCO Lender, or any other exercise by
any such party, of any rights and remedies relating to the BIPCO
Lender Priority Collateral under the Subordinated Security
Documents or otherwise, or any release of any or all of the BIPCO
Lender Priority Collateral for any purpose, or (D) object to the
forbearance by the BIPCO Lenders from bringing or pursuing any
foreclosure proceeding or action or any other exercise of any
rights or remedies relating to the BIPCO Lender Priority
Collateral, and (ii) the BIPCO Lenders shall have the exclusive
right to enforce rights, exercise remedies and make
determinations regarding release, disposition, or restrictions
with respect to the Lender Priority Collateral; provided, that in
any bankruptcy proceeding or similar event or proceeding
commenced by or against BIPCO or any other BIPCO Loan Party, the
Trustee may file a claim or statement of interest with respect to
the Trustee Obligations.
(c) (i) In exercising rights and remedies with respect to
the BAI Lender Priority Collateral, the BAI Lenders may enforce
the provisions of the BAI Loan Documents and exercise remedies
thereunder, all in such order and in such manner as they may
determine in the exercise of their sole discretion. Such
exercise and enforcement shall include, without limitation, the
rights of an agent appointed by them to sell or otherwise dispose
of BAI Lender Priority Collateral upon foreclosure, to incur
expenses in connection with such sale or disposition, and to
exercise all the rights and remedies of a secured lender under
the Uniform Commercial Code of any applicable jurisdiction and of
a secured creditor under bankruptcy or similar laws of any
applicable jurisdiction.
(ii) In exercising rights and remedies with respect to the BIPCO
Lender Priority Collateral, the BIPCO Lenders may enforce the
provisions of the BIPCO Loan Documents and exercise remedies
thereunder, all in such order and in such manner as they may
determine in the exercise of their sole discretion. Such
exercise and enforcement shall include, without limitation, the
rights of an agent appointed by them to sell or otherwise dispose
of BIPCO Lender Priority Collateral upon foreclosure, to incur
expenses in connection with such sale or disposition, and to
exercise all the rights and remedies of a secured lender under
the Uniform Commercial Code of any applicable jurisdiction and of
a secured creditor under bankruptcy or similar laws of any
applicable jurisdiction.
(d) (i) BIPCO Lender Priority Collateral. Subject to the
provisions of paragraph 6 hereof, any money, property, securities
or other direct or indirect distributions of any nature
whatsoever received from the sale, disposition or other
realization upon a forclosure or other exercise of remedies upon
the occurrence and continuance of an Event of Default (as defined
in the Credit Agreements or the Indenture) by any Senior Secured
Party or the Trustee of all or any part of the BIPCO Lender
Priority Collateral (other than the BITCO Collateral and the
Soucy Collateral which constitute a part of the BIPCO Lender
Priority Collateral), regardless of whether such money, property,
securities or other distributions are received directly or
indirectly during the pendency of or in connection with any
bankruptcy, insolvency or other like proceeding or otherwise,
shall be delivered to the BIPCO Agent in the form received, duly
indorsed to such party, if required, and applied by the BIPCO
Agent in the following order:
First, to the payment in full of all costs and expenses
(including, without limitation, attorneys' fees and
disbursements) paid or incurred by the Senior Secured
Lenders in connection with such realization on the BIPCO
Lender Priority Collateral or the protection of any of their
rights and interests therein;
Second, to the payment in full of all BIPCO Obligations
in the order prescribed by Section 2.16 of the BIPCO Credit
Agreement;
Third, to the Trustee for application to the Trustee
Obligations to the full extent thereof at such time; and
Fourth, to pay the appropriate Loan Party or designee
thereof or as a court of competent jurisdiction may direct,
any surplus then remaining.
(ii) BITCO Collateral. Subject to the provisions of paragraph 6
hereof, any money, property, securities or other direct or
indirect distributions of any nature whatsoever received from the
sale, disposition or other realization upon a forclosure or other
exercise of remedies upon the occurrence and continuance of an
Event of Default (as defined in the Credit Agreements or the
Indenture) by any Senior Secured Party or the Trustee of all or
any part of the BITCO Collateral, regardless of whether such
money, property, securities or other distributions are received
directly or indirectly during the pendency of or in connection
with any bankruptcy, insolvency or other like proceeding or
otherwise, shall be delivered to the BAI Agent in the form
received, duly indorsed to such party, if required, and applied
by the BAI Agent in the following order:
First, to the payment in full of all costs and expenses
(including, without limitation, attorneys' fees and
disbursements) paid or incurred by the Senior Secured
Lenders in connection with such realization on the BITCO
Collateral or the protection of any of their rights and
interests therein;
Second, to the payment in full of all BAI Obligations
in the order prescribed by Section 2.13 of the BAI Credit
Agreement;
Third, to the payment in full of all BIPCO Obligations
in the order prescribed by Section 2.16 of the BIPCO Credit
Agreement shall provide;
Fourth, to the Trustee for application to the Trustee
Obligations to the full extent thereof at such time; and
Fifth, to pay to the appropriate Loan Party or designee
thereof or as a court of competent jurisdiction may direct,
any surplus then remaining.
(iii) Soucy Collateral. Subject to the provisions of paragraph
6 hereof, any money, property, securities or other direct or
indirect distributions of any nature whatsoever received from the
sale, disposition or other realization upon a forclosure or other
exercise of remedies upon the occurrence and continuance of an
Event of Default (as defined in the Credit Agreements or the
Indenture) by any Senior Secured Party or the Trustee of all or
any part of the Soucy Collateral, regardless of whether such
money, property, securities or other distributions are received
directly or indirectly during the pendency of or in connection
with any bankruptcy, insolvency or other like proceeding or
otherwise, shall be delivered to the BIPCO Agent or the BAI Agent
in the form received, duly indorsed to such party, if required,
and applied by the BIPCO Agent or the BAI Agent in the following
order:
First, to the payment in full of all costs and expenses
(including, without limitation, attorneys' fees and
disbursements) paid or incurred by the Senior Secured
Lenders in connection with such realization on the Soucy
Collateral or the protection of any of their rights and
interests therein;
Second, pro rata to the payment in full of all BAI
Obligations and BIPCO Obligations, in such order as each of
Section 2.13 of the BAI Credit Agreement and Section 2.16 of
the BIPCO Credit Agreement, respectively, shall provide;
Third, to the Trustee for application to the Trustee
Obligations to the full extent thereof at such time; and
Fourth, to pay to the appropriate Loan Party or
designee thereof or as a court of competent jurisdiction may
direct, any surplus then remaining.
(e) The BAI Lenders' rights with respect to the BAI Lender
Priority Collateral and the BIPCO Lenders' rights with respect to
the BIPCO Lender Priority Collateral shall include, without
limitation, the exclusive right to release at any time any or all
of such collateral from the liens under the Loan Documents and
the Subordinated Security Documents without the consent of the
Trustee and without any duty, obligation or liability arising
from any such action, provided, that such release is in
connection with the exercise of remedies in respect of the items
of Lender Priority Collateral so released. Upon any such sale,
release or other disposition of any Lender Priority Collateral,
the lien and security interest created for the benefit of the
Trustee pursuant to the Subordinated Security Documents in such
Lender Priority Collateral shall be automatically released, and
the Trustee shall execute or cause to be executed such release
documents and instruments and shall take such further actions as
the Senior Secured Lenders shall request.
(f) (A) Subject to the provisions of paragraph 6 hereof,
in the event that:
(i) the BAI Lenders, in exercise of their foreclosure or
similar remedies, have disposed of or otherwise realized
upon the BAI Lender Priority Collateral, or have been repaid
pursuant to a bankruptcy or similar proceeding at the
commencement of which the security interest securing the BAI
Obligations is in effect,
(ii) all of the BAI Obligations have been paid in full and
the commitments under the BAI Credit Agreement have been
terminated,
(iii) after giving effect thereto any BAI Lender Priority
Collateral remains that:
(x) never constituted BIPCO Lender Priority Collateral,
or has been released from the security interests
created by the BIPCO Loan Documents, and
(y) remains pledged pursuant to the Subordinated
Security Documents, and
(iv) at such time there are Trustee Obligations outstanding,
then the Trustee shall have the right to enforce the
provisions of the Subordinated Security Documents in respect
of BAI Lender Priority Collateral.
(B) Subject to the provisions of paragraph 6 hereof, in the
event that:
(i) the BIPCO Lenders, in exercise of their foreclosure or
similar remedies, have disposed of or otherwise realized
upon the BIPCO Lender Priority Collateral, or have been
repaid pursuant to a bankruptcy or similar proceeding at the
commencement of which the security interest securing the
BIPCO Obligations is in effect,
(ii) all of the BIPCO Obligations have been paid in full and
the commitments under the BIPCO Credit Agreement have been
terminated,
(iii) after giving effect thereto any BIPCO Lender Priority
Collateral remains that:
(x) never constituted BAI Lender Priority Collateral
or has been released from the security interests
created by the BAI Loan Documents, and
(y) remains pledged pursuant to the Subordinated
Security Documents, and
(iv) at such time there are Trustee Obligations outstanding,
then the Trustee shall have the right to enforce the
provisions of the Subordinated Security Documents in respect
of the BIPCO Lender Priority Collateral.
4. Obligations Unconditional. All rights, interests,
agreements and obligations of the Senior Secured Lenders and the
Trustee, respectively, hereunder shall remain in full force and
effect irrespective of:
(a) any lack of validity or enforceability of the Loan
Documents or any Trustee Documents;
(b) any change in the time, manner or place of payment of,
or in any other term of, all or any of the Lender Obligations or
Trustee Obligations, or any amendment or waiver or other
modification, including any increase in the amount thereof,
whether by course of conduct or otherwise, of the terms of either
Credit Agreement or any other Loan Document or of the terms of
the Trustee Documents;
(c) any exchange, release or nonperfection of any security
interest in any Lender Priority Collateral or any other
collateral, or any release, amendment, waiver or other
modification, whether in writing or by course of conduct or
otherwise, of all or any of the Lender Obligations or Trustee
Obligations or any guarantee thereof;
(d) the commencement of any bankruptcy or similar
proceeding in respect of either of the Borrowers or any other
Loan Party; or
(e) any other circumstances which otherwise might
constitute a defense available to, or a discharge of, any Loan
Party in respect of the Lender Obligations or of the Trustee in
respect of this Agreement.
5. Waiver of Claims; Waivers of Jury Trial. (a) To the
maximum extent permitted by law, the Trustee waives any claim it
might have against any Senior Secured Lender with respect to, or
arising out of, any action or failure to act or any error of
judgment or negligence on the part of any Senior Secured Lender
or its respective directors, officers, employees or agents with
respect to any exercise of rights or remedies in respect of the
Lender Priority Collateral or any transaction relating to the
Lender Priority Collateral. Neither the BAI Agent, the BIPCO
Agent, any Senior Secured Lender nor any of their respective
directors, officers, employees or agents shall be liable for
failure to demand, collect or realize upon any of the Collateral
or for any delay in doing so or shall be under any obligation to
sell or otherwise dispose of any Collateral upon the request of
any Loan Party, the Trustee or any other Person or to take any
other action whatsoever with regard to the Collateral or any part
thereof.
(b) THE BORROWERS, THE BAI AGENT (ON ITS OWN BEHALF AND ON
BEHALF OF THE BAI LENDERS), THE BIPCO AGENT (ON ITS OWN BEHALF
AND ON BEHALF OF THE BIPCO LENDERS) AND THE TRUSTEE HEREBY
IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL
ACTION OR PROCEEDING RELATING TO THIS AGREEMENT AND FOR
COUNTERCLAIM THEREIN.
6. Provisions Define Relative Rights. This Agreement is
intended solely for the purpose of defining the relative rights
of the BAI Lenders, the BAI Agent, the BIPCO Lenders, the BIPCO
Agent and the Trustee, and no other Person shall have any right,
benefit or other interest under this Agreement. Notwithstanding
anything to the contrary contained herein, this Agreement shall
not modify or amend the rights and obligations of the Borrowers
or any other Loan Party under any Loan Document.
7. Shared Lender Priority Collateral. The BIPCO Agent and
the BAI Agent acknowledge that the Timberlands Pledge Agreement
and the Soucy Pledge Agreement create, in favor of Toronto-
Dominion (Texas), Inc., as secured party thereunder (in such
capacity, the "Agent"), security interests in Collateral to
secure both the BAI Obligations and the BIPCO Obligations. The
BIPCO Agent, on behalf of the BIPCO Lenders, and the BAI Agent,
on behalf of the BAI Lenders, hereby (i) confirm that the Agent
has been appointed as agent of such parties to be the secured
party under the Timberlands Pledge Agreement and the Soucy Pledge
Agreement, (ii) agree with the Agent that in taking and
refraining from actions under the Timberlands Pledge Agreement
(including amendments and waivers with respect thereto), the
Agent shall follow the directions of the Required Lenders under
the BAI Credit Agreement so long as the BAI Credit Agreement
remains outstanding, and thereafter shall follow the directions
of the Required Lenders under the BIPCO Credit Agreement and
(iii) agree with the Agent that in taking and refraining from
actions under the Soucy Pledge Agreement (including amendments
and waivers with respect thereto), the Agent shall follow the
directions of the Required Lenders under the BAI Credit Agreement
and the Required Lenders under the BIPCO Credit Agreement.
8. Payments in Ordinary Course. Notwithstanding any
provision of this Agreement limiting the rights of the holders of
the Trustee Obligations in the Collateral, nothing in this
Agreement shall prohibit BIPCO and FinCo from making payments in
respect of the Trustee Obligations in the ordinary course of
business, whether or not the cash with which such payments are
made constitutes proceeds of Collateral.
9. Termination of Agreement; Acknowledgements. (a) The
rights of the Senior Secured Lenders under this Agreement in
respect of the Collateral securing only the BIPCO Obligations
shall terminate when the BIPCO Obligations have been paid in full
in cash and all commitments to extend credit under the BIPCO
Credit Agreement have terminated. The BIPCO Agent agrees that,
within 30 days after payment in cash of all principal, interest
and other amounts then outstanding under the BIPCO Obligations
and termination of all commitments to extend credit under the
BIPCO Credit Agreement, it will, upon the request of the Trustee,
provide a written acknowledgement of such payment to the Trustee,
which acknowledgement shall also acknowledge that the Senior
Secured Lenders have no further rights under this Agreement in
respect of the Collateral securing only the BIPCO Obligations.
Concurrently with such acknowledgement, the BIPCO Agent will
deliver to the Trustee if any of the Trustee Obligations shall be
outstanding, any items of such Collateral held in the possession
of the BIPCO Agent, provided that if no Trustee Obligations shall
be outstanding, the BIPCO Agent will deliver any such items of
Collateral to the appropriate Loan Party. The BIPCO Agent
acknowledges that prior to such delivery it holds such items of
Collateral for the Trustee in accordance with the terms of this
Agreement, for purposes of perfecting the Trustee's security
interest therein.
(b) The rights of the Senior Secured Lenders under this
Agreement in respect of the Collateral securing only the BAI
Obligations shall terminate when the BAI Obligations have been
paid in full in cash and all commitments to extend credit under
the BAI Credit Agreement have terminated. The BAI Agent agrees
that, within 30 days after payment of all principal, interest and
other amounts then outstanding under the BAI Obligations and
termination of all commitments to extend credit under the BAI
Credit Agreement, it will, upon the request of the Trustee,
provide a written acknowledgement of such payment to the Trustee,
which acknowledgement shall also acknowledge that the Senior
Secured Lenders have no further rights under this Agreement in
respect of the Collateral securing only the BAI Obligations.
Concurrently with such acknowledgement, the BAI Agent will
deliver to the Trustee if any Trustee Obligations shall be
outstanding any items of such Collateral held in the possession
of the BAI Agent, provided that if no Trustee Obligations are
outstanding, the BAI Agent will deliver any such items of
Collateral to the appropriate Loan Party. The BAI Agent
acknowledges that prior to such delivery it holds such items of
Collateral for the Trustee in accordance with the terms of this
Agreement for purposes of perfecting the Trustee's security
interest therein.
(c) The rights of the Senior Secured Lenders under this
Agreement in respect of all Collateral (to the extent not
previously terminated pursuant to paragraphs (a) and (b) above)
shall in any event terminate when all Lender Obligations have
been paid in full in cash and all commitments to extend credit
under the Loan Documents have terminated.
10. Powers Coupled With An Interest. All powers,
authorizations and agencies contained in this Agreement are
coupled with an interest and are irrevocable until the Lender
Obligations are paid in full and the commitments under the Credit
Agreements are terminated.
11. Notices. All notices, requests and demands to or upon
the parties to be effective shall be in writing (or by telex, fax
or similar electronic transfer confirmed in writing) and shall be
deemed to have been duly given or made (i) when delivered by hand
or (ii) if given by mail, when deposited in the mails by
certified mail, return receipt requested, or (iii) if by telex,
fax or similar electronic transfer, when sent and receipt has
been confirmed, addressed as follows:
If to the BAI Agent or
the BIPCO Agent: TORONTO-DOMINION (TEXAS), INC.
909 Fannin Street
Houston, Texas 77010
Attention: Jano Mott
Telecopy: (713) 951-9921
Telephone: (713) 653-8231
If to the Trustee: CRESTAR BANK
Attention: Corporate Trust Department
919 Main Street, 10th Floor
Richmond, Virginia 23219
Telecopy: (804) 782-7855
Telephone: (804) 782-5726
The parties hereto may change their addresses and transmission
numbers for notices by notice in the manner provided in this
Section.
12. Counterparts. This Agreement may be executed by one or
more of the parties on any number of separate counterparts, and
all of said counterparts taken together shall be deemed to
constitute one and the same instrument. A set of the
counterparts of this Agreement signed by all the parties shall be
lodged with the BAI Agent, the BIPCO Agent and the Trustee.
13. Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions
hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such
provision in any other jurisdiction.
14. Integration. This Agreement represents the entire
agreement of the Senior Secured Lenders and the Trustee with
respect to the subject matter hereof and there are no promises or
representations by any of them relative to the subject matter
hereof not reflected herein.
15. Amendments in Writing. None of the terms or provisions
of this Agreement may be waived, amended, supplemented or
otherwise modified except by a written instrument executed by the
BAI Agent, the BIPCO Agent, the Borrowers and the Trustee.
16. Successors and Assigns. (a) This Agreement shall be
binding upon and inure to the benefit of each of the Senior
Secured Lenders and the Trustee and their successors and assigns.
(b) Upon a successor administrative agent becoming the
Administrative Agent under the BAI Credit Agreement or the BIPCO
Credit Agreement, such successor Administrative Agent
automatically shall become the BAI Agent or the BIPCO Agent, as
the case may be, hereunder with all the rights and powers of such
party hereunder, and bound by the provisions hereof, without the
need for any further action on the part of any party hereto.
(c) Upon a successor trustee becoming the Trustee under the
Indenture, such successor Trustee automatically shall become the
Trustee hereunder with all the rights and powers of the Trustee
hereunder, and bound by the provisions hereof, without the need
for any further action on the part of any party hereto.
17. Governing Law; Jurisdiction. This Agreement shall be
governed by, and construed and interpreted in accordance with,
the law of the State of New York, excluding (to the greatest
extent permissible by law) any rule of law that would cause the
application of the laws of any jurisdiction other than the State
of New York. Each party hereto agrees that all judicial
proceedings brought against it arising out of or relating to this
Agreement or its obligations hereunder may be brought in any
federal court of competent jurisdiction in the State, County and
City of New York, and accepts generally and unconditionally the
nonexclusive jurisdiction and venue of such courts.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered as of the day and
year first above written.
TORONTO-DOMINION (TEXAS), INC., as
BAI Agent and as BIPCO Agent, and
as Agent for the BAI Agent and the
BIPCO Agent
By: /s/ Jano Mott
Title: Vice President
CRESTAR BANK, as Trustee
By: /s/ Sarah A. McMahon
Title: Vice President
Consented:
BRANT-ALLEN INDUSTRIES, INC., as Borrower
By: /s/ Edward D. Sherrick
Title: Vice President of Finance
BEAR ISLAND PAPER COMPANY, as Borrower
By: /s/ Edward D. Sherrick
Title: Vice President of Finance
BEAR ISLAND FINANCE COMPANY II
By: /s/ Edward D. Sherrick
Title: Vice President of Finance
EXHIBIT 10.3(E)
FORM OF COMPLIANCE CERTIFICATE
This Compliance Certificate is delivered to you pursuant to
Section 5.2(b) of the Credit Agreement, dated as of _______________, as
amended, supplemented or modified from time to time (the "Credit
Agreement"), among Brant-Allen Industries, Inc. (the "Borrower"), the
financial institutions or other entities from time to time party thereto
as lenders (the "Lenders"), TD Securities (USA) Inc., as advisor and
arranger (in such capacity, the "Arranger") and Toronto-Dominion (Texas),
Inc., as administrative agent for the Lenders (in such capacity, the
"Administrative Agent"). Terms defined in the Credit Agreement and not
otherwise defined herein are used herein with the meanings so defined.
i. I am the duly elected, qualified and acting Chief
Financial Officer of the Borrower.
ii. I have reviewed and am familiar with the contents of this
Certificate.
iii. I have reviewed the terms of the Credit Agreement and
the Loan Documents and have made or caused to be made under my
supervision, a review in reasonable detail of the transactions and
condition of the Borrower during the accounting period covered by the
financial statements attached hereto as Attachment 1 (the "Financial
Statements"). Such review did not disclose the existence during or at the
end of the accounting period covered by the Financial Statements, and I
have no knowledge of the existence, as of the date of this Certificate,
of any condition or event which constitutes a Default or Event of Default
[, except as set forth below].
iv. Attached hereto as Attachment 2 are the computations
showing compliance with the covenants set forth in Sections 6.1,
6.2(c),(d),(g),(i), and (k), 6.3(j),(k), 6.6(c),(e), 6.7, 6.8(e),(g) and
6.17 of the Credit Agreement.
IN WITNESS WHEREOF, I execute this Certificate this _____ day
of , ____.
---------
BRANT-ALLEN INDUSTRIES, INC.
By:_______________________________
Title:
Attachment 2
to Exhibit E
The information described herein is as of __________, ____, and pertains
to the period from __________, ___ to __________ __, ____.
[Set forth Covenant Calculations]
EXHIBIT F
FORM OF CLOSING CERTIFICATE
This Closing Certificate is delivered pursuant to subsections
4.1(m) and 4.1(n) of the Credit Agreement dated as of December 1, 1997
(the "Credit Agreement"; terms defined therein being used herein as
therein defined), among Brant-Allen Industries, Inc. (the "Borrower"),
the financial institutions or other entities from time to time party
thereto as lenders (the "Lenders"), TD Securities (USA) Inc., as advisor
and arranger (in such capacity, the "Arranger") and Toronto-Dominion
(Texas), Inc., as administrative agent for the Lenders (in such capacity,
the "Administrative Agent").
The undersigned ___________ of __________ (the "Company")
certifies as of the date hereof, on behalf of the Company and solely with
respect to paragraphs 1 through 8 hereof, as follows:
1. The representations and warranties of the Company set
forth in each of the Loan Documents to which it is a party are true and
correct in all material respects on and as of the date hereof with the
same effect as if made on the date hereof, except for representations and
warranties expressly stated to relate to a specific earlier date, in
which case such representations and warranties were true and correct in
all material respects as of such earlier date.
2. No consent or authorization of, filing with, notice to or
other act by or in respect of, any Governmental Authority or any other
Person that has not been obtained is required in connection with the
Transaction and the borrowings under the Credit Agreement or with the
execution, delivery, performance, validity or enforceability of the
Credit Agreement or any of the Loan Documents to which the Company is a
party, except (i) consents, authorizations, filings and notices described
in Schedule 3.4 to the Credit Agreement and (ii) the filings referred to
in Section 3.19 of the Credit Agreement.
3. No Default or Event of Default has occurred and is
continuing as of the date hereof or after giving effect to the Loans to
be made on the date hereof.
[Borrower only]
4. The Transaction has been consummated and no material provi
sion of the Acquisition Agreement or any document executed pursuant
thereto has been waived, amended, supplemented or otherwise modified.
[Borrower only]
5. The Borrower has paid the Retiring Partners cash in an
amount not exceeding an aggregate of $35,000,000 on the Closing Date.
[Borrower only]
6. The Borrower has deposited an amount no less than the
amount designated in the Cash Collateral Agreement into the Cash
Collateral Account.
[Borrower only]
7. ___________________ is the duly elected and qualified
Corpo rate Secretary of the Company and the signature set forth for such
officer below is such officer's true and genuine signature.
8. There are no liquidation or dissolution proceedings
pending or to my knowledge threatened against the Company, nor has any
other event occurred materially adversely affecting or threatening the
continued corporate existence of the Company.
The undersigned Corporate Secretary of the Company certifies
as of the date hereof, on behalf of the Company and solely with repsect
to paragraphs 9 through 14 herreof, as follows:
9. The Company is a corporation duly incorporated, validly
existing and in good standing under the laws of the jurisdiction of its
organization.
10. Attached hereto as Exhibit II is a true and complete copy
of resolutions duly adopted by the Board of Directors of the Company on
_________________ authorizing the execution, delivery and performance of
the Loan Documents to which the Company is a party; such resolutions have
not in any way been amended, modified, revoked or rescinded since the
date of adoption, have been in full force and effect since their adoption
to and including the date hereof and are now in full force and effect and
are the only corporate proceedings of the Company now in force relating
to or affecting the matters referred to therein.
11. Attached hereto as Exhibit III is a true and complete
copy of the By-Laws of the Company as in effect on the date hereof.
12. Attached hereto as Exhibit IV is a true and complete copy
of the Certificate of Incorporation or Articles of Organization of the
Company as in effect on the date hereof, and such certificate or articles
have not been amended, repealed, modified or restated.
13. Attached hereto as Exhibit V is a true and correct copy
of each of the following documents: (i) the Acquisition Agreement; (ii)
the Second Priority Note Indenture; (iii) the John Hancock Credit
Agreement and (iv) the Paper Company Loan Agreement. [Borrower only]
14. The following persons are now duly elected and qualified
officers of the Company holding the offices indicated next to their
respective names below, and the signatures appearing opposite their
respective names below are the true and genuine signatures of such
officers, and each of such officers is duly authorized to execute and
deliver on behalf of the Company each of the Loan Documents to which it
is a party and any certificate or other document to be delivered by the
Company pursuant to the Loan Documents to which it is a party:
Name Office Signature
- - ----------------------- ----------------------- -------------------------
- - ----------------------- ----------------------- -------------------------
- - ----------------------- ----------------------- -------------------------
IN WITNESS WHEREOF, the undersigned have hereunto set our
names as of the date set forth below.
[INSERT NAME OF COMPANY]
- - -------------------------------
- - ------------------------------------
Name: Name:
Title: Title:
Date: _______________, 1997
EXHIBIT 10.3(G)
FORM OF
ASSIGNMENT AND ACCEPTANCE
Reference is made to the Credit Agreement, dated as of , 199
(as amended, supplemented or otherwise modified from time to time, the
"Credit Agreement"), among Brant-Allen Industries, Inc. (the "Borrower"),
the financial institutions or other entities from time to time party
thereto as lenders (the "Lenders"), TD Securities (USA) Inc., as advisor
and arranger (in such capacity, the "Arranger") and Toronto-Dominion
(Texas), Inc., as administrative agent for the Lenders (in such capacity,
the "Administrative Agent"). Unless otherwise defined herein, terms
defined in the Credit Agreement and used herein shall have the meanings
given to them in the Credit Agreement.
The Assignor identified on Schedule l hereto (the "Assignor")
and the Assignee identified on Schedule l hereto (the "Assignee") agree
as follows, as of the Effective Date (as defined below):
1. The Assignor hereby irrevocably sells and assigns to the
Assignee without recourse to the Assignor, and the Assignee hereby
irrevocably purchases and assumes from the Assignor without recourse to
the Assignor, as of the Effective Date, the interest described in
Schedule 1 hereto (the "Assigned Interest") in and to the Assignor's
rights and obligations under the Credit Agreement with respect to those
credit facilities contained in the Credit Agreement as are set forth on
Schedule 1 hereto (individually, an "Assigned Facility"; collectively,
the "Assigned Facilities"), in a principal amount for each Assigned
Facility as set forth on Schedule 1 hereto.
2. The Assignor (a) makes no representation or warranty and
assumes no responsibility with respect to any statements, warranties or
representations made in or in connection with the Credit Agreement or
with respect to the execution, legality, validity, enforceability,
genuineness, sufficiency or value of the Credit Agreement, any other Loan
Document or any other instrument or document furnished pursuant thereto,
other than that the Assignor has not created any adverse claim upon the
Assigned Interest and that such Assigned Interest is free and clear of
any such adverse claim; (b) makes no representation or warranty and
assumes no responsibility with respect to the financial condition of the
Borrower, any of its Subsidiaries or any other obligor or the performance
or observance by the Borrower, any of its Subsidiaries or any other
obligor of any of their respective obligations under the Credit Agreement
or any other Loan Document or any other instrument or document furnished
pursuant hereto or thereto[; and (c) attaches any Notes held by it
evidencing the Assigned Facilities marked "cancelled" and (i) requests
that the Administrative Agent, upon request by the Assignee, exchange the
attached Notes marked "cancelled" for a new Note or Notes payable to the
Assignee in the principal amount of the Assigned Interest and (ii) if the
Assignor has retained any interest in the Assigned Facility, requests
that the Administrative Agent exchange the attached Notes for a new Note
or Notes payable to the Assignor, in each case in amounts which reflect
the Assignor's interest in the Assigned Facility after giving effect to
the assignment being made hereby (and after giving effect to any other
assignments which have become effective on the Effective Date)].
3. The Assignee (a) represents and warrants that it is
legally authorized to enter into this Assignment and Acceptance; (b)
confirms that it has received a copy of the Credit Agreement, together
with copies of the financial statements referred to in subsection 3.1
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; (c) agrees that it will, independently
and without reliance upon the Assignor, the Agents or any 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 the Credit Agreement, the other Loan Documents or any
other instrument or document furnished pursuant hereto or thereto; (d)
appoints and authorizes the Agents to take such action as the agents on
its behalf and to exercise such powers and discretion under the Credit
Agreement, the other Loan Documents or any other instrument or document
furnished pursuant hereto or thereto as are delegated to the Agents by
the terms thereof, together with such powers as are incidental thereto;
and (e) agrees that it will be bound by the provisions of the Credit
Agreement and will perform in accordance with its terms all the
obligations which by the terms of the Credit Agreement are required to be
performed by it as a Lender including, if it is organized under the laws
of a jurisdiction outside the United States, its obligation pursuant to
subsection 2.15(d) of the Credit Agreement.
4. The effective date of this Assignment and Acceptance shall
be the Effective Date of Assignment described in Schedule 1 hereto (the
"Effective Date"). Following the execution of this Assignment and
Acceptance, it will be delivered to the Administrative Agent for
acceptance by it and recording by the Administrative Agent pursuant to
the Credit Agreement, effective as of the Effective Date (which shall
not, unless otherwise agreed to by the Administrative Agent, be earlier
than five Business Days after the date of such acceptance and recording
by the Administrative Agent).
5. Upon such acceptance and recording, from and after the
Effective Date, the Administrative Agent shall make all payments in
respect of the Assigned Interest (including payments of principal,
interest, fees and other amounts) [to the Assignor for amounts which have
accrued to the Effective Date and to the Assignee for amounts which have
accrued subsequent to the Effective Date] [to the Assignee whether such
amounts have accrued prior to the Effective Date or accrue subsequent to
the Effective Date. The Assignor and the Assignee shall make all
appropriate adjustments in payments by the Agent for periods prior to the
Effective Date or with respect to the making of this assignment directly
between themselves.]
6. From and after the Effective Date, (a) 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
thereunder and under the other Loan Documents and shall be bound by the
provisions thereof and (b) 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.
7. This Assignment and Acceptance shall be governed by and
construed in accordance with the laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this
Assignment and Acceptance to be executed as of the date first above
written by their respective duly authorized officers.
[Name of Assignee]
By: _________________________________________
Title:
[Name of Assignor]
By: ________________________________________
Schedule 1
to Assignment and Acceptance
Name of Assignor: -----------------------------
Name of Assignee: -----------------------------
Effective Date of Assignment: -----------------
Credit Principal
Facility Assigned Ammount Assigned Commitment Percentage Assigned1
- - --------------------- ------------------ -------------------------------
$__________ __._____%
____________________
1. Calculate the assigned Commitment Percentage to at least 15 decimal
places and show as a percentage of the aggregate commitments of all Lenders.
Accepted: Consented To:
TORONTO-DOMINION (TEXAS), INC., [Name of Borrower]2
as Administrative Agent
By:___________________________ By:__________________________________
Title: Title:
TD SECURITIES (USA) INC., as Arranger
By:__________________________________
Title:
____________________
2. The Borrower's consent is not required with respect
to any assignment to a Lender.
FORM 3
U.S. SECURITIES AND EXCHANGE COMMISSION _____________________
WASHINGTON, D.C. 20549 | OMB APPROVAL |
INITIAL STATEMENT OF |_____________________|
BENEFICIAL OWNERSHIP OF SECURITIES |OMB NUMBER: 3235-0104|
|EXPIRES: |
| SEPTEMBER 30, 1998 |
Filed pursuant to Section 16(a) of the |ESTIMATED AVERAGE |
Securities Exchange Act of 1934, |BURDEN HOURS |
Section 17(a) of the Public Utility |PER RESPONSE 0.5 |
Holding Company Act of 1935 |_____________________|
or Section 30(f) of the Investment
Company Act of 1940
----------------------------------------------------------------------------
1. Name and Address of Reporting Person
Haland Yngve
---------------------------------------------------------------------
(Last) (First) (Middle)
c/o Autoliv, Inc. World Trade Center, Klarabergsviadukten 70
---------------------------------------------------------------------
(Street)
S-107 24 Stockholm Sweden
---------------------------------------------------------------------
(City) (State) (Zip)
----------------------------------------------------------------------------
2. Date of Event Requiring Statement (Month/Day/Year)
May 22, 1997
----------------------------------------------------------------------------
3. IRS OR SOCIAL SECURITY NUMBER OF REPORTING PERSON (VOLUNTARY)
----------------------------------------------------------------------------
4. Issuer Name and Ticker or Trading Symbol
Autoliv, Inc. Trading Symbol - ALV
----------------------------------------------------------------------------
5. RELATIONSHIP OF REPORTING PERSON(S) TO ISSUER (CHECK ALL APPLICABLE)
( ) DIRECTOR
( ) 10% OWNER
( X) OFFICER (GIVE TITLE BELOW)
( ) OTHER (SPECIFY TITLE BELOW)
Vice President - Research and Development
----------------------------------------------------------------------------
6. IF AMENDMENT, DATE OF ORIGINAL (MONTH/DAY/YEAR)
----------------------------------------------------------------------------
7. INDIVIDUAL OR JOINT/GROUP FILING (CHECK APPLICABLE LINE)
X FORM FILED BY ONE REPORTING PERSON
___FORM FILED BY MORE THAN ONE REPORTING PERSON
============================================================================
TABLE I - NON-DERIVATIVE SECURITIES BENEFICIALLY OWNED
____________________________________________________________________________
|1. TITLE OF SECURITY|2. AMOUNT OF |3. OWNERSHIP |4. NATURE OF INDIRECT |
| (INSTR. 4) | SECURITIES | FORM DIRECT| BENEFICIAL OWNERSHIP|
| | BENEFICIALLY| DIRECT (D) | (INSTR. 5) |
| | OWNED | OR INDIRECT| |
| | (INSTR. 4) | (I) (INSTR.| |
| | | 5) | |
| | | | |
____________________________________________________________________________
Common Stock, par 0
value $1.00 per
share
============================================================================
TABLE II - DERIVATIVE SECURITIES BENEFICIALLY OWNED
(E.G., PUTS, CALLS, WARRANTS, OPTIONS, CONVERTIBLE SECURITIES)
----------------------------------------------------------------------------
1. Title of Derivative Security (Instr. 4)
----------------------------------------------------------------------------
2. Date Exercisable and Expiration Date (Month/Day/Year)
________________________ _________________________
Date Exercisable Expiration Date
----------------------------------------------------------------------------
3. Title and Amount of Securities Underlying Derivative Security (Instr. 4)
________________________________ _______________________________
Title Amount of Number of Shares
----------------------------------------------------------------------------
4. Conversion or Exercise Price of Derivative Security
----------------------------------------------------------------------------
5. Ownership Form of Derivative Security: Direct(D) or Indirect(I)(Instr. 5)
----------------------------------------------------------------------------
6. Nature of Indirect Beneficial Ownership (Instr. 5)
============================================================================
EXPLANATION OF RESPONSES:
/s/ Yngve Haland July 7, 1997
---------------------------------------------------------------------
** SIGNATURE OF REPORTING PERSON DATE
_____________________________
** INTENTIONAL MISSTATEMENTS OR OMISSIONS OF FACTS CONSTITUTE FEDERAL
CRIMINAL VIOLATIONS.
SEE 18 U.S.C. 1001 AND 15 U.S.C. 78FF(A).
=============================================================================
EXHIBIT I-1
FORM OF TERM NOTE
THIS NOTE AND THE OBLIGATIONS REPRESENTED HEREBY MAY NOT BE TRANSFERRED
EXCEPT IN COMPLIANCE WITH THE TERMS AND PROVISIONS OF THE CREDIT
AGREEMENT REFERRED TO BELOW. TRANSFERS OF THIS NOTE AND THE OBLIGATIONS
REPRESENTED HEREBY MUST BE RECORDED IN THE REGISTER MAINTAINED BY THE
ADMINISTRATIVE AGENT PURSUANT TO THE TERMS OF SUCH CREDIT AGREEMENT.
$____________ New York, New York
________ __, 199__
FOR VALUE RECEIVED, the undersigned, BRANT-ALLEN INDUSTRIES,
INC., a Delaware corporation (the "Borrower"), hereby uncondi tionally
promises to pay to the Administrative Agent for the benefit of
(the "Lender") or its registered assigns at the Payment Office specified
in the Credit Agreement (as hereinafter defined) in lawful money of the
United States and in immediately available funds, the principal amount of
(a) DOLLARS ($ ), or, if less, (b) the unpaid principal amount of the
Term Loan made by the Lender pursuant to Section 2.1 of the Credit
Agreement. The entire principal amount of the Term Loan made by the
Lender outstanding under this Note shall be paid on the date specified in
Section 2.3 of the Credit Agree ment. The Borrower further agrees to pay
interest in like money at such office on the unpaid principal amount
hereof from time to time outstanding at the rates and on the dates
specified in Section 2.10 of the Credit Agreement.
The holder of this Note is authorized to endorse on the
schedules annexed hereto and made a part hereof or on a continuation
thereof which shall be attached hereto and made a part hereof the date,
Type and amount of the Term Loan evidenced hereby and the date and amount
of each payment or prepayment of principal with respect thereto, each
conversion of all or a portion thereof to another Type, each continuation
of all or a portion thereof as the same Type and, in the case of
Eurodollar Loans, the length of each Interest Period with respect
thereto. Each such endorsement shall constitute, absent manifest error,
prima facie evidence of the accurancy of the information endorsed. The
failure to make any such endorsement or any error in any such endorsement
shall not affect the obligations of the Borrower in respect of any of the
Term Loans.
This Note (a) is one of the Term Notes referred to in the
Credit Agreement dated as of _______________ (as amended, supplemented or
otherwise modified from time to time, the "Credit Agreement"), among the
Borrower, the Lender, the other banks and financial institutions or
entities from time to time parties thereto, Toronto-Dominion (Texas),
Inc., as Administrative Agent, and TD Securities (USA) Inc., as Arranger,
(b) is subject to the provisions of the Credit Agreement and (c) is
subject to optional and mandatory prepayment in whole or in part as
provided in the Credit Agreement. This Note is secured and guaranteed as
provided in the Loan Documents. Reference is hereby made to the Loan Docu
ments for a description of the properties and assets in which a security
interest has been granted, the nature and extent of the security and the
guarantees, the terms and conditions upon which the security interests
and each guarantee were granted and the rights of the holder of this Note
in respect thereof.
Upon the occurrence of any one or more of the Events of
Default, all principal and all accrued interest then remaining unpaid on
this Note shall become, or may be declared to be, immediately due and
payable, all as provided in the Credit Agreement.
All parties now and hereafter liable with respect to this
Note, whether maker, principal, surety, guarantor, endorser or otherwise,
hereby waive presentment, demand, protest and all other notices of any
kind.
Unless otherwise defined herein, terms defined in the Credit
Agreement and used herein shall have the meanings given to them in the
Credit Agreement.
NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED HEREIN OR
IN THE CREDIT AGREEMENT, THIS NOTE MAY NOT BE TRANSFERRED BY THE LENDER
EXCEPT PURSUANT TO AND IN ACCORDANCE WITH THE REGISTRATION AND OTHER
PROVISIONS OF SECTION 9.6 OF THE CREDIT AGREEMENT.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED
IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
BRANT-ALLEN INDUSTRIES, INC.
By: _______________________________
Name:
Title:
<TABLE>
<CAPTION>
Schedule A
to Term Note
------------
LOANS, CONVERSIONS AND REPAYMENTS OF BASE RATE LOANS
<S> <C> <C> <C> <C> <C> <C>
Amount of Unpaid Principal
Amount of Amount Amount of Prin- Base Rate Loans Balance of
Base Rate Converted to cipal of Base Converted to Base Rate
Date Loans Base Rate Loans Rate Loans Repaid Eurodollar Loans Loans Notation Made By
</TABLE>
<TABLE>
<CAPTION>
Schedule B
to Term Note
------------
LOANS, CONTINUATIONS, CONVERSIONS AND REPAYMENTS OF EURODOLLAR LOANS
<S> <C> <C> <C> <C> <C> <C>
Interest Period Amount of Amount of Unpaid Principal
Amount of Amount Converted and Eurodollar Principal of Eurodollar Loans Balance of
Eurodollar to Eurodollar Rate with Eurodollar Loans Converted to Eurodollar Notation
Date Loans Loans Respect Thereto Repaid Base Rate Loans Loans Made By
</TABLE>
EXHIBIT I-2
FORM OF REVOLVING CREDIT NOTE
THIS NOTE AND THE OBLIGATIONS REPRESENTED HEREBY MAY NOT BE TRANSFERRED
EXCEPT IN COMPLIANCE WITH THE TERMS AND PROVISIONS OF THE CREDIT
AGREEMENT REFERRED TO BELOW. TRANSFERS OF THIS NOTE AND THE OBLIGATIONS
REPRESENTED HEREBY MUST BE RECORDED IN THE REGISTER MAINTAINED BY THE
ADMINISTRATIVE AGENT PURSUANT TO THE TERMS OF SUCH CREDIT AGREEMENT.
$____________ New York, New York
_________ __, 199__
FOR VALUE RECEIVED, the undersigned, BRANT-ALLEN INDUSTRIES,
INC., a Delaware corporation (the "Borrower"), hereby uncondi tionally
promises to pay to the Administrative Agent for the benefit of
____________________ (the "Lender") or its registered assigns at the
Payment Office specified in the Credit Agreement (as hereinafter defined)
in lawful money of the United States and in immediately available funds,
on the Revolving Credit Termination Date the principal amount of (a)
DOLLARS ($ ), or, if less, (b) the aggregate unpaid principal amount of
all Revolving Credit Loans made by the Lender to the Borrower pursuant to
Section [2.____] of the Credit Agreement. The Borrower further agrees to
pay interest in like money at such Payment Office on the unpaid principal
amount hereof from time to time outstand ing at the rates and on the
dates specified in Section 2.10 of the Credit Agreement.
The holder of this Note is authorized to endorse on the
schedules annexed hereto and made a part hereof or on a continuation
thereof which shall be attached hereto and made a part hereof the date,
Type and amount of each Revolv ing Credit Loan made pursuant to the
Credit Agreement and the date and amount of each payment or prepayment of
principal thereof, each continuation thereof, each conversion of all or a
portion thereof to another Type and, in the case of Eurodollar Loans, the
length of each Interest Period with respect thereto. Each such
endorsement shall constitute, absent manifest error, prima facie evidence
of the accuracy of the information endorsed. The failure to make any such
endorse ment or any error in any such endorsement shall not affect the
obligations of the Borrower in respect of any Revolving Credit Loan.
This Note (a) is one of the Revolving Credit Notes referred
to in the Credit Agreement dated as of December 1, 1997 (as amended,
supplemented or otherwise modified from time to time, the "Credit
Agreement"), among the Borrower, the Lender, the other banks and
financial institutions or entities from time to time parties thereto,
Toronto-Dominion (Texas), Inc. , as Administrative Agent, and TD
Securities (USA) Inc., as Arranger, (b) is subject to the provisions of
the Credit Agreement and (c) is subject to optional and mandatory
prepayment in whole or in part as provided in the Credit Agreement. This
Note is secured and guaranteed as provided in the Loan Documents.
Reference is hereby made to the Loan Documents for a description of the
properties and assets in which a security interest has been granted, the
nature and extent of the security and the guarantees, the terms and
conditions upon which the security interests and each guarantee were
granted and the rights of the holder of this Note in respect thereof.
Upon the occurrence of any one or more of the Events of
Default, all principal and all accrued interest then remaining unpaid on
this Note shall become, or may be declared to be, immediately due and
payable, all as provided in the Credit Agreement.
All parties now and hereafter liable with respect to this
Note, whether maker, principal, surety, guarantor, endorser or otherwise,
hereby waive presentment, demand, protest and all other notices of any
kind.
Unless otherwise defined herein, terms defined in the Credit
Agreement and used herein shall have the meanings given to them in the
Credit Agreement.
NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED HEREIN OR
IN THE CREDIT AGREEMENT, THIS NOTE MAY NOT BE TRANSFERRED BY THE LENDER
EXCEPT PURSUANT TO AND IN ACCORDANCE WITH THE REGISTRATION AND OTHER
PROVISIONS OF SECTION 9.6 OF THE CREDIT AGREEMENT.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED
IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
BRANT-ALLEN INDUSTRIES, INC.
By: _______________________________
Name:
Title:
Schedule A
to Revolving Credit Note
<TABLE>
<CAPTION>
LOANS, CONVERSIONS AND REPAYMENTS OF BASE RATE LOANS
<S> <C> <C> <C> <C> <C> <C>
Amount of Base Rate
Amount of Amount Amount of Loans Converted Unpaid Principal
Base Rate Converted to Principal of to Eurodollar Balance of Base
Date Loans Base Rate Loans Loans Repaid Loans Rate Loans Notation Made By
</TABLE>
Schedule B
to Revolving Credit Note
<TABLE>
<CAPTION>
LOANS, CONTINUATIONS, CONVERSIONS AND REPAYMENTS OF EURODOLLAR LOANS
<S> <C> <C> <C> <C> <C> <C>
Interest Period Amount of Unpaid Principal
Amount of Amount Con- and Eurodollar Principal of Balance of
Eurodollar verted to Euro- Rate with Eurodollar Loans Eurodollar Notation
Date Loans dollar Loans Respect Thereto Repaid Loans Made By
</TABLE>
EXHIBIT J
FORM OF EXEMPTION CERTIFICATE
Reference is made to the Credit Agreement, dated as of
___________________ (as amended, supplemented or otherwise modified from
time to time, the "Credit Agreement") among Brant-Allen Industries, Inc.,
a Delaware corporation (the "Borrower"), the several banks and other
financial institutions from time to time parties thereto (the "Lenders"),
Toronto-Dominion (Texas), Inc., as administrative agent for the Lenders
thereunder (in such capacity, the "Administrative Agent") and TD
Securities (USA) Inc., as Arranger. Capital ized terms used herein that
are not defined herein shall have the meanings ascribed to them in the
Credit Agreement. ______________________ (the "Non-U.S. Lender") is
providing this certificate pursuant to subsection 2.15(d) of the Credit
Agreement. The Non-U.S. Lender hereby represents and warrants that:
1. The Non-U.S. Lender is the sole record and beneficial
owner of the Loans or the obligations evidenced by Note(s) in respect of
which it is providing this certificate.
2. The Non-U.S. Lender is not a "bank" for purposes of
Section 881(c)(3)(A) of the Internal Revenue Code of 1986, as amended
(the "Code"). In this regard, the Non-U.S. Lender further represents and
warrants that:
(a) the Non-U.S. Lender is not subject to regulatory or other
legal requirements as a bank in any jurisdiction; and
(b) the Non-U.S. Lender has not been treated as a bank for
purposes of any tax, securities law or other filing or
submission made to any Governmental Authority, any
application made to a rating agency or qualification for any
exemption from tax, securities law or other legal
requirements;
3. The Non-U.S. Lender is not a 10-percent shareholder of the
Borrower within the meaning of Section 881(c)(3)(B) of the Code; and
4. The Non-U.S. Lender is not a controlled foreign
corporation receiving interest from a related person within the meaning
of Section 881(c)(3)(C) of the Code.
IN WITNESS WHEREOF, the undersigned has duly executed this
certificate.
[NAME OF NON-U.S. LENDER]
By ____________________________
Name:
Title:
Date: ____________________
<PAGE>
EXHIBIT 10.5
TIMBERLANDS PARTNERSHIP INTEREST SALE AGREEMENT
AGREEMENT dated as of October 15, 1997 by and among Dow Jones
Virginia Company, Inc., a Delaware corporation ("DJ"), Newsprint,
Inc., a Virginia corporation ("Newsprint") (each of DJ and Newsprint
sometimes being referred to herein as a "Selling Partner" and
sometimes being collectively referred to as the "Selling Partners"),
and Brant-Allen Industries, Inc., a Delaware corporation
("Brant-Allen").
WHEREAS, the Selling Partners are the sole limited partners in
Bear Island Timberlands Company, L.P., a Virginia limited partnership
(the "Partnership"), and parties to the Limited Partnership Agreement
(the "Limited Partnership Agreement") dated as of August 14, 1985, as
amended, among the Selling Partners and Brant-Allen; and
WHEREAS, each of the Selling Partners desires to sell its entire
partnership interest (the "Partnership Interest") in the Partnership
to Brant-Allen, and Brant-Allen desires to purchase such Partnership
Interests on the terms provided for herein.
NOW, THEREFORE, in consideration of the mutual agreements
contained herein, intending to be legally bound hereby, the parties
agree as follows:
I. SALE OF PARTNERSHIP INTERESTS
1.1 Partnership Interests. Subject to the terms and
conditions of this Agreement, at the Closing provided for herein each
of the Selling Partners agrees to sell, transfer and convey its entire
Partnership Interest to Brant-Allen, and Brant-Allen agrees to
purchase from each of the Selling Partners such Partnership Interest.
1.2 Consideration. (a) Subject to the terms and conditions
of this Agreement, and in reliance upon the representations,
warranties and agreements of the parties contained herein, and in
consideration of the sale of the Partnership Interest by each of the
Selling Partners to Brant-Allen, Brant-Allen shall pay at Closing to
each Selling Partner the amount that each Selling Partner would
receive if the Enterprise Value of the Partnership, as defined below,
were distributed as follows: (i) of the first $18,860,496 of
Enterprise Value, each of the Selling Partners would receive
$6,264,102, and (ii) of the remaining portion of Enterprise Value,
each of the Selling Partners would receive 35% of such remaining
portion.
(b) As used herein, the term "Enterprise Value" of the
Partnership shall mean the amount equal to (A) $520 per acre for the
approximately 129,000 acres of timberlands of the Partnership, the
definitive amount of such acreage to be determined on or before the
Closing Date by an independent third party to be mutually agreed upon
by the parties, plus the book value of the notes receivable which are
long-term assets of the Partnership as of the Closing Date plus the
book value of the other fixed assets of the Partnership as of the
Closing Date plus the Working Capital (as defined below) of the
Partnership as of the Closing Date less (B) the amount of the
long-term portion of the term debt of the Partnership (determined in
accordance with generally accepted accounting principles, as applied
consistent with the past practices of the Partnership) outstanding on
the Closing Date (as defined below) (the "Long-Term Debt") plus the
lesser of (i) the amount of any prepayment penalties paid by the
Partnership pursuant to the requirements of Section 2.3 of the
Timberlands Loan and Maintenance Agreement between the Partnership and
John Hancock Mutual Life Insurance Company dated July 12, 1988 as a
result of the prepayment of the Long-Term Debt on the Closing Date, or
(ii) the amount of any refinancing fee paid by the Partnership as a
result of refinancing the Long-Term Debt on the Closing Date. For
purposes of this Agreement, the term "Working Capital" shall mean
current assets less current liabilities, including the current portion
of the Long-Term Debt and accrued interest thereon; provided, however,
that if, prior to the Closing, an entity related to Brant-Allen
acquires from the Partnership a one percent (1%) interest in the
Partnership, the amount contributed to the Partnership by such entity
shall be excluded from the computation of current assets. In
addition, for purposes of determining the amounts to be paid on the
Closing Date, the book value of the notes receivable which are
long-term assets, the net book value of the other assets and the
amounts of Working Capital, Long-Term Debt, prepayment penalties and
refinancing fees shall be estimated in good faith by the Chief
Financial Officer of the Partnership.
(c) The aggregate of the amounts referred to in
Section 1.2(a) shall be paid to the Selling Partners at the Closing in
immediately available funds.
1.3 Closing Statement. (a) Not later than thirty (30)
days following the Closing Date, Brant-Allen shall deliver to each of
the Selling Partners a statement computing the Enterprise Value (the
"Closing Statement"), which Closing Statement shall include (i) the
notes receivable which are long-term assets of the Partnership as of
the Closing Date (ii) the book value of all fixed assets of the
Partnership, other than the timberlands, as of the Closing Date, (iii)
the Working Capital of the Partnership as of the Closing Date, and
(iv) a statement of the long-term portion of the Long-Term Debt
outstanding on the Closing Date, the amount of any prepayment penalty
paid by the Partnership as a result of the prepayment of the Long-Term
Debt and the amount of any refinancing fee paid by the Partnership as
a result of refinancing the Long-Term Debt. The Closing Statement
shall be certified by the Chief Financial Officer of the Partnership
and shall be accompanied by such work papers and other relevant
documents relating to its preparation as the Selling Partners may
reasonably request.
(b) If the Selling Partners are both in agreement with
the amounts shown in the Closing Statement, any difference between the
amounts paid on the Closing Date and the amounts which would have been
paid on the Closing Date had the amounts shown in the Closing
Statement been used to compute the amounts paid on the Closing Date
shall be paid in immediately available funds by the party or parties
from whom such payment is owing to the other party or parties within
two (2) business days of the delivery of the Closing Statement.
However, in the event that one or both of the Selling Partners does
not agree with the amounts shown in the Closing Statement, such
Selling Partner and Brant-Allen shall jointly appoint an independent
accounting firm to arbitrate the dispute. Brant-Allen, on the one
hand, and the disputing Selling Partner or Selling Partners, on the
other hand, shall bear equally the cost of retaining such accounting
firm. The parties shall use their best commercially reasonable
efforts to resolve any such dispute within thirty (30) days following
the delivery of the Closing Statement. The determination of the
accounting firm shall be final and binding on all parties. Any
adjustment required as a consequence of the arbitration shall be paid
in immediately available funds within one (1) business day of the
termination of the arbitration.
1.4 Fair Value. The Selling Partners agree that the
consideration referred to in Section 1.2 above represents the fair
value of the Partnership Interests. Each of the Selling Partners
hereby expressly agrees and acknowledges that it shall not receive and
is not entitled to receive any further payments of any kind from the
Partnership or its partners.
II. CLOSING
2.1 Closing. Subject to the terms and conditions of this
Agreement, the closing of the transactions contemplated hereby (the
"Closing") shall occur at the offices of Skadden, Arps, Slate, Meagher
& Flom LLP, 919 Third Avenue, New York, New York, on the day that is
two (2) business days following the satisfaction of the conditions to
Closing set forth in Article VI of this Agreement, or at such other
time and place as the parties may agree (the "Closing Date"), but in
no event shall the Closing occur after 5:00 p.m. (Eastern Standard
Time) on January 31, 1998.
2.2 Restructuring. Prior to the purchase of the Partnership
Interests pursuant to this Agreement, Brant-Allen may elect to (i)
transfer a portion of its partnership interest to an affiliated entity
in order to create a new limited partner with a 1% limited partnership
interest, (ii) transfer its interest in the Partnership to a limited
liability company wholly-owned by Brant-Allen, and/or (iii) convert
the Partnership from a limited partnership to a limited liability
company (collectively, the "Restructuring"). The Selling Partners
will reasonably cooperate with Brant-Allen and take any actions that
Brant-Allen may reasonably request in order to implement the
Restructuring, provided, that the Selling Partners will not be
required to take any actions that might adversely affect them or their
Partnership Interests, provided further that if any actions required
to be taken by the Selling Partners might be adverse, but not
materially adverse, the Selling Partners will take such actions if,
prior to taking such actions, they are fully indemnified by
Brant-Allen to the Selling Partners' satisfaction for any adverse
consequences of such actions. If Brant-Allen elects to proceed with
the Restructuring, the Restructuring will occur and become effective
concurrently with, or immediately prior to, the Closing.
2.3 Tax Certificate. Each of the Selling Partners shall
deliver to Brant-Allen at the Closing a certificate of such Selling
Partner's non-foreign status which complies with the requirements of
Section 1445 of the Internal Revenue Code of 1986, as amended, and the
Treasury Regulations promulgated thereunder.
III. REPRESENTATIONS OF THE SELLING PARTNERS
Each of the Selling Partners, severally, but not jointly,
hereby represents and warrants to Brant-Allen as follows:
3.1 Ownership of the Partnership Interest. Such Selling
Partner has the complete and unrestricted power, and the unqualified
right to sell, assign, transfer and deliver to Brant-Allen, good and
valid title to its Partnership Interest, free and clear of all liens,
claims, options, charges and encumbrances whatsoever (individually, an
"Encumbrance"), except any Encumbrance that may have resulted from any
liability of the Partnership. Evidence of the authority of each
Selling Partner to enter into this Agreement has been, or will be,
separately delivered to Brant-Allen, such evidence being certified
resolutions properly adopted by the Board of Directors and
shareholders, respectively, of such Selling Partner.
3.2 Valid and Binding Agreement. This Agreement constitutes
the valid and binding agreement of such Selling Partner, enforceable
in accordance with its terms. The officer signing on behalf of such
Selling Partner has the necessary corporate authority to do so. No
consent or approval of any court, governmental agency (foreign,
federal or state), or any other person or entity is required in
connection with the execution or consummation of the transactions
contemplated herein to permit such Selling Partner to carry out its
obligations hereunder.
3.3 No Violation. The execution, delivery and performance
of this Agreement by such Selling Partner will not (i) result in a
breach of any of the terms or provisions of, or constitute a default
under, the certificate of incorporation or by-laws of such Selling
Partner or any indenture or other agreement or instrument to which
such Selling Partner is a party, (ii) constitute a default under any
mortgage, deed of trust, or other encumbrance to which such Selling
Partner or its property is subject, or (iii) conflict with, or result
in a breach of, any law, order, judgment, decree or regulation binding
on such Selling Partner.
3.4 Selling Partner's Knowledge. As of the date hereof,
such Selling Partner has no actual knowledge of any material breach of
any representation or warranty of Brant-Allen set forth in this
Agreement.
IV. REPRESENTATIONS OF BRANT-ALLEN
Brant-Allen hereby represents and warrants to each of the
Selling Partners as follows:
4.1 Valid and Binding Agreement. This Agreement constitutes
the valid and binding agreement of Brant-Allen, enforceable in
accordance with its terms. The officer signing on behalf of
Brant-Allen has the necessary corporate authority to do so. No
consent or approval of any court, governmental agency (foreign,
federal or state), or any other person or entity is required in
connection with the execution or consummation of the transactions
contemplated herein to permit Brant-Allen to carry out its obligations
hereunder.
4.2 No Violation. The execution, delivery and performance
of this Agreement by Brant-Allen will not (i) result in a breach of
any of the terms or provisions of, or constitute a default under, the
certificate of incorporation or by-laws of Brant-Allen or any
indenture or other agreement or instrument to which Brant-Allen is a
party, (ii) constitute a default under any mortgage, deed of trust, or
other encumbrance to which Brant-Allen or its property is subject, or
(iii) conflict with, or result in a breach of, any law, order,
judgement, decree or regulation binding on Brant-Allen.
4.3 Financial Statements. To the knowledge of Brant-Allen,
the unaudited balance sheet of the Partnership as of May 31, 1997, the
related statements of income, changes in partners' equity and cash
flow and internal management accounts or reports for the period
(collectively, the "Interim Financial Statements"), and the audited
balance sheets of the Partnership as of December 31, 1996 and 1995,
and the related statements of income, changes in partners' equity and
cash flows for the years then ended, including any footnotes thereto
(collectively, the "Financial Statements"), fairly present in all
material respects the financial position of the Partnership as of the
dates indicated and the results of its operations and cash flows for
the periods indicated, and, in the case of the Interim Financial
Statements, subject to normal year-end adjustments which, to the
knowledge of Brant-Allen, are not expected to be material. To the
knowledge of Brant-Allen, the Interim Financial Statements and the
Financial Statements have been prepared in accordance with generally
accepted accounting principles consistently applied throughout the
periods covered thereby and in accordance with the books and records
of the Partnership maintained in accordance with historical practice
(except that the Interim Financial Statements do not contain footnote
disclosure that otherwise would be required by generally accepted
accounting principles).
4.4 Disclosure. To Brant-Allen's knowledge, none of the
documents or materials set forth on Schedule 4.4 to this Agreement,
which have been furnished to the Selling Partners in connection with
the consummation of the transactions contemplated by this Agreement
contains any untrue statement of a material fact by the Partnership or
omits to state a material fact necessary in order to make statements
contained herein or therein, in light of the circumstances in which
they were made, not misleading. As of the date of this Agreement,
there is no fact which Brant-Allen has not disclosed to either of the
Selling Partners and of which Brant-Allen has knowledge which
materially positively affects, or could reasonably be expected to
materially positively affect, the business or assets of the
Partnership or the operations, financial condition or prospects of the
Partnership; it being understood that for purposes of such
representation, Brant-Allen shall be deemed to have disclosed, and the
Selling Partners shall be deemed to have possession and otherwise be
aware of, all information relating to the paper and the newsprint
industries generally, and to general economic conditions, which would
reasonably be expected to be known by participants in such industries
or is otherwise generally publicly available. Brant-Allen has
furnished to the Selling Partners all material information relating to
offers made by third parties to acquire the Partnership Interests or
all or a material portion of the assets of the Partnership.
4.5 Conduct of Business. Since May 31, 1997, the
Partnership has not taken, and Brant-Allen has not caused the
Partnership to take, any action outside the ordinary course of
business or inconsistent with past practices, except as contemplated
by this Agreement, including but not limited to the following:
(a) the creation, incurring or assumption of any debt,
liability or obligation, direct, indirect, whether accrued, absolute,
contingent or otherwise, relating to the business of the Partnership,
and which is material to the business of the Partnership;
(b) with respect to any executive officer of the
Partnership, other than in the ordinary course of business (i) any
increase in the rate or terms of compensation payable or to become
payable, (ii) the payment or agreement to pay any pension, retirement
or other employee benefit not required by any existing plan, agreement
or arrangement, or (iii) the commitment to any additional pension,
bonus, incentive, deferred compensation or other employee benefit
plan, agreement or arrangement, or the increase in the rate or terms
of any such plan, agreement or arrangement which currently exists;
(c) the waiver or release of any right of material value
relating to the business of the Partnership;
(d) the alteration of, or increase in services provided
under, any maintenance or service agreement of the Partnership, other
than in the ordinary course of business, consistent with the past
practices of the Partnership;
(e) the acceleration of any expense of the Partnership;
(f) any expenditure of capital relating to the business of
the Partnership, other than in the ordinary course of business,
consistent with the past practices of the Partnership;
(g) any material alteration in the manner of keeping the
books, accounts or records of the Partnership, or in the accounting
practices therein reflected, except as required by law or generally
accepted accounting principles; or
(h) any agreement to take any of the foregoing actions.
V. RELATED MATTERS, COVENANTS
5.1 Funding. Brant-Allen shall use its best commercially
reasonable efforts to obtain the funds necessary to consummate the
transactions contemplated by this Agreement. Brant-Allen shall
provide the Selling Partners with written or oral weekly progress
reports as to the status of the potential financing and shall
appropriately respond to any questions that the Selling Partners may
have with respect to such financing. In addition, Brant-Allen shall
cooperate and use reasonable efforts in making available to the
Selling Partners representatives of the Toronto Dominion Bank, TD
Securities (U.S.A.), Inc., Salomon Brothers, Inc and John Hancock Life
Insurance Company (the "Prospective Lenders"), subject to the
availability of such representatives, to discuss the status of the
financings and to appropriately respond to any questions that the
Selling Partners may have with respect to such financings at such
times as either of the Selling Partners may reasonably request.
Brant-Allen also shall promptly provide to the Selling Partners with
copies of any documents relating to the financing, or current drafts
thereof, provided to or by any of the Prospective Lenders as the
Selling Partners may reasonably request.
5.2 Transfer Taxes. Brant-Allen shall be responsible for
the payment, if any, of 50 percent (50%) of all sales, use, transfer,
recording, ad valorem and other similar taxes and fees attributable to
the sale of the Selling Partners' Partnership Interests hereunder, and
the remaining 50 percent (50%) of any such taxes or fees shall be paid
by the Selling Partners.
5.3 Conduct of Business. The parties agree that the
business of the Partnership shall be conducted in the ordinary course
and consistent with past practices in all material respects between
the date hereof and the Closing Date and that during such period
Brant-Allen shall not cause or permit the Partnership to take any of
the actions set forth in Section 4.5. The Selling Partners shall not
take any action that may have the effect of causing a dissolution of
the Partnership.
5.4 Distributions. Brant-Allen shall not permit the
Partnership to make any distributions, in cash or kind, to either
Selling Partner or to Brant-Allen, or to any of their respective
affiliates, between the date hereof and the Closing Date.
5.5 No Dispositions. The Selling Partners shall not, nor
shall they enter into any agreement (other than this Agreement) to,
directly or indirectly, sell, convey, pledge, encumber, assign or
otherwise transfer in any manner all or any portion of the Partnership
interests prior to the Closing or termination of this Agreement.
5.6 Section 754 Election. Each of the Selling Partners
acknowledges that the Partnership or its successor intends to make an
election pursuant to Section 754 of the Internal Revenue Code of 1986,
as amended (the "Election"), to step up the basis of Partnership
assets as a result of the sale of the Selling Partners' Partnership
Interests and agrees to cooperate with the Partnership in making such
election by, among other things, providing to the Partnership such
information as is necessary to enable the Partnership to determine the
basis of its assets following the Election.
5.7 Fees and Expenses. The parties hereto shall bear their
own respective fees and expenses incurred in connection with the
preparation for and consummation of the transactions contemplated by
this Agreement. None of the fees or expenses that may be incurred by
the parties hereto in connection with this Agreement or obtaining the
financing for the purchase of the Selling Partners' Partnership
Interests (such as any third party costs of environmental due
diligence and costs of accountants and counsel, including those of the
Partnership) shall be borne by the Partnership.
5.8 Long-Term Debt Repayment. Brant-Allen shall take all
action necessary to prepay the Long-Term Debt contemporaneously with
the Closing.
5.9 Hart-Scott-Rodino. Each of the parties will file any
Notification and Report Forms and related material that it may be
required to file with the Federal Trade Commission and the Antitrust
Division of the United States Department of Justice under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
"HSR Act"), and will use all commercially reasonable efforts to obtain
an early termination of the applicable waiting period, and will make
any further filings pursuant thereto that may be necessary or
advisable in connection therewith.
VI. CONDITIONS TO CLOSING
6.1 Conditions to Obligations of the Selling Partners. The
obligations of the Selling Partners to consummate the transactions
contemplated by this Agreement shall be subject to the satisfaction on
or prior to the Closing Date of the following conditions:
(a) the representations and warranties of Brant-Allen
contained herein shall be true and accurate in all material respects
on the date of this Agreement and on the Closing Date;
(b) Brant-Allen shall have performed in all material
respects all the covenants and agreements required to be performed by
it prior to the Closing Date;
(c) no order or injunction of any court or governmental
authority shall be in effect which shall restrain, enjoin or otherwise
prevent the consummation of any of the transactions contemplated
hereby, and, if applicable, all applicable waiting periods (and any
extensions thereof) under the HSR Act shall have expired or otherwise
been terminated;
(d) the transactions contemplated by the Partnership
Interest Sale Agreement of even date herewith by and among the Selling
Partners and Brant-Allen shall be closed contemporaneously;
(e) each of the Selling Partners shall have received
evidence in a form and substance reasonably satisfactory to it that it
has been released of any and all guaranties made by it in connection
with the Partnership; and
(f) Brant-Allen shall have caused the Long-Term Debt to have
been contemporaneously repaid.
6.2 Conditions to Obligations of Brant-Allen. The
obligation of Brant-Allen to consummate the transactions contemplated
by this Agreement shall be subject to the satisfaction on or prior to
the Closing Date of the following conditions:
(a) the representations and warranties of the Selling
Partners contained herein shall be true and accurate in all material
respects on the date of this Agreement and on the Closing Date;
(b) the Selling Partners shall have performed in all
material respects all the covenants and agreements required to be
performed by them prior to the Closing Date;
(c) no order or injunction of any court or governmental
authority shall be in effect which shall restrain, enjoin or otherwise
prevent the consummation of any of the transactions contemplated
hereby, and, if applicable, all applicable waiting periods (and any
extensions thereof) under the HSR Act shall have expired or otherwise
been terminated; and
(d) Brant-Allen shall have closed on the funds necessary to
consummate the transactions contemplated by this Agreement; provided,
however, that Brant-Allen's failure to satisfy this condition 6.2(d)
will not eliminate the assessment of the Dilution Percentage (as
hereinafter defined) if any of the conditions required to assess the
Dilution Percentage are met under the provisions of Article VIII of
this Agreement.
VII. MISCELLANEOUS
7.1 Survival. All representations, warranties and
agreements made in this Agreement or pursuant hereto (including
Sections 7.7 and 8.2) shall survive indefinitely following the
Closing, except that the representations and warranties made by
Brant-Allen in Sections 4.3, 4.4 and 4.5 shall expire and have no
further force or effect after the first anniversary of the Closing
Date and, accordingly, the Selling Partners shall not be indemnified
for breaches of such representations and warranties discovered after
such first anniversary. None of the representations, warranties and
agreements made in this Agreement or pursuant hereto shall survive the
termination of this Agreement, except this Section 7.1 shall not limit
any covenant or agreement which by its terms contemplates performance
after the termination of this Agreement.
7.2 Further Assurance and Cooperation. From time to time at
the request of any party to this Agreement and without further
consideration, each party will execute and deliver such documents and
take such action as may reasonably be requested in order to consummate
more effectively the transactions contemplated by this Agreement.
7.3 Assignment; Parties in Interest; Execution in
Counterpart. This Agreement and the rights, interests and obligations
hereunder may not be assigned by any party hereto without the prior
written consent of the other parties hereto, except that Brant-Allen
may assign the right to purchase the Selling Partners' Partnership
Interests to a wholly-owned subsidiary (including, without limitation,
a limited liability company formed in connection with the
Restructuring), provided that Brant-Allen shall remain responsible for
all obligations hereunder. This Agreement will be binding upon, inure
to the benefit of and be enforceable by the parties and their
respective successors and assigns. This Agreement may be executed in
one or more counterparts, but all such counterparts shall constitute
one and the same instrument.
7.4 Entire Agreement. This Agreement and the documents
referred to herein or delivered pursuant hereto which form a part
hereof, contain the entire understanding of the parties with respect
to its subject matter. There are no restrictions, agreements,
promises, warranties, covenants or undertaking other than those
expressly set forth herein or therein. This Agreement supersedes all
prior agreements and understandings between the parties with respect
to its subject matter.
7.5 Law Governing. This Agreement will be governed by and
construed in accordance with the laws of the Commonwealth of Virginia.
7.6 Specific Performance. Each of the parties hereto
acknowledges and agrees that the other parties hereto would be
irreparably damaged in the event any of the provisions of this
Agreement were not performed in accordance with their specific terms
or were otherwise breached. Accordingly, each of the parties hereto
agrees that it shall be entitled to an injunction or injunctions to
prevent breaches of the provisions of this Agreement and to enforce
specifically this Agreement and the terms and provisions hereof in any
action instituted in any court of the United States or any state
thereof having subject matter jurisdiction, in addition to any other
remedy to which a party may be entitled, at law or in equity.
7.7 Indemnification.
(a) Brant-Allen (the "Buyer Indemnifying Party") shall
indemnify and hold each of the Selling Partners (each a "Seller
Indemnified Party") harmless from and against all claims, demands,
losses, obligations, liabilities, damages and reasonable costs and
expenses, including attorneys' fees and expenses (individually, a
"Loss," and collectively, "Losses"), that either of the Seller
Indemnified Parties shall incur or suffer which result from or relate
to (i) any breach of any representation or warranty of the Buyer
Indemnifying Party contained in this Agreement; (ii) any breach of, or
failure to perform, any covenant or agreement of the Buyer
Indemnifying Party contained in this Agreement; (iii) the business or
assets of the Partnership; or (iv) any alleged liability under Section
50-73.43 of the Virginia Revised Uniform Limited Partnership Act or
any successor provision as a result of the sale to Brant-Allen of the
Selling Partners' Partnership Interests pursuant to this Agreement.
(b) Each Selling Partner (each a "Seller Indemnifying
Party") shall indemnify and hold Brant-Allen (the "Buyer Indemnified
Party") harmless from and against all Losses that the Buyer
Indemnified Party shall incur or suffer which result from or relate to
(i) any breach of any representation or warranty of such Selling
Partner contained in this Agreement; and (ii) any breach of, or
failure to perform, any covenant or agreement of such Selling Partner
contained in this Agreement.
(c) The Seller Indemnifying Party and the Buyer Indemnifying
Party are each referred to herein as an "Indemnifying Party," and the
Buyer Indemnified Party and the Seller Indemnified Party are each
referred to herein as an "Indemnified Party." The Indemnified Party
shall promptly notify the Indemnifying Party of any Loss for which
indemnification is sought under this Agreement. If such Loss is
initiated by a third party, the Indemnifying Party shall have the
right, but not the obligation, at its own expense, to assume the
defense thereof with counsel reasonably acceptable to the Indemnified
Party. In connection with any such third party Loss which the
Indemnifying Party has elected to defend, (i) the Indemnified Party
shall have the right to participate, at its own expense, and (ii) the
parties hereto shall cooperate with each other and provide each other
with access to relevant books and records in their possession. No
third party Loss shall be settled without the prior written consent of
the Indemnified Party.
(d) Notwithstanding the foregoing, no Indemnifying Party
shall have any liability to any Indemnified Party pursuant to this
Section 7.7 unless and until the total amount of Losses suffered by
the Indemnified Party shall exceed $100,000, in which case the amount
of Losses for which indemnity may be sought shall be limited to the
amount in excess of $100,000.
7.8 Knowledge of Brant-Allen. Whenever a representation and
warranty contained in this Agreement is made to the "knowledge of
Brant-Allen," it shall mean all facts and conditions which are
actually known by Joseph Allen, Peter Brant, Edward Sherrick or Tom
Armstrong (individually, an "Insider") or which should have been known
by a prudent manager holding the position of an Insider with access to
the books and records of the Partnership or Brant-Allen.
7.9 Knowledge of a Selling Partner. The "actual knowledge"
of Newsprint for purposes of Section 3.4 shall mean all facts and
conditions which are actually known by Boisfeuillet Jones, Jr., Gerald
Rosberg and Martin Cohen, and the "actual knowledge" of DJ for
purposes of Section 3.4 shall mean all facts and conditions which are
actually known by Kevin J. Roche and Leonard E. Doherty.
7.10 Notice. All notices, requests and other communications
hereunder shall be sufficient if given in writing and either
personally delivered, sent by a nationally recognized overnight
courier or sent by telecopy, addressed as follows, and shall be
effective only when actually received:
if to Newsprint: with a copy to:
Newsprint, Inc. Shaw, Pittman, Potts & Trowbridge
c/o The Washington Post 2300 N Street, N.W.
1150 15th Street, N.W. Washington, D.C. 20037
Washington,D.C. 20071 Tel: (202) 663-8000
Tel: (202) 334-6696 Fax: (202) 663-8007
Fax: (202) 334-4536 Attn: Thomas H. McCormick, Esq.
Attn: John Hockenberry, Esq.
if to DJ: with a copy to:
Dow Jones Virginia Company, Inc. Shaw, Pittman, Potts & Trowbridge
c/o Dow Jones & Company, Inc. 2300 N Street, N.W.
World Financial Center Washington, D.C. 20037
200 Liberty Street, 14th Floor Tel: (202) 663-8000
New York, NY 10281 Fax: (202) 663-8007
Tel: (212) 416-3023 Attn: Thomas H. McCormick, Esq.
Fax: (212) 416-2637
Attn: Mr. Kevin J. Roche
if to Brant-Allen: with a copy to:
Brant-Allen Industries, Inc. Skadden, Arps, Slate, Meagher &
80 Field Point Road Flom LLP
Greenwich, CT 06830 919 Third Avenue
Tel: (203) 661-3344 New York,NY 10022
Fax: (203) 661-3349 Tel: (212) 735-3000
Attn: Mr. Peter Brant Fax: (212) 735-2000
Attn: Jeffrey W. Tindell, Esq.
VIII. TERMINATION
8.1 Termination Rights. This Agreement may be terminated in
any of the following circumstances:
(a) Upon the mutual agreement of the parties.
(b) By a nonbreaching party concurrently with the
termination of the Partnership Interest Sale Agreement, dated as of
October 15, 1997, among the parties with respect to the Bear Island
Paper Company, L.P. in accordance with the terms thereof.
(c) By a Selling Partner at any time after a Selling Partner
has been advised by Brant-Allen that commercial banking, investment
banking or lending services of entities other than one or more of the
Prospective Lenders will be required to obtain funds sufficient to
consummate the transactions contemplated by this Agreement; provided
that it is agreed and understood that the Prospective Lenders may at
their election include other banks, underwriters, agents and
syndicates as part of their customary selling efforts.
(d) By a Selling Partner at any time after a Selling Partner
has notified Brant-Allen in writing that Brant-Allen is in material
breach of any provision of this Agreement, unless Brant-Allen has
cured such breach within three (3) business days of receiving such
notice.
(e) By Brant-Allen at any time after Brant-Allen has
notified a Selling Partner in writing that the Selling Partner is in
material breach of any provision of this Agreement, unless the Selling
Partner has cured such breach within three (3) business days of
receiving such notice.
(f) By a Selling Partner on or after November 30, 1997,
unless prior to November 30, 1997 a Selling Partner has received a
certificate, which shall be reasonably based, from Brant-Allen, dated
after November 20, 1997, certifying that, as of the date of such
certificate, Brant-Allen has no current knowledge of any issue that
would reasonably be expected to prevent the financing necessary for
the transactions contemplated by this Agreement from being received on
or prior to December 31, 1997; provided, however, that the certificate
may list an issue which could be expected to not be resolved until
after December 31, 1997 if (i) the issue involves an action of the
type described in clause (iv) of paragraph (g) below, and (ii)
Brant-Allen certifies that it will use all commercially reasonable
efforts to resolve such issue prior to December 31, 1997.
(g) By a Selling Partner on or after December 31, 1997,
unless prior to December 31, 1997 a Selling Partner has received a
certificate, which shall be reasonably based, from Brant-Allen
certifying that (i) all necessary loan agreements relating to the
financing have been executed by all parties; (ii) the underwriting or
purchase agreements relating to the issuance of any securities
relating to the financing has been fully negotiated and is, except for
execution, completed; (iii) prospective investors have "circled" or
otherwise indicated their commitment to purchase the requisite dollar
amount of securities to be issued in connection with the financing;
and (iv) the only outstanding actions necessary to be taken before the
Closing can occur, which shall be listed and described in the
certificate, shall be actions which do not involve the exercise of any
material discretion on the part of any person and are capable of
being, and reasonably expected to be, completed on or before January
31, 1998. At the time Brant-Allen provides the Selling Partner such
certificate, Brant-Allen shall also provide the Selling Partner a copy
of the loan agreement and/or underwriting or purchase agreement
referred to in such certificate.
(h) By any party after January 31, 1998.
8.2 Effect of Termination. (a) Subject to paragraph (b)
below, upon a rightful termination of this Agreement by a Selling
Partner pursuant to Section 8.1(b), (c), (d), (f) or (g) or by any
party pursuant to Section 8.1(h), including as a result of the waiting
period under the HSR Act, if applicable, not having expired by January
31, 1998, Brant-Allen shall be assessed a dilution of 2.5% of its
interest in the Partnership (the "Dilution Percentage") to be
distributed equally to the Selling Partners. In the event that the
dilution is assessed in accordance with this Section 8.2, the parties
hereto agree that they will take the necessary actions to amend the
Limited Partnership Agreement to reduce Brant-Allen's interest in the
Partnership (i.e., Brant-Allen's share of the Partnership's profits,
losses and distributions as set forth in Section 3.2 of the Limited
Partnership Agreement) by the Dilution Percentage and to increase the
partnership interest of each of the Selling Partners by one half (1/2)
of the Dilution Percentage or 1.25% (the "Amendment"). Brant-Allen
hereby grants to each of the Selling Partners and their successors and
assigns a limited power of attorney (which the parties acknowledge
shall be deemed to be coupled with an interest) for the purpose of
executing any and all documents, instruments and certificates that are
necessary to effect the Amendment; provided, however, that Brant-Allen
shall be notified at least five (5) business days prior to a Selling
Partner's use of this proposed power of attorney.
(b) Brant-Allen shall not be assessed the Dilution
Percentage if the termination of this Agreement results from one or
more Prospective Lenders being unable or unwilling to provide funds
necessary to consummate the transactions contemplated by this
Agreement primarily due to one or more of the following reasons that
arose after the date of this Agreement: (i) a fire or earthquake,
hurricane or comparable physical event beyond the control of
Brant-Allen causing material damage to the Partnership's properties;
provided that Brant-Allen's negligence or misconduct did not
materially contribute to the extent of the damage caused by such
event; or (ii) a proceeding is begun under a governmental authority's
power of eminent domain with respect to a material portion of the
Partnership's properties.
(c) The parties acknowledge and agree that time is of the
essence with respect to the expected dates for Closing as set forth in
this Article VIII and that the assessment of the Dilution Percentage
as set forth in Section 8.2 hereof are reasonable and justifiable
liquidated damages for the failure of the Closing to occur in a timely
manner.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first written.
DOW JONES VIRGINIA COMPANY, INC.
By: /s/ Kevin J. Roche
__________________________
Name: ____________________
Title: ___________________
NEWSPRINT, INC.
By: /s/ Martin Cohen
__________________________
Name: Martin Cohen
Title: President
BRANT-ALLEN INDUSTRIES, INC.
By: /s/ Joseph Allen
__________________________
Name: Joseph Allen
Title: Executive Vice President
Timberlands Partnership Interest Sale Agreement
Schedule 4.4
Financial Statements (as defined in the Timberlands Partnership
Interest Sale Agreement)
Interim Financial Statements (as defined in the Timberlands
Partnership Interest Sale Agreement)
Bowater's Letter of Intent, dated July 25, 1997, to purchase the
business and assets of Bear Island Paper Company, L.P. and Bear Island
Timberlands Company, L.P. (the "Partnerships")
Bowater's Proposed Asset Purchase Agreement, dated August 12, 1997,
for the Partnerships
T.D. Securities Engagement Letter, dated August 29, 1997
T.D. Securities Commitment Letters, dated August 29, 1997, relating to
$120 million in bank debt and sale of $100 million in high yield bonds
Salomon Brothers Letter, relating to sale of $195 million in high
yield bonds
<PAGE>
EXHIBIT 10.6
MANAGEMENT SERVICES AGREEMENT
THIS AGREEMENT, made as of December 1, 1997, by
and between Brant-Allen Industries, Inc. ("Brant-Allen")
and Bear Island Paper Company, L.L.C. (together with its
subsidiaries and affiliates, the "Company").
W I T N E S S E T H:
WHEREAS, the Company wishes to retain Brant-
Allen to provide the Company with certain management
services and Brant-Allen wishes to provide such
management services to the Company, in each case on the
terms and subject to the conditions of this Agreement set
forth;
NOW, THEREFORE, in consideration of the mutual
covenants and agreements contained in this Agreement, the
parties to this Agreement agree as follows:
1. Retention of Brant-Allen. The Company
hereby engages Brant-Allen and Brant-Allen hereby agrees
to accept the engagement by the Company to perform the
duties and responsibilities described in Section 2 of
this Agreement on an exclusive basis in accordance with
the terms and conditions of this Agreement.
2. Duties of Brant-Allen. (a) Brant-Allen
shall have full control of the business of the Company,
subject to the overall management and control of the
Board of Directors of the Company. During the term of
this Agreement, Brant-Allen shall use reasonable efforts
to provide the Company with such senior management,
treasury, financial and administrative (including
marketing and sales) services on those matters as are
within Brant-Allen's expertise, as may be reasonably
required from time to time by the Company. Such services
shall include, among other things, the following duties
and responsibilities (and Brant-Allen shall have full
authority to carry out the following for and in the name
of the Company):
(i) to supervise, oversee and direct the operation,
improvements, maintenance and repair of the
Company's mill and related plant, facilities and
equipment;
(ii) to enter into for and in the name of the
Company such contracts, agreements and other
arrangements for (A) the purchase, lease or other
acquisition of timberlands and timber rights, (B)
the supply of wood and other necessary materials or
goods and (C) the production, sale, delivery and
distribution of newsprint, in each case, as Brant-
Allen may deem necessary or desirable.
(iii) to use its reasonable efforts to market,
price and sell newsprint, in bone fide, arms' length
transactions for the best price obtainable by Brant-
Allen using its reasonable efforts;
(iv) to bill, invoice, collect and receive all
payments from customers for sales of newsprint,
paper, inventory and other products and by-products
of the Company's mill as agent for the Company and
to remit to the Company's bank account or accounts
referred to in paragraph (xiii) below all such
payments on the business day following availability
of the funds for such payments.
(v) to execute, for and in the name of the Company,
any and all contracts, agreements, instruments or
documents of any kind, which Brant-Allen may deem
appropriate in conducting the business of the
Company and use reasonable efforts to renew, amend
or assign existing contracts entered into by the
Newsprint Sales division of Brant-Allen and
newsprint customers so that, thereafter, such
contracts are between the Company and such
customers;
(vi) to acquire for and in the name of the Company
by purchase or otherwise, to own, hold, sell,
assign, or otherwise dispose of real and personal
property of any kind and wheresoever situate
(including, without limitation, to grant easements
and rights of way in connection with the Company's
real property) for such sums and on such terms and
conditions as Brant-Allen may deem prudent;
(vii) to incur indebtedness and borrow money upon
the credit of the Company for any purpose or to
guarantee any debts, liabilities or other
obligations of any corporation or partnership or
other entity controlled by the Company ("Controlled
Entity") and mortgage, pledge, charge, assign or
transfer all or any part of the real and personal,
moveable and immoveable property, undertakings or
rights of the Company, present and future, for such
purposes and to secure any other liability of the
Company or any other debt, liability or obligation
of a Controlled Entity, provided, however, that any
such action does not: (A) conflict with the
Company's organizational documents, (B) constitute a
violation of or a default under any agreement,
indenture, instrument, or other document to which
the Company is a party or (C) contravene any
provision of those laws, rules and regulations that
are applicable to the Company;
(viii) to prosecute, defend, settle and compromise
any actions at law or in equity brought by or
against the Company (other than any action or
proceeding brought by the Company to enforce this
Agreement) in such manner as it may deem expedient;
(ix) to employ and pay for such professional or
other assistance as it may deem requisite in the
discharge of its duties under this Agreement;
(x) to employ for and in the name of the Company
such employees or agents as it may deem necessary or
desirable to conduct the business of the Company or
discharge its duties under this Agreement;
(xi) to maintain for and in the name of the Company
(A) complete and accurate records and books of
account of all operations, receipts and expenditures
of the Company and (B) such internal controls as may
be required to comply with all laws and regulations
applicable to the Company, and provide the Company,
its officers or agents, free access at all
reasonable times to inspect, examine and copy them;
(xii) to provide or make available such reports,
certificates, other documents and information as any
applicable regulatory body or agency (including,
without limitation, the Securities and Exchange
Commission, the Environmental Protection Agency and
the Virginia Department of Environmental Quality)
may require under any law or regulation applicable
to the Company and as any lender, trustee,
bondholder and their respective officers, employees
and agents may be entitled to receive under the
terms of any agreement, indenture, instrument or
other document to which the Company is a party;
(xiii) to deposit all moneys received by the
Company (whether as capital contributions, income or
otherwise) to the credit of the account or accounts
of the Company at such bank or banks as may be
appointed from time to time by Brant-Allen and, if
not (w) maintained in such accounts, (x) expended
for the Company's business, (y) paid in connection
with the Company's indebtedness or (z) distributed
to the Company's members to invest such moneys only
in (A) evidences of indebtedness with a maturity of
180 days or less issued or directly and fully
guaranteed or insured by the United States of
America or any agency or a instrumentality thereof
(provided that the full faith and credit of the
United States of America is pledged in support
thereof); (B) certificates of deposit or acceptances
or Eurodollar time deposits with a maturity of 180
days or less of, and overnight bank deposits with,
any financial institution that is a member of the
Federal Reserve System having combined capital and
surplus and undivided profits of not less that $500
million; (C) commercial paper with a maturity of 180
days or less issued by a corporation that is not an
Affiliate of the Company and is organized under the
laws of any state of the United States or the
District of Columbia and rated at least A-1 by S&P
or at least P-1 by Moody's; and (D) funds which
invest in any of the foregoing; and
(xiv) to authorize such person or persons as shall
form time to time be designated by Brant-Allen to
perform any of the foregoing actions and to execute
or sign any of the foregoing documents (including,
without limitation, any checks or wire transfers
drawn on any bank account of the Company) on behalf
of the Company.
(b) Brant-Allen shall provide the foregoing services
and perform the foregoing duties and responsibilities for
the interest, advantage and profit of the Company,
devoting such of its time and attention as Brant-Allen
deems necessary to perform its duties and obligations set
forth in this Agreement.
(c) Nothing in this Agreement shall be deemed to
derogate from the powers of Brant-Allen to manage the
Company as set forth in the Virginia Limited Liability
Company Act and, in the case of conflict, the provisions
of the Virginia Limited Liability Company Act shall
control.
3. Compensation. During the term of this
Agreement, the Company shall pay to Brant-Allen, without
any set-offs, credits or deductions, a fee equal to 3%
of the Company's annual net sales (that is, the selling
price of newsprint produced by the Company less
transportation costs) payable in advance in monthly
installments (commencing on the date of this Agreement)
based on Brant-Allen's estimate of the Company's net
sales for the forthcoming month and subject to a monthly
reconciliation to reflect the Company's actual net sales
during that month provided that, if any of the Company's
10% senior secured notes due 2007 are outstanding, not
more than one third of such fee shall be paid in cash.
Brant-Allen shall receive no other fees or compensation
for managing the Company but shall be reimbursed for any
direct, out-of-pocket expenses incurred by Brant-Allen on
behalf of the Company. The Company shall bear its own
costs and expenses, including, but not limited to,
operating expenses relating to the Company's assets and
business activities.
4. Term. This Agreement shall commence on
the date of execution of this Agreement and shall
continue in full force and effect until the fifth
anniversary of the date of this Agreement and shall be
renewed automatically for successive five-year periods
unless terminated by either party to this Agreement upon
giving two years written notice to the other party.
5. Indemnification. Brant-Allen shall not be
liable or accountable for damages to the Company, except
for fraud, gross negligence or wilful misconduct. The
Company hereby agrees to indemnify, defend and hold
harmless Brant-Allen and each of its directors, officers
and employees from and against any and all damages,
claims, liabilities, injuries, losses and expenses
(including reasonable attorneys' fees) incurred by Brant-
Allen or any of its directors, officers or employees as a
result of, arising out of or otherwise relating to the
performance by Brant-Allen of its duties under this
Agreement, except for any action or inaction constituting
gross negligence or willful misconduct on the part of
Brant-Allen in the performance of its duties under this
Agreement. Brant-Allen hereby agrees to indemnify,
defend and hold harmless the Company and each of its
directors, officers and employees from and against any
and all damages, claims, liabilities, injuries, losses
and expenses (including reasonable attorneys' fees)
incurred by the Company or any of its directors, officers
or employees as a result of, arising out of or otherwise
relating to any action or inaction constituting gross
negligence or willful misconduct on the part of Brant-
Allen in the performance of its duties under this
Agreement.
6. Company Employee and Other Plans. The
Company hereby agrees that the directors, officers and
employees of Brant-Allen may participate in any employee
stock ownership or option plan, employee benefit plan or
arrangements, defined contribution retirement plan,
employee insurance, long term disabilities, medical and
other plans maintained or sponsored by the Company for
the benefit of its directors, officers and employees.
7. Headings. The headings in this Agreement
are for convenience and reference only and are not part
of the substance of this Agreement.
8. Severability. The parties to this
Agreement expressly agree that it is not the intention of
any of them to violate any public policy, statutory or
common law rules, regulations, or decisions of any
governmental or regulatory body. If any provision of
this Agreement is judicially or administratively
interpreted or construed as being in violation of any
such policy, rule, regulation, or decision, then such
provision, section, sentence, word, clause, or
combination thereof shall be inoperative (and in lieu
thereof there shall be inserted such provision, sentence,
word, clause, or combination thereof as may be valid and
consistent with the intent of the parties under this
Agreement) and the remainder of this Agreement, as
amended, shall remain binding upon the parties hereto,
unless the inoperative provision would cause enforcement
of the remainder of this Agreement to be inequitable
under the circumstances.
9. Further Assurances. Each party to this
Agreement shall cooperate and shall take such further
reasonable action and shall execute and deliver such
further documents as may be reasonably requested by any
of the other parties to this Agreement in order to carry
out the intent and accomplish the purpose of this
Agreement.
10. Notices. All notices pursuant to this
Agreement shall be deemed to have been validly delivered
five days after deposit in the United States mail,
certified mail, return receipt requested, with proper
postage prepaid, or upon receipt thereof (whether by non-
certified mail, facsimile, telegram, express delivery, or
otherwise), whichever is earlier, and addressed to the
party to be notified as follows:
If to the Company, at:
Bear Island Paper Company L.L.C.
P.O. Box 2119
Ashland, VA 23005
If to Brant-Allen, at:
Brant-Allen Industries Inc.
80 Field Point Road
Greenwich, CT 06830
or to such other address as each party may designate for
itself by like notice. Failure or delay in delivering
the courtesy copies of any notice shall in no way
adversely affect the effectiveness of such notice.
11. Successors. This Agreement shall be
binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted
assigns; provided, however, that, except as otherwise
provided in this Agreement, neither party hereto may
delegate its duties or assign its obligations under this
Agreement to any other person or entity without the prior
written consent of the other party hereto which consent
may be granted or withheld in the absolute discretion of
the other party hereto.
12. Remedies. The failure of any party to
enforce any right or remedy under this Agreement, or to
enforce any such right or remedy promptly, shall not
constitute a waiver thereof, nor give rise to any
estoppel against such party nor excuse any other party
from its obligations under this Agreement. Any waiver of
any such right or remedy by any party must be in writing
and signed by the party against which such waiver is
sought to be enforced.
13. Counterparts. This Agreement, executed in
any number of counterparts, shall collectively constitute
one agreement.
14. CHOICE OF LAW. THIS AGREEMENT AND THE
RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS
AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF VIRGINIA.
15. Consent to Jurisdiction. Brant-Allen
hereby consents and submits to the jurisdiction and venue
of the federal and state courts of the Commonwealth of
Virginia, in connection with matters arising out of this
Agreement. The parties hereby waive the right to contest
the jurisdiction and venue of such courts on the ground
of inconvenience or otherwise.
IN WITNESS WHEREOF, the parties have executed
and delivered this Agreement as of date first above
written.
BEAR ISLAND PAPER COMPANY, L.L.P.
By: /s/ Edward D. Sherrick
__________________________
Name: Edward D. Sherrick
Title: Vice President of Finance
BRANT-ALLEN INDUSTRIES, INC.
By: /s/ Edward D. Sherrick
__________________________
Name: Edward D. Sherrick
Title: Vice President of Finance
<PAGE>
Exhibit 10.7
WOOD SUPPLY AGREEMENT
THIS AGREEMENT dated as of the 1st day of December, 1997, between
BEAR ISLAND TIMBERLANDS COMPANY, L.L.C., a Virginia limited liability
company (formerly, Bear Island Timberlands Company, L.P.), ("Seller") and
BEAR ISLAND PAPER COMPANY, L.L.C., a Virginia limited liability company
(formerly, Bear Island Paper Company, L.P.), ("Buyer").
A. Buyer owns and operates a paper manufacturing mill in Hanover
County, Virginia, and requires for its manufacturing operations pine
pulpwood, in the forms of either roundwood or chips, in quantities
exceeding those which can be produced from Buyer's timberlands.
B. Seller now owns approximately 130,000 acres of pine timberlands.
C. Buyer also owns timberlands from which it supplies itself with
pine pulpwood, but Buyer requires pulpwood in addition to that which it can
obtain from its own land.
D. Buyer desires to purchase from Seller, and Seller is willing to
sell to Buyer, annually, 40,000 cord equivalents of wood fiber ("Fiber")
either in form of pine roundwood or pine chips, in each case satisfying
Buyer's specifications, the current versions of which are attached hereto
as Exhibits A and B.
IN CONSIDERATION OF the premises recited above and other good and
valuable consideration, receipt of which is hereby acknowledged, the
parties agree as follows:
1. Sale and Purchase of Fiber. Seller agrees to sell and Buyer agrees
to purchase during each calendar year of the term of this Agreement
(prorated to one-twelfth of the annual amount for the month of December
1997) 40,000 cords of Fiber upon the terms and conditions set forth herein.
The term "Fiber" shall mean either (i) pine logs or roundwood ("Roundwood")
satisfying the Pulpwood Specifications outlined in Exhibit A attached
hereto and made a part hereof or (ii) pine chips ("Chips") satisfying the
Chip Specifications outlined in Exhibit B attached hereto and made a part
hereof. Buyer shall have the absolute right from time to time, and upon
reasonable prior notice to Seller, to change the Specifications contained
in Exhibit A and Exhibit B.
2. Term. The parties agree that the term of this Agreement shall be
for ten years and one month from December 1, 1997.
3. Delivery. Seller agrees to deliver all shipments of Fiber to Buyer
at Buyer's plant located in Hanover County, Virginia, or at such remote
yards as Buyer shall designate to Seller. In addition, Seller agrees to
deliver the Fiber in a manner compatible with Buyer's unloading and
handling equipment. Buyer agrees to use all reasonable manner and means to
expeditiously unload Fiber delivered by Seller. Title to the Fiber shall
belong to Seller and risk of loss shall be upon Seller until delivery to
Buyer. Buyer shall keep and maintain an accurate record of the type and
quantity of all deliveries by Seller made pursuant to this Agreement and
such records shall be subject to reasonable inspection by Seller or its
agents. Upon the request of Seller, Buyer agrees to furnish weight tickets
evidencing the weight of any deliveries made under this Agreement. At the
end of each Pricing Period (defined below) Buyer will give to Seller a
tentative delivery schedule for the next four months which is compatable
with the Buyer's needs and the requirements of this Agreement. Buyer may
require Seller to cease deliveries for reasonable periods to accommodate
Buyer's business needs and schedule.
4. Postponement of Obligations. Seller's obligations to Buyer with
respect to deliveries of Fiber for any period during the term of this
Agreement and within any such period shall be postponed to the extent
reasonably required by adverse logging conditions within Seller's scheduled
procurement areas.
5. Inspection. All deliveries of Fiber shall be subject to inspection
by Buyer or its authorized representatives.
6. Price. Buyer agrees to pay Seller the Current Market Price for the
Wood Fiber sold under this Agreement, priced separately according to
whether it is in the form of Roundwood or Chips, and as weighed at the
scales of Buyer or its designated representative at the place of delivery.
"Current Market Price" for each period of two months (a "Pricing Period")
means, for the purposes of this Agreement, that price per ton which equals
the average price per ton of Roundwood or Chips, as the case may be, paid
by Buyer for Fiber purchased by Buyer from sources other than Seller and
which are not affiliates of either Buyer or Seller during the Pricing
Period, plus Buyer's then current normal hauling rate allowance for each
ton of Fiber delivered, determined by the distance hauled. The parties
agree to accept the weights measured by the scales of Buyer or its
designated representative as conclusive.
7. Payment. All payments due to Seller from Buyer under this
Agreement for deliveries of Fiber to Buyer within a period (the "delivery
period") commencing on Thursday at 11 p.m. local time and ending on the
next following Thursday at 10:59 p.m. local time shall be at a good faith
estimate of the rate for the current Pricing Period and shall be made on
the Monday following such delivery period and shall be accompanied by
copies of scale tickets or load tally sheets to support each such payment.
Buyer may, but shall not be required to, deduct from payments otherwise due
to Seller under this Agreement any amounts paid, at the request of Seller,
directly to any third party from whom Seller has procured Fiber for
delivery to Buyer and for which deductions Buyer accounts to Seller with
its payment to Seller. Within a reasonable time after the end of each
Pricing Period, Buyer and Seller shall determine the Current Market Price
for the Pricing Period and shall make, one to the other, such payment as is
required to correct any aggregate over-or under-payment for Fiber
delivered by Seller to Buyer during such Pricing Period. Upon Seller's
reasonable request, Buyer shall allow Seller to inspect Buyer's Fiber
procurement records at any reasonable time during business hours.
8. Measurements. For purposes of computing volumes and weights of
Fiber for purposes of this Agreement, the following conversion table shall
apply:
One (1) Cord:
Roundwood 128 cubic feet 5150 pounds
Chips 4400 pounds
9. Force Majeure. Neither of the parties hereto shall be liable to
the other for any nonperformance under this Agreement caused by strike,
walk-out, riot, civil war, acts of public enemy and/or acts of God which
prevent the performance of Buyer and Seller under this Agreement.
10. Notices. All notices required to be given under this Agreement
shall be in writing and shall be deemed to have been duly given if
delivered personally or mailed by registered or certified mail, return
receipt requested, postage prepaid, to the parties at the following
addresses:
If to Seller
Bear Island Timberlands Company, L.L.C.
P. O. Box 2119
Ashland, Virginia 23005
Attn: Donald F. August
If to Buyer
Bear Island Paper Company, L.L.C.
P. O. Box 2119
Ashland, Virginia 23005
Attn: David M. Jones
11. Parties in Interest. This Agreement shall be binding upon, inure
to the benefit of, and be enforceable by, the parties hereto and their
respective successors and assigns. This Agreement shall not be assigned
without the prior written consent of the parties.
12. Entire Agreement; Amendments. This Agreement contains the entire
understanding of the parties with respect to the subject matter herein.
This Agreement may be amended only by a written instrument duly executed by
the parties.
13. Governing Law. This Agreement shall be construed and enforced in
accordance with the laws of the Commonwealth of Virginia.
14. Waivers. The waiver by a party of a breach of this Agreement
shall not operate or be construed as a waiver of any subsequent breach.
15. Captions. The captions or titles to individual paragraphs of this
Agreement are intended only to facilitate reference and shall not
contribute to the interpretation of the provisions of this Agreement.
IN WITNESS WHEREOF the parties have executed this Agreement as of the
date first above written.
SELLER
BEAR ISLAND TIMBERLANDS COMPANY, L.L.C.,
a Virginia limited liability company
By: /s/ Edward D. Sherrick
_________________________________
Vice President
BUYER
BEAR ISLAND PAPER COMPANY, L.L.C.,
a Virginia limited liability company
By: /s/ Edward D. Sherrick
__________________________________
Vice President
EXHIBIT A
BEAR ISLAND PAPER COMPANY
PULPWOOD SPECIFICATIONS
All pulpwood must be prepared and delivered in accordance with the
following specifications:
1. SPECIES: Southern Yellow Pines (i.e. Lobiolly, Short
Leaf, Virginia)
2. LENGTH: Pulpwood is acceptable in three length categories:
A. Short Wood: Wood from 4.0 to 9.0 feet long. Wood must not
vary in length by more than 2.0 (two) feet in any bundle
or rack.
B. Bundle Bucker Wood: Wood from 10.0 to 18.0 feet long.
Wood must not vary in length by more than 2.0 (two) feet
in any bundle or rack and must be delivered on equipment
which allows cutting of the wood with the Bundle Bucker
saw.
C. Tree Length: Wood from 20.0 feet up to the maximum
allowable legal length.
3. DIAMETER: The minimum acceptable diameter is 3.0 inches. The
maximum acceptable diameter is 20.0 inches anywhere along the
stick of wood (including knots, limbs, crook, sweep, etc.)
4. PREPARATION: All limbs should be cut as flush to the stem as
possible. Forks should be cut out.
5. UNACCEPTABLE WOOD: Pulpwood sticks exhibiting
evidence of the following are unacceptable and will be
culled.
A. Burned or charred
B. Metal
C. Tar or Asphalt
D. Excessive mud, sand or grit
E. Blue stain if penetration is greater than 1/3 of the
diameter on sticks up to 6 inches in diameter. For sticks
greater than 6 inches if penetration is greater than 2
inches.
F. Rotten Wood (i.e. soggy, crumbly wood)
6. QUALITY INSPECTION: Bear Island Paper Company
reserves the right to dispose of any wood not meeting
these specifications and will not be held accountable
for any sticks determined to be unacceptable. Truck
loads containing in excess of 1/2 cord of cull wood
are subject to rejection. All round-tip freight,
demurrage and other charges incurred by rejected
shipments shall be the responsibility of the supplier.
7. All loads must be delivered on equipment and loaded in such a
manner as to be capable of being unloaded with the equipment
available on Bear Island's woodyard.
EXHIBIT B
BEAR ISLAND PAPER COMPANY
CHIP SPECIFICATIONS
Size: Chipper to be set to cut 1" chips that, when
classified on a Williams Classifier, have the
following percentages retained on the indicated
screens:
Percent Screen Size
55 to 65 5/8 inch and larger
Up to Maximum of 8 3/16 and under
Bark Content: To be maintained at or below 2% by weight.
Blue Stain To be on less than 10% of chips.
<PAGE>
EXHIBIT 10.8(a)
AGREEMENT made this 19th day of May, 1978,
between BEAR ISLAND PAPER COMPANY, a Virginia limited
partnership having its principal office in Hanover County,
Virginia ("Seller") and DOW JONES & COMPANY, Delaware
corporation having offices in South Brunswick, New Jersey
("Buyer").
W I T N E S S E T H:
Section 1. Sale and Purchase: Subject to the
terms and conditions of this Agreement, Seller undertakes
to sell to Buyer and Buyer undertakes to purchase from
Seller a minimum of not less than the following amounts
(expressed in terms of short tons of 2,000 pounds each) of
29/30 pound basis weight standard web offset white
newsprint paper (hereinafter called "newsprint") from the
Commencement Date until the expiration of this Agreement:
Calendar Year Tons of Newsprint
------------- -----------------
1980 17,000
1981 25,000
1982 and each 30,000
year thereafter
Notwithstanding the foregoing, if the Commencement Date is
(i) July 1, 1980, the minimum tonnage for 1980 shall be
15,000 tons, (ii) any subsequent date during 1980, the
minimum tonnage for 1980 shall equal 15,000 multiplied by
a fraction of which the numerator shall be the number of
months remaining in such year commencing with the
Commencement Date and the denominator shall be six (6), or
(iii) any subsequent date, the minimum tonnage for the
year in question shall equal the applicable minimum
tonnage set forth above multiplied by a fraction of which
the numerator shall be the number of months remaining in
such year commencing with the Commencement Date and the
denominator shall be twelve (12). Buyer agrees, however,
to increase the minimum tonnage with respect to any year
prior to 1982, up to 30,000 tons per year, to the extent
its requirements in such year exceed said minimum tonnage
plus the amounts it is then required to purchase under
then existing contracts. The term, "Commencement Date" as
used herein shall mean the first day of the calendar month
following the month in which the newsprint mill which
Seller is presently engaged in constructing in Hanover
County, Virginia (the "Mill") is capable of producing
8,000 short tons of saleable newsprint per month.
Newsprint shall be shipped to and received by Buyer at a
substantially uniform rate throughout the year. Except as
provided in this Section and in Sections 7 and 16 hereof,
Seller and Buyer agree that the minimum quantity of
newsprint to be sold and purchased each year will not be
reduced by either party during the term of this Agreement.
Unless Buyer otherwise consents in writing prior to
shipment, Seller shall only supply Buyer hereunder with
newsprint produced by the Mill.
Section 2. Term: This Agreement shall
terminate on the first to occur of December 31, 2000 or
the December 31 following the twentieth anniversary of the
Commencement Date.
Section 3. Price: The price per ton to be paid
by Buyer shall be the Average Publisher Price per ton for
such newsprint (presently $320 for 30 pound basis weight
newsprint) in effect at the date title passes to Buyer for
shipments of rolls in carload lots, freight allowed or
prepaid to destinations within the continental United
States east of the Mississippi River designated from time
to time by Buyer (hereinafter referred to as the "Basic
Price"). If Buyer requires shipment to a destination
which is not within the area of the continental United
States east of the Mississippi River, freight outside of
said area shall be for Buyer's account. The "Average
Publisher Price" shall mean the average of the publisher
prices publicly quoted from time to time by Bowaters
Southern Paper Corp., International Paper Company, and
Kimberly-Clark Corporation, or the successor of any such
company. If any such company or successor shall cease to
publicly quote such prices for any reason, Seller with
Buyer's consent (which shall not be unreasonably withheld)
shall substitute another, comparable, major newsprint
producer. If Buyer elects to purchase newsprint hereunder
on a basis other than freight allowed or prepaid, the
Basic Price of the newsprint so purchased shall be reduced
in the amount of the "Freight Allowance" then in effect.
The "Freight Allowance" shall mean an amount equal to $17
per ton increased or decreased, as the case may be, by the
percentage by which the I.C.C. published common carrier
rate on newsprint (if Buyer receives by truck), or the
published rate charged by the Southern Freight Association
on groundwood papers (if Buyer receives by rail), changes
between the Commencement Date and the date title passes to
Buyer. If at any time Seller charges any other purchaser
a freight allowed or prepaid price pursuant to a contract
with a term of two or more years which is lower than the
Basic Price and affords the Seller a lower net return,
f.o.b. the Mill, the Basic Price hereunder will be reduced
to equal such lower price.
Section 4. Upcharges: Seller's price increases
(or upcharges) as announced by Seller from time to time
and in effect at the date title passes to Buyer shall
apply to all variations from newsprint in rolls and all
changes from standard basis weight or standard finishes;
such announced price increases will be in accordance with
the announced increases from time to time in the Average
Publisher Price for such newsprint.
Section 5. Agency: Except as to those
shipments as to which Buyer notifies Seller in writing
that Buyer will make shipping arrangements, Buyer
authorizes Seller and Seller hereby undertakes, without
cost to Buyer, to route all shipments hereunder and
determine the carrier and obtain insurance coverage with
respect to newsprint in transit from the Mill to the
destinations specified by Buyer.
Section 6. Title: Title to newsprint shall
pass to Buyer upon the loading on a car or truck at the
Mill consigned to Buyer or to the order of Buyer.
Section 7. Specifications:
(a) The basis weight of newsprint to be
delivered hereunder shall be approximately 30 pounds to
500 sheets 24" x 36", without reference to production
basis; 2-1/2% over or under such basis weight on
individual shipments shall be considered good delivery.
Notwithstanding the foregoing, Buyer may require, and
Seller shall be obligated to produce and sell to Buyer
hereunder, newsprint with a basis weight of 29 pounds or
less, to 500 sheets 24" x 36", at a price determined in
accordance with Sections 3 and 4 hereof, and the minimum
quantity of newsprint to be sold and purchased hereunder
shall be decreased proportionately.
(b) Buyer shall provide Seller by the fifteenth
day of each month with complete specifications (expressed
in tons) respecting core size, roll widths and diameter
for the shipments to be made during the succeeding month;
if Seller does not receive such specifications, Seller may
deliver in accordance with the specifications last
received.
Section 8. Cores: Rolls shall be wound on
nonreturnable paper cores having three inches inside
diameter. Returnable metal tip cores will be furnished at
the request of Buyer. Returnable cores will be charged to
Buyer on a memo basis at the rate of $1.00 per core which
shall be credited to Buyer's account upon their return in
good condition, freight prepaid (unless the parties agree
to other terms), to the Mill.
Section 9. Invoices: Invoices shall be based
on the gross weight of rolls on shipment, including paper,
wrappings, non-returnable cores and plugs but excluding
returnable cores.
Section 10. Truckload or Carload Lots:
Newsprint shall be ordered and shipped in not less than
full forty (40) foot truckload lots or fifty (50) foot
carload lots.
Section 11. Terms of Payment: Terms of payment
shall be net cash not later than the-fifteenth day of the
month for all newsprint delivered during the previous
month.
Section 12. Interest: Interest at the rate of
1/2 of 1% per annum over the prime rate charged from time
to time by Citibank, N.A. in New York City, shall be paid
by Buyer on all unpaid amounts from the due date until the
date of payment.
Section 13. Claims: In case of any claim,
other than a transit claim, arising with respect to any
shipment under this Agreement, Buyer shall notify Seller
thereof in writing fifteen days after the date of
discovery by Buyer of the facts giving rise to such claim
and the newsprint involved will be held by Buyer for
inspection by Seller; if Buyer fails to give such notice,
Buyer will be deemed to have waived such claim. If Seller
fails to inspect the newsprint involved within fifteen
days of receipt of such notice, such claim shall be deemed
to be admitted by Seller. Buyer shall notify Seller of
any transit claim arising with respect to any shipment
hereunder arranged by Seller pursuant to Section 5 hereof
and shall appoint Seller as its agent to take all action
which may be necessary or advisable to prosecute such
claim. Seller undertakes to prosecute any such claim to
the best of its ability.
Section 14. Special or Consequential Damages:
Seller shall not in any event be liable for special or
consequential damages under this Agreement.
Section 15. Newsprint Left on Cores: No
allowance shall be made for waste or after delivery of the
newsprint to Buyer or for newsprint left on cores.
Section 16. Force Majeure: If and whenever
Seller's production or delivery of newsprint is prevented,
impaired, reduced or restricted by reason of force
majeure, strikes, floods, fires, accidents, transportation
contingencies, embargoes, or shortages of water, power,
labor, necessary materials or supplies, war, acts of God,
or the public enemy, riot or civil commotion, compliance
with any law, prohibition, restraint, order, direction,
request, rule or regulation promulgated by any government,
federal, state, or provincial or any subdivision or agency
thereof, or by reason of any construction delays or any
other cause, whether of a similar or dissimilar nature,
beyond its reasonable control, Seller shall first reduce
the quantities of newsprint being supplied to The Bato
Company, Inc. ("Bato"), and all entities controlled by or
under common control with Bato, and, after such quantities
being supplied to Bato and all such entities are reduced
to zero, Seller may without liability reduce the quantity
herein specified in proportion to the reduction or
restriction upon Seller's production for or delivery to
purchasers other than Bato and such entities. If due to
any cause described in the foregoing sentence, or due to
any reduction in Buyer's requirements for newsprint
resulting from decreased consumption, Buyer's ability to
accept or utilize newsprint is prevented, impaired,
reduced or restricted, then Buyer may without liability
reduce the quantity herein specified to be purchased in
proportion to the reduction or restriction upon Buyer's
ability to accept or utilize newsprint, provided that,
before Buyer may reduce the quantity herein specified, it
must first reduce its purchases of newsprint from its
other suppliers to the extent its contracts with such
suppliers permit. In any such case, the newsprint which
Seller is unable to produce or deliver or which Buyer is
unable to accept or utilize shall be eliminated from this
Agreement with respect to the year in which such reduction
occurs and the parties hereto shall be relieved of all
liability with respect thereto. Notwithstanding the
foregoing, Buyer agrees to accept shipments in transit
when any of the foregoing events occurs.
Section 17. Default: If and whenever Buyer
shall fail to pay any amount when due under this Agreement
or subject to Section 16, shall fail to fulfill any other
provision of this Agreement, Seller at its option may,
while such default continues, make deliveries subject to
payment in advance of shipment, or suspend deliveries
under this Agreement, and if such failure or default
continues for thirty (30) days after written notice
thereof Seller may, at its option (whether or not
deliveries have been previously suspended), terminate this
Agreement without incurring any liability for any losses
or damages which may result from any such suspension or
cancellation, without prejudice to Seller's right to
recover all amounts remaining unpaid under this Agreement
and to recover all damages sustained by Seller by reason
of such failure or default.
Section 18. No Waiver: Any condoning, excusing
or overlooking of any default, breach or non-observance by
any party at any time or times in respect of any term or
condition of this Agreement shall not operate as a waiver
of the rights hereunder of such party in respect of any
subsequent default, breach or non-observance.
Section 19. General:
(a) All amounts referred to in this Agreement
are expressed in United States funds.
(b) Neither of the parties hereto shall have
the right to assign any of its rights or obligations under
this Agreement to any other party without the prior
written consent of the other party hereto, except that
Buyer may assign this Agreement to any corporation
controlling, controlled by, or under common control with,
Buyer, and Seller may assign his Agreement to any person,
corporation, partnership or other entity succeeding to the
ownership of the Mill.
(c) Any notice pursuant to this Agreement shall
be delivered personally or sent by registered mail,
addressed as follows (or at such other address as either
party may notify the other of in writing for such
purpose):
To Seller: Bear Island Paper Company
c/o Brant-Allen Industries, Inc.
80 Field Point Road
Greenwich, Connecticut 06830
To Buyer: Dow Jones & Company., Inc,
P.O. Box 300
Princeton, New Jersey 08540
Attention: George Flynn
and shall be deemed to have been received upon delivery
or, if mailed five (5) business days after having been
mailed. Each party shall give prompt notice to the other
of a change of address.
(d) This Agreement shall be interpreted and
construed in accordance with the laws of the State of
Virginia.
IN WITNESS WHEREOF this Agreement has been
executed on the date first written above.
BEAR ISLAND PAPER COMPANY
By BRANT-ALLEN INDUSTRIES, INC.,
General Partner
By /s/ Peter M. Brant
_____________________________
Name: Peter M. Brant
Title: PRESIDENT
DOW JONES & COMPANY, INC.
By /s/ George W. Flynn
_____________________________
Name: George W. Flynn
Title: VICE PRESIDENT
EXHIBIT 10.8(b)
April 1, 1987
Bear Island Paper Company
Route 738
Ashland, Virginia 23005
Dear Sirs:
This will confirm that Sections 1, 2 and 3 of the
newsprint purchase contract between us dated May 19, 1978 are
hereby amended as follows:
Section 1 is hereby amended by adding the following
under the captions "Calendar Year" and "Tons of Newsprint":
Calendar Year Tons of Newsprint
------------- -----------------
1988 and each 50,000
year thereafter
Sections 2 and 3 are hereby amended to read in their
entirety as follows:
Section 2. Term: This Agreement shall terminate on
December 31, 2000, except that it may be extended to December 31,
2004 provided that the parties agree upon new pricing provisions
for the period January 1, 2001 through December 31, 2004. This
Agreement will, however, extend automatically to December 31,
2004 if neither party requests renegotiation of price terms prior
to January 1, 2000.
Section 3. Price: The price to be paid for newsprint
purchased hereunder shall be calculated and paid as follows:
(a) Commencing as of the date hereof, and in each June
and December thereafter, Seller shall make a good faith
estimate of what the Partners' Price (as hereinafter
defined) will equal over the six months commencing January
1, 1987, and each succeeding six months commencing on each
July 1 and January 1 thereafter, and during such six months
Buyer will pay Seller the estimated Partners' Price for
newsprint purchased hereunder. The foregoing pricing
method will apply from January 1, 1987, and accordingly,
Seller shall immediately credit or debit Buyer's account by
the amount that the prices paid by Buyer for newsprint
purchased between January 1, 1987 and the date hereof were
more or less than the estimated Partners' Price set as of
the date hereof.
(b) Buyer may elect to purchase tonnage f.o.b. the
Mill, in which event Buyer will pay the estimated Partners'
Price less the Freight Allowance (as hereinafter defined).
(c) Commencing in January 1988, and in each January
thereafter,'Seller's independent public accountants shall
certify the actual Partners' Price for the immediately
preceding calendar year. If the actual Partners' Price
exceeds the estimates thereof paid by Buyer during such
calendar year, Buyer's account will be debited by the amount
of such excess; on the other hand, if such estimates of the
Partners' Price exceeded the actual Partners' Price, Buyer's
account will be credited by the amount of such excess.
(d) "Partners' Price" means the lesser of (i) Seller's
average publicly announced list price per ton for rolls in
carload or truckload lots, freight allowed or prepaid to
destinations within the continental United States east of
the Mississippi for the calendar year in question, (ii) the
average of the publisher prices publicly quoted from time to
time by Bowaters Southern Paper Corp., Boise Cascade
Corporation (DeRidder mill only), and Kimberly-Clark
Corporation, or their respective successors, (and after
giving effect to any publicly announced across-the-board
discounts), and (iii) the amount resulting from the
following formula:
A + B - C
----------
85,000
Where Accruals: The prices actually received by Seller for
the highest priced 85,000 tons sold by Seller during the calendar
year in question to customers other than Buyer, The Washington
Post Company, and their respective affiliates, provided that
(a) if Seller increases its publicly announced list
price one or more times during the calendar year in
question, said 85,000 tons will be drawn pro rata from the
tonnage sold before and after the price change in proportion
to the number of days in the year that each list price was
in effect (so that, for example, if Seller's list price were
to increase on July 1 of the year in question, 181/365ths
(i.e. 42,151) of the 85,000 "highest priced" tons would be
represented by the 42,151 highest priced tons sold between
January 1 and June 30 of that year; assuming no further
price increases in such year, the remaining 42,849 tons
would be represented by the 42,849 highest priced tons sold
after June 30 of that year); and
(b) if a customer whose purchases of newsprint during
the year in question were among the highest priced 85,000
tons (and thus included in "A") also purchased other
newsprint during such year from Seller at a lower price,
then the price actually received by Seller for such other
newsprint shall be added to "A" and the number of tons of
such other newsprint shall be added to the formula's
denominator; and
Where B equals: The lesser of (i) the Freight Allowance for
each ton of newsprint sold f.o.b. the Mill (the price for which
is included in "A"), and (ii) the difference between the price
for such ton and Seller's average publicly announced list price
per ton at the time such ton was sold; and
Where C equals: The amount by which any freight charges
included in "A" for shipments to destinations west of the
Mississippi or outside the continental United States exceed the
highest freight charges actually paid by Seller during such
calendar year for shipments within the continental United States
east of the Mississippi.
(e) Notwithstanding the foregoing provisions of
Section 3 (d) , if any sales are included in "A" to a
customer who also purchased newsprint during the calendar
year in question from any affiliate of Seller (including
without limitation F.F. Soucy, Inc., F.F. Soucy, Inc. &
Partners, or their respective affiliates) at a lower price
than was charged such customer by Seller, then for purposes
of calculating "A" for such calendar year, the price of the
newsprint sold to such customer by Seller shall not be
deemed to be the amount actually paid for such newsprint,
but shall be deemed to be the average price per ton paid by
such customer for all newsprint purchased during such
calendar year from Seller and Seller's affiliates.
(f) "Freight Allowance" means an amount equal to
$21.45 per ton for customers receiving by rail, and $19.50
per ton for customers receiving by truck, increased or
decreased, as the case may be, by the percentage by which
general transportation costs increase or decrease in the
Eastern United States between January 1, 1987 and the date
title passes to the Buyer or other customer in question. It
shall be Seller's responsibility to make reasonable
assessments annually of whether such general transportation
costs change sufficiently to justify an increase or decrease
pursuant to the foregoing sentence.
If the foregoing accurately reflects our agreement,
please execute this letter agreement in the space provided below.
Very truly yours,
DOW JONES & COMPANY, INC.
By: /s/ Peter S. Skinner
_______________________
Name: Peter S. Skinner
Accepted and agreed upon:
BEAR ISLAND PAPER COMPANY
By: Brant-Allen Industries, Inc.
General Partner
By: /s/ Peter M. Brant
____________________________
Name: Peter M. Brant
EXHIBIT 10.8(c)
December 10, 1991
Bear Island Paper Company
Route 738
Ashland, Virginia 23005
Dear Sirs:
This Agreement will confirm that Section 3 of the newsprint
purchase contract between Bear Island and Dow Jones dated May 19,
1978, and amended on April 1, 1987, is further amended to read in
its entirety as follows:
Section 3. Price: As of January 1, 1992, the price to be
paid for newsprint purchased hereunder shall be calculated and
paid as follows:
(a) Within 20 days of the end of each quarter, The
Washington Post and Dow Jones will each advise Bear Island of its
respective Average Net Transaction Prices for newsprint (as
defined in the following sentence) purchased during the prior
quarter. The Average Net Transaction Price is the weighted
average price (on a freight pre-paid basis) of all Eastern
newsprint purchased by Dow Jones (or The Washington Post) from
regular North American non-equity/partner suppliers providing
10,000 or more tons to Dow Jones (or The Washington Post)
annually; prices will be adjusted for basis weight as set forth
in subsection (e) below.
During the last 10 days of each January, April, July and
October, Seller shall make a good faith estimate of what the
Partners' Price (as hereinafter defined) will equal during the
current quarter, and during such quarter Buyer will pay Seller
the estimated Partners' Price for newsprint.
In each January Bear Island will make a determination of the
actual Partners' Price for the immediately preceding calendar
year. If the actual Partners' Price exceeds the estimates
thereof paid by Dow Jones during such calendar year, Dow Jones's
account will be debited by the amount of such excess; on the
other hand, if such estimates of the Partners' Price exceeded the
actual Partners' Price, Dow Jones's account will be credited by
the amount of such excess.
(b) Buyer may elect to purchase tonnage f.o.b. the Mill, in
which event Buyer will pay the estimated Partners' Price less the
Freight Allowance (as hereinafter defined).
(c) In each January Dow Jones's and The Washington Post's
independent public accountants shall certify the accuracy of
their respective Average Net Transaction Prices submitted to
Seller for the preceding year. In each January Seller's
independent public accountants shall certify Seller's calculation
of the actual Partner's Price for the immediately preceding year.
(d) "Partners' Price," means the average of the annual
Average Net Transaction Price of The Washington Post and Dow
Jones, weighted equally, such average not to be more than two
percent (2%) above nor less than two percent (2%) below Seller's
weighted average price for all tonnage sold to non-partners
during the calendar year. Prices will be adjusted for basis
weight as set forth in subsection (e) below.
(e) Unless the parties agree otherwise, prices for all
tonnage will be converted on a straight pro-rata basis into an
equivalent 48.8 gram basis weight price for making calculations.
(f) "Freight Allowance" for 1992 means an amount equal to
$23.54 per ton for customers receiving by rail, and $20.77 per
ton for customers receiving by truck. Commencing in January 1993
and in each January thereafter, the Freight Allowance for the
current calendar year shall be increased or decreased, as the
case may be, by the percentage by which Bear Island's average
annual transportation costs per ton for rail and truck increased
or decreased in the Eastern United States during the preceding
year over such costs during the prior year.
If the foregoing accurately reflects our agreement, please
execute this letter agreement in the space provided below.
Very truly yours,
DOW JONES & COMPANY, INC.
By: /s/ James H. Ottaway Jr.
___________________________
Name: James H. Ottaway Jr.
Accepted and agreed upon: Accepted and agreed upon for
BEAR ISLAND PAPER COMPANY purposes of providing and
verifying past prices:
By: Brant-Allen Industries, Inc. THE WASHINGTON POST COMPANY
General Partner
By: /s/ Peter M. Brant By: /s/ Martin Cohen
____________________________ __________________________
Name: Peter M. Brant Martin Cohen
EXHIBIT 10.8(d)
August 10, 1993
Bear Island Paper Company
Route 738
Ashland, Virginia 23005
Dear Sirs:
This Agreement will confirm that the newsprint purchase
contract between Bear Island and The Washington Post dated May
19, 1978, and amended on April 1, 1987 and December 10, 1991 is
further amended as follows:
In the first sentence of Section 3, the words "January
1, 1992" shall be deleted, and the words "July 1, 1993" shall be
substituted in place thereof.
The first sentence of Section 3(d) shall end after the
word "equally" and the remainder of the sentence ("such average
not...calendar year") shall be deleted.
In all other respects, the contract shall remain the
same.
If the foregoing accurately reflects our agreement,
please execute this letter agreement in the space provided below.
Very truly yours,
THE WASHINGTON POST COMPANY
By: /s/ Martin Cohen
_____________________________
Name: Martin Cohen
Accepted and agreed upon: Accepted and agreed upon for
BEAR ISLAND PAPER COMPANY purposes of providing and verifying
past prices:
By: Brant-Allen Industries, DOW JONES & COMPANY, Inc.
Inc.
General Partner
By: /s/ Joseph Allen By: /s/ Kevin J. Roche
______________________ ____________________________
Name: Joseph Allen Name: Kevin J. Roche
EXHIBIT 10.8(e)
April 22, 1996
Bear Island Paper Company
Route 738
Ashland, Virginia 23005
Dear Sirs:
This Agreement will confirm that the newsprint purchase
contract between Bear Island and Dow Jones & Co. Inc. dated May
19, 1978, and amended on April 1, 1987, December 10, 1991, and
August 10, 1993, is further amended for the period January 1,
1996, through December 31, 1996, as follows:
In the first sentence of Section 3, the words "January 1,
1993," shall be deleted, and the words "January 1, 1996" shall be
substituted in place thereof.
The third paragraph of Section 3(a) ("In each January . . .
amount of such excess") shall be deleted, and the following
paragraph shall be substituted in place thereof:
In each January Bear Island will determine the actual
Partners' Price for each quarter of the immediately preceding
calendar year. If the actual Partners' Price for any such
quarter exceeded the estimates thereof paid by Dow Jones
during such quarter, Dow Jones's account will be debited by
the amount of such excess; on the other hand, if such
estimates of the Partners' Price for any such quarter exceeded
the actual Partners' Price for such quarter, Dow Jones's
account will be credited by the amount of such excess.
Section 3(d) ("'Partners' Price' means . . . subsection (e)
below") shall be deleted, and the following subsection shall be
substituted in place thereof:
(d) "Partners' Price" means, for any calendar quarter, the
average of the Average Net Transaction Price of The Washington
Post and Dow Jones, weighted equally, for newsprint purchased
by each of them during such quarter. Prices will be adjusted
for basis weight as set forth in subsection (e) below.
In all other respects, the contract shall remain the same.
Bear Island Paper Company
April 22, 1996
Page 2
If the foregoing accurately reflects our agreement, please
execute this letter agreement in the space provided below.
Very truly yours,
DOW JONES & COMPANY, Inc.
By: /s/ Kevin J. Roche
__________________________
Name: Kevin J. Roche
Accepted and agreed upon: Accepted and agreed upon for
purposes of providing and verifying
BEAR ISLAND PAPER COMPANY past prices:
By: Brant-Allen Industries, Inc. THE WASHINGTON POST
General Partner
By: /s/ Edward D. Sherrick By: /s/ Boisfeuillet Jones Jr.
________________________ _____________________________
Name: Esward D. Sherrick Name: Boisfeuillet Jones Jr.
<PAGE>
EXHIBIT 10.9(a)
AGREEMENT made this 19th day of May, 1978,
between BEAR ISLAND PAPER COMPANY, a Virginia limited
partnership having its principal office in Hanover County,
Virginia ("Seller") and THE WASHINGTON POST COMPANY, a
Delaware corporation having its principal place of business
at 1150 15th Street, N.W., Washington, D.C. ("Buyer").
W I T N E S S E T H
Section 1. Sale and Purchase: Subject to the
terms and conditions of his Agreement, Seller undertakes to
sell to Buyer and Buyer undertakes to purchase from Seller
a minimum of not less than the following amounts (expressed
in terms of short tons of 2,000 pounds each) of 29/30 pound
basis weight standard web offset white newsprint paper
(hereinafter called "newsprint") from the Commencement Date
until the expiration of this Agreement:
Calendar Year Tons of Newsprint
------------- -----------------
1980 11,000
1981 22,500
1982 30,000
1983 and each 50,000
year thereafter
If the Commencement Date occurs in a year after 1980, the
minimum tonnage for such year shall be adjusted by
multiplying it by a fraction of which the numerator shall
be the number of remaining months of such year commencing
with the Commencement Date and the denominator shall be
twelve (12), but Buyer agrees to increase the minimum
tonnage with respect to any year prior to 1983, up to
50,000 tons per year, to the extent its requirements in
such year exceed said minimum tonnage plus the amounts it
is then required to purchase under then existing contracts.
The term "Commencement Date" as used herein shall mean the
first day of the calendar month following the month in
which the newsprint mill which Seller is presently engaged
in constructing in Hanover County, Virginia (the "Mill") is
capable of producing 8,000 short tons of saleable newsprint
per month. Newsprint shall be shipped to and received by
Buyer at a substantially uniform rate throughout the year.
Except as provided in this Section and in Sections 7 and 16
hereof, Seller and Buyer agree that the minimum quantity of
newsprint to be sold and purchased each year will not be
reduced by either party during the term of this Agreement.
Unless Buyer otherwise consents in writing prior to
shipment, Seller shall only supply Buyer hereunder with
newsprint produced by the Mill.
Section 2.. Term: This Agreement shall
terminate on the first to occur of December 31, 2000 or the
December 31 following the twentieth anniversary of the
Commencement Date.
Section 3. Price: The price per ton to be paid
by Buyer shall be the Average Publisher Price per ton for
such newsprint (presently $320 for 30 pound basis weight
newsprint) in effect at the date title passes to Buyer for
shipments of rolls in carload lots, freight allowed or
prepaid to destinations within the continental United
States east of the Mississippi River designated from time
to time by Buyer (hereinafter referred to as the "Basic
Price"). If Buyer requires shipment to a destination which
is not within the area of the continental United States
east of the Mississippi River, freight outside of said area
shall be for Buyer's account. The "Average Publisher
Price" shall mean the average of the publisher prices
publicly quoted from time to time by Bowaters Southern
Paper Corp., International Paper Company, and Kimberly-
Clark Corporation, or the successor of any such company.
If any such company or successor shall cease to publicly
quote such prices for any reason, Seller with Buyer's
consent (which shall not be unreasonably withheld) shall
substitute another, comparable, major newsprint producer.
If Buyer elects to purchase newsprint hereunder on a basis
other than freight allowed or prepaid, the Basic Price of
the newsprint so purchased shall be reduced in the amount
of the "Freight Allowance" then in effect. The "Freight
Allowance" shall mean an amount equal to $17 per ton
increased or decreased, as the case may be, by the
percentage by which the I.C.C. published common carrier
rate on newsprint (if Buyer receives by truck), or the
published rate charged by the Southern Freight Association
on groundwood papers (if Buyer receives by rail), changes
between the Commencement Date and the date title passes to
Buyer. If at any time Seller charges any other purchaser a
freight allowed or prepaid price pursuant to a contract
with a term of two or more years which is lower than the
Basic Price and affords the Seller a lower net return,
f.o.b. the Mill, the Basic Price hereunder will be reduced
to equal such lower price.
Section 4. Upcharges: Seller's price increases
(or upcharges) as announced by Seller from time to time and
in effect at the date title passes to Buyer shall apply to
all variations from newsprint in rolls and all changes from
standard basis weight or standard finishes; such announced
price increases will be in accordance with the announced
increases from time to time in the Average Publisher Price
for such newsprint.
Section 5. Agency: Except as to those shipments
as to which Buyer notifies Seller in writing that Buyer
will make shipping arrangements, Buyer authorizes Seller
and Seller hereby undertakes, without cost to Buyer, to
route all shipments hereunder and determine the carrier and
obtain insurance coverage with respect to newsprint in
transit from the Mill to the destinations specified by
Buyer.
Section 6. Title: Title to newsprint shall pass
to Buyer upon the loading on a car or truck at the Mill
consigned to Buyer or to the order of Buyer.
Section 7. Specifications:
(a) The basis weight of newsprint to be
delivered hereunder shall be approximately 30 pounds to 500
sheets 24' x 36", without reference to production basis;
2-1/2% over or under such basis weight on individual
shipments shall be considered good delivery.
Notwithstanding the foregoing, Buyer may require, and
Seller shall be obligated to produce and sell to Buyer
hereunder, newsprint with a basis weight of 29 pounds or
less, to 500 sheets 24" x 36", at a price determined in
accordance with Sections 3 and 4 hereof, and the minimum
quantity of newsprint to be sold and purchased hereunder
shall be decreased proportionately.
(b) Buyer shall Provide Seller by the fifteenth
day of each month with complete specifications (expressed
in tons) respecting core size, roll widths and diameter -
for the shipments to be made during the succeeding month;
if Seller does not receive such specifications, Seller may
deliver in accordance with the specifications last
received.
Section 8. Cores: Rolls shall be wound on
nonreturnable paper cores having three inches inside
diameter. Returnable metal tip cores will be furnished at
the request of Buyer. Returnable cores will be charged to
Buyer on a memo basis at the rate of $1.00 per core which
shall be credited to Buyer's account upon their return in
good condition, freight prepaid (unless the parties agree
to other terms), to the Mill.
Section 9. Invoices: Invoices shall be based on
the gross weight of rolls on shipment, including paper,
wrappings, nonreturnable cores and plugs but excluding
returnable cores.
Section 10. Truckload or Carload Lots:
Newsprint shall be ordered and shipped in not less than
full forty (40) foot truckload lots or fifty (50) foot
carload lots.
Section 11. Terms of Payment: Terms of payment
shall be net cash net cash not later than the fifteenth day
of the month for all newsprint delivered during the
previous month.
Section 12. Interest: Interest at the rate of
1/2 of 1% per annum over the prime rate charged from time
to time by Citibank, N.A. in New York City, shall be paid
by Buyer on all unpaid amounts from the due date until the
date of payment.
Section 13. Claims: In case of any claim, other
than a transit claim, arising with respect to any shipment
under this Agreement, Buyer shall notify Seller thereof in
writing fifteen days after the date of discovery by Buyer
of the facts giving rise to such claim and the newsprint
involved will be held by Buyer for inspection by Seller; if
Buyer fails to give such notice, Buyer will be deemed to
have waived such claim. If Seller fails to inspect the
newsprint involved within fifteen days of receipt of such
notice, such claim shall be deemed to be admitted by
Seller. Buyer shall notify Seller of any transit claim
arising with respect to any shipment hereunder arranged by
Seller pursuant to Section 5 hereof and shall appoint
Seller as its agent to take all action which may be
necessary or advisable to prosecute such claim. Seller
undertakes to prosecute any such claim to the best of its
ability.
Section 14. Special or Consequential Damages:
Seller shall not in any event be liable for special or
consequential damages under this Agreement.
Section 15. Newsprint Left on Cores: No
allowance shall be made for waste or damage after delivery
of the newsprint to Buyer or for newsprint left on cores.
Section 16. Force Majeure: If and whenever
Seller's production or delivery of newsprint is prevented,
impaired, reduced or restricted by reason of force majeure,
strikes, floods, fires, accidents, transportation
contingencies, embargoes, or shortages of water, power,
labor, necessary materials or supplies, war, acts of God,
or the public enemy, riot or civil commotion, compliance
with any law, prohibition, restraint, order, direction,
request, rule or regulation promulgated by any government,
federal, state, or provincial or any subdivision or agency
thereof, or by reason of any construction delays or any
other cause, whether of a similar or dissimilar nature,
beyond its reasonable control, Seller shall first reduce
the quantities of newsprint being supplied to The Bato
Company, Inc. ("Bato"), and all entities controlled by or
under common control with Bato, and, after such quantities
being supplied to Bato and all such entities are reduced to
zero, Seller may without liability reduce the quantity
herein specified in proportion to the reduction or
restriction upon Seller's Production for or delivery to
purchasers other than Bato and such entities. If due to
any cause described in the foregoing sentence, or due to
any reduction in Buyer's requirements for newsprint
resulting from decreased consumption, Buyers ability to
accept or utilize newsprint is prevented, impaired reduced
or restricted, then Buyer may without liability reduce the
quantity herein specified to be purchased in proportion to
the reduction or restriction upon Buyer's ability to accept
or utilize newsprint, provided that, before Buyer may
reduce the quantity herein specified, it must first reduce
its purchases of newsprint from its other suppliers to the
extent its contracts with such suppliers permit. In any
such case, the newsprint which Seller is unable to produce
or deliver or which Buyer is unable to accept or utilize
shall be eliminated from this Agreement with respect to the
year in which such reduction occurs and the parties hereto
shall be relieved of all liability with respect thereto.
Notwithstanding the foregoing, Buyer agrees to accept
shipments in transit when any of the foregoing events
occurs.
Section 17. Default: If and whenever Buyer
shall fail to pay any amount when due under this Agreement
or subject to Section 16, shall fail to fulfill any other
provision of this Agreement, Seller at its option may,
while such default continues, make deliveries subject to
payment in advance of shipment, or suspend deliveries under
this Agreement, and if such failure or default continues
for thirty (30) days after written notice thereof Seller
may, at its option (whether or not deliveries have been
previously suspended), terminate this Agreement without
incurring any liability for any losses or damages which may
result from any such suspension or cancellation, without
prejudice to Seller's right to recover all amounts
remaining unpaid under this Agreement and to recover all
damages sustained by Seller by reason of such failure or
default.
Section 18. No Waiver: Any condoning, excusing
or overlooking of any default, breach or non-observance by
any party at any time or times in respect of any term or
condition of this Agreement shall not operate as a waiver
of the rights hereunder of such party in respect of any
subsequent default, breach or non-observance.
Section 19. General:
(a) All amounts referred to in this Agreement
are expressed in United States funds.
(b) Neither of the parties hereto shall have the
right to assign any of its rights or obligations under this
Agreement to any other party without the prior written
consent of the other party hereto, except that Buyer may
assign this Agreement to any corporation controlling,
controlled by, or under common control with, Buyer, and
Seller may assign this Agreement to any person,
corporation, partnership or other entity succeeding to the
ownership of the Mill.
(c) Any notice pursuant to this Agreement shall
be delivered personally or sent by registered mail,
addressed as follows (or at such other address as either
party may notify the other of in writing for such purpose):
To Seller: Bear Island Paper Company
c/o Brant-Allen Industries, Inc.
80 Field Point Road
Greenwich, Connecticut 06830
To Buyer: The Washington Post Company
1150 15th Street, N.W.
Washington, D.C. 70071
Attention: Virgil Schroeder
and shall be deemed to have been received upon delivery or,
if mailed five (5) business days after having been mailed.
Each party shall give prompt notice to the other of a
change of address.
(d) This Agreement shall be interpreted and
construed in accordance with the laws of the State of
Virginia.
IN WITNESS WHEREOF this Agreement has been
executed on the date first written above.
BEAR ISLAND PAPER COMPANY
By BRANT-ALLEN INDUSTRIES, INC.,
General Partner
By: /s/ Peter M. Brant
________________________________
Name: Peter M. Brant
THE WASHINGTON POST COMPANY
By: /s/ Christopher M. Little
________________________________
Name: Christopher M. Little
EXHIBIT 10.9(b)
April 1, 1987
Bear Island Paper Company
Route 738
Ashland, Virginia 23005
Dear Sirs:
This will confirm that Sections 1, 2 and 3 of the
newsprint purchase contract between us dated May 19, 1978 are
hereby amended as follows:
Section 1 is hereby amended by adding the following
under the captions "Calendar Year" and "Tons of Newsprint":
Calendar Year Tons of Newsprint
------------- -----------------
1988 and each 50,000
year thereafter
Sections 2 and 3 are hereby amended to read in their
entirety as follows:
Section 2. Term: This Agreement shall terminate on
December 31, 2000, except that it may be extended to December 31,
2004 provided that the parties agree upon new pricing provisions
for the period January 1, 2001 through December 31, 2004. This
Agreement will, however, extend automatically to December 31,
2004 if neither party requests renegotiation of price terms prior
to January 1, 2000.
Section 3. Price: The price to be paid for newsprint
purchased hereunder shall be calculated and paid as follows:
(a) Commencing as of the date hereof, and in each June
and December thereafter, Seller shall make a good faith
estimate of what the Partners' Price (as hereinafter
defined) will equal over the six months commencing January
1, 1987, and each succeeding six months commencing on each
July 1 and January 1 thereafter, and during such six months
Buyer will pay Seller the estimated Partners' Price for
newsprint purchased hereunder. The foregoing pricing
method will apply from January 1, 1987, and accordingly,
Seller shall immediately credit or debit Buyer's account by
the amount that the prices paid by Buyer for newsprint
purchased between January 1, 1987 and the date hereof were
more or less than the estimated Partners' Price set as of
the date hereof.
(b) Buyer may elect to purchase tonnage f.o.b. the
Mill, in which event Buyer will pay the estimated Partners'
Price less the Freight Allowance (as hereinafter defined).
(c) Commencing in January 1988, and in each January
thereafter,'Seller's independent public accountants shall
certify the actual Partners' Price for the immediately
preceding calendar year. If the actual Partners' Price
exceeds the estimates thereof paid by Buyer during such
calendar year, Buyer's account will be debited by the amount
of such excess; on the other hand, if such estimates of the
Partners' Price exceeded the actual Partners' Price, Buyer's
account will be credited by the amount of such excess.
(d) "Partners' Price" means the lesser of (i) Seller's
average publicly announced list price per ton for rolls in
carload or truckload lots, freight allowed or prepaid to
destinations within the continental United States east of
the Mississippi for the calendar year in question, (ii) the
average of the publisher prices publicly quoted from time to
time by Bowaters Southern Paper Corp., Boise Cascade
Corporation (DeRidder mill only), and Kimberly-Clark
Corporation, or their respective successors, (and after
giving effect to any publicly announced across-the-board
discounts), and (iii) the amount resulting from the
following formula:
A + B - C
----------
85,000
Where Accruals: The prices actually received by Seller for
the highest priced 85,000 tons sold by Seller during the calendar
year in question to customers other than Buyer, The Washington
Post Company, and their respective affiliates, provided that
(a) if Seller increases its publicly announced list
price one or more times during the calendar year in
question, said 85,000 tons will be drawn pro rata from the
tonnage sold before and after the price change in proportion
to the number of days in the year that each list price was
in effect (so that, for example, if Seller's list price were
to increase on July 1 of the year in question, 181/365ths
(i.e. 42,151) of the 85,000 "highest priced" tons would be
represented by the 42,151 highest priced tons sold between
January 1 and June 30 of that year; assuming no further
price increases in such year, the remaining 42,849 tons
would be represented by the 42,849 highest priced tons sold
after June 30 of that year); and
(b) if a customer whose purchases of newsprint during
the year in question were among the highest priced 85,000
tons (and thus included in "A") also purchased other
newsprint during such year from Seller at a lower price,
then the price actually received by Seller for such other
newsprint shall be added to "A" and the number of tons of
such other newsprint shall be added to the formula's
denominator; and
Where B equals: The lesser of (i) the Freight Allowance for
each ton of newsprint sold f.o.b. the Mill (the price for which
is included in "A"), and (ii) the difference between the price
for such ton and Seller's average publicly announced list price
per ton at the time such ton was sold; and
Where C equals: The amount by which any freight charges
included in "A" for shipments to destinations west of the
Mississippi or outside the continental United States exceed the
highest freight charges actually paid by Seller during such
calendar year for shipments within the continental United States
east of the Mississippi.
(e) Notwithstanding the foregoing provisions of
Section 3 (d) , if any sales are included in "A" to a
customer who also purchased newsprint during the calendar
year in question from any affiliate of Seller (including
without limitation F.F. Soucy, Inc., F.F. Soucy, Inc. &
Partners, or their respective affiliates) at a lower price
than was charged such customer by Seller, then for purposes
of calculating "A" for such calendar year, the price of the
newsprint sold to such customer by Seller shall not be
deemed to be the amount actually paid for such newsprint,
but shall be deemed to be the average price per ton paid by
such customer for all newsprint purchased during such
calendar year from Seller and Seller's affiliates.
(f) "Freight Allowance" means an amount equal to
$21.45 per ton for customers receiving by rail, and $19.50
per ton for customers receiving by truck, increased or
decreased, as the case may be, by the percentage by which
general transportation costs increase or decrease in the
Eastern United States between January 1, 1987 and the date
title passes to the Buyer or other customer in question. It
shall be Seller's responsibility to make reasonable
assessments annually of whether such general transportation
costs change sufficiently to justify an increase or decrease
pursuant to the foregoing sentence.
If the foregoing accurately reflects our agreement,
please execute this letter agreement in the space provided below.
Very truly yours,
DOW JONES & COMPANY, INC.
By: /s/ Peter S. Skinner
_______________________
Name: Peter S. Skinner
Accepted and agreed upon:
BEAR ISLAND PAPER COMPANY
By: Brant-Allen Industries, Inc.
General Partner
By: /s/ Peter M. Brant
____________________________
Name: Peter M. Brant
EXHIBIT 10.9(b)
December 10, 1991
Bear Island Paper Company
Route 738
Ashland, Virginia 23005
Dear Sirs:
This Agreement will confirm that Section 3 of the newsprint
purchase contract between Bear Island and Dow Jones dated May 19,
1978, and amended on April 1, 1987, is further amended to read in
its entirety as follows:
Section 3. Price: As of January 1, 1992, the price to be
paid for newsprint purchased hereunder shall be calculated and
paid as follows:
(a) Within 20 days of the end of each quarter, The
Washington Post and Dow Jones will each advise Bear Island of its
respective Average Net Transaction Prices for newsprint (as
defined in the following sentence) purchased during the prior
quarter. The Average Net Transaction Price is the weighted
average price (on a freight pre-paid basis) of all Eastern
newsprint purchased by Dow Jones (or The Washington Post) from
regular North American non-equity/partner suppliers providing
10,000 or more tons to Dow Jones (or The Washington Post)
annually; prices will be adjusted for basis weight as set forth
in subsection (e) below.
During the last 10 days of each January, April, July and
October, Seller shall make a good faith estimate of what the
Partners' Price (as hereinafter defined) will equal during the
current quarter, and during such quarter Buyer will pay Seller
the estimated Partners' Price for newsprint.
In each January Bear Island will make a determination of the
actual Partners' Price for the immediately preceding calendar
year. If the actual Partners' Price exceeds the estimates
thereof paid by Dow Jones during such calendar year, Dow Jones's
account will be debited by the amount of such excess; on the
other hand, if such estimates of the Partners' Price exceeded the
actual Partners' Price, Dow Jones's account will be credited by
the amount of such excess.
(b) Buyer may elect to purchase tonnage f.o.b. the Mill, in
which event Buyer will pay the estimated Partners' Price less the
Freight Allowance (as hereinafter defined).
(c) In each January Dow Jones's and The Washington Post's
independent public accountants shall certify the accuracy of
their respective Average Net Transaction Prices submitted to
Seller for the preceding year. In each January Seller's
independent public accountants shall certify Seller's calculation
of the actual Partner's Price for the immediately preceding year.
(d) "Partners' Price," means the average of the annual
Average Net Transaction Price of The Washington Post and Dow
Jones, weighted equally, such average not to be more than two
percent (2%) above nor less than two percent (2%) below Seller's
weighted average price for all tonnage sold to non-partners
during the calendar year. Prices will be adjusted for basis
weight as set forth in subsection (e) below.
(e) Unless the parties agree otherwise, prices for all
tonnage will be converted on a straight pro-rata basis into an
equivalent 48.8 gram basis weight price for making calculations.
(f) "Freight Allowance" for 1992 means an amount equal to
$23.54 per ton for customers receiving by rail, and $20.77 per
ton for customers receiving by truck. Commencing in January 1993
and in each January thereafter, the Freight Allowance for the
current calendar year shall be increased or decreased, as the
case may be, by the percentage by which Bear Island's average
annual transportation costs per ton for rail and truck increased
or decreased in the Eastern United States during the preceding
year over such costs during the prior year.
If the foregoing accurately reflects our agreement, please
execute this letter agreement in the space provided below.
Very truly yours,
DOW JONES & COMPANY, INC.
By: /s/ James H. Ottaway Jr.
___________________________
Name: James H. Ottaway Jr.
Accepted and agreed upon: Accepted and agreed upon for
BEAR ISLAND PAPER COMPANY purposes of providing and
verifying past prices:
By: Brant-Allen Industries, Inc. THE WASHINGTON POST COMPANY
General Partner
By: /s/ Peter M. Brant By: /s/ Martin Cohen
____________________________ __________________________
Name: Peter M. Brant Martin Cohen
EXHIBIT 10.9(c)
August 10, 1993
Bear Island Paper Company
Route 738
Ashland, Virginia 23005
Dear Sirs:
This Agreement will confirm that the newsprint purchase
contract between Bear Island and The Washington Post dated May
19, 1978, and amended on April 1, 1987 and December 10, 1991 is
further amended as follows:
In the first sentence of Section 3, the words "January
1, 1992" shall be deleted, and the words "July 1, 1993" shall be
substituted in place thereof.
The first sentence of Section 3(d) shall end after the
word "equally" and the remainder of the sentence ("such average
not...calendar year") shall be deleted.
In all other respects, the contract shall remain the
same.
If the foregoing accurately reflects our agreement,
please execute this letter agreement in the space provided below.
Very truly yours,
THE WASHINGTON POST COMPANY
By: /s/ Martin Cohen
_____________________________
Name: Martin Cohen
Accepted and agreed upon: Accepted and agreed upon for
BEAR ISLAND PAPER COMPANY purposes of providing and verifying
past prices:
By: Brant-Allen Industries, DOW JONES & COMPANY, Inc.
Inc.
General Partner
By: /s/ Joseph Allen By: /s/ Kevin J. Roche
______________________ ____________________________
Name: Joseph Allen Name: Kevin J. Roche
EXHIBIT 10.9(d)
April 22, 1996
Bear Island Paper Company
Route 738
Ashland, Virginia 23005
Dear Sirs:
This Agreement will confirm that the newsprint purchase
contract between Bear Island and Dow Jones & Co. Inc. dated May
19, 1978, and amended on April 1, 1987, December 10, 1991, and
August 10, 1993, is further amended for the period January 1,
1996, through December 31, 1996, as follows:
In the first sentence of Section 3, the words "January 1,
1993," shall be deleted, and the words "January 1, 1996" shall be
substituted in place thereof.
The third paragraph of Section 3(a) ("In each January . . .
amount of such excess") shall be deleted, and the following
paragraph shall be substituted in place thereof:
In each January Bear Island will determine the actual
Partners' Price for each quarter of the immediately preceding
calendar year. If the actual Partners' Price for any such
quarter exceeded the estimates thereof paid by Dow Jones
during such quarter, Dow Jones's account will be debited by
the amount of such excess; on the other hand, if such
estimates of the Partners' Price for any such quarter exceeded
the actual Partners' Price for such quarter, Dow Jones's
account will be credited by the amount of such excess.
Section 3(d) ("'Partners' Price' means . . . subsection (e)
below") shall be deleted, and the following subsection shall be
substituted in place thereof:
(d) "Partners' Price" means, for any calendar quarter, the
average of the Average Net Transaction Price of The Washington
Post and Dow Jones, weighted equally, for newsprint purchased
by each of them during such quarter. Prices will be adjusted
for basis weight as set forth in subsection (e) below.
In all other respects, the contract shall remain the same.
Bear Island Paper Company
April 22, 1996
Page 2
If the foregoing accurately reflects our agreement, please
execute this letter agreement in the space provided below.
Very truly yours,
DOW JONES & COMPANY, Inc.
By: /s/ Kevin J. Roche
__________________________
Name: Kevin J. Roche
Accepted and agreed upon: Accepted and agreed upon for
purposes of providing and verifying
BEAR ISLAND PAPER COMPANY past prices:
By: Brant-Allen Industries, Inc. THE WASHINGTON POST
General Partner
By: /s/ Edward D. Sherrick By: /s/ Boisfeuillet Jones Jr.
________________________ _____________________________
Name: Esward D. Sherrick Name: Boisfeuillet Jones Jr.
<PAGE>
EXHIBIT 12.1
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
PRO FORMA
-----------------------------
NINE MONTHS
NINE MONTHS YEAR ENDED ENDED
YEARS ENDED DECEMBER 31, ENDED SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30,
------------------------------------------------------------------------- -------------- ------------
1992 1993 1994 1995 1996 1996 1997 1996 1997
--------- ---------- ---------- --------- --------- --------- -------- -------------- ------------
(DOLLARS IN THOUSANDS) (UNAUDITED)
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
EARNINGS
INCOME BEFORE INCOME
TAXES,
EXTRAORDINARY CHARGE,
CUMULATIVE EFFECT OF
ACCOUNTING CHANGES AND
DISCONTINUED OPERATIONS... $(9,589) $(2,419) $(4,567) $22,269 $19,423 $19,348 $1,804 $ 5,346 $(7,470)
INTEREST EXPENSE, NET
OF CAPITALIZED INTEREST... 7,716 6,345 6,194 5,986 5,398 4,059 3,592 20,303 14,799
PORTION OF RENTS
REPRESENTATIVE OF
INTEREST FACTOR........... 0 3 3 2 2 2 1 2 1
AMORTIZATION OF
CAPITALIZED INTEREST...... 0 45 67 67 67 50 50 67 50
--------- ---------- ---------- --------- --------- --------- -------- -------------- -------------
TOTAL EARNINGS............ $(1,873) $ 3,974 $ 1,697 $28,324 $24,890 $23,459 $5,447 $25,718 $ 7,380
========= ========== ========== ========= ========= ========= ======== ============== =============
FIXED CHARGES
INTEREST EXPENSES
(BEFORE DEDUCTING
CAPITALIZED INTEREST)..... 7,716 7,282 6,714 6,053 5,465 4,109 3,642 20,370 14,849
PORTION OF RENTS
REPRESENTATIVE OF
INTEREST FACTOR........... 0 3 3 2 2 2 1 2 1
--------- ---------- ---------- --------- --------- --------- -------- -------------- -------------
TOTAL FIXED CHARGES....... $ 7,716 $ 7,285 $ 6,717 $ 6,055 $ 5,467 $ 4,111 $3,643 $20,372 $14,850
========= ========== ========== ========= ========= ========= ======== ============== =============
RATIO OF EARNINGS
TO FIXED CHARGES ......... (.243) .546 .253 4.678 4.553 5.706 1.495 1.262 .497
========= ========== ========== ========= ========= ========= ======== ============== =============
</TABLE>
<PAGE>
EXHIBIT 21.1
SUBSIDIARIES OF THE COMPANY
1. Bear Island Finance Company II
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-4 of our
report, which includes an explanatory paragraph regarding significant
related-party transactions, dated January 17, 1997, on our audits of the
financial statements of Bear Island Paper Company, L.P. We also consent to
the reference to our firm under the caption "Experts."
/s/ Coopers & Lybrand L.L.P.
Richmond, Virginia
December 10, 1997
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-4 of our
report, which includes an explanatory paragraph regarding significant
related-party transactions, dated January 17, 1997, on our audits of the
financial statements of Bear Island Timberlands Company, L.P. We also consent
to the reference to our firm under the caption "Experts."
/s/ Coopers & Lybrand L.L.P.
Richmond, Virginia
December 10, 1997
<PAGE>
EXHIBIT 23.3
CONSENT OF CHARTERED ACCOUNTANTS
We consent to the inclusion in the registration statement of Bear Island
Paper Company, L.L.C. and Bear Island Finance Company II, on Form S-4, to be
dated December 12, 1997, of our report dated January 14, 1997, relating to
our audits of the consolidated financial statements of F.F. Soucy, Inc.,
included in the prospectus, which is part of the registration statement. We
also consent to the reference to our firm under the caption "Experts".
/s/ Coopers & Lybrand
General Partnership
Chartered Accountants
Montreal, Quebec
December 10, 1997
<PAGE>
- - -------------------------------------------------------------------------------
Securities and Exchange Commission
Washington, DC 20549
--------------
Form T-1
--------------
Statement of Eligibility Under the Trust Indenture Act of 1939 of A
Corporation Designated to Act As Trustee
Check if an application to determine eligibility of a trustee pursuant to
Section 305(b)(2)_____
Crestar Bank
(Exact name of trustee as specified in its charter)
<TABLE>
<CAPTION>
<S> <C>
Virginia 53-0116200
(State of Incorporation, if not a national bank) (I.R.S. employer identification no.)
</TABLE>
919 East Main Street
Richmond, VA 23219
(Address of principal executive office) (Zip Code)
John C. Clark, III
919 E. Main Street, 18th Floor, Richmond, Virginia 23219
(804)782-7455
(Name, address and telephone number of agent for service)
United Dominion Realty Trust, Inc.
(Exact name of obligor as specified in its charter)
<TABLE>
<CAPTION>
<S> <C>
Virginia 54-0857512
(State or other jurisdiction of incorporation (I.R.S. employer identification no.)
or organization
</TABLE>
10 South 6th Street, Suite 203
Richmond, VA 23219-3802
(Address of principal executive offices) (Zip Code)
Subordinated Debt Securities
(Title of indenture securities)
- - -----------------------------------------------------------------------------
<PAGE>
Item 1. General Information
Furnish the following information as to trustee:
(a) Name and Address of each examining or supervising authority to which it is
subject.
Bureau of Financial Institutions,
State Corporation Commission of Virginia
Richmond, Virginia
The Board of Governors of the Federal Reserve System,
Washington, DC
The Federal Reserve Bank,
Richmond, Virginia
Federal Deposit Insurance Corporation,
Washington, DC
(b) Whether it is authorized to exercise corporate trust powers.
The trustee is authorized to exercise corporate trust powers.
Item 2. Affiliations with Obligor.
If the obligor is an affiliate of the trustee, describe such affiliation.
Obligor is not an affiliation of the trustee.
Item 16. List of Exhibits
List below all exhibits filed as part of this Statement of Eligibility.
*Exhibit 1 - A copy of the articles of incorporation of the trustee as now in
effect. (Incorporated by reference from Exhibit 1 filed with T-1 Statement,
Registration Statement No. 33-3984.)
*Exhibit 2 - A copy of the certificate of authority of the trustee to commence
business. (Incorporated by reference from Exhibit 2 filed with T-1 Statement,
Registration Statement No. 33-3984.)
*Exhibit 3 - A copy of the certificate of the authority of the trustee to
exercise corporate trust powers. (Incorporated by reference from Exhibit 3
filed with T-1 Statement, Registration Statement No. 33-3984.)
Exhibit 4 - A copy of the existing by-laws of the trustee.
Exhibit 5 - Not applicable.
Exhibit 6 - The consent of the trustee required by Section 321(b) of the
Act.
Exhibit 7 - A copy of the latest report of the condition of the trustee
published pursuant to law or the requirements of its supervising or examining
authority.
Exhibit 8 - Not applicable.
Exhibit 9 - Not applicable.
*The Exhibits thus designated are incorporated herein by reference. Following
the description of such Exhibits is a reference to the copy of the Exhibits
heretofore filed with the Securities and Exchange Commission, to which there
have been no amendments or changes.
<PAGE>
Signature
Pursuant to the requirements of the Trust Indenture Act of 1939, the trustee,
Crestar Bank, a corporation organized and existing under the laws of the
Commonwealth of Virginia, has duly caused this statement of eligibility to be
signed on its behalf by the undersigned, thereunto duly authorized, all in the
City of Richmond, and the Commonwealth of Virginia, on the fifteenth day of
May, 1997.
Crestar Bank
By: /s/ L.B. BEDELL
- - ------------------------------
(L. B. Bedell, Vice President)
<PAGE>
EXHIBIT T-1 (4)
Bylaws
And
Administrative Regulations
Of
Crestar Bank
Incorporated Under The Laws
Of The Commonwealth Of Virginia
Adopted December 20, 1979
(And Including Amendments Adopted
Thereto Through December 20, 1996)
<PAGE>
Index
To
Bylaws
And
Administrative Regulations
Of
Crestar Bank
<TABLE>
<CAPTION>
Article I - Meetings Of Stockholders
<S> <C> <C>
1.1 - Place of Meetings.................................................................................1
1.2 - Annual Meetings...................................................................................1
1.3 - Special Meetings..................................................................................1
1.4 - Notice of Meetings................................................................................1
1.5 - Quorum............................................................................................1
1.6 - Voting............................................................................................1
1.7 - Conduct of Meetings...............................................................................2
1.8 - Inspector.........................................................................................2
Article II - Board Of Directors
2.1 - General Powers....................................................................................2
2.2 - Number of Directors...............................................................................2
2.3 - Election of Directors.............................................................................2
2.4 - Term of Office....................................................................................2
2.5 - Quorum............................................................................................2
2.6 - Meetings of the Board.............................................................................2
2.7 - Compensation......................................................................................3
2.8 - Eligibility.......................................................................................3
Article III - Committees
3.1 - Standing Committees...............................................................................4
3.2 - Executive Committee...............................................................................5
3.3 - Audit Committee...................................................................................5
3.4 - Human Resources and Compensation Committee........................................................6
3.5 - Nominating and Governance Committee...............................................................6
3.6 - Area Boards.......................................................................................6
3.7 - Other Committees..................................................................................7
Article IV - Officers
4.1 - Number and Manner of Election or Appointment......................................................7
4.2 - Term of Office....................................................................................7
4.3 - Removal...........................................................................................8
4.4 - Resignations......................................................................................8
4.5 - Vacancies, New Offices and Promotions.............................................................8
4.6 - Chairman of the Board.............................................................................8
4.7 - President.........................................................................................8
4.8 - Corporate Secretary...............................................................................8
4.9 - Treasurer.........................................................................................9
4.10 - Auditor...........................................................................................9
4.11 - Powers and Duties of Other Officers...............................................................9
4.12 - Bonds.............................................................................................9
Article V - Capital Stock
5.1 - Certificates......................................................................................9
5.2 - Lost, Destroyed and Mutilated Certificates.......................................................10
5.3 - Transfer of Stock................................................................................10
5.4 - Closing of Transfer Books and Fixing Record Date.................................................10
Article VI - Miscellaneous Provisions
6.1 - Seal.............................................................................................10
6.2 - Voting of Stock Held.............................................................................10
6.3 - Fiscal Year......................................................................................11
Article VII - Emergency Bylaws.................................................................................11
Article VIII - Indemnification Of Directors And Officers.......................................................12
Article IX - Amendments........................................................................................13
<PAGE>
Administrative Regulation I
Sales, Purchase and Pledge or Deposit of Securities Owned by the Bank
1.1 - Sale, Purchase and Pledge or Deposit of Securities...............................................14
Administrative Regulation II
Exercise of Fiduciary Powers
2.1 - Certification, Authentication, etc. of Securities and Documents..................................14
2.2 - Qualification as Fiduciary.......................................................................15
2.3 - Acceptance of Trusts.............................................................................15
2.4 - Purchase and Sales of Securities.................................................................15
2.5 - Deposit of Securities Under Plans Reorganizations, etc...........................................15
2.6 - Sales, and Leases of Real Estate and Tangible Personal Property:
Foreclosure and Extension of Mortgages...........................................................15
2.7 - All Acts Done Under the Foregoing Paragraphs.....................................................16
2.8 - Voting Stock and Other Securities................................................................16
Administrative Regulation III
Borrowing Money, Rediscount of Bills and Notes, Buying or Selling Funds
3.1 - Borrowed Money, Security Therefor and Rediscounts................................................16
3.2 - Purchase and Sales of Surplus Funds..............................................................16
Administrative Regulation IV
Release of Encumbrances
4.1 - Sales and Leases of Property.....................................................................17
4.2 - Release Of Encumbrances..........................................................................17
Administrative Regulation V
Checks, Drafts, Orders, etc.
5.1 - Bank - Except Trust..............................................................................17
5.2 - Trust Group......................................................................................17
Administrative Regulation VI
Signature Guarantee, Confirmations, etc.
6.1 - Signature Guarantee..............................................................................17
6.2 - Confirmations....................................................................................18
Administrative Regulation VII
Responsibility of Area Boards
7.1 - Responsibilities of Area Boards..................................................................17
Administrative Regulation VIII
Deposit and Security Accounts
8.1 - Deposit Accounts.................................................................................18
8.2 - Security Accounts................................................................................18
</TABLE>
<PAGE>
-1-
Crestar Bank
Bylaws
Article I
Meetings Of Stockholders
1.1 Place of Meetings. All meetings of the stockholders shall be held at
such place, either within or without the State of Virginia, as may be
designated by the Board of Directors.
1.2 Annual Meeting. The annual meeting of stockholders, for the election
of Directors and transaction of such other business as may come before the
meeting, shall be held at such time and date as designated by the Board of
Directors.
1.3 Special Meetings. Special meetings of the stockholders for any
purpose or purposes may be called at any time by the Chairman of the Board, by
the President, or by a majority of the Board of Directors. No business shall
be transacted and no corporate action shall be taken at a special meeting
other than that stated in the notice of the meeting.
1.4 Notice of Meetings. Unless waived in the manner prescribed by law,
notice of each meeting of stockholders shall be given in writing, not less
than ten nor more than sixty days before the day of the meeting, or such other
notice as is required by law, to each stockholder entitled to vote at such
meeting and shall state the place, date and hour of the meeting and, in the
case of a special meeting, the purpose or purposes for which the meeting is
called. If mailed, such notice shall be deemed to have been given when
deposited in the United States mail, with postage thereon prepaid, directed to
the stockholder at his address as it appears on the stock transfer books of
the Bank.
1.5 Quorum. Any number of stockholders together holding a majority of the
outstanding shares of capital stock entitled to vote with respect to the
business to be transacted, who shall be present in person or represented by
proxy at any meeting duly called, shall constitute a quorum for the
transaction of business. If less than a quorum shall be in attendance at the
time for which a meeting shall have been called, the meeting may be adjourned
from time to time by a majority of the stockholders present or represented by
proxy without notice other than by announcement at the meeting until a quorum
shall attend.
1.6 Voting. At any meeting of the stockholders, each stockholder of a
class entitled to vote on any matter coming before the meeting shall, as to
such matter, have one vote, in person or by proxy, for each share of capital
stock of such class standing in his name on the stock transfer books of the
Bank on the date, not more than seventy days prior to such meeting, as
designated by the Board of Directors, for the purpose of determining
stockholders entitled to vote, as the date on which the stock transfer books
of the Bank are to be closed or as the record date.
Every proxy shall be in writing and signed by the stockholder entitled to vote
or signed by his duly authorized attorney-in-fact. At a meeting where a quorum
is present, the affirmative vote of the majority of the shares represented at
the meeting and entitled to vote shall be the act of the stockholders.
1.7 Conduct of Meetings. At each meeting of the stockholders, the
Chairman of the Board or the President shall act as chairman and preside. In
their absence, the Chairman of the Board may designate another officer of the
Bank who need not be a Director to preside. The Corporate Secretary of the
Bank or an Assistant Corporate Secretary, or in their absence, a person whom
the chairman of such meeting shall appoint, shall act as corporate secretary
of such meeting.
1.8 Inspectors. An appropriate number of inspectors for any meeting of
stockholders may be appointed by the chairman of such meeting. Inspectors so
appointed will open and close the polls, will receive and take charge of
proxies and ballots, and will decide all questions as to the qualifications of
voters, validity of proxies and ballots, and the number of votes properly
cast.
Article II
Board Of Directors
2.1 General Powers. The business and affairs of the Bank shall be managed
by the Board of Directors and, except as otherwise expressly provided by law,
in accordance with the Articles of Incorporation or these
<PAGE>
Bylaws.
2.2 Number of Directors. The Board of Directors shall consist of not less
than five nor more than twenty-seven Directors, the exact number to be
designated by the Board, and a majority of whom shall be citizens of the
Commonwealth of Virginia.
2.3 Election of Directors. Directors shall be elected at each annual
meeting of the stockholders. Any vacancy occurring in the Board of Directors,
including a vacancy resulting from an increase by not more than two in the
number of authorized Directors, may be filled by the majority vote of the
remaining Directors, though less than a quorum of the Board, unless the
vacancy is sooner filled by the stockholders.
2.4 Term of Office. Each Director (unless he sooner dies, resigns, or is
removed from office) shall hold office until the next annual meeting of
stockholders or until his successor shall have been elected and qualifies.
2.5 Quorum. A majority of the number of Directors pursuant to these
Bylaws at the time of the meeting, shall constitute a quorum for the
transaction of business. The act of a majority of Directors present at a
meeting at which a quorum is present shall be the act of the Board of
Directors. Less than a quorum may adjourn any meeting.
2.6 Meetings of the Board.
(a) Place of Meetings. Meetings of the Board of Directors shall be held
at such place and at such time, either within or without the State of Virginia
as may be designated by the Board, or upon call of the Chairman of the Board
or the President.
(b) Organizational Meeting. An organizational meeting shall be held as
soon as practicable after the adjournment of the annual meeting of
stockholders at which the Board of Directors is elected, for the purpose of
taking the oaths of the Directors, electing officers, appointing committees
for the ensuing year, and for transacting such other business as may properly
come before the meeting.
(c) Regular Meetings. Regular meetings of the Board of Directors shall be
held at such time and place as the Board may designate, or upon call of the
Chairman of the Board, or the President, and no notice thereof need be given.
(d) Special Meetings. Special meetings of the Board of Directors may be
held at any time or place upon the call of the Chairman of the Board or the
President, or any three members of the Board.
Notice of each such meeting shall be given to each Director by mail at his
business or residence address at least forty-eight hours before the meeting,
or by telephoning or telegraphing notice to him at least twenty-four hours
before the meeting. Meetings may be held at any time without notice if all of
the Directors are present, or if those not present waive notice in writing
either before or after the meeting. The notice of meetings of the Board need
not state the purpose of the meeting.
(e) Conduct of Meetings. At each meeting of the Board of Directors, the
Chairman of the Board or the President shall act as chairman and preside. In
their absence, the Chairman of the Board may designate another officer of the
Bank who need not be a Director, to preside. The Corporate Secretary of the
Bank or an Assistant Corporate Secretary, or in their absence, a person whom
the chairman of such meeting shall appoint, shall act as corporate secretary
of such meeting.
Any action required or permitted to be taken by the Board may be taken without
a meeting if all Directors consent in writing to the adoption of a resolution
authorizing the action. The resolution and the written consents of the
directors shall be filed with the minutes of the proceedings of the Board
meeting.
2.7 Compensation. Directors, and members of any committee of the Board
who are not officers of the Bank or subsidiaries thereof, shall be paid such
compensation as the Board of Directors from time to time may determine for his
services as Director, or as Chairman or a member of any committee of the
Board, and shall, in addition, be reimbursed for such expenses as shall be
incurred by him in the performance of his duties. Nothing herein shall
preclude Directors and members of any committee of the Board from serving the
Bank in other capacities and receiving compensation therefor.
2.8 Eligibility. No person shall be eligible to serve as a Director
unless, when his term commences, he is not less than twenty-one years of age
nor more than seventy years of age. No Director shall be eligible for
reelection after he has attained the age of 70 or after his separation from
the business or professional organization with which he was primarily
associated at the time he first became a Director, unless elected after
becoming associated with another business or professional organization. Except
for the Chief Executive Officer, no Director who is an officer of the
Corporation or any subsidiary shall be eligible for reelection after he has
retired.
<PAGE>
Article III
Committees
3.1 Standing Committees.
(a) Number. There shall be three standing committees of the Board of
Directors. The standing committees are as follows: Executive, Audit, and Human
Resources and Compensation. In order to broaden the experience of Directors, it
shall be the policy of the Bank to seek rotation among Directors as members of
the various committees.
At the first meeting of the Board of Directors after the annual meeting of the
stockholders, the Chairman of the Board shall recommend the membership of each
committee and the Board shall elect the membership of each committee, who
shall serve at the pleasure of the Board.
(b) Quorum. A majority of the number of members of any standing committee
shall constitute a quorum for the transaction of business. The action of a
majority of members present at a committee meeting at which a quorum is
present shall constitute the act of the committee.
(c) Conduct of Meetings. Any action required or permitted to be taken by
the committee may be taken without a meeting if all members of the committee
consent in writing to the adoption of a resolution authorizing the action. The
resolution and written consents of the members shall be filed with the minutes
of the proceedings of the committee.
(d) Meetings and Minutes. Subject to the foregoing, and unless the Board
shall otherwise decide, each committee shall fix its rules of procedure,
determine its action and fix the time and place of its meetings. Special
meetings of a committee may be held at any time upon the call of the Chairman
of the Board, the Chairman of the Committee, or any two members of the
committee. Each committee shall keep minutes of all meetings which shall be at
all times available to Directors. Action taken by a committee shall be
reported promptly to the Board but not less frequently than quarterly.
(e) Term of Office. A member of any standing committee shall hold office
until the next organizational meeting of the Board of Directors or until he is
removed or ceases to be a Director.
(f) Vacancies. Should a vacancy occur on any standing committee resulting
from any cause whatsoever, the Board, by resolution, may fill such vacancy at
any time.
(g) Resignation and Removal. A member of a standing committee may resign
at any time by giving written notice of his intention to do so to the Chairman
of the Board or the Corporate Secretary of the Corporation, and may be removed
at any time by the Board of Directors.
3.2 Executive Committee.
(a) How Constituted. The Executive Committee shall consist of not less
than five nor more than nine Directors, including the Chairman of the Board,
who shall be Chairman of the Committee, and the President. If the Chairman of
the Board will not be present at a meeting, the President shall preside, and
if the President will not be present, the Chairman may designate another
officer of the Bank, who need not be a member of the Committee or a Director,
to preside at the meeting.
(b) Primary Responsibilities. The primary responsibilities of the
Executive Committee shall consist of: exercise of all powers of the Board of
Directors between meetings of the Board except as to matters exclusively
reserved to the Board under law; annual review of management's financial goals
and business plan; service as the Board's steering committee on capital,
liquidity, asset/liability and credit issues, as well as the Board's advisor
on mergers and acquisition and corporate structure matters; review of loan
policy and procedure, the quarterly classification of loans and the adequacy
of the allowance for loan loss reserves; review and recommendation to the
Board of the annual capital budget and authorization of capital expenditures
within a level established by the Board; supervision over the exercise of
fiduciary powers; oversight over the Bank's contributions policy, approval of
the annual contributions budget, and authorization or recommendation to the
Board of larger individual contributions as specified by the Board; joint
consultation with the Human Resources and Compensation Committee and
recommendation to the Board of any titling changes and management succession
involving the top five officers of the Bank; and evaluation and recommendation
to the Board of nominees for election as Directors.
3.3 Audit Committee
(a) How Constituted. The Audit Committee shall consist of not less than
five nor more than nine Directors, none of whom shall be officers of the Bank
or any subsidiary thereof. The Chairman of the Committee shall be appointed by
the Board of Directors upon recommendation of the Chairman of the Board. If
the
<PAGE>
Chairman of the Committee will not be present at a meeting, he may
designate any member of the Committee to preside at the meeting.
(b) Primary Responsibilities. The primary responsibilities of the Audit
Committee shall consist of: recommendation of the selection of independent
accountants and auditors; review of the scope of the accountant's examination
and approval of any non-audit services to be performed by the independent
accountants; review of examination reports by the independent accountants and
regulatory agencies; approval of, and review of the results of, the internal
audit plan; review of the procedures for establishing the allowance for loan
losses and monitoring of the credit process review function; review of
Crestar's Community Reinvestment Act policy, plans and performance; review of
internal programs to assure compliance with laws and regulations and the
adequacy of internal controls; review of the adequacy of insurance coverage;
and review of compliance with the Standards of Conduct.
3.4 Human Resources and Compensation Committee.
(a) How Constituted. The Compensation Committee shall consist of not less
than five nor more than eight Directors, none of whom shall be officers of the
Corporation or any subsidiary thereof. The Chairman of the Committee shall be
appointed by the Board of Directors upon recommendation of the Chairman of the
Board. If the Chairman of the Committee will not be present at the meeting, he
may designate any member of the Committee to preside at the meeting.
(b) Primary Responsibilities. The primary responsibilities of the Human
Resources and Compensation Committee shall consist of: review and approval of
major compensation policies; determination of appropriate performance targets
under the Bank's benefit plans; recommendation to the Board of salaries, and
approval of other compensation to be paid or awarded to, the highest level and
most highly paid officers; recommendation of officers requiring Board approval
and joint consultation with the Executive Committee and recommendation to the
Board of any titling changes and management succession involving the top five
officers of the Bank; review of other matters pertaining to management
structure, succession planning and executive development; approval of election
of Corporate and Group level Executive Vice Presidents requiring Board
approval; review and recommendation for Board approval of new and significant
changes to qualified and non-qualified benefit plans; and recommendation for
Board approval of appropriate changes in Director compensation.
3.5 Nominating and Governance Committee
(a) How Constituted. The Nominating and Governance Committee shall
consist of not less than three nor more than five Directors, none of whom
shall have served as an officer of Crestar Financial Corporation or any
subsidiary or affiliate thereof within the calendar year of appointment or the
calendar year immediately preceding the year of appointment. The Chairman of
the Committee shall be appointed by the Board of Directors upon recommendation
of the Chairman of the Board. If the Chairman of the Committee will not be
present at a meeting, he or she may designate any member of the Committee to
preside at the meeting.
(b) Primary Responsibilities. The primary responsibilities of the
Nominating and Governance Committee shall consist of: interpreting the Bylaws
whenever a member's change in circumstance, such as illness, retirement or
modification of primary employment, may impact eligibility for continued Board
service; recommending changes to eligibility requirements as needed to ensure
that the Board consists of highly-qualified persons who can provide
constructive input into the business of the Bank and represent a cross section
of Crestar constituencies; conducting a comprehensive study of board
governance practices of similarly-situated corporations and recommending
adoption of Crestar corporate governance guidelines as appropriate; monitoring
effectiveness of such guidelines and implementing modification as needed; and
establishing and implementing a nomination process to identify and recommend
Board nominees as appropriate.
3.6 Area Boards. The Board of Directors or the Chairman of the Board or
his designee may appoint, from time to time, Area Boards for any one or more
of the Bank's locations, whose members may consist of such persons, including
officers and Directors, as may be deemed proper. Area Boards shall serve at
the pleasure of the Board of Directors or the Chairman of the Board and their
duties shall be those prescribed in the Administrative Regulations as in
effect from time to time.
3.7 Other Committees. The Board of Directors may, by resolution establish
such other committees of the Board as it may deem advisable. The members, terms
and authority of such committees shall be as set forth in the resolutions.
The Chairman of the Board may establish such other committees of the Board of
Directors as he deems advisable, and may appoint the members of such
committees. Any such committees shall have the authority to consider, review,
advise and recommend to the Chairman of the Board with respect to such matters
as may be referred to it by the Chairman of the Board, but
<PAGE>
shall have no authority to act for the Bank except with the prior approval
of the Board of Directors.
Article IV
Officers
4.1 Number and Manner of Election or Appointment. The officers of the Bank
shall be:
(a) The Chairman of the Board, the President, a Corporate Secretary, a
Treasurer, an Auditor, one or more Regional Presidents, and one or more
Corporate Executive Vice Presidents, and one or more Group Executive Vice
Presidents, each of whom shall be elected by the Board;
(b) one or more local Presidents, Executive Vice Presidents, Corporate
Senior Vice Presidents, and Senior Vice Presidents as appointed by the
appropriate Policy Committee member for the Group, and
(c) such other officers as appointed by an approval officer for each
Group as designated by the appropriate Policy Committee member. Officers of
subsidiaries of the Bank shall be elected and have their compensation set in
the same manner as comparable officers of the Bank. One person may hold more
than one office except that the offices of the President and Corporate
Secretary may not be held by the same person.
4.2 Term of Office. The officers designated in Section 4.1(a) shall be
elected annually by the Board at its organizational meeting. Such officers
shall each hold office until the next organizational meeting of the Board and
until their successors are elected.
The officers designated in Section 4.1(b) shall be elected annually by the
Human Resources and Compensation Committee at its first meeting following the
Annual Meeting of Stockholders. Such officers shall each hold office until the
next such meeting of the Committee and until their successors are elected. The
officers designated in Section 4.1(c) may be appointed at any time by the
appropriate Policy Committee member for the Group. The officers designated in
Section 4.1(d) may be appointed at any time by the approval officer designated
by the appropriate Policy Committee member for each Group.
4.3 Removal. Any officer may be removed from office, with or without
cause, at any time, by the Board of Directors. Any officer elected by the
Human Resources and Compensation Committee may be removed from office by the
Committee with or without cause at any time. Any officer appointed by a Policy
Committee member or approval officer for each Group may be removed from office
by him with or without cause at any time.
4.4 Resignations. Any officer may resign at any time by giving written
notice to the Board, Human Resources and Compensation Committee, Chairman of
the Board, President, or the Corporate Secretary. Such resignation shall be
effective on the date of receipt of such notice or any later date specified
therein, and unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.
4.5 Vacancies, New Offices and Promotions. A vacancy from any cause in
any office may be filled at any time for the unexpired portion of the term, in
the manner prescribed in these Bylaws for regular election or appointment to
such office. New offices may be created and filled, and the promotions and
changes in officers' titles may be made at any time in the manner prescribed
in these Bylaws for regular election or appointment to such office.
4.6 Chairman of the Board. The Chairman of the Board shall be the Chief
Executive Officer and shall have general supervision of the policies and
operations of the Bank, subject to the direction and control of the Board. He
shall preside at all meetings of the stockholders, the Board of Directors and
the Executive Committee. He shall be responsible for extending lines of credit
and other loan commitments, for making loans and for discounting acceptable
trade paper. All such extensions of credit shall be based on acceptable credit
risk. Subject to his executive authority and control, the Chairman of the
Board may delegate specific loan authority to officers and employees of the
Bank. He shall have the power to sign checks, orders, contracts, leases,
notes, drafts and other documents and instruments in connection with the
business of the Bank, and have such other powers and perform such other duties
as shall be designated by the Board of Directors or as may be incidental to
his office. The Chairman of the Board shall have the authority to appoint
officers of the Bank below the rank of Executive Vice President.
4.7 President. The President shall participate in the supervision of the
policies and management of the Corporation, and may, if so designated by the
Board of Directors, be the chief administrative officer of the Corporation. He
shall perform all duties incidental to the office of President and shall
perform such other duties as may be assigned to him from time to time by the
Board of Directors or the Chairman of the Board. In the absence of the
Chairman of the Board, he shall preside at meetings
<PAGE>
of stockholders, the Board of Directors and the Executive Committee.
He shall have the same power to sign for the Corporation and to appoint
officers as prescribed in these Bylaws for the Chairman of the Board.
4.8 Corporate Secretary. The Corporate Secretary shall: a) keep the
minutes of all meetings of the Stockholders, the Board of Directors, the
Executive Committee, and such other Committees as the Board may designate; b)
see that all notices of such meetings are given in accordance with these Bylaws
or as required by law; c) be custodian of the corporate records and of the seal
of the Corporation and have authority to affix the seal to any documents
requiring such seal and to attest the same; d) sign, with the Chief Executive
Officer, certificates for shares of the Corporation, the issuance of which shall
have been authorized by resolution of the Board of Directors; and e) in general
perform all duties incident to the office of Corporate Secretary and such other
duties as from time to time may be assigned to him by the Board of Directors or
the Chief Executive Officer. In the absence of the Corporate Secretary, an
Assistant Corporate Secretary shall act in his stead.
4.9 Treasurer. The Treasurer shall perform such duties with respect to
securities and funds of the Bank as may be prescribed by the Board of
Directors or the Chief Executive Officer, and such other duties as may be
incidental to the office of Treasurer.
4.10 Auditor. The Auditor shall have general supervision over the
internal audit of the Bank and its subsidiaries. He shall be responsible to
the Board of Directors, through the Audit Committee, for independently
evaluating the adequacy, effectiveness, and efficiency of the Bank's systems
of internal control and of employee compliance therewith. He shall have the
duty of reporting his findings and recommendations to the Audit Committee at
least quarterly on any matters concerning the Bank, except those with respect
to credit quality, responsibility for which has been vested in the officer in
charge of credit administration. Should the Auditor deem any matter to be of
special importance or his independence to be in jeopardy, he shall report
immediately to the Chairman of the Audit Committee or, in his absence, any
member of the Committee. The Auditor shall have such other duties and perform
such special audits and examinations as may be prescribed from time to time by
the Audit Committee or the Board of Directors. For administrative purposes,
the Auditor shall be accountable to the Chief Executive Officer.
4.11 Powers and Duties of Other Officers. The powers and duties of all
other officers of the Bank shall be those usually pertaining to their
respective offices, subject to the direction and control of the Board of
Directors and as otherwise provided in these Bylaws, or as prescribed by the
Chief Executive Officer.
4.12 Bonds. Each officer and employee of the Bank shall give bond
covering the honest and faithful performance of his duties. The form and
amount of such bonds, and the name of the company providing the surety, shall
be approved annually by the Board of Directors at its organizational meeting,
the premiums thereon to be paid by the Bank.
Article V
Capital Stock
5.1 Certificates. The shares of capital stock of the Bank shall be
evidenced by certificates in forms prescribed by the Board of Directors and
executed in any manner permitted by law and stating thereon the information
required by law. Transfer agents and/or registrars for one or more classes of
the stock of the Bank may be appointed by the Board of Directors and may be
required to countersign certificates representing stock of such class or
classes. If any officer whose signature or facsimile thereof shall have been
used on a stock certificate shall for any reason cease to be an officer of the
Bank and such certificate shall not then have been delivered by the Bank, the
Board of Directors may evertheless adopt such certificate and it may then be
issued and delivered as though such person had not ceased to be an officer of
the Bank.
5.2 Lost, Destroyed and Mutilated Certificates. Holders of the stock of
the Bank shall immediately notify the Bank of any loss, destruction or
mutilation of the certificate therefor, and the Board of Directors or the
Executive Committee may cause one or more new certificates for the same number
of shares in the aggregate to be issued to such stockholder upon the surrender
of the mutilated certificate or upon satisfactory proof of such loss or
destruction, and the deposit of a bond in such form and amount and with such
surety as the Board of Directors may require.
5.3 Transfer of Stock. The stock of the Bank shall be transferable or
assignable only on the Books of the Bank by the holders in person or by
attorney on surrender of the Certificate for such shares duly endorsed and, if
sought to be transferred by attorney, accompanied by a written power of
attorney to have the same transferred on the books of the Bank. The Bank shall
recognize, however, the exclusive right of the person registered on its books
as the owner of shares to receive dividends and to vote as such owner.
<PAGE>
5.4 Closing of Transfer Books and Fixing Record Date. For the purpose of
determining stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, or entitled to receive payment of any
dividend, or in order to make a determination of stockholders for any other
proper purpose, the Board of Directors may provide, that the stock transfer
books shall be closed for a stated period but not to exceed in any case,
seventy days.
In lieu of closing the stock transfer books, the Board of Directors may fix in
advance a date as the record date for any such determination of stockholders,
such date in any case to be not more than seventy days prior to the date on
which the particular action, requiring such determination of stockholders, is
to be taken. It the stock transfer books are not closed and no record date is
fixed for the determination of stockholders entitled to notice or to vote at a
meeting of stockholders, or stockholders entitled to receive payment of a
dividend, the date on which notices of the meeting are mailed or the date on
which the resolution of the Board of Directors declaring such dividend is
adopted, as the case may be, shall be the record date for such determination
of stockholders. When a determination of stockholders entitled to vote at any
meeting of the stockholders has been made as provided in this section such
determination shall apply to any adjournment thereof.
Article VI
Miscellaneous Provisions
6.1 Seal. The corporate seal of the Bank shall consist of a flat-face
circular die, on which there shall be engraved the Crestar logogram and the
name of the Bank. Any officer of the Bank designated in writing by the Chief
Executive Officer or Corporate Secretary shall have authority to affix and
attest the seal. Failure to use the corporate seal shall not affect the
validity of any instrument.
6.2 Voting of Stock Held. Unless otherwise provided by resolution of the
Board of Directors or of the Executive Committee, the Chairman of the Board,
the President, or any Executive or Senior Vice President may from time to time
appoint an attorney or attorneys or agent or agents of this Bank, in the name
and on behalf of this Bank, to cast the vote which this Bank may be entitled
to cast as a stockholder or otherwise in any other corporation, any of whose
stock or securities may be held by this Bank, at meetings of the holders of
the stock or other securities of such other corporation, or to consent in
writing to any action by any such other corporation. Such officer shall
instruct the person or persons so appointed as to the manner of casting such
votes or giving such consent and may execute or cause to be executed on behalf
of this Bank such written proxies, consents, waivers or other instruments as
may be necessary or proper. In lieu of an appointment of an attorney or agent,
the officer may himself attend any meetings of the holders of stock of other
securities of any such other corporation and there vote or exercise any or all
power of this Bank as the holder of such stock or other securities of such
other corporation.
6.3 Fiscal Year. The fiscal year of the Bank shall be the calendar year.
Article VII
Emergency Bylaws
7.1 The Emergency Bylaws provided in this Article VII shall be operative
during any emergency resulting from an attack of the United States or any
nuclear or atomic disaster, notwithstanding any different provision in the
preceding articles of the Bylaws or in the Articles of Incorporation of the
Bank or in the Virginia Stock Corporation Act (other than those provisions
relating to emergency Bylaws). To the extent not inconsistent with these
Emergency Bylaws, the Bylaws provided in the preceding articles shall remain
in effect during such emergency and upon the termination of such emergency the
Emergency Bylaws shall cease to be operative unless and until another such
emergency shall occur.
During any such emergency:
(a) Any meeting of the Board of Directors may be called by any officer of
the Bank or by any Director. The notice thereof shall specify the time and
place of the meeting. To the extent feasible, notice shall be given only to
such of the Directors as it may be feasible to reach at the time, by such
means as may be feasible at the time, including publication or radio, and at a
time less than twenty-four hours before the meeting if deemed necessary by the
person giving notice. Notice shall be similarly given, to the extent feasible,
to the other persons referred to in (b) below,
(b) At any meeting of the Board of Directors, a quorum shall consist of a
majority of the number of Directors fixed at the time in accordance with
Article II of the Bylaws. If the Directors present at any particular meeting
shall be fewer than the number required for such quorum, other persons present
may be included in the number necessary to make up such
<PAGE>
quorum, and shall be deemed Directors for such particular meeting as
determined by the following provisions and in the following order of priority:
(i) Officers designated in Section 4.1(a) of the Bylaws, Executive
Vice Presidents not already serving as Directors, in the order of their
seniority of first election to such offices, or if two or more shall have been
first elected to such offices on the same day, in the order of their seniority
in age,
(ii) All other officers of the Bank in the order of their seniority
of first election to such offices, or if two or more shall have been first
elected to such offices on the same day, in the order of their seniority in
age; and
(iii) Any other persons that are designated on a list that shall have
been approved by the Board of Directors before the emergency, such persons to
be taken in such order of priority and subject to such conditions as may be
provided in the resolution approving the list.
(c) The Board of Directors, during as well as before any such emergency,
may provide, and from time to time modify, lines of succession in the event
that during such an emergency any or all officers or agents of the Bank shall
for any reason be rendered incapable of discharging their duties.
(d) The Board of Directors, during as well as before any such emergency,
may, effective in the emergency, change the principal office, or designate
several alternative offices. or authorize the officers to do so.
No officer, Director or employee acting in accordance with these Emergency
Bylaws shall be liable except for willful misconduct.
These Emergency Bylaws shall be subject to repeal or change by further action
of the Board of Directors or by action of the stockholders, except that no
such repeal or change shall modify the provisions of the next preceding
paragraph with regard to action or inaction prior to the time of such repeal
or change. Any such amendment of these Emergency Bylaws may make any further
or different provision that may be practical and necessary for the
circumstances of the emergency.
Article VIII
Indemnification Of Directors And Officers
8.1 A. To the full extent that the Virginia Stock Corporation Act, as it
exists on the date hereof or may hereafter be amended, permits the limitation
or elimination of the liability of directors or officers, a Director or
officer of the Bank shall not be liable to the Bank or its stockholders for
monetary damages.
B. To the full extent permitted and in the manner prescribed by the
Virginia Stock Bank Act and any other applicable law, the Bank shall indemnify
a Director or officer of the Bank who is or was a party to any proceeding by
reason of the fact that he is or was such a Director or officer or is or was
serving at the request of the Bank as a director, officer, employee or agent
of another corporation, partnership, joint venture, trust, employee benefit
plan or other enterprise. The Board of Directors is hereby empowered, by
majority vote of a quorum of disinterested Directors, to contract in advance
to indemnify any Director or officer.
C. The Board of Directors is hereby empowered, by majority vote of a
quorum of disinterested Directors, to cause the Bank to indemnify or contract
in advance to indemnify any person not specified in Section B of this Article
who was or is a party to any proceeding, by reason of the fact that he is or
was an employee or agent of the Bank, or is or was serving at the request of
the Bank as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise,
to the same extent as if such person were specified as one to whom
indemnification is granted in Section B.
D. The Bank may purchase and maintain insurance to indemnify it against
the whole or any portion of the liability assumed by it in accordance with
this Article and may also procure insurance, in such amounts as the Board of
Directors may determine, on behalf of any person who is or was a Director,
officer, employee or agent of the Bank, or is or was serving at the request of
the Bank as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise,
against any liability asserted against or incurred by such person in any such
capacity or arising from his status as such, whether or not the Bank would
have power to indemnify him against such liability under the provisions of
this Article.
E. In the event there has been a change in the composition of a majority
of the Board of Directors after the date of the alleged act or omission with
respect to which indemnification is claimed, any
<PAGE>
determination as to indemnification and advancement of expenses with respect
to any claim for indemnification made pursuant to Section A of this Article
VIII shall be made by special legal counsel agreed upon by the Board of
Directors and the proposed indemnitee. If the Board of Directors and the
proposed indemnitee are unable to agree upon such special legal counsel, the
Board of Directors and the proposed indemnitee each shall select a nominee,
and the nominees shall select such special legal counsel.
F. The provisions of this Article VIII shall be applicable to all
actions, claims, suits or proceedings commenced after the adoption hereof,
whether arising from any action taken or failure to act before or after such
adoption. No amendment, modification or repeal of this Article shall diminish
the rights provided hereby or diminish the right to indemnification with
respect to any claim, issue or matter in any then pending or subsequent
proceeding that is based in any material respect on any alleged action or
failure to act prior to such amendment, modification or repeal.
G. Reference herein to Directors, officers, employees or agents shall
include Area Board Directors, former Directors, officers, employees and agents
and their respective heirs, executors and administrators.
Article IX
Amendments
9.1 These Bylaws may be amended, altered, or repealed at any meeting of
the Board of Directors by affirmative vote of a majority of the number of
Directors fixed by resolution of the Board pursuant to these Bylaws. The
stockholders entitled to vote in an election of Directors, however, shall have
the power to rescind, alter, amend or repeal any Bylaws and to enact Bylaws
which, if expressly so provided, may not be amended, altered or repealed by
the Board of Directors.
Administrative Regulation I
Sale, Purchase And Pledge Or Deposit Of Securities Owned
1.1 Sale, Purchase and Pledge or Deposit of Securities. The President,
the Executive Vice President - Investment Bank, the Managing Director
Asset/Liability Management Division, the Managing Director - Funds Management
Division, or such other officers of the Asset/Liability Management Division or
the Funds Management Division as any of the foregoing may designate in writing
(which designation shall be filed with the Corporate Secretary) are authorized
and empowered in its behalf at any time and from to time:
(a) To sell, assign, loan, sell under agreement to repurchase, transfer,
and deliver any and all securities of any description now or at any time
hereafter belonging to the Bank in its own right, or which the Bank is or
shall be authorized and empowered to sell, assign, or transfer as attorney for
the owners or holders thereof.
(b) To make any pledge or deposit of any of the bonds, notes, obligations
or any other securities belonging to the Bank (including any receipts issued
by any other banking institution evidencing the deposit by the Bank of any of
its securities with any other banking institution as custodian) including
without limitation the pledge or deposit with the Treasurer of the United
States, or any other public official or public authority, national, state or
local, for the purpose of securing (i) borrowings from the Federal Reserve
Bank, (ii) deposits for which security is or may be required or permitted by
law at any time to be given, (iii) sureties on surety bonds furnished to
secure such deposits, or (iv) deposits made, whether time or demand, by the
Bank as sole or joint fiduciary of any character. Any officer authorized
hereunder to make such pledges or deposits shall have power to make any
endorsement, transfer or assignment of any such securities, to make
substitutions and withdrawals thereof, and to designate the person or persons
to whom on behalf of the Bank any such securities so withdrawn may be
delivered.
(c) To purchase, borrow, or purchase under agreement to resell for the
account of the Bank in its own right such bonds, stocks or other securities as
may be permitted by law.
(d) To do any act and to execute and acknowledge any document necessary
to the exercise of the powers hereby granted and to appoint attorneys-in-fact
to do such acts and execute such documents.
Administrative Regulation II
Exercise Of Fiduciary Powers
2.1 Certification, Authentication, etc., of Securities and Documents. Any
officer or employee of the Trust Group who may be designated from time to time
in writing (which designation shall be filed with the Corporate Secretary) by
either the President, the Executive Vice President for Trusts, any Senior Vice
President, or Vice President in the Trust Group,
<PAGE>
to act as Special Corporate Assistant shall have the authority to authenticate
or certify, on behalf of the Bank, any bonds, certificates, or other documents
necessary or proper for the Bank to certify in its capacity as Trustee under
any mortgage, deed of trust or other instrument, and to sign or countersign in
the name of the Bank (a) as Transfer Agent or Registrar the certificates for
the capital stock or the bonds or other securities of any corporation for
which the Bank may be at any time Transfer Agent or Co-Transfer Agent, or
Registrar or Co-Registrar, respectively, and (b) as Depositary the receipts
for any securities deposited with the Bank under any agreement under which it
may at any time be Depositary; and any of said officers or employees
authenticating, certifying, signing or countersigning any of such bonds,
certificates, stocks, securities, receipts and documents on behalf of the Bank
may do so under the title or style of "Authorized Officer" or "Authorized
Signature."
2.2 Qualification as Fiduciary. In all cases where the Bank shall be
appointed to act as Trustee, Executor, Administrator (with or without will
annexed), Curator, Guardian, Committee, Receiver, Special Commissioner, or in
any other lawful fiduciary capacity, any one of the following officers,
namely: The President, the Executive Vice President for Trusts, or any officer
of the Trust Group is authorized to take on behalf of the Bank any oath, and
to execute any bond required to be taken or executed, upon the Bank's
qualifying to act in such fiduciary capacity.
2.3 Acceptance of Trusts. The President, the Executive Vice President for
Trusts, or any officer in the Trust Group may accept on behalf of the Bank any
trust and sign his name to any instrument evidencing such acceptance and
acknowledge and deliver the same.
2.4 Purchase and Sales of Securities. Any of the following officers of
the Bank, namely: The President, the Executive Vice President for Trusts, or
any officer in the Trust Group, is authorized in the exercise of powers
conferred upon the Bank as fiduciary or agent, to buy, sell, assign, transfer
and deliver any bonds, stocks and other securities of every description,
standing in the name of this Bank as either sole or joint fiduciary, or in the
name of any ward for whom it is either sole guardian or co-guardian, or of any
decedent for whom it is either the sole personal representative or one of the
personal representatives, or which may be held by it in any fiduciary or
representative capacity whatsoever, either solely or in conjunction with some
other person or persons, whether registered or otherwise (and to exchange
registered for bearer or bearer for registered securities), and any such
officer so authorized shall have authority to appoint one or more attorneys
for that purpose and to execute and deliver on behalf of the Bank all
necessary and proper instruments for the purpose of effectuating the powers
hereby conferred.
2.5 Deposit of Securities Under Plans of Reorganizations, etc. Any of the
following officers of the Bank, namely: The President, the Executive Vice
President for Trusts, or any officer in the Trust Group may deposit or
authorize the deposit of the securities referred to in paragraph 2.4 with any
Committee or Depository under any plan of reorganization, consolidation,
merger or readjustment of any individual, corporation, firm or association,
and may approve any such plan, and may execute in the name of the Bank in its
appropriate fiduciary or representative capacity and deliver on its behalf any
protective committee agreement for any of the above mentioned purposes.
2.6 Sales and Leases of Real Estate and Tangible Personal Property:
Foreclosure and Extension of Mortgages. Any of the following officers of the
Bank, namely: The President, the Executive Vice President for Trusts, or any
officer of the Trust Group, in the exercise of powers conferred upon the Bank
as fiduciary or agent are authorized (i) to sell, exchange or lease any real
estate or tangible personal property or any interest therein, which the Bank
may hold in any fiduciary or representative capacity, (ii) to grant options
for purchase thereof, (iii) to cause the foreclosure of any deed of trust or
mortgage held by the Bank in any such fiduciary or representative capacity, or
(iv) to consent to the extension of the maturity of any such deed of trust or
mortgage.
2.7 All Acts Done Under the Foregoing Paragraphs numbered 2.2, 2.3, 2.4,
2.5 and 2.6 shall be reported to the Trust Administrative Committees, as may
be appropriate, provided that no action then taken by the Committees shall
affect the rights of third parties.
2.8 Voting Stock and Other Securities. The President, the Executive Vice
President for Trusts, or any officer of the Trust Group shall have the power
and authority to attend any meeting of the stockholders or security holders of
any corporation in which this Bank, as fiduciary or agent, is a stockholder or
security holder, and vote on behalf of this Bank any such stock or securities;
and any of them is hereby authorized and empowered to designate, in writing,
any person or persons as proxy, with power of substitution, to attend and vote
at such meeting such stock or securities on behalf of this Bank; provided,
however, that such proxy shall be empowered by such writing to vote only on
the matters and questions in the manner and to the effect therein specified.
Administrative Regulation III
<PAGE>
Borrowing Money, Rediscounts Of Bills And Notes, Buying Or Selling Funds
3.1 Borrowed Money, Security Therefor and Rediscounts. Transactions with
the Federal Reserve Bank, or with any other bank in the nature of borrowings,
pledges or rediscounts by the Bank shall be by the President, the Executive
Vice President - Investment Bank, the Managing Director - Asset/Liability
Management Division, the Managing Director - Funds Management Division, or
such other officers of the Asset/Liability Management Division or the Funds
Management Division as any of the foregoing may designate in writing (which
designation shall be filed with the Corporate Secretary), and any of such
officers is severally authorized in the Bank's behalf at any time and from
time to time:
(a) To borrow money for any temporary purpose and on such terms and for
such periods as he may deem wise;
(b) To pledge as security for the sums so borrowed, sell under repurchase
agreement, any and all securities, bills or notes, of every description
belonging to the Bank in its own right, including receipts of any other
banking institution evidencing deposit with it of any securities, bills or
notes, belonging to the Bank; or
(c) To rediscount any bills or notes belonging to the Bank in its own
right.
3.2 Purchase and Sale of Surplus Funds. The President, the Executive Vice
President - Investment Bank, the Managing Director - Asset/Liability
Management Division, the Managing Director - Funds Management Division, or
such other officers of the Asset/Liability Management Division or the Funds
Management Division as any of them may designate in writing (which designation
shall be filed with the Corporate Secretary), are authorized to purchase or
sell surplus funds.
Administrative Regulation IV
Sales And Leases Of Property
4.1 Sales and Leases of Bank-Owned Real Estate and Associated Personal
Property. The President, any officer at the level of Vice President or above
in the Real Estate Division and in the Collections and Foreclosures Division
of Crestar Mortgage Corporation (and who is also a Vice President or above of
the Bank), any managing officer or Senior Vice President of any Special Assets
or loan workout unit, and any Senior Vice President in the Real Estate Finance
Group, are authorized (I) to sell, exchange or lease any Bank-owned real
estate and any associated personal property or any interest therein, (ii) to
grant options for the purchase thereof, and (iii) to do any act and to
execute, acknowledge and deliver any deed, contract and other document
necessary or desirable in connection therewith.
4.2 Release of Encumbrances. Any release, termination statement, or
satisfaction of judgment required by the Bank shall be executed by any officer
of the Bank or by an attorney-in-fact appointed by an officer of the Bank for
the purpose. Whenever the Bank may be lawfully required to consent to the
release of the lien of any deed of trust, its consent may be evidenced by the
execution of such deed of release or any other document on behalf of the Bank
by any officer of the Bank.
Administrative Regulation V
Checks, Drafts, Orders, Etc.
5.1 Bank - Except Trust. All checks, drafts or orders of the Bank for the
payment of money, whether directed to itself or to others (except those drawn
on trust funds), shall be executed or signed on behalf of the Bank by any
officer or, if authorized to sign by any officer (other than a member of the
Trust Group) who is a Division Head, Senior Vice President or above, by any
employee of the Bank, with a copy of such authorization filed with the
Corporate Controller.
5.2 Trust Group. All checks, drafts or orders of the Trust Group for the
payment of money, whether directed to itself or others, shall be executed or
signed on behalf of the Bank by any officer or employee of the Trust Group who
may be authorized so to sign by any officer of the Trust Group who is Senior
Vice President or above, with a copy of such authorization filed with the
corporate Controller.
Administrative Regulation VI
Signature Guarantee, Confirmations, Etc.
6.1 Signature Guarantee. Any officer of the Bank, or any employee of the
Bank who may be designated in writing (which designation shall be filed with
the Corporate Secretary) by the Chairman of the Board, the President, any
Executive Vice President, any Senior Vice President or Division Head, shall
have the authority to guarantee, on behalf of the Bank, the signature of a
bank customer or other person on any stock certificate, bond, note, or other
security, provided that such officer or
<PAGE>
employee shall know personally:
1. The person signing.
2. That the signature is genuine.
3. That the signer is an appropriate person to endorse or sign.
4. That the signer has legal capacity to sign.
Any such officer or employee guaranteeing any such signature may do so under
the style of "Authorized Officer" or "Authorized Signature".
6.2 Confirmations. The General Auditor or any Vice President Audit is
authorized to certify in the name of, or on behalf of, the Bank in its own
right or in a fiduciary or representative capacity, as to the accuracy and
completeness of any account, schedule of assets, instrument or paper requiring
such certification.
Administrative Regulation VII
Responsibilities Of Area Boards
7.1 Responsibilities of Area Boards. The Area Boards, as provided by
Section 3.7 of the Bylaws, shall, jointly with senior management, assist in the
direction of one or more of the Bank's offices by: 1) selecting and evaluating
the performance of local executive officers, 2) ensuring the adoption of
challenging goals and marketing policies, 3) ensuring a reasonable return on
allocated capital, 4) ensuring a level of profitability that provides for
balanced growth, responsiveness to the credit needs of the community, and high
standards of integrity for all personnel, 5) ensuring an appropriate commitment
of the Bank to a significant role in the local community, 6) ensuring
conformance to applicable statutes & regulations, 7) ensuring a reporting system
that adequately monitors these objectives, 8) promoting the Bank through the
acquisition of business and by personal example and, 9) providing an outside
perspective as a constructive critic and loyal friend.
Administrative Regulation VIII
Deposit And Security Accounts
8.1 Deposit Accounts. The President, the Executive Vice President
Investment Bank, the Executive Vice President, Controller and Treasurer, the
Managing Director - Asset/Liability Management Division, and the Managing
Director - Funds Management Division are individually authorized and empowered
to open and maintain in the name of the Bank one or more deposit accounts at
other financial institutions. The aforementioned officers shall designate the
personnel authorized to sign for and transact business in such accounts and
may agree to any terms governing such accounts. Any resolutions required of
this Corporation in connection with such accounts may be certified by the
Corporate Secretary as if specifically adopted by the Board of Directors.
8.2 Securities Accounts. The President, the Executive Vice President
Investment Bank, the Managing Director Asset/Liability Management Division,
and the Managing Director - Funds Management Division are individually
authorized and empowered to open and maintain in the name of the Bank one or
more securities accounts for the purpose of purchasing, selling, reselling,
borrowing, lending, and otherwise dealing in money market instruments and
securities of any and every kind, including agreements or contracts for their
repurchase or future delivery, with banks, brokers, dealers, securities firms,
or other organizations, and to issue written, telephonic, telegraphic, or
verbal orders or instructions for transactions to be carried out in such
accounts. The aforementioned officers shall designate the personnel authorized
to sign for and transact business in such accounts and may agree to any terms
governing such accounts. Any resolutions required of this Bank in connection
with such accounts may be certified by the Corporate Secretary as if
specifically adopted by the Board of Directors.
<PAGE>
EXHIBIT T-1 (6)
Exhibit 6
Consent of Trustee
Pursuant to the requirements of Section 321(b) of the Trust Indenture Act of
1939 in connection with the execution of a Indenture among United Dominion
Realty Trust, Inc. and Crestar Bank, as Trustee, we hereby consent that
reports of examinations by federal, state, territorial, or district
authorities may be furnished by such authorities to the Securities Exchange
Commission upon request therefor.
Crestar Bank
By: /s/ L.B. BEDELL
- - -----------------------------
(L. B. Bedell, Vice President)
Dated: May 15, 1997
<PAGE>
EXHIBIT T-1 (7)
Federal Financial Institutions Examination Council
Board of Governors of the Federal Reserve System
OMB Number: 7100-0036
Federal Deposit Insurance Corporation
OMB Number: 3064-0052
Office of the Comptroller of the Currency
OMB Number: 1557-0081
Expires March 31, 2000
[LOGO]
Please refer to page i, Table of Contents, for the required disclosure of
estimated burden.
Consolidated Reports of Condition and Income for
A Bank With Domestic and Foreign Offices - FFIEC 031
Report at the close of business June 30, 1997
(970630)
(RCRI 9999)
This report is required by law: 12 U.S.C. Section 324 (State member banks);
12 U.S.C. Section 1817 (State nonmember banks);
and 12 U.S.C. Section 161 (National banks).
This report form is to be filed by banks with branches and consolidated
subsidiaries in U.S. territories and possessions, Edge or Agreement
subsidiaries, foreign branches, consolidated foreign subsidiaries, or
International Banking Facilities.
NOTE: The Reports of Condition and Income must be signed by an authorized
officer and the Report of Condition must be attested to by not less than two
directors (trustees) for State nonmember banks and three directors for State
member and National banks.
I, Richard G. Tilghman, Chairman and Chief Executive Officer
- - ------------------------------------------------------------
Name and Title of Officer Authorized to Sign Report
of the named bank do hereby declare that these Reports of Condition and Income
(including the supporting schedules) have been prepared in conformance with
the instructions issued by the appropriate Federal regulatory authority and
are true to the best of my knowledge and belief.
/s/ RICHARD G. TILGHMAN
- - -------------------------------------
Signature of Officer Authorized to Sign Report
Date of Signature 8/18/97
The Reports of Condition and Income are to be prepared in accordance with
Federal regulatory authority instructions. NOTE: These instructions may in
some cases differ from generally accepted accounting principles.
We, the undersigned directors (trustees), attest to the correctness of this
Report of Condition (including the supporting schedules) and declare that it
has been examined by us and to the best of our knowledge and belief has been
prepared in conformance with the instructions issued by the appropriate
Federal regulatory authority and is true and correct.
/s/ SIGNATURE ILLEGIBLE
- - ----------------------------------
Director (Trustee)
/s/ SIGNATURE ILLEGIBLE
- - ----------------------------------
Director (Trustee)
/s/ SIGNATURE ILLEGIBLE
- - ----------------------------------
Director (Trustee)
For Banks Submitting Hard Copy Report Forms:
State Member Banks: Return the original and one copy to the appropriate
Federal Reserve District Bank.
State Nonmember Banks: Return the original only in the special return address
envelope provided. If express mail is used in lieu of the special return
address envelope, return the original only to the FDIC, c/o Quality Data
Systems, 2127 Espey Court, Suite 204, Crofton, MD 21114.
National Banks: Return the original only in the special return address
<PAGE>
envelope provided. If express mail is used in lieu of the special return
address envelope, return the original only to the FDIC, c/o Quality Data
Systems, 2127 Espey Court, Suite 204, Crofton, MD 21114.
FDIC Certificate Number
(RCRI 9050)
Crestar Bank
P.O. Box 26665
Richmond, VA 23261
E512430000 55124300000
June 30, 1997
31
Board of Governors of the Federal Reserve System, Federal Deposit Insurance
Corporation, Office of the Comptroller of the Currency
<PAGE>
Legal Title of Bank: CRESTAR BANK
Address: P.O. Box 26665
City, State Zip: Richmond, VA 23261-6665
FDIC Certificate No.: 12543
Call Date: 6/30/97 ST-BK: 51-2430 FFIEC 031
Page RI-1
Consolidated Report of Income
for the period January 1, 1997 - June 30, 1997
All Report of Income schedules are to be reported on a calendar year-to-date
basis in thousands of dollars.
Schedule RI--Income Statement
<TABLE>
<CAPTION>
I480
Dollar Amounts in Thousands RIAD Bill Mil Thou
<S> <C> <C> <C>
1. Interest Income:
a. Interest and fee income on loans:
(1) In domestic offices:
(a) Loans secured by real estate 4011 307,890 1.a.(1)(a)
(b) Loans to depository institutions 4019 50 1.a.(1)(b)
(c) Loans to finance agricultural production and other loans to farmers 4024 140 1.a.(1)(c)
(d) Commercial and industrial loans 4012 84,185 1.a.(1)(d)
(e) Acceptances of other banks 4026 0 1.a.(1)(e)
(f) Loans to individuals for household, family, and other personal
expenditures:
(1) Credit cards and related plans 4054 105,648 1.a.(1)(f)(1)
(2) Other 4055 121,196 1.a.(1)(f)(2)
(g) Loans to foreign governments and official institutions 4056 0 1.a.(1)(g)
(h) Obligations (other than securities and leases) of states and political
subdivisions in the U.S.:
(1) Taxable obligations 4503 840 1.a.(1)(h)(1)
(2) Tax-exempt obligations 4504 6,633 1.a.(1)(h)(2)
(i) All other loans in domestic offices 4058 6,182 1.a.(1)(i)
(2) In foreign offices, Edge and Agreement subsidiaries, and IBFs 4059 1.a.(2)
b. Income from lease financing receivables:
(1) Taxable leases 4505 1,073 1.b.(1)
(2) Tax-exempt leases 4307 0 1.b.(2)
c. Interest income on balances due from depository institutions: (1)
(1) In domestic offices 4105 1 1.c.(1)
(2) In foreign offices, Edge and Agreement subsidiaries, and IBFs 4106 126 1.c.(2)
d. Interest and dividend income on securities:
(1) U.S. Treasury securities and U.S. Government agency obligations 4027 119,959 1.d.(1)
(2) Securities issued by states and political subdivisions in the U.S.:
(a) Taxable securities 4506 0 1.d.(2)(a)
(b) Tax-exempt securities 4507 1,666 1.d.(2)(b)
(3) Other domestic debt securities 3657 19,069 1.d.(3)
(4) Foreign debt securities 3658 83 1.d.(4)
(5) Equity securities (including investments in mutual funds) 3659 3,326 1.d.(5)
e. Interest income from trading assets 4069 0 1.e.
</TABLE>
- - ----------
(1) Includes interest income on time certificates of deposit not held for
trading.
3
<PAGE>
Legal Title of Bank: CRESTAR BANK
Address: P.O. Box 26665
City, State Zip: Richmond, VA 23261-6665
FDIC Certificate No.: 12543
Call Date: 6/30/97 ST-BK: 51-2430 FFIEC 031
Page RI-2
Schedule RI--Continued
<TABLE>
<CAPTION>
Year-to-date
Dollar Amounts in Thousands RIAD Bil Mil Thou
<S> <C> <C> <C>
1. Interest income (continued)
f. Interest income on federal funds sold and securities purchased under
agreements to resell 4020 1,976 1.f.
g. Total interest income (sum of items 1.a through 1.f) 4107 780,043 1.g.
2. Interest expense:
a. Interest on deposits:
(1) Interest on deposits in domestic offices:
(a) Transaction accounts (NOW accounts, ATS accounts, and
telephone and preauthorized transfer accounts) 4508 3,454 2.a.(1)(a)
(b) Nontransaction accounts:
(1) Money market deposit accounts (MMDAs) 4509 79,749 2.a.(1)(b)(1)
(2) Other savings deposits 4511 21,150 2.a.(1)(b)(2)
(3) Time deposits of $100,000 or more A517 26,980 2.a.(1)(b)(3)
(4) Time deposits of less than $100,000 A518 99,939 2.a.(1)(b)(4)
(2) Interest on deposits in foreign offices, Edge and
Agreement subsidiaries, and IBFs 4172 213 2.a.(2)
b. Expense of federal funds purchased and securities sold under
agreements to repurchase 4180 58,971 2.b.
c. Interest on demand notes issued to the U.S. Treasury, trading
liabilities, and other borrowed money 4185 26,061 2.c.
d. Not applicable
e. Interest on subordinated notes and debentures 4200 14,306 2.e.
f. Total interest expense (sum of items 2.a through 2.e) 4073 330,823 2.f.
3. Net interest income (item 1.g minus 2.f) RIAD 4074 449,220 3.
4. Provisions:
a. Provision for loan and lease losses RIAD 4230 65,498 4.a.
b. Provision for allocated transfer risk RIAD 4243 0 4.b.
5. Noninterest income:
a. Income from fiduciary activities 4070 24,276 5.a.
b. Service charges on deposit accounts in domestic offices 4080 62,408 5.b.
c. Trading revenue (must equal Schedule RI, sum of Memorandum
items 8.a through 8.d) A220 784 5.c.
d.-e. Not applicable
f. Other noninterest income:
(1) Other fee income 5407 67,394 5.f.(1)
(2) All other noninterest income* 5408 43,642 5.f.(2)
g. Total noninterest income (sum of items 5.a through 5.f) RIAD 4079 198,504 5.g
6. a. Realized gains (losses) on held-to-maturity securities RIAD 3521 0 6.a
b. Realized gains (losses) on available-for-sale securities RIAD 3196 3,598 6.b.
7. Noninterest expense:
a. Salaries and employee benefits 4135 186,736 7.a.
b. Expenses of premises and fixed assets (net of rental income)
(excluding salaries and employee benefits and mortgage interest) 4217 51,948 7.b.
c. Other noninterest expense* 4092 120,952 7.c.
d. Total noninterest expense (sum of items 7.a through 7.c) RIAD 4093 359,636 7.d.
8. Income (loss) before income taxes and extraordinary items and other
adjustments (item 3 plus or minus items 4.a, 4.b, 5.g, 6.a, 6.b, and 7.d) RIAD 4301 226,548 8.
9. Applicable income taxes (on item 8) RIAD 4302 79,971 9.
10. Income (loss) before extraordinary items and other adjustments (item 8
minus 9) RIAD 4300 146,577 10.
11. Extraordinary items and other adjustments, net of income taxes* RIAD 4320 0 11.
12. Net income (loss) (sum of items 10 and 11) RIAD 4340 146,577 12.
</TABLE>
- - ---------
*Describe on Schedule RI-E--Explanations.
4
<PAGE>
Legal Title of Bank: CRESTAR BANK
Address: P.O. Box 26665
City, State Zip: Richmond, VA 23261-6665
FDIC Certificate No.: 12543
Call Date: 6-30-97 ST-BK: 51-2430 FFIEC 031
Page RI-3
Schedule RI--Continued
<TABLE>
<CAPTION>
I481
Year-to-date
RIAD Bil Mil Thou
Memoranda
Dollar Amounts in Thousands
<S> <C> <C> <C>
1. Interest expense incurred to carry tax-exempt securities, loans, and leases
acquired after August 7, 1986, that is not deductible for federal income tax
purposes 4513 2,395 M.1.
2. Income from the sale and servicing of mutual funds and annuities in domestic
offices (included in Schedule RI, item 8) 8431 247 M.2.
3.-4. Not applicable
5. Number of full-time equivalent employees at end of current period Number
(round to nearest whole number) 4150 7,960 M.5.
6. Not applicable
7. If the reporting bank has restated its balance sheet as a result of applying
push down accounting this calendar year, report the date of the bank's CC MM DD YY
acquisition(1) RIAD 9106 00 00 00 00 M.7.
8. Trading revenue (from cash instruments and off-balance sheet derivative
instruments) (sum of Memorandum items 8.a through 8.d must equal
Schedule RI, item 5.c): Bil Mil Thou
a. Interest rate exposures 8757 163 M.8.a.
b. Foreign exchange exposures 8758 621 M.8.b.
c. Equity security and index exposures 8759 0 M.8.c.
d. Commodity and other exposures 8760 0 M.8.d.
9. Impact on income of off-balance sheet derivatives held for purposes other
than trading:
a. Net increase (decrease) to interest income 8761 (1,445) M.9.a.
b. Net (increase) decrease to interest expense 8762 (772) M.9.b.
c. Other (noninterest) allocations 8763 0 M.9.c.
10. Credit losses on off-balance sheet derivatives (see instructions) A251 0 M.10.
11. Does the reporting bank have a Subchapter S election in effect for federal YES NO
income tax purposes for the current tax year? A530 X M.11.
Bil Mil Thou
12. Deferred portion of total applicable income taxes included in Schedule RI,
items 9 and 11 (to be reported with the December Report of Income) 4772 N/A M.12.
</TABLE>
- - ----------
(1) For example, a bank acquired on June 1, 1997, would report 19970601.
5
<PAGE>
Legal Title of Bank: CRESTAR BANK
Address: P.O. Box 26665
City, State Zip: Richmond, VA 23261-6665
FDIC Certificate No.: 12543
Call Date: 6-30-97 ST-BK: 51-2430 FFIEC 031
Page RI-4
Schedule RI-A--Changes in Equity Capital
Indicate decreases and losses in parentheses.
<TABLE>
<CAPTION>
I483
Dollar Amounts in Thousands RIAD Bil Mil Thou
<S> <C> <C> <C>
1. Total equity capital originally reported in the December 31, 1996, Reports
of Condition and Income 3215 1,267,765 1.
2. Equity capital adjustments from amended Reports of Income, net* 3216 0 2.
3. Amended balance end of previous calendar year (sum of items 1 and 2) 3217 1,267,765 3.
4. Net income (loss) (must equal Schedule RI, item 12) 4340 146,577 4.
5. Sale, conversion, acquisition, or retirement of capital stock, net 4346 7,273 5.
6. Changes incident to business combinations, net 4356 333,028 6.
7. LESS: Cash dividends declared on preferred stock 4470 0 7.
8. LESS: Cash dividends declared on common stock 4460 35,186 8.
9. Cumulative effect of changes in accounting principles from prior years* (see
instructions for this schedule) 4411 0 9.
10. Corrections of material accounting errors from prior years* (see
instructions for this schedule) 4412 0 10.
11. Change in net unrealized holding gains (losses) on available-for-sale
securities 8433 (5,006) 11.
12. Foreign currency transaction adjustments 4414 0 12.
13. Other transactions with parent holding company* (not included in items 5, 7,
or 8 above) 4415 0 13.
14. Total equity capital end of current period (sum of items 3 through 13) (must
equal Schedule RC, item 28) 3210 1,714,451 14.
</TABLE>
- - ----------
*Describe on Schedule RI-E--Explanations.
Schedule RI-B--Charge-offs and Recoveries and Changes
in Allowance for Loan and Lease Losses
Part I. Charge-offs and Recoveries on Loans and Leases
Part I excludes charge-offs and recoveries through the allocated transfer risk
reserve.
<TABLE>
<CAPTION>
I486
(Column A) (Column B)
Charge-offs Recoveries
Calendar year-to-date
Dollar Amounts in Thousands RIAD Bil Mil Thou RIAD Bil Mil Thou
<S> <C> <C> <C> <C> <C>
1. Loans secured by real estate:
a. To U.S. addressees (domicile) 4651 3,008 4661 3,800 1.a.
b. To non-U.S. addressees (domicile) 4652 0 4662 0 1.b.
2. Loans to depository institutions and acceptances of the banks:
a. To U.S. banks and other U.S. depository institutions 4653 0 4663 0 2.a.
b. To foreign banks 4654 0 4664 0 2.b.
3. Loans to finance agricultural production and other loans to farmers 4655 0 4665 4 3.
4. Commercial and industrial loans:
a. To U.S. addressees (domicile) 4645 2,786 4617 1,179 4.a.
b. To non-U.S. addressees (domicile) 4646 0 4618 0 4.b.
5. Loans to individuals for household, family, and other personal
expenditures:
a. Credit cards and related plans 4656 50,862 4666 4,335 5.a.
b. Other (includes single payment, installment, and all student loans) 4657 13,504 4667 5,204 5.b.
6. Loans to foreign governments and official institutions 4643 0 4627 0 6.
7. All other loans 4644 71 4628 520 7.
8. Lease financing receivables:
a. Of U.S. addressees (domicile) 4658 0 4668 0 8.a.
b. Of non-U.S. addressees (domicile) 4659 0 4669 0 8.b.
9. Total (sum of items 1 through 8) 4635 70,231 4605 15,062 9.
</TABLE>
6
<PAGE>
Legal Title of Bank: CRESTAR BANK
Address: P.O. Box 26665
City, State Zip: Richmond, VA 23261-6665
FDIC Certificate No.: 12543
Call Date: 6/30/97 ST-BK: 51-2430 FFIEC 031
Page RI-5
Schedule RI-B--Continued
Part I. Continued
<TABLE>
<CAPTION>
(Column A) (Column B)
Charge-offs Recoveries
Memoranda Calendar year-to-date
Dollar Amounts in Thousands RIAD Bil Mil Thou RIAD Bil Mil Thou
<S> <C> <C> <C> <C> <C>
1-3. Not applicable
4. Loans to finance commercial real estate, construction, and land
development activities (not secured by real estate) included in
Schedule RI-B, part I, items 4 and 7, above 5409 0 5410 0 M.4.
5. Loans secured by real estate in domestic offices (included in
Schedule RI-B, part I, item 1, above):
a. Construction and land development 3582 400 3583 27 M.5.a.
b. Secured by farmland 3584 0 3585 7 M.5.b.
c. Secured by 1-4 family residential properties:
(1) Revolving, open-end loans secured by 1-4 family residential
properties and extended under lines of credit 5411 742 5412 362 M.5.c.(1)
(2) All other loans secured by 1-4 family residential properties 5413 1,489 5414 664 M.5.c.(2)
d. Secured by multifamily (5 or more) residential properties 3588 0 3589 9 M.5.d.
e. Secured by nonfarm nonresidential properties 3590 377 3591 2,731 M.5.e.
</TABLE>
Part II. Changes in Allowance for Loan and Lease Losses
<TABLE>
<CAPTION>
Dollar Amounts in Thousands RIAD Bil Mil Thou
<S> <C> <C> <C>
1. Balance originally reported in the December 31, 1996, Reports of Condition
and Income 3124 233,836 1.
2. Recoveries (must equal part I, item 9, column B above) 4605 15,062 2.
3. LESS: Charge-offs (must equal part I, item 9, column A above) 4635 70,231 3.
4. Provision for loan and lease losses (must equal Schedule RI, item 4.a) 4230 65,498 4.
5. Adjustments* (see instructions for this schedule) 4815 35,004 5.
6. Balance end of current period (sum of items 1 through 5)(must equal Schedule RC,
item 4.b) 3213 279,169 6.
</TABLE>
- - ----------
*Describe on Schedule RI-E--Explanations.
7
<PAGE>
Legal Title of Bank: CRESTAR BANK
Address: P.O. Box 26665
City, State Zip: Richmond, VA 23261-6665
FDIC Certificate No.: 12543
Call Date: 6/30/97 ST-BK: 51-2430 FFIEC 031
Page RI-6
Schedule RI-D--Income from International Operations
For all banks with foreign offices, Edge or Agreement subsidiaries, or IBFs
where international operations account for more than 10 percent of total
revenues, total assets, or net income.
Part I. Estimated Income from International Operations
<TABLE>
<CAPTION>
I492
Year-to-date
Dollar Amounts in Thousands RIAD Bil Mil Thou
<S> <C> <C> <C>
1. Interest income and expense booked at foreign offices, Edge and Agreement
subsidiaries, and IBFs:
a. Interest income booked 4837 N/A 1.a.
b. Interest expense booked 4838 N/A 1.b.
c. Net interest income booked at foreign offices, Edge and Agreement
subsidiaries, and IBFs (item 1.a minus 1.b) 4839 N/A 1.c.
2. Adjustments for booking location of international operations:
a. Net interest income attributable to international operations booked at
domestic offices 4840 N/A 2.a.
b. Net interest income attributable to domestic business booked at foreign
offices 4841 N/A 2.b.
c. Net booking location adjustment (item 2.a minus 2.b) 4842 N/A 2.c.
3. Noninterest income and expense attributable to international operations:
a. Noninterest income attributable to international operations 4097 N/A 3.a.
b. Provision for loan and lease losses attributable to international operations 4235 N/A 3.b.
c. Other noninterest expense attributable to international operations 4239 N/A 3.c.
d. Net non-interest income (expense) attributable to international operations (item
3.a minus 3.b and 3.c) 4843 N/A 3.d.
4. Estimated pretax income attributable to international operations before
capital allocation adjustment (sum of items 1.c, 2.c, and 3.d) 4844 N/A 4.
5. Adjustment to pretax income for internal allocations to international
operations to reflect the effects of equity capital on overall bank funding
costs 4845 N/A 5.
6. Estimated pretax income attributable to international operations after
capital allocation adjustment (sum of items 4 and 5) 4846 N/A 6.
7. Income taxes attributable to income from international operations as
estimated in item 6 4797 N/A 7.
8. Estimated net income attributable to international operations (item 6 minus 7) 4341 N/A 8.
</TABLE>
<TABLE>
<CAPTION>
Memoranda
Dollar Amounts in Thousands RIAD Bil Mil Thou
<S> <C> <C> <C>
1. Intracompany interest income included in item 1.a above 4847 N/A M.1.
2. Intracompany interest expense included in item 1.b above 4848 N/A M.2.
</TABLE>
Part II. Supplementary Details on Income from International Operations
Required by the Departments of Commerce and Treasury for Purposes of the U.S.
International Accounts and the U.S. National Income and Product Accounts
<TABLE>
<CAPTION>
Year-to-date
Dollar Amounts in Thousands RIAD Bil Mil Thou
<S> <C> <C> <C>
1. Interest income booked at IBFs 4849 N/A 1.
2. Interest expense booked at IBFs 4850 N/A 2.
3. Noninterest income attributable to international operations booked at
domestic offices (excluding IBFs):
a. Gains (losses) and extraordinary items 5491 N/A 3.a.
b. Fees and other noninterest income 5492 N/A 3.b.
4. Provision for loan and lease losses attributable to international operations
booked at domestic offices (excluding IBFs) 4852 N/A 4.
5. Other noninterest expense attributable to international operations booked at
domestic offices (excluding IBFs) 4853 N/A 5.
</TABLE>
8
<PAGE>
Legal Title of Bank: CRESTAR BANK
Address: P.O. Box 26665
City, State Zip: Richmond, VA 23261-6665
FDIC Certificate No.: 12543
Call Date: 6/30/97 ST-BK: 51-2430 FFIEC 031
Page RI-7
Schedule RI-E--Explanations
Schedule RI-E is to be completed each quarter on a calendar year-to-date
basis.
Detail all adjustments in Schedule RI-A and RI-B, all extraordinary items and
other adjustments in Schedule RI, and all significant items of other
noninterest income and other noninterest expense in Schedule RI. (See
instructions for details.)
<TABLE>
<CAPTION>
I495
Year-to-date
Dollar Amounts in Thousands RIAD Bil Mil Thou
<S> <C> <C> <C>
1. All other noninterest income (from Schedule RI, item 5.f.(2)) Report
amounts that exceed 10% of Schedule RI, item 5.f.(2):
a. Net gains (losses) on other real estate owned 5415 0 1.a.
b. Net gains (losses) on sales of loans 5416 5,258 1.b.
c. Net gains (losses) on sales of premises and fixed assets 5417 5,837 1.c.
Itemize and describe the three largest other amounts that exceed 10% of
Schedule RI, item 5.f.(2):
d. TEXT 4461 Personalized Check Sales 4461 5,382 1.d.
e. TEXT 4462 Other Operating Income 4462 6,234 1.e.
f. TEXT 4463 Gain on Sale of Merchant Card Processing 4463 17,431 1.f.
2. Other noninterest expense (from Schedule RI, item 7.c):
a. Amortization expense of intangible assets 4531 6,479 2.a.
Report amounts that exceed 10% of Schedule RI, item 7.c:
b. Net (gains) losses on other real estate owned 5418 0 2.b.
c. Net (gains) losses on sales of loans 5419 0 2.c.
d. Net (gains) losses on sales of premises and fixed assets 5420 0 2.d.
Itemize and describe the three largest amounts that exceed 10% of Schedule
RI, item 7.c.:
e. TEXT 4464 Communications 4464 17,835 2.e.
f. TEXT 4467 Professional Fees 4467 14,868 2.f.
g. TEXT 4468 4468 2.g.
3. Extraordinary items and other adjustments and applicable income tax effect
(from Schedule RI, item 11) (itemize and describe all extraordinary
items and other adjustments):
a. (1) TEXT 4469 4469 3.a.(1)
(2) Applicable income tax effect RIAD 4486 3.a.(2)
b. (1) TEXT 4487 4487 3.b.(1)
(2) Applicable income tax effect RIAD 4488 3.b.(2)
c. (1) TEXT 4489 4489 3.c.(1)
(2) Applicable income tax effect RIAD 4491 3.c.(2)
4. Equity capital adjustments from amended Reports of Income (from Schedule
RI-A, item 2) (itemize and describe all adjustments):
a. TEXT 4492 4492 4.a.
b. TEXT 4493 4493 4.b.
5. Cumulative effect of changes in accounting principles from prior years (from
Schedule RI-A, item 9) (itemize and describe all changes in accounting
principles):
a. TEXT A546 Effect of change to GAAP from previous non-GAAP instructions A546 0 5.a.
b. TEXT 4495 4495 5.b.
6. Corrections of material accounting errors from prior years (from Schedule
RI-A, item 10 (itemize and describe all corrections):
a. TEXT 4496 4496 6.a.
b. TEXT 4497 4497 6.b.
</TABLE>
<PAGE>
Legal Title of Bank: CRESTAR BANK
Address: P.O. Box 26665
City, State Zip: Richmond, VA 23261-6665
FDIC Certificate No.: 12543
Call Date: 6/30/97 ST-BK: 51-2430 FFIEC 031
Page RI-8
Schedule RI-E--Continued
<TABLE>
<CAPTION>
Year-to-date
Dollar Amounts in Thousands RIAD Bil Mil Thou
<S> <C> <C>
7. Other transactions with parent holding company (from Schedule RI-A, item
13) (itemize and describe all such transactions):
a. TEXT 4498 4498 7.a.
b. TEXT 4499 4499 7.b.
8. Adjustments to allowance for loan and lease losses (from Schedule RI-B,
part II, item 5) (itemize and describe all adjustments):
a. TEXT 4521 Bank Mergers 4521 8.a.
b. TEXT 4522 4522 35,004 8.b.
9. Other explanations (the space below is provided for the bank to briefly
describe, at its option, any other significant items affecting the Report
of Income): I498 I499
No comment __ (RIAD 4769)
Other explanations (please type or print clearly):
(TEXT 4769)
</TABLE>
<PAGE>
Legal Title of Bank: CRESTAR BANK
Address: P.O. Box 26665
City, State Zip: Richmond, VA 23261-6665
FDIC Certificate No.: 12543
Call Date: 6/30/97 ST-BK: 51-2430 FFIEC 031
Page RC-1
Consolidated Report of Condition for Insured Commercial
and State-Chartered Savings Banks for June 30, 1997
All schedules are to be reported in thousands of dollars. Unless otherwise,
indicated, report the amount outstanding as of the last business day of the
quarter.
Schedule RC--Balance Sheet
<TABLE>
<CAPTION>
C400
Dollar Amounts in Thousands RCFD Bil Mil Thou
<S> <C> <C> <C>
ASSETS
1. Cash and balances due from depository institutions (from Schedule RC-A):
a. Noninterest-bearing balances and currency and coin(1) 0081 984,612 1.a.
b. Interest-bearing balances(2) 0071 75,042 1.b.
2. Securities:
a. Held-to-maturity securities (from Schedule RC-B, column A) 1754 718,519 2.a.
b. Available-for-sale securities (from Schedule RC-B, column D) 1773 3,351,960 2.b.
3. Federal funds sold and securities purchased under agreements to resell 1350 864,806 3.
4. Loans and lease financing receivables:
a. Loans and leases, net of unearned income (from Schedule RC-C) RCFD 2122 14,903,815 4.a.
b. LESS: Allowance for loan and lease losses RCFD 3123 279,169 4.b.
c. LESS: Allocated transfer risk reserve RCFD 3128 0 4.c.
d. Loans and leases, net of unearned income, allowance,
and reserve (item 4.a minus 4.b and 4.c) 2125 14,624,646 4.d.
5. Trading assets (from Schedule RC-D) 3545 0 5.
6. Premises and fixed assets (including capitalized leases) 2145 435,233 6.
7. Other real estate owned (from Schedule RC-M) 2150 42,606 7.
8. Investments in unconsolidated subsidiaries and associated companies
(from Schedule RC-M) 2130 1,263 8.
9. Customers' liability to this bank on acceptances outstanding 2155 4,101 9.
10. Intangible assets (from Schedule RC-M) 2143 198,058 10.
11. Other assets (from Schedule RC-F) 2160 951,656 11.
12. Total assets (sum of items 1 through 11) 2170 22,252,502 12.
</TABLE>
- - ----------
(1) Includes cash items in process of collection and unposted debits.
(2) Includes time certificates of deposit not held for trading.
<PAGE>
Legal Title of Bank: CRESTAR BANK
Address: P.O. Box 26665
City, State Zip: Richmond, VA 23261-6665
FDIC Certificate No.: 12543
Call Date: 6/30/97 ST-BK: 51-2430 FFIEC 031
Page RC-2
Schedule RC--Continued
<TABLE>
<CAPTION>
Dollar Amounts in Thousands Bil Mil Thou
<S> <C> <C>
LIABILITIES
13. Deposits:
a. In domestic offices (sum of totals of columns A and C from Schedule RC-E,
part I) RCON 2200 15,907,594 13.a.
(1) Noninterest-bearing(1) RCON 6631 3,492,531 13.a.(1)
(2) Interest-bearing RCON 6636 12,415,063 13.a.(2)
b. In foreign offices, Edge and Agreement subsidiaries, and IBFs (from Schedule
RC-E, part II) RCFN 2200 50,000 13.b.
(1) Noninterest-bearing RCFN 6631 0 13.b.(1)
(2) Interest-bearing RCFN 6636 50,000 13.b.(2)
14. Federal funds purchased and securities sold under agreements to repurchase RCFD 2800 2,525,223 14.
15. a. Demand notes issued to the U.S. Treasury RCON 2840 499,401 15.a.
b. Trading liabilities (from Schedule RC-D) RCFD 3548 0 15.b.
16. Other borrowed money (includes mortgage indebtedness and obligations under
capitalized leases):
a. With a remaining maturity of one year or less RCFD 2332 640,284 16.a.
b. With a remaining maturity of more than one year through three years RCFD A547 0 16.b.
c. With a remaining maturity of more than three years RCFD A548 268,100 16.c.
17. Not applicable
18. Bank's liability on acceptances executed and outstanding RCFD 2920 4,101 18.
19. Subordinated notes and debentures (2) RCFD 3200 335,000 19.
20. Other liabilities (from Schedule RC-G) RCFD 2930 308,348 20.
21. Total liabilities (sum of items 13 through 20) RCFD 2948 20,538,051 21.
22. Not applicable
EQUITY CAPITAL
23. Perpetual preferred stock and related surplus RCFD 3838 0 23.
24. Common stock RCFD 3230 172,572 24.
25. Surplus (exclude all surplus related to preferred stock) RCFD 3839 330,161 25.
26. a. Undivided profits and capital reserves RCFD 3632 1,240,451 26.a.
b. Net unrealized holding gains (losses) on available-for-sale securities RCFD 8434 (28,733) 26.b.
27. Cumulative foreign currency translation adjustments RCFD 3284 0 27.
28. Total equity capital (sum of items 23 through 27) RCFD 3210 1,714,451 28.
29. Total liabilities and equity capital (sum of
items 21 and 28) RCFD 3300 22,252,502 29.
Memorandum
To be reported only with the March Report of Condition.
1. Indicate in the box at the right the number of the statement below that best
describes the most comprehensive level of auditing work performed for the Number
bank by independent external auditors as of any date during 1996 RCFD 6724 N/A M.1.
</TABLE>
1 = Independent audit of the bank conducted in accordance with generally
accepted auditing standards by a certified public accounting firm which
submits a report on the bank
2 = Independent audit of the bank's parent holding company conducted in
accordance with generally accepted auditing standards by a certified
public accounting firm which submits a report on the consolidated holding
company (but not on a bank separately)
3 = Directors' examination of the bank conducted in accordance with
generally accepted auditing standards by a certified public accounting
firm (may be required by state chartering authority)
4 = Directors' examination of the bank performed by other external auditors
(may be required by state chartering authority)
5 = Review of the bank's financial statements by external auditors
6 = Compilation of the bank's financial statements by external auditors
7 = Other audit procedures (excluding tax preparation work)
8 = No external audit work
- - ----------
(1) Includes total demand deposits and noninterest-bearing time and
savings deposits.
(2) Includes limited-life preferred stock and related surplus.
<PAGE>
Legal Title of Bank: CRESTAR BANK
Address: P.O. Box 26665
City, State Zip: Richmond, VA 23261-6665
FDIC Certificate No.: 12543
Call Date: 6/30/97 ST-BK: 51-2430 FFIEC 031
Page RC-3
Schedule RC-A--Cash and Balances Due From Depository Institutions
Exclude assets held for trading.
<TABLE>
<CAPTION>
C405
(Column A) (Column B)
Consolidated Domestic
Bank Offices
Dollar Amounts in Thousands RCFD Bil Mil Thou RCON Bil Mil Thou
<S> <C> <C> <C> <C> <C>
1. Cash items in process of collection, unposted debits, and
currency and coin 0022 960,243 1.
a. Cash items in process of collection and unposted debits 0020 725,281 1.a.
b. Currency and coin 0080 234,962 1.b.
2. Balances due from depository institutions in the U.S. 0082 20,601 2.
a. U.S. branches and agencies of foreign banks
(including their IBFs) 0083 0 2.a.
b. Other commercial banks in the U.S. and other depository
institutions in the U.S. (including their IBFs) 0085 20,601 2.b.
3. Balances due from banks in foreign countries and foreign
central banks 0070 77,617 3.
a. Foreign branches of other U.S. banks 0073 75,000 3.a.
b. Other banks in foreign countries and foreign central banks 0074 2,617 3.b.
4. Balances due from Federal Reserve Banks 0090 1,193 0090 1,193 4.
5. Total (sum of items 1 through 4) (total of column A must
equal Schedule RC, sum of items 1.a and 1.b) 0010 1,059,654 0010 1,059,654 5.
</TABLE>
<TABLE>
<CAPTION>
Memorandum RCON Bil Mil Thou
Dollar Amounts in Thousands
<S> <C> <C> <C>
1. Noninterest-bearing balances due from commercial banks
in the U.S. (included in item 2, column B above) 0050 20,560 M.1.
</TABLE>
Schedule RC-B--Securities
Exclude assets held for trading.
<TABLE>
<CAPTION>
C410
Held-to-maturity Available-for-sale
(Column A) (Column B) (Column C) (Column D)
Amortized Cost Fair Value Amortized Cost Fair Value(1)
Dollar Amounts in Thousands RCFD Bil Mil Thou RCFD Bil Mil Thou RCFD Bil Mil Thou RCFD Bil Mil Thou
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. U.S. Treasury securities 0211 187,842 0213 186,326 1286 499,455 1287 495,925 1.
2. U.S. Government agency
obligations (exclude
mortgage-backed
securities):
a. Issued by U.S. Government
agencies(2) 1289 5,004 1290 4,992 1291 0 1293 0 2.a.
b. Issued by U.S. Government-
sponsored agencies(3) 1294 4,942 1295 5,005 1297 84,245 1298 82,795 2.b.
</TABLE>
- - ----------
(1) Includes equity securities without readily determinable fair values at
historical cost in item 6.b, column D.
(2) Includes Small Business Administration "Guaranteed Loan
Pool Certificates," U.S. Maritime Administration obligations,
and Export-Import Bank participation certificates.
(3) Includes obligations (other than mortgage-backed securities) issued by the
Farm Credit System, the Federal Home Loan Bank System, the Federal Home
Loan Mortgage Corporation, the Federal National Mortgage Association, the
Financing Corporation, Resolution Funding Corporation, the Student Loan
Marketing Association, and the Tennessee Valley Authority.
<PAGE>
Legal Title of Bank: CRESTAR BANK
Address: P.O. Box 26665
City, State Zip: Richmond, VA 23261-6665
FDIC Certificate No.: 12543
Call Date: 6/30/97 ST-BK: 51-2430 FFIEC 031
Page RC-4
Schedule RC-B--Continued
<TABLE>
<CAPTION>
Held-to-maturity Available-for-sale
(Column A) (Column B) (Column C) (Column D)
Amortized Cost Fair Value Amortized Cost Fair Value(1)
Dollar Amounts in Thousands RCFD Bil Mil Thou RCFD Bil Mil Thou RCFD Bil Mil Thou RCFD Bil Mil Thou
<S> <C> <C> <C> <C> <C> <C> <C> <C>
3. Securities issued by states
and political subdivisions
in the U.S.:
a. General obligations 1676 7,777 1677 7,769 1678 0 1679 0 3.a.
b. Revenue obligations 1681 39,734 1686 40,379 1690 0 1691 0 3.b.
c. Industrial development
and similar obligations 1694 335 1695 338 1696 0 1697 0 3.c.
4. Mortgage-backed securities
(MBS):
a. Pass-through securities:
(1) Guaranteed by GNMA 1698 2,385 1699 2,571 1701 87,279 1702 85,118 4.a.(1)
(2) Issued by FNMA and FHLMC 1703 28,626 1705 29,115 1706 1,973,597 1707 1,938,643 4.a.(2)
(3) Other pass-through
securities 1709 0 1710 0 1711 0 1713 0 4.a.(3)
b. Other mortgage-backed
securities (include CMOs,
REMICs, and stripped MBS):
(1) Issued or guaranteed by
FNMA, FHLMC, or GNMA 1714 433,163 1715 432,838 1716 92,757 1717 92,691 4.b.(1)
(2) Collateralized by MBS
issued or guaranteed
by FNMA, FHLMC, or GNMA 1718 633 1719 634 1731 146,115 1732 145,904 4.b.(2)
(3) All other mortgage-backed
securities 1733 5,677 1734 5,677 1735 109,130 1736 108,355 4.b.(3)
5. Other debt securities:
a. Other domestic debt
securities 1737 151 1738 141 1739 291,168 1741 288,981 5.a.
b. Foreign debt securities 1742 2,250 1743 2,250 1744 0 1746 0 5.b.
6. Equity securities:
a. Investments in mutual
funds and other equity
securities with readily
determinable fair values A510 20,344 A511 21,031 6.a.
b. All other equity
securities(1) 1752 92,517 1753 92,517 6.b.
7. Total (sum of items 1 through
6) (total of column A must
equal Schedule RC, item 2.a)
(total of column D must equal
Schedule RC, item 2.b) 1754 718,519 1771 718,035 1772 3,396,607 1773 3,351,960 7.
</TABLE>
- - ----------
(1) Includes equity securities without readily determinable fair values at
historical cost in item 6.b, column D.
<PAGE>
Legal Title of Bank: CRESTAR BANK
Address: P.O. Box 26665
City, State Zip: Richmond, VA 23261-6665
FDIC Certificate No.: 12543
Call Date: 6/30/97 ST-BK: 51-2430 FFIEC 031
Page RC-5
Schedule RC-B--Continued
<TABLE>
<CAPTION>
Memoranda C412
Dollar Amounts in Thousands RCFD Bil Mil Thou
<S> <C> <C> <C>
1. Pledged securities(1) 0416 2,339,558 M.1.
2. Maturity and repricing data for debt securities(1),(2) (excluding those
in nonaccrual status):
a. Securities issued by the U.S. Treasury, U.S. Government agencies, and
states and political subdivisions in the U.S.; other non-mortgage
debt securities; and mortgage pass-through securities other than those
backed by closed-end first lien 1-4 family residential mortgages with a
remaining maturity or repricing frequency of: (3) (4)
(1) Three months or less A549 7,621 M.2.a.(1)
(2) Over three months through 12 months A550 20,671 M.2.a.(2)
(3) Over one year through three years A551 894,741 M.2.a.(3)
(4) Over three years through five years A552 161,250 M.2.a.(4)
(5) Over five years through 15 years A553 26,770 M.2.a.(5)
(6) Over 15 years A554 4,683 M.2.a.(6)
b. Mortgage pass-through securities backed by closed-end first lien 1-4
family residential mortgage with a remaining maturity or repricing
frequency of: (3) (5)
(1) Three months or less A555 10,302 M.2.b.(1)
(2) Over three months through 12 months A556 2,009 M.2.b.(2)
(3) Over one year through three years A557 5,967 M.2.b.(3)
(4) Over three years through five years A558 191,846 M.2.b.(4)
(5) Over five years through 15 years A559 1,804,170 M.2.b.(5)
(6) Over 15 years A560 40,478 M.2.b.(6)
c. Other mortgage-backed securities (include CMOs, REMICs, and stripped
MBS; exclude mortgage pass-through securities) with an expected
average life of: (6)
(1) Three years or less A561 186,096 M.2.c.(1)
(2) Over three years A562 600,327 M.2.c.(2)
d. Fixed rate AND floating rate debt securities with a REMAINING MATURITY
of one year or less (included in Memorandum items 2.a through 2.c above) A248 25,088 M.2.d.
3.-6. Not applicable
7. Amortized cost of held-to-maturity securities sold or transferred to
available-for-sale or trading securities during the calendar year-to-date
(report the amortized cost at date of sale or transfer) 1778 0 M.7.
8. High-risk mortgage securities (included in the held-to-maturity and
available-for-sale accounts in Schedule RC-B, item 4.b):
a. Amortized cost 8780 14,043 M.8.a.
b. Fair value 8781 14,047 M.8.b.
9. Structured notes (included in the held-to-maturity and available-for-sale
accounts in Schedule RC-B, items 2, 3, and 5):
a. Amortized cost 8782 0 M.9.a.
b. Fair value 8783 0 M.9.b.
</TABLE>
- - ------------------
(1) Includes held-to-maturity securities at amortized cost and
available-for-sale securities at fair value.
(2) Exclude equity securities, e.g., investments in mutual funds, Federal
Reserve stock, common stock, and preferred stock.
(3) Report fixed rate debt securities by remaining maturity and floating rate
debt securities by repricing frequency.
(4) Sum of Memorandum items 2.a.(1) through 2.a.(6) plus any nonaccrual debt
securities in the categories of debt securities reported in Memorandum item
2.a that are included in Schedule RC-N, item 9, column C, must equal Schedule
RC-B, sum of items 1, 2, 3, and 5, columns A and D, plus mortgage pass-through
securities other than those backed by closed-end first lien 1-4 family
residential mortgages included in Schedule RC-B, item 4.a, columns A and D.
(5) Sum of Memorandum items 2.b.(1) through 2.b.(6) plus any nonaccrual
mortgage pass-through securities backed by closed-end first lien 1-4 family
residential mortgages included in Schedule RC-N, item 9, column C, must equal
Schedule RC-B, item 4.a, sum of columns A and D, less the amount of mortgage
pass-through securities other than those backed by closed-end first lien 1-4
family residential mortgages included in Schedule RC-B, item 4.a, columns A
and D.
(6) Sum of Memorandum items 2.c.(1) and 2.c.(2) plus any nonaccrual "Other
mortgage-backed securities" included in Schedule RC-N, item 9, column C, must
equal Schedule RC-B, item 4.b, sum of columns A and D.
<PAGE>
Legal Title of Bank: CRESTAR BANK
Address: P.O. Box 26665
City, State Zip: Richmond, VA 23261-6665
FDIC Certificate No.: 12543
Call Date: 6/30/97 ST-BK: 51-2430 FFIEC 031
Page RC-6
Schedule RC-C--Loans and Lease Financing Receivables
Part I. Loans and Leases
Do not deduct the allowance for loan and lease losses from amounts reported in
this schedule. Report total loans and leases, net of unearned income. Exclude
assets held for trading and commercial paper.
<TABLE>
<CAPTION>
C415
(Column A) (Column B)
Consolidated Domestic
Bank Offices
Dollar Amounts in Thousands RCFD Bil Mil Thou RCON Bil Mil Thou
<S> <C> <C> <C> <C> <C>
1. Loans secured by real estate 1410 7,693,391 1.
a. Construction and land development 1415 324,766 1.a.
b. Secured by farmland (including farm residential and other improvements) 1420 16,896 1.b.
c. Secured by 1-4 family residential properties:
(1) Revolving, open-end loans secured by 1-4 family residential properties
and extended under lines of credit 1797 867,109 1.c.(1)
(2) All other loans secured by 1-4 family residential properties:
(a) Secured by first liens 5367 4,017,005 1.c.(2)(a)
(b) Secured by junior liens 5368 242,681 1.c.(2)(b)
d. Secured by multifamily (5 or more) residential properties 1460 157,843 1.d.
e. Secured by nonfarm nonresidential properties 1480 2,067,091 1.e.
2. Loans to depository institutions:
a. To commercial banks in the U.S. 1505 2,284 2.a.
(1) To U.S. branches and agencies of foreign banks 1506 0 2.a.(1)
(2) To other commercial banks in the U.S. 1507 2,284 2.a.(2)
b. To other depository institutions in the U.S. 1517 0 1517 0 2.b.
c. To banks in foreign countries 1510 1,173 2.c.
(1) To foreign branches of other U.S. banks 1513 0 2.c.(1)
(2) To other banks in foreign countries 1516 1,173 2.c.(2)
3. Loans to finance agricultural production and other loans to farmers 1590 3,857 1590 3,857 3.
4. Commercial and industrial loans:
a. To U.S. addressees (domicile) 1763 2,310,967 1763 2,310,967 4.a.
b. To non-U.S. addressees (domicile) 1764 0 1764 0 4.b.
5. Acceptances of other banks:
a. Of U.S. banks 1756 0 1756 0 5.a.
b. Of foreign banks 1757 0 1757 0 5.b.
6. Loans to individuals for household, family, and other personal expenditures
(i.e., consumer loans) (includes purchased paper) 1975 4,279,325 6.
a. Credit cards and related plans (includes check credit and other revolving
credit plans) 2008 1,203,248 6.a.
b. Other (includes single payment, installment, and all student loans) 2011 3,076,077 6.b.
7. Loans to foreign governments and official institutions (including foreign
central banks) 2081 572 2081 572 7.
8. Obligations (other than securities and leases) of states and political
subdivisions in the U.S. (includes nonrated industrial development
obligations) 2107 237,941 2107 237,941 8.
9. Other loans 1563 343,652 9.
a. Loans for purchasing or carrying securities (secured and unsecured) 1545 113,226 9.a.
b. All other loans (exclude consumer loans) 1564 230,426 9.b.
10. Lease financing receivables (net of unearned income) 2165 30,653 10.
a. Of U.S. addressees (domicile) 2182 30,653 10.a.
b. Of non-U.S. addressees (domicile) 2183 0 10.b.
11. LESS: Any unearned income on loans reflected in items 1-9 above 2123 0 2123 0 11.
12. Total loans and leases, net of unearned income (sum of items 1 through 10
minus item 11) (total of column A must equal Schedule RC, item 4.a) 2122 14,903,815 2122 14,903,815 12.
</TABLE>
<PAGE>
Legal Title of Bank: CRESTAR BANK
Address: P.O. Box 26665
City, State Zip: Richmond, VA 23261-6665
FDIC Certificate No.: 12543
Call Date: 6/30/97 ST-BK: 51-2430 FFIEC 031
Page RC-7
Schedule RC-C--Continued
Part I. Continued
<TABLE>
<CAPTION>
Memoranda
Dollar Amounts in Thousands Bil Mil Thou
<S> <C> <C> <C>
1. Not applicable
2. Loans and leases restructured and in compliance with modified terms (included
in Schedule RC-C, part I, above and not reported as past due or nonaccrual in
Schedule RC-N, Memorandum item 1):
a. Loans secured by real estate:
(1) To U.S. addressees (domicile) RCFD 1687 0 M.2.a.(1)
(2) To non-U.S. addressees (domicile) RCFD 1689 0 M.2.a.(2)
b. All other loans and all lease financing receivables (exclude loans to
individuals for household, family, and other personal expenditures) RCFD 8691 0 M.2.b.
c. Commercial and industrial loans to and lease financing receivables of
non-U.S. addresses (domicile) included in Memorandum item 2.b above RCFD 8692 0 M.2.c.
3. Maturity and repricing data for loans and leases (excluding those in
nonaccrual status):
a. Closed-end loans secured by first liens on 1-4 family residential
properties in domestic offices with a remaining maturity or repricing
frequency of:(1)(2)
(1) Three months or less RCON A564 1,073,950 M.3.a.(1)
(2) Over three months through 12 months RCON A565 1,385,719 M.3.a.(2)
(3) Over one year through three years RCON A566 307,997 M.3.a.(3)
(4) Over three years through five years RCON A567 213,085 M.3.a.(4)
(5) Over five years through 15 years RCON A568 651,164 M.3.a.(5)
(6) Over 15 years RCON A569 385,090 M.3.a.(6)
b. All loans and leases other than closed-end loans secured by first liens
on 1-4 family residential properties in domestic offices with a
remaining maturity or repricing frequency of:(1)(3)
(1) Three months or less RCFD A570 6,785,176 M.3.b.(1)
(2) Over three months through 12 months RCFD A571 535,737 M.3.b.(2)
(3) Over one year through three years RCFD A572 1,725,826 M.3.b.(3)
(4) Over three years through five years RCFD A573 938,756 M.3.b.(4)
(5) Over five years through 15 years RCFD A574 848,987 M.3.b.(5)
(6) Over 15 years RCFD A575 52,327 M.3.b.(6)
c. Fixed rate AND floating rate loans and leases with a REMAINING MATURITY
of one year or less (included in Memorandum items 3.a and 3.b above) RCFD A247 4,581,981 M.3.c.
d. Fixed rate AND floating rate loans secured by nonfarm nonresidential
properties in domestic offices(4) with a REMAINING MATURITY of over
five years (included in Memorandum item 3.b above) RCON A577 122,262 M.3.d.
e. Fixed rate AND floating rate commercial and industrial loans(5) with a
REMAINING MATURITY of over three years (included in Memorandum item
3.b above) RCFD A578 79,244 M.3.e.
</TABLE>
- - ----------
(1) Report fixed rate loans and leases by remaining maturity and floating rate
loans by repricing frequency.
(2) Sum of Memorandum items 3.a.(1) through 3.a.(6) plus total nonaccrual
closed-end loans secured by first liens on 1-4 family residential
properties in domestic offices included in Schedule RC-N, Memorandum item
3.c.(2), column C, must equal total closed-end loans secured by first
liens on 1-4 family residential properties from Schedule RC-C, part I,
item 1.c.(2)(a), column B.
(3) Sum of Memorandum items 3.b.(1) through 3.b.(6), plus total nonaccrual
loans and leases from Schedule RC-N, sum of items 1 through 8, column C,
minus nonaccrual closed-end loans secured by first liens on 1-4 family
residential properties in domestic offices included in Schedule RC-N,
Memorandum item 3.c.(2), column C, must equal total loans and leases from
Schedule RC-C, part I, sum of items 1 through 10, column A, minus total
closed-end loans secured by first liens on 1-4 family residential
properties in domestic offices from Schedule RC-C, part I, item
1.c.(2)(a), column B.
(4) As defined for Schedule RC-C, part I, item 1.e, column B.
(5) As defined for Schedule RC-C, part I, item 4, column A.
<PAGE>
Legal Title of Bank: CRESTAR BANK
Address: P.O. Box 26665
City, State Zip: Richmond, VA 23261-6665
FDIC Certificate No.: 12543
Call Date: 6/30/97 ST-BK: 51-2430 FFIEC 031
Page RC-8
Schedule RC-C--Continued
Part I. Continued
<TABLE>
<CAPTION>
Memoranda (continued)
Dollar Amounts in Thousands Bil Mil Thou
<S> <C> <C> <C>
4. Loans to finance commercial real estate, construction, and land development
activities (not secured by real estate) included in Schedule RC-C, part I,
items 4 and 9, column A, page RC-6(1) RCFD 2746 0 M.4.
5. Loans and leases held for sale (included in Schedule RC-C, part I, page RC-6) RCFD 5369 643,080 M.5.
6. Adjustable rate closed-end loans secured by first liens on 1-4 family
residential properties in domestic offices (included in Schedule RC-C,
part I, item 1.c.(2)(a), column B, page RC-6) RCON 5370 1,656,649 M.6.
</TABLE>
- - ----------
(1) Exclude loans secured by real estate that are included in Schedule RC-C,
part I, item 1, column A.
Schedule RC-D--Trading Assets and Liabilities
Schedule RC-D is to be completed only by banks with $1 billion or more in
total assets or with $2 billion or more in par/notional amount of off-balance
sheet derivative contracts (as reported in Schedule RC-L, items 14.a through
14.e, columns A through D).
<TABLE>
<CAPTION>
C420
Dollar Amounts in Thousands Bil Mil Thou
<S> <C> <C> <C>
ASSETS
1. U.S. Treasury securities in domestic offices RCON 3531 0 1.
2. U.S. Government agency obligations in domestic offices
(exclude mortgage-backed securities) RCON 3532 0 2.
3. Securities issued by states and political subdivisions in the U.S. in
domestic offices RCON 3533 0 3.
4. Mortgage-backed securities (MBS) in domestic offices:
a. Pass-through securities issued or guaranteed by FNMA, FHLMC, or GNMA RCON 3534 0 4.a.
b. Other mortgage-backed securities issued or guaranteed by FNMA, FHLMC, or
GNMA (include CMOs, REMICs, and stripped MBS) RCON 3535 0 4.b.
c. All other mortgage-backed securities RCON 3536 0 4.c.
5. Other debt securities in domestic offices RCON 3537 0 5.
6. Certificates of deposit in domestic offices RCON 3538 0 6.
7. Commercial paper in domestic offices RCON 3539 0 7.
8. Bankers acceptances in domestic offices RCON 3540 0 8.
9. Other trading assets in domestic offices RCON 3541 0 9.
10. Trading assets in foreign offices RCFN 3542 0 10.
11. Revaluation gains on interest rate, foreign exchange rate, and other
commodity and equity contracts:
a. In domestic offices RCON 3543 0 11.a.
b. In foreign offices RCFN 3543 0 11.b.
12. Total trading assets (sum of items 1 through 11) (must equal Schedule RC,
item 5) RCFD 3545 0 12.
LIABILITIES Bil Mil Thou
13. Liability for short positions RCFD 3546 0 13.
14. Revaluation losses on interest rate, foreign exchange rate, and other
commodity and equity contracts RCFD 3547 0 14.
15. Total trading liabilities (sum of items 13 and 14) (must equal Schedule
RC, item 15.b) RCFD 3548 0 15.
</TABLE>
<PAGE>
Legal Title of Bank: CRESTAR BANK
Address: P.O. Box 26665
City, State Zip: Richmond, VA 23261-6665
FDIC Certificate No.: 12543
Call Date: 6/30/97 ST-BK: 51-2430 FFIEC 031
Page RC-8a
Schedule RC-C--Continued
Part II. Loans to Small Businesses and Small Farms
Schedule RC-C, Part II is to be reported only with the June Report of
Condition.
Report the number and amount currently outstanding as of June 30 of business
loans with "original amounts" of $1,000,000 or less and farm loans with
"original amounts" of $500,000 or less. The following guidelines should be
used to determine the "original amount" of a loan: (1) For loans drawn down
under lines of credit or loan commitments, the "original amount" of the loan
is the size of the line of credit or loan commitment when the line of credit
or loan commitment was most recently approved, extended, or renewed prior to
the report date. However, if the amount currently outstanding as of the report
date exceeds this size, the "original amount" is the amount currently
outstanding on the report date. (2) For loan participations and syndications,
the "original amount" of the loan participation or syndication is the entire
amount of the credit originated by the lead lender. (3) For all other loans,
the "original amount" is the total amount of the loan at origination or the
amount currently outstanding as of the report date, whichever is larger.
Loans to Small Businesses
<TABLE>
<CAPTION>
C418
RCON YES NO
<S> <C> <C> <C>
1. Indicate in the appropriate box at the right whether all or substantially
all of the dollar volume of your bank's "Loans secured by nonfarm
nonresidential properties" in domestic offices reported in Schedule RC-C,
part I, item 1.e, column B, and all or substantially all of the dollar
volume of your bank's "Commerical and industrial loans to U.S. addressees"
in domestic offices reported in Schedule RC-C, part I, item 4.a, column B,
have original amounts of $100,000 or less (If your bank has no loans
outstanding in both of these two loan categories, place an "X" in the
box marked "NO".) 6999 X 1.
</TABLE>
If YES, complete items 2.a and 2.b below, skip items 3 and 4, and go to
item 5.
If NO and your bank has loans outstanding in either loan category, skip
items 2.a and 2.b, complete items 3 and 4 below, and go to item 5.
If NO and your bank has no loans outstanding in both loan categories,
skip items 2 through 4, and go to item 5.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Number of Loans
RCON
2. Report the total number of loans currently outstanding for each of the
following Schedule RC-C, part I, loan categories:
a. "Loans secured by nonfarm nonresidential properties" in domestic offices
reported in Schedule RC-C, part I, item 1.e, column B. (Note: Item 1.e,
column B, divided by the number of loans should NOT exceed $100,000.) 5562 N/A 2.a.
b. "Commercial and industrial loans to U.S. addressees" in domestic offices
reported in Schedule RC-C, part I, item 4.a, column B. (Note: Item 4.a,
column B, divided by the number of loans should NOT exceed $100,000.) 5563 N/A 2.b.
</TABLE>
<TABLE>
<CAPTION>
(Column A) (Column B)
Amount
Currently
Number of Loans Outstanding
Dollar Amounts in Thousands RCON RCON Bil Mil Thou
<S> <C> <C> <C> <C> <C>
3. Number and amount currently outstanding of "Loans secured by nonfarm
nonresidential properties" in domestic offices reported in Schedule RC-C,
part I, item 1.e, column B (sum of items 3.a through 3.c must be less than
or equal to Schedule RC-C, part I, item 1.e, column B):
a. With original amounts of $100,000 or less 5564 2,049 5565 72,362 3.a.
b. With original amounts of more than $100,000 through $250,000 5566 1,272 5567 161,008 3.b.
c. With original amounts of more than $250,000 through $1,000,000 5568 1,390 5569 569,142 3.c.
4. Number and amount currently outstanding of "Commercial and industrial loans
to U.S. addressees" in domestic offices reported in Schedule RC-C, part I,
item 4.a, column B (sum of items 4.a through 4.c must be less than or equal
to Schedule RC-C, part I, item 4.a, column B):
a. With original amounts of $100,000 or less 5570 21,223 5571 187,264 4.a.
b. With original amounts of more than $100,000 through $250,000 5572 1,503 5573 139,382 4.b.
c. With original amounts of more than $250,000 through $1,000,000 5574 1,367 5575 315,372 4.c.
</TABLE>
<PAGE>
Legal Title of Bank: CRESTAR BANK
Address: P.O. Box 26665
City, State Zip: Richmond, VA 23261-6665
FDIC Certificate No.: 12543
Call Date: 6/30/97 ST-BK: 51-2430 FFIEC 031
Page RC-8b
Schedule RC-C--Continued
Part II. Continued
Agricultural Loans to Small Farms
<TABLE>
<CAPTION>
YES NO
<S> <C> <C> <C>
5. Indicate in the appropriate box at the right whether all or substantially
all of the dollar volume of your bank's "Loans secured by farmland
(including farm residential and other improvements)" in domestic offices
reported in Schedule RC-C, part I, item 1.b, column B, and all or
substantially all of the dollar volume of your bank's "Loans to finance
agricultural production and other loans to farmers" in domestic offices
reported in Schedule RC-C, part I, item 3, column B, have original amounts
of $100,000 or less (If your bank has no loans outstanding in both of these
two loan categories, place an "X" in the box marked "NO".) 6860 X 5.
</TABLE>
If YES, complete items 6.a and 6.b below and do not complete items 7 and 8.
If NO and your bank has loans outstanding in either loan category, skip
items 6.a and 6.b and complete items 7 and 8 below.
If NO and your bank has no loans outstanding in both loan categories, do not
complete items 6 through 8.
<TABLE>
<CAPTION>
Number of Loans
RCON
<S> <C> <C> <C>
6. Report the total number of loans currently outstanding for each of the
following Schedule RC-C, part I, loan categories:
a. "Loans secured by farmland (including farm residential and other
improvements)" in domestic offices reported in Schedule RC-C,
part I, item 1.b, column B. (Note: Item 1.b, column B, divided by the
number of loans should NOT exceed $100,000.) 5576 N/A 6.a.
b. "Loans to finance agricultural production and other loans to farmers"
in domestic offices reported in Schedule RC-C, part I, item 3, column B.
(Note: Item 3, column B, divided by the number of loans should
NOT exceed $100,000.) 5577 N/A 6.b.
</TABLE>
<TABLE>
<CAPTION>
(Column A) (Column B)
Amount
Currently
Number of Loans Outstanding
Dollar Amounts in Thousands RCON RCON Bil Mil Thou
<S> <C> <C> <C>
7. Number and amount currently outstanding of "Loans secured by farmland
(including farm residential and other improvements)" in domestic
offices reported in Schedule RC-C, part I, item 1.b, column B (sum
of items 7.a through 7.c must be less than or equal to Schedule RC-C,
part I, item 1.b, column B):
a. With original amounts of $100,000 or less 5578 148 5579 3,828 7.a.
b. With original amounts of more than $100,000 through $250,000 5580 39 5581 4,457 7.b.
c. With original amounts of more than $250,000 through $500,000 5582 16 5583 3,837 7.c.
8. Number and amount currently outstanding of "Loans to finance agricultural
production and other loans to farmers" in domestic offices reported in
Schedule RC-C, part I, item 3, column B (sum of items 8.a through 8.c must
be less than or equal to Schedule RC-C, part I, item 3, column B):
a. With original amounts of $100,000 or less 5584 228 5585 1,752 8.a.
b. With original amounts of more than $100,000 through $250,000 5586 9 5587 471 8.b.
c. With original amounts of more than $250,000 through $500,000 5588 3 5589 1,011 8.c.
</TABLE>
<PAGE>
Legal Title of Bank: CRESTAR BANK
Address: P.O. Box 26665
City, State Zip: Richmond, VA 23261-6665
FDIC Certificate No.: 12543
Call Date: 6/30/97 ST-BK: 51-2430 FFIEC 031
Page RC-9
Schedule RC-E--Deposit Liabilities
Part I. Deposits in Domestic Offices
<TABLE>
<CAPTION>
C425
Nontransaction
Transaction Accounts Accounts
(Column A) (Column B) (Column C)
Total transaction Memo: Total Total
accounts (including demand deposits nontransaction
total demand (included in accounts
deposits) column A) (including MMDAs)
Dollar Amounts in Thousands RCON Bil Mil Thou RCON Bil Mil Thou RCON Bil Mil Thou
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Deposits of:
1. Individuals, partnerships,
and corporations 2201 3,426,241 2240 3,116,531 2346 11,955,889 1.
2. U.S. Government 2202 25,261 2280 19,430 2520 2,234 2.
3. States and political subdivisions
in the U.S. 2203 135,693 2290 113,047 2530 117,550 3.
4. Commercial banks in the U.S. 2206 155,446 2310 155,446 2550 532 4.
5. Other depository institutions
in the U.S. 2207 44,359 2312 44,359 2349 671 5.
6. Banks in foreign countries 2213 4,310 2320 4,310 2236 0 6.
7. Foreign governments and
official institutions
(including foreign central banks) 2216 0 2300 0 2377 0 7.
8. Certified and official checks 2330 39,408 2330 39,408 8.
9. Total (sum of items 1 through 8)
(sum of columns A and C must
equal Schedule RC, item 13.a) 2215 3,830,718 2210 3,492,531 2385 12,076,876 9.
</TABLE>
<TABLE>
<CAPTION>
Memoranda
Dollar Amounts in Thousands RCON Bil Mil Thou
<S> <C> <C> <C>
1. Selected components of total deposits (i.e., sum of item 9, columns A and C):
a. Total Individual Retirement Accounts (IRAs) and Keogh Plan accounts 6835 1,201,873 M.1.a.
b. Total brokered deposits 2365 546,000 M.1.b.
c. Fully insured brokered deposits (included in Memorandum item 1.b above):
(1) Issued in denominations of less than $100,000 2343 0 M.1.c.(1)
(2) Issued either in denominations of $100,000 or in denominations greater than
$100,000 and participated out by the broker in shares of $100,000 or less 2344 0 M.1.c.(2)
d. Maturity data for brokered deposits:
(1) Brokered deposits issued in denominations of less than $100,000 with
a remaining maturity of one year or less (included in Memorandum
item 1.c.(1) above)
A243 0 M.1.d.(1)
(2) Brokered deposits issued in denominations of $100,000 or more with a
remaining maturity of one year or less (included in Memorandum
item 1.b above) A244 546,000 M.1.d.(2)
e. Preferred deposits (uninsured deposits of states and political subdivisions
in the U.S. reported in item 3 above which are secured or collateralized as
required under state law) 5590 237,633 M.1.e.
2. Components of total nontransaction accounts (sum of Memorandum items 2.a
through 2.d must equal item 9, column C above):
a. Savings deposits:
(1) Money market deposit accounts (MMDAs) 6810 5,410,451 M.2.a.(1)
(2) Other savings deposits (excludes MMDAs) 0352 1,552,860 M.2.a.(2)
b. Total time deposits of less than $100,000 6648 3,976,629 M.2.b.
c. Total time deposits of $100,000 or more 2604 1,136,936 M.2.c.
3. All NOW accounts (included in column A above) 2398 338,187 M.3.
4. Not applicable
</TABLE>
<PAGE>
Legal Title of Bank: CRESTAR BANK
Address: P.O. Box 26665
City, State Zip: Richmond, VA 23261-6665
FDIC Certificate No.: 12543
Call Date: 6/30/97 ST-BK: 51-2430 FFIEC 031
Page RC-10
Schedule RC-E--Continued
Part I. Continued
Memoranda (continued)
<TABLE>
<CAPTION>
Dollar Amounts in Thousands RCON Bil Mil Thou
<S> <C> <C> <C>
5. Maturity and repricing data for time deposits of less than $100,000
a. Time deposits of less than $100,000 with a remaining maturity or repricing frequency
of: (1) (2)
(1) Three months or less A579 884,204 M.5.a.(1)
(2) Over three months through 12 months A580 1,930,291 M.5.a.(2)
(3) Over one year through three years A581 947,846 M.5.a.(3)
(4) Over three years A582 214,291 M.5.a.(4)
b. Fixed rate AND floating rate time deposits of less than $100,000 with a REMAINING
MATURITY of one year or less (included in Memorandum items 5.a.(1) through
5.a.(4) above) A241 2,758,204 M.5.b.
6. Maturity and repricing data for time deposits of $100,000 or more:
a. Time deposits of $100,000 or more with a remaining maturity or repricing frequency
of: (1) (3)
(1) Three months or less A584 774,354 M.6.a.(1)
(2) Over three months through 12 months A585 252,420 M.6.a.(2)
(3) Over one year through three years A586 95,335 M.6.a.(3)
(4) Over three years A587 14,827 M.6.a.(4)
b. Fixed rate AND floating rate time deposits of $100,000 or more with a REMAINING
MATURITY of one year or less (included in Memorandum items 6.a.(1) through
6.a.(4) above) A242 1,021,402 M.6.b.
</TABLE>
- - ----------
(1) Report fixed rate time deposits by remaining maturity and floating rate
time deposits by repricing frequency.
(2) Sum of Memorandum items 5.a.(1) through 5.a.(4) must equal Schedule RC-E,
Memorandum item 2.b above.
(3) Sum of Memorandum items 6.a.(1) through 6.a.(4) must equal Schedule RC-E,
Memorandum item 2.c above.
<PAGE>
Legal Title of Bank: CRESTAR BANK
Address: P.O. Box 26665
City, State Zip: Richmond, VA 23261-6665
FDIC Certificate No.: 12543
Call Date: 6/30/97 ST-BK: 51-2430 FFIEC 031
Page RC-11
Schedule RC-E--Continued
Part II. Deposits in Foreign Offices (including Edge and Agreement subsidiaries
and IBFs)
<TABLE>
<CAPTION>
Dollar Amounts in Thousands RCFN Bil Mil Thou
<S> <C> <C>
Deposits of:
1. Individuals, partnerships, and corporations 2621 0 1.
2. U.S. banks (including IBFs and foreign branches of U.S. banks) 2623 50,000 2.
3. Foreign banks (including U.S. branches and agencies of foreign banks,
including their IBFs) 2625 0 3.
4. Foreign governments and official institutions (including foreign central
banks) 2650 0 4.
5. Certified and official checks 2330 0 5.
6. All other deposits 2668 0 6.
7. Total (sum of items 1 through 6)(must equal Schedule RC, item 13.b) 2200 50,000 7.
</TABLE>
<TABLE>
<CAPTION>
Memorandum
Dollar Amounts in Thousands RCFN Bil Mil Thou
<S> <C> <C> <C>
1. Time deposits with a remaining maturity of one year or less (included in
Part II, item 7 above) A245 50,000 M.1.
</TABLE>
Schedule RC-F--Other Assets
<TABLE>
<CAPTION>
C430
Dollar Amounts in Thousands Bil Mil Thou
<S> <C> <C> <C>
1. Income earned, not collected on loans RCFD 2164 140,621 1.
2. Net deferred tax assets (1) RCFD 2148 112,417 2.
3. Interest-only strips receivable (not in the form of a security)
(2) on:
a. Mortgage loans RCFD A519 3,460 3.a.
b. Other financial assets RCFD A520 0 3.b.
4. Other (itemize and describe amounts that exceed 25% of this item) RCFD 2168 695,158 4.
a. TEXT 3549 A/R Trade Date Settlements RCFD 3549 324,477 4.a.
b. TEXT 3550 RCFD 3550 4.b.
c. TEXT 3551 RCFD 3551 4.c.
5. Total (sum of items 1 through 4) (must equal Schedule RC, item 11) RCFD 2160 951,656 5.
</TABLE>
<TABLE>
<CAPTION>
Memorandum
Dollar Amounts in Thousands Bil Mil Thou
<S> <C> <C>
1. Deferred tax assets disallowed for regulatory capital purposes RCFD 5610 0 M.1.
</TABLE>
Schedule RC-G--Other Liabilities
<TABLE>
<CAPTION>
C435
Dollar Amounts in Thousands Bil Mil Thou
<S> <C> <C>
1. a. Interest accrued and unpaid on deposits in domestic offices (3) RCON 3645 28,556 1.a.
b. Other expenses accrued and unpaid (includes accrued income taxes payable) RCFD 3646 156,810 1.b.
2. Net deferred tax liabilities (1) RCFD 3049 0 2.
3. Minority interest in consolidated subsidiaries RCFD 3000 0 3.
4. Other (itemize and describe amounts that exceed 25% of this item) RCFD 2938 122,982 4.
a. TEXT 3552 Accounts Payable RCFD 3552 63,497 4.a.
b. TEXT 3553 Purchase Contracts - Spot & Future Contracts RCFD 3553 56,258 4.b.
c. TEXT 3554 RCFD 3554 4.c.
5. Total (sum of items 1 through 4) (must equal Schedule RC, item 20) RCFD 2930 308,348 5.
</TABLE>
- - ----------
(1) See discussion of deferred income taxes in Glossary entry on "income
taxes."
(2) Report interest-only strips receivable in the form of a security
as available-for-sale securities in Schedule RC, item 2.b., or as trading
assets in Schedule RC, item 5, as appropriate.
(3) For savings banks, include "dividends" accrued and unpaid on deposits.
<PAGE>
Legal Title of Bank: CRESTAR BANK
Address: P.O. Box 26665
City, State Zip: Richmond, VA 23261-6665
FDIC Certificate No.: 12543
Call Date: 6/30/97 ST-BK: 51-2430 FFIEC 031
Page RC-12
Schedule RC-H--Selected Balance Sheet Items for Domestic Offices
<TABLE>
<CAPTION>
C440
Domestic Offices
Dollar Amounts in Thousands RCON Bil Mil Thou
<S> <C> <C> <C>
1. Customers' liability to this bank on acceptances outstanding 2155 4,101 1.
2. Bank's liability on acceptances executed and outstanding 2920 4,101 2.
3. Federal funds sold and securities purchased under agreements to resell 1350 864,806 3.
4. Federal funds purchased and securities sold under agreements to repurchase 2800 2,525,223 4.
5. Other borrowed money 3190 908,384 5.
EITHER
6. Net due from own foreign offices, Edge and Agreement subsidiaries, and IBFs 2163 26,065 6.
OR
7. Net due to own foreign offices, Edge and Agreement subsidiaries, and IBFs 2941 N/A 7.
8. Total assets (excludes net due from foreign offices, Edge and Agreement
subsidiaries, and IBFs) 2192 22,176,329 8.
9. Total liabilities (excludes net due to foreign offices, Edge and Agreement
subsidiaries, and IBFs) 3129 20,487,943 9.
</TABLE>
Items 10-17 include held-to-maturity and available-for-sale securities in
domestic offices.
<TABLE>
<CAPTION>
RCON Bil Mil Thou
<S> <C> <C> <C>
10. U.S. Treasury securities 1779 683,767 10.
11. U.S. Government agency obligations (exclude mortgage-backed securities) 1785 92,741 11.
12. Securities issued by states and political subdivisions in the U.S. 1786 47,846 12.
13. Mortgage-backed securities (MBS):
a. Pass-through securities:
(1) Issued or guaranteed by FNMA, FHLMC, or GNMA 1787 2,054,772 13.a.(1)
(2) Other pass-through securities 1869 0 13.a.(2)
b. Other mortgage-backed securities (include CMOs, REMICs, and stripped MBS):
(1) Issued or guaranteed by FNMA, FHLMC, or GNMA 1877 525,854 13.b.(1)
(2) All other mortgage-backed securities 2253 260,569 13.b.(2)
14. Other domestic debt securities 3159 289,132 14.
15. Foreign debt securities 3160 2,250 15.
16. Equity securities:
a. Investments in mutual funds and other
equity securities with readily determinable fair values A513 21,031 16.a.
b. All other equity securities 3169 92,517 16.b.
17. Total held-to-maturity and available-for-sale securities (sum of items 10
through 16) 3170 4,070,479 17.
</TABLE>
<TABLE>
<CAPTION>
Memorandum (to be completed only by banks with IBFs and other "foreign" offices)
Dollar Amounts in Thousands RCON Bil Mil Thou
<S> <C> <C>
EITHER
1. Net due from the IBF of the domestic offices of the reporting bank 3051 N/A M.1.
OR
2. Net due to the IBF of the domestic offices of the reporting bank 3059 N/A M.2.
</TABLE>
<PAGE>
Legal Title of Bank: CRESTAR BANK
Address: P.O. Box 26665
City, State Zip: Richmond, VA 23261-6665
FDIC Certificate No.: 12543
Call Date: 6/30/97 ST-BK: 51-2430 FFIEC 031
Page RC-13
Schedule RC-I--Selected Assets and Liabilities of IBFs
To be completed only by banks with IBFs and other "foreign" offices.
<TABLE>
<CAPTION>
C445
Dollar Amounts in Thousands RCFN Bil Mil Thou
<S> <C> <C>
1. Total IBF assets of the consolidated bank (component of Schedule RC,
item 12) 2133 N/A 1.
2. Total IBF loans and lease financing receivables (component of Schedule RC-C,
part I, item 12, column A) 2076 N/A 2.
3. IBF commercial and industrial loans (component of Schedule RC-C, part I,
item 4, column A) 2077 N/A 3.
4. Total IBF liabilities (component of Schedule RC, item 21) 2898 N/A 4.
5. IBF deposit liabilities due to banks, including other IBFs (component of
Schedule RC-E, part II, items 2 and 3) 2379 N/A 5.
6. Other IBF deposit liabilities (component of Schedule RC-E, part II, items 1,
4, 5, and 6) 2381 N/A 6.
</TABLE>
Schedule RC-K--Quarterly Averages (1)
<TABLE>
<CAPTION>
C455
Dollar Amounts in Thousands Bil Mil Thou
<S> <C> <C> <C>
ASSETS
1. Interest-bearing balances due from depository institutions RCFD 3381 847 1.
2. U.S. Treasury securities and U.S. Government agency obligations(2) RCFD 3382 3,737,496 2.
3. Securities issued by states and political subdivisions in the U.S.(2) RCFD 3383 47,886 3.
4. a. Other debt securities(2) RCFD 3647 578,345 4.a.
b. Equity securities(3) (includes investments in mutual funds and Federal
Reserve stock) RCFD 3648 114,362 4.b.
5. Federal funds sold and securities purchased under agreements to resell RCFD 3365 68,770 5.
6. Loans:
a. Loans in domestic offices:
(1) Total loans RCON 3360 14,692,899 6.a.(1)
(2) Loans secured by real estate RCON 3385 7,596,015 6.a.(2)
(3) Loans to finance agricultural production and other loans to farmers RCON 3386 3,350 6.a.(3)
(4) Commercial and industrial loans RCON 3387 2,237,860 6.a.(4)
(5) Loans to individuals for household, family, and other personal expenditures RCON 3388 4,038,343 6.a.(5)
b. Total loans in foreign offices, Edge and Agreement subsidiaries, and IBFs RCFN 3360 0 6.b.
7. Trading assets RCFD 3401 0 7.
8. Lease financing receivables (net of unearned income) RCFD 3484 30,169 8.
9. Total assets(4) RCFD 3368 20,568,285 9.
LIABILITIES
10. Interest-bearing transaction accounts in domestic offices (NOW accounts,
ATS accounts, and telephone and preauthorized transfer accounts) (exclude
demand deposits) RCON 3485 229,518 10.
11. Nontransaction accounts in domestic offices:
a. Money market deposit accounts (MMDAs) RCON 3486 5,575,910 11.a.
b. Other savings deposits RCON 3487 1,573,048 11.b.
c. Time deposits of $100,000 or more RCON A514 1,168,167 11.c.
d. Time deposits of less than $100,000 RCON A529 3,997,638 11.d.
12. Interest-bearing deposits in foreign offices, Edge and Agreement
subsidiaries, and IBFs RCFN 3404 7,692 12.
13. Federal funds purchased and securities sold under agreements to repurchase RCFD 3353 1,940,581 13.
14. Other borrowed money (includes mortgage indebtedness and obligations under
capitalized leases) RCFD 3355 856,319 14.
</TABLE>
- - ----------
(1) For all items, banks have the option of reporting either (1) an average of
daily figures for the quarter, or (2) an average of weekly figures (i.e.,
the Wednesday of each week of the quarter).
(2) Quarterly averages for all debt securities should be based on
amortized cost.
(3) Quarterly averages for all equity securities should be based on
historical cost.
(4) The quarterly average for total assets should reflect all debt securities
(not held for trading) at amortized cost, equity securities with readily
determinable fair values at the lower of cost or fair value, and equity
securities without readily determinable fair values at historical cost.
<PAGE>
Legal Title of Bank: CRESTAR BANK
Address: P.O. Box 26665
City, State Zip: Richmond, VA 23261-6665
FDIC Certificate No.: 12543
Call Date: 6/30/97 ST-BK: 51-2430 FFIEC 031
Page RC-14
Schedule RC-L--Off-Balance Sheet Items
Please read carefully the instructions for the preparation of Schedule RC-L.
Some of the amounts reported in Schedule RC-L are regarded as volume
indicators and not necessarily as measures of risk.
<TABLE>
<CAPTION>
C460
Dollar Amounts in Thousands RCFD Bil Mil Thou
<S> <C> <C> <C>
1. Unused commitments:
a. Revolving, open-end lines secured by 1-4 family residential properties,
e.g., home equity lines 3814 533,298 1.a.
b. Credit card lines 3815 2,977,603 1.b.
c. Commercial real estate, construction, and land development:
(1) Commitments to fund loans secured by real estate 3816 1,753,823 1.c.(1)
(2) Commitments to fund loans not secured by real estate 6550 0 1.c.(2)
d. Securities underwriting 3817 0 1.d.
e. Other unused commitments 3818 4,425,163 1.e.
2. Financial standby letters of credit and foreign office guarantees 3819 259,870 2.
a. Amount of financial standby letters of credit conveyed to others RCFD 3820 2,488 2.a.
3. Performance standby letters of credit and foreign office guarantees 3821 138,949 3.
a. Amount of performance standby letters of credit conveyed to others RCFD 3822 1,991 3.a.
4. Commercial and similar letters of credit 3411 44,798 4.
5. Participations in acceptances (as described in the instructions) conveyed to
others by the reporting bank 3428 0 5.
6. Participations in acceptances (as described in the instructions) acquired by
the reporting (nonaccepting) bank 3429 0 6.
7. Securities borrowed 3432 0 7.
8. Securities lent (including customers' securities lent where the customer is
indemnified against loss by the reporting bank) 3433 0 8.
9. Financial assets transferred with recourse that have been
treated as sold for Call Report purposes:
a. First lien 1-to-4 family residential mortgage loans:
(1) Outstanding principal balance of mortgages transferred as of the report
date A521 150,000 9.a.(1)
(2) Amount of recourse exposure on these mortgages as of the report date A522 150,000 9.a.(2)
b. Other financial assets (excluding small business obligations reported in item
9.c):
(1) Outstanding principal balance of assets transferred as of the report
date A523 0 9.b.(1)
(2) Amount of recourse exposure on these assets as of the report date A524 0 9.b.(2)
c. Small business obligations transferred with recourse under Section 208 of the
Riegle Community Development and Regulatory Improvement Act of 1994:
(1) Outstanding principal balance of small business obligations transferred
as of the report date A249 0 9.c.(1)
(2) Amount of retained recourse on these obligations as of the report date A250 0 9.c.(2)
10. Notional amount of credit derivatives:
a. Credit derivatives on which the reporting bank is the guarantor A534 0 10.a.
b. Credit derivatives on which the reporting bank is the beneficiary A535 0 10.b.
11. Spot foreign exchange contracts 8765 65,666 11.
12. All other off-balance sheet liabilities (exclude off-balance sheet
derivatives) (itemize and describe each component of this item over 25% of
Schedule RC, item 28, "Total equity capital") 3430 1,493,362 12.
a. TEXT 3555 Mortgage Servicing With Recourse RCFD 3555 1,473,975 12.a.
b. TEXT 3556 RCFD 3556 12.b.
c. TEXT 3557 RCFD 3557 12.c.
d. TEXT 3558 RCFD 3558 12.d.
</TABLE>
<PAGE>
Legal Title of Bank: CRESTAR BANK
Address: P.O. Box 26665
City, State Zip: Richmond, VA 23261-6665
FDIC Certificate No.: 12543
Call Date: 6/30/97 ST-BK: 51-2430 FFIEC 031
Page RC-15
Schedule RC-L--Continued
<TABLE>
<CAPTION>
Dollar Amounts in Thousands RCFD Bil Mil Thou
<S> <C> <C> <C>
13. All other off-balance sheet assets (exclude off-balance sheet derivatives)
(itemize and describe each component of this item over 25% of Schedule RC,
item 28, "Total equity capital") 5591 0 13.
a. TEXT 5592 RCFD 5592 13.a.
b. TEXT 5593 RCFD 5593 13.b.
c. TEXT 5594 RCFD 5594 13.c.
d. TEXT 5595 RCFD 5595 13.d.
</TABLE>
<TABLE>
<CAPTION>
C461
(Column A) (Column B) (Column C) (Column D)
Dollar Amounts in Thousands Interest Rate Foreign Exchange Equity Derivative Commodity and
Off-balance Sheet Derivatives Contracts Contracts Contracts Other Contracts
Position Indicators Tril Bil Mil Thou Tril Bil Mil Thou Tril Bil Mil Thou Tril Bil Mil Thou
<S> <C> <C> <C> <C> <C>
14. Gross amounts (e.g., notional amounts)
(for each column, sum of items 14.a
through 14.e must equal sum of items
15, 16.a, and 16.b):
a. Future contracts 0 0 0 0 14.a.
RCFD 8693 RCFD 8694 RCFD 8695 RCFD 8696
b. Forward contracts 968,151 22,813 0 0 14.b.
RCFD 8697 RCFD 8698 RCFD 8699 RCFD 8700
c. Exchange-traded option contracts:
(1) Written options 0 0 0 0 14.c.(1)
RCFD 8701 RCFD 8702 RCFD 8703 RCFD 8704
(2) Purchased options 0 0 0 0 14.c.(2)
RCFD 8705 RCFD 8706 RCFD 8707 RCFD 8708
d. Over-the-counter option contracts:
(1) Written options 26,924 0 0 0 14.d.(1)
RCFD 8709 RCFD 8710 RCFD 8711 RCFD 8712
(2) Purchased options 3,691,924 0 0 0 14.d.(2)
RCFD 8713 RCFD 8714 RCFD 8715 RCFD 8716
e. Swaps 1,256,828 0 0 0 14.e.
RCFD 3450 RCFD 3826 RCFD 8719 RCFD 8720
15. Total gross notional amount of derivative
contracts held for trading 0 22,813 0 0 15.
RCFD A126 RCFD A127 RCFD 8723 RCFD 8724
16. Total gross notional amount of derivative
contracts held for purposes other
than trading:
a. Contracts marked to market 0 0 0 0 16.a.
RCFD 8725 RCFD 8726 RCFD 8727 RCFD 8728
b. Contracts not marked to market 5,943,827 0 0 0 16.b.
RCFD 8729 RCFD 8730 RCFD 8731 RCFD 8732
c. Interest rate swaps where the bank
has agreed to pay a fixed rate 0 16.c.
RCFD A589
</TABLE>
<PAGE>
Legal Title of Bank: CRESTAR BANK
Address: P.O. Box 26665
City, State Zip: Richmond, VA 23261-6665
FDIC Certificate No.: 12543
Call Date: 6/30/97 ST-BK: 51-2430 FFIEC 031
Page RC-16
Schedule RC-L--Continued
<TABLE>
<CAPTION>
(Column A) (Column B) (Column C) (Column D)
Dollar Amounts in Thousands Interest Rate Foreign Exchange Equity Derivative Commodity and
Off-balance Sheet Derivatives Contracts Contracts Contracts Other Contracts
Position Indicators RCFD Bil Mil Thou RCFD Bil Mil Thou RCFD Bil Mil Thou RCFD Bil Mil Thou
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
17. Gross fair values of
derivative contracts:
a. Contracts held for trading:
(1) Gross positive fair value 8733 0 8734 217 8735 0 8736 0 17.a.(1)
(2) Gross negative fair value 8737 0 8738 613 8739 0 8740 0 17.a.(2)
b. Contracts held for purposes
other than trading that
are marked to market:
(1) Gross positive fair value 8741 0 8742 0 8743 0 8744 0 17.b.(1)
(2) Gross negative fair value 8745 0 8746 0 8747 0 8748 0 17.b.(2)
c. Contracts held for purposes
other than trading that are
not marked to market:
(1) Gross positive fair value 8749 25,456 8750 0 8751 0 8752 0 17.c.(1)
(2) Gross negative fair value 8753 15,938 8754 0 8755 0 8756 0 17.c.(2)
</TABLE>
<TABLE>
<CAPTION>
Memoranda Dollar Amounts in Thousands RCFD Bil Mil Thou
<S> <C> <C> <C>
1.-2. Not applicable
3. Unused commitments with an original maturity exceeding one year that are
reported in Schedule RC-L, items 1.a through 1.e, above (report only the
unused portions of commitments that are fee paid or otherwise legally
binding) 3833 4,673,554 M.3.
a. Participations in commitments with an original maturity
exceeding one year conveyed to others RCFD 3834 0 M.3.a.
4. To be completed only by banks with $1 billion or more in total assets:
Standby letters of credit and foreign office guarantees (both financial and
performance) issued to non-U.S. addressees (domicile) included in Schedule
RC-L, items 2 and 3, above 3377 41 M.4.
5. Installment loans to individuals for household, family, and other personal
expenditures that have been securitized and sold (with servicing retained),
amounts outstanding by type of loan:
a. Loans to purchase private passenger automobiles (to be completed
for the September report only) 2741 N/A M.5.a.
b. Credit cards and related plans (TO BE COMPLETED QUARTERLY) 2742 0 M.5.b.
c. All other consumer installment credit (including mobile home loans)
(to be completed for the September report only) 2743 N/A M.5.c.
</TABLE>
<PAGE>
Legal Title of Bank: CRESTAR BANK
Address: P.O. Box 26665
City, State Zip: Richmond, VA 23261-6665
FDIC Certificate No.: 12543
Call Date: 6/30/97 ST-BK: 51-2430 FFIEC 031
Page RC-17
Schedule RC-M--Memoranda
<TABLE>
<CAPTION>
C465
Dollar Amounts in Thousands RCFD Bil Mil Thou
<S> <C> <C> <C>
1. Extensions of credit by the reporting bank to its executive officers,
directors, principal shareholders, and their related interests as of the
report date:
a. Aggregate amount of all extensions of credit to all executive officers,
directors, principal shareholders, and their related interests 6164 27,907 1.a.
b. Number of executive officers, directors, and principal shareholders to whom
the amount of all extensions of credit by the reporting bank (including
extensions of credit to related interests) equals or exceeds the lesser
of $500,000 or 5 percent of total capital as defined for this Number
purpose in agency regulations RCFD 6165 2 1.b.
2. Federal funds sold and securities purchased under agreements to resell with
U.S. branches and agencies of foreign banks(1) (included in Schedule RC,
item 3) 3405 0 2.
3. Not applicable.
4. Outstanding principal balance of 1-4 family residential mortgage loans
serviced for others (include both retained servicing and purchased
servicing):
a. Mortgages serviced under a GNMA contract 5500 1,378,171 4.a.
b. Mortgages serviced under a FHLMC contract:
(1) Serviced with recourse to servicer 5501 11,860 4.b.(1)
(2) Serviced without recourse to servicer 5502 1,917,163 4.b.(2)
c. Mortgages serviced under a FNMA contract:
(1) Serviced under a regular option contract 5503 103,330 4.c.(1)
(2) Serviced under a special option contract 5504 2,733,978 4.c.(2)
d. Mortgages serviced under other servicing contracts 5505 5,469,783 4.d.
5. To be completed only by banks with $1 billion or more in total assets:
Customers' liability to this bank on acceptances outstanding (sum of items
5.a and 5.b must equal Schedule RC, item 9):
a. U.S. addressees (domicile) 2103 4,101 5.a.
b. Non-U.S. addressees (domicile) 2104 0 5.b.
6. Intangible assets:
a. Mortgage servicing assets 3164 42,428 6.a.
(1) Estimated fair value of mortgage servicing assets RCFD A590 75,311 6.a.(1)
b. Other identifiable intangible assets:
(1) Purchased credit card relationships 5506 0 6.b.(1)
(2) All other identifiable intangible assets 5507 3,713 6.b.(2)
c. Goodwill 3163 151,917 6.c.
d. Total (sum of items 6.a, 6.b.(1), 6.b.(2), and 6.c)
(must equal Schedule RC, item 10) 2143 198,058 6.d.
e. Amount of intangible assets (included in item 6.b.(2) above) that have been
grandfathered or are otherwise qualifying for regulatory capital purposes 6442 112 6.e.
7. Mandatory convertible debt, net of common or perpetual preferred stock
dedicated to redeem the debt 3295 0 7.
</TABLE>
- - ----------
(1) Do not report federal funds sold and securities purchased under agreements
to resell with other commercial banks in the U.S. in this item.
<PAGE>
Legal Title of Bank: CRESTAR BANK
Address: P.O. Box 26665
City, State Zip: Richmond, VA 23261-6665
FDIC Certificate No.: 12543
Call Date: 6/30/97 ST-BK: 51-2430 FFIEC 031
Page RC-18
Schedule RC-M--Continued
<TABLE>
<CAPTION>
Dollar Amounts in Thousands Bil Mil Thou
<S> <C> <C> <C>
8. a. Other real estate owned:
(1) Direct and indirect investments in real estate ventures RCFD 5372 0 8.a.(1)
(2) All other real estate owned:
(a) Construction and land development in domestic offices RCON 5508 0 8.a.(2)(a)
(b) Farmland in domestic offices RCON 5509 0 8.a.(2)(b)
(c) 1-4 family residential properties in domestic offices RCON 5510 19,523 8.a.(2)(c)
(d) Multifamily (5 or more) residential properties in domestic offices RCON 5511 320 8.a.(2)(d)
(e) Nonfarm nonresidential properties in domestic offices RCON 5512 22,763 8.a.(2)(e)
(f) In foreign offices RCFN 5513 0 8.a.(2)(f)
(3) Total (sum of items 8.a.(1) and 8.a.(2)) (must equal Schedule RC, item 7) RCFD 2150 42,606 8.a.(3)
b. Investments in unconsolidated subsidiaries and associated companies:
(1) Direct and indirect investments in real estate ventures RCFD 5374 1,263 8.b.(1)
(2) All other investments in unconsolidated subsidiaries and associated
companies RCFD 5375 0 8.b.(2)
(3) Total (sum of items 8.b.(1) and 8.b.(2)) (must equal Schedule RC, item 8) RCFD 2130 1,263 8.b.(3)
9. Noncumulative perpetual preferred stock and related surplus included in
Schedule RC, item 23, "Perpetual preferred stock and related surplus" RCFD 3778 0 9.
10. Mutual fund and annuity sales in domestic offices during the quarter
(include proprietary, private label, and third party products):
a. Money market funds RCON 6441 1,218,984 10.a.
b. Equity securities funds RCON 8427 36,662 10.b.
c. Debt securities funds RCON 8428 6,560 10.c.
d. Other mutual funds RCON 8429 22,319 10.d.
e. Annuities RCON 8430 52,301 10.e.
f. Sales of proprietary mutual funds and annuities (included in items 10.a
through 10.e above) RCON 8784 32,468 10.f.
11. Net unamortized realized deferred gains (losses) on off-balance sheet derivative
contracts included in assets and liabilities reported in Schedule RC RCFD A525 0 11.
12. Amount of assets netted against nondeposit liabilities and deposits in foreign
offices (other than insured branches in Puerto Rico and U.S. territories and
possessions) on the balance sheet (Schedule RC) in accordance with generally
accepted accounting principles (1) RCFD A526 0 12.
13. Outstanding principal balance of loans other than 1-4 family residential mortgage
loans that are serviced for others (to be completed if this balance is more than
$10 million and exceeds ten percent of total assets) RCFD A591 0 13.
</TABLE>
<TABLE>
<CAPTION>
Dollar Amounts in Thousands
Memorandum RCFD Bil Mil Thou
<S> <C> <C> <C>
1. Reciprocal holdings of banking organizations' capital instruments
(to be completed for the December report only) 3836 N/A M.1.
</TABLE>
- - -------------
(1) Exclude netted on-balance sheet amounts associated with off-balance sheet
derivative contracts, deferred tax assets netted against deferred tax
liabilities, and assets netted in accounting for pensions.
<PAGE>
Legal Title of Bank: CRESTAR BANK
Address: P.O. Box 26665
City, State Zip: Richmond, VA 23261-6665
FDIC Certificate No.: 12543
Call Date: 6/30/97 ST-BK: 51-2430 FFIEC 031
Page RC-19
Schedule RC-N--Past Due and Nonaccrual Loans, Leases, and Other Assets
The FFIEC regards the information reported in all of Memorandum item 1, in
items 1 through 10, column A, and in Memorandum items 2 through 4, column A,
as confidential.
<TABLE>
<CAPTION>
C470
(Column A) (Column B) (Column C)
Past due Past due 90 Nonaccrual
30 through 89 days or more
days and still and still
accruing accruing
Dollar Amounts in Thousands RCFD Bil Mil Thou RCFD Bil Mil Thou RCFD Bil Mil Thou
<S> <C> <C> <C> <C> <C> <C>
1. Loans secured by real estate:
a. To U.S. addressees (domicile) 1245 91,484 1246 10,473 1247 49,321 1.a.
b. To non-U.S. addressees (domicile) 1248 0 1249 0 1250 0 1.b.
2. Loans to depository institutions and
acceptances of other banks:
a. To U.S. banks and other U.S. depository
institutions 5377 0 5378 0 5379 0 2.a.
b. To foreign banks 5380 0 5381 0 5382 0 2.b.
3. Loans to finance agricultural production
and other loans to farmers 1594 6 1597 64 1583 0 3.
4. Commercial and industrial loans:
a. To U.S. addressees (domicile) 1251 8,040 1252 397 1253 3,624 4.a.
b. To non-U.S. addressees (domicile) 1254 0 1255 0 1256 0 4.b.
5. Loans to individuals for household, family,
and other personal expenditures:
a. Credit cards and related plans 5383 29,740 5384 19,622 5385 0 5.a.
b. Other (includes single payment,
installment and all student loans) 5386 64,663 5387 28,513 5388 2,807 5.b.
6. Loans to foreign governments and official
institutions 5389 0 5390 0 5391 0 6.
7. All other loans 5459 13 5460 20 5461 2,400 7.
8. Lease financing receivables:
a. Of U.S. addressees (domicile) 1257 0 1258 0 1259 0 8.a.
b. Of non-U.S. addressees (domicile) 1271 0 1272 0 1791 0 8.b.
9. Debt securities and other assets (exclude
other real estate owned and other
repossessed assets) 3505 0 3506 0 3507 0 9.
</TABLE>
Amounts reported in items 1 through 8 above include guaranteed and
unguaranteed portions of past due and nonaccrual loans and leases. Report in
item 10 below certain guaranteed loans and leases that have already been
included in the amounts reported in items 1 through 8.
<TABLE>
<CAPTION>
RCFD Bil Mil Thou RCFD Bil Mil Thou RCFD Bil Mil Thou
<S> <C> <C> <C> <C> <C> <C> <C>
10. Loans and leases reported in items 1
through 8 above which are wholly or
partially guaranteed by the U.S.
Government. 5612 38,490 5613 25,185 5614 0 10.
a. Guaranteed portion of loans and leases
included in item 10 above. 5615 38,081 5616 25,180 5617 0 10.a.
</TABLE>
<PAGE>
Legal Title of Bank: CRESTAR BANK
Address: P.O. Box 26665
City, State Zip: Richmond, VA 23261-6665
FDIC Certificate No.: 12543
Call Date: 6/30/97 ST-BK: 51-2430 FFIEC 031
Page RC-20
Schedule RC-N--Continued
<TABLE>
<CAPTION>
C473
(Column A) (Column B) (Column C)
Past due Past due 90 Nonaccrual
30 through 89 days or more
days and still and still
accruing accruing
Memoranda
Dollar Amounts in Thousands RCFD Bil Mil Tho RCFD Bil Mil Thou RCFD Bil Mil Thou
<S> <C> <C> <C> <C> <C> <C> <C>
1. Restructured loans and leases included
in Schedule RC-N, items 1 through 8,
above (and not reported in Schedule RC-C,
part I, Memorandum item 2) 1658 0 1659 0 1661 1,290 M.1.
2. Loans to finance commercial real estate,
construction, and land development
activities (not secured by real estate)
included in Schedule RC-N, items 4
and 7, above 6558 0 6559 0 6560 0 M.2.
</TABLE>
<TABLE>
<CAPTION>
RCON Bil Mil Thou RCON Bil Mil Thou RCON Bil Mil Thou
<S> <C> <C> <C> <C> <C> <C> <C>
3. Loans secured by real estate in domestic
offices (included in Schedule RC-N,
item 1, above):
a. Construction and land development 2759 2,453 2769 0 3492 10,116 M.3.a.
b. Secured by farmland 3493 0 3494 0 3495 56 M.3.b.
c. Secured by 1-4 family residential
properties:
(1) Revolving, open-end loans secured by
1-4 family residential properties and
extended under lines of credit 5398 7,997 5399 1,231 5400 647 M.3.c.(1)
(2) All other loans secured by 1-4 family
residential properties 5401 69,539 5402 7,297 5403 27,886 M.3.c.(2)
d. Secured by multifamily (5 or more)
residential properties 3499 99 3500 762 3501 1,231 M.3.d.
e. Secured by nonfarm nonresidential
properties 3502 11,396 3503 1,183 3504 9,385 M.3.e.
</TABLE>
<TABLE>
<CAPTION>
(Column A) (Column B)
Past due 30 Past due 90
through 89 days days or more
RCFD Bil Mil Thou RCFD Bil Mil Thou
<S> <C> <C> <C> <C> <C>
4. Interest rate, foreign exchange rate, and
other commodity and equity contracts:
a. Book value of amounts carried as assets 3522 0 3528 0 M.4.a.
b. Replacement cost of contracts with a
positive replacement cost 3529 0 3530 0 M.4.b.
</TABLE>
Person to whom questions about the Reports of Condition and Income should be
directed:
C477
Natie P. Hennelly (804)782-5320
Name and Title (TEXT 8901) Area code/phone number/extension
(TEXT 8902)
30
<PAGE>
Legal Title of Bank: CRESTAR BANK
Address: P.O. Box 26665
City, State Zip: Richmond, VA 23261-6665
FDIC Certificate No.: 12543
Call Date: 6/30/97 ST-BK: 51-2430 FFIEC 031
Page RC-21
Schedule RC-O--Other Data for Deposit Insurance and FICO Assessments
<TABLE>
<CAPTION>
C475
Dollar Amounts in Thousands RCON Bil Mil Thou
<S> <C> <C>
1. Unposted debits (see instructions):
a. Actual amount of all unposted debits 0030 N/A 1.a.
or
b. Separate amount of unposted debits:
(1) Actual amount of unposted debits to demand deposits 0031 0 1.b.(1)
(2) Actual amount of unposted debits to time and savings deposits (1) 0032 0 1.b.(2)
2. Unposted credits (see instructions):
a. Actual amount of all unposted credits 3510 N/A 2.a.
or
b. Separate amount of unposted credits:
(1) Actual amount of unposted credits to demand deposits 3512 0 2.b.(1)
(2) Actual amount of unposted credits to time and savings deposits (1) 3514 0 2.b.(2)
3. Uninvested trust funds (cash) held in bank's own trust department (not
included in total deposits in domestic offices) 3520 0 3.
4. Deposits of consolidated subsidiaries in domestic offices and in insured
branches in Puerto Rico and U.S. territories and possessions (not included
in total deposits):
a. Demand deposits of consolidated subsidiaries 2211 18,193 4.a.
b. Time and savings deposits (1) of consolidated subsidiaries 2351 0 4.b.
c. Interest accrued and unpaid on deposits of consolidated subsidiaries 5514 0 4.c.
5. Deposits in insured branches in Puerto Rico and U.S. territories and
possessions:
a. Demand deposits in insured branches (included in Schedule RC-E, Part II) 2229 0 5.a.
b. Time and savings deposits (1) in insured branches (included in Schedule
RC-E, Part II) 2383 0 5.b.
c. Interest accrued and unpaid on deposits in insured branches (included in
Schedule RC-G, item 1.b) 5515 0 5.c.
6. Reserve balances actually passed through to the Federal Reserve by the
reporting bank on behalf of its respondent depository institutions that are
also reflected as deposit liabilities of the reporting bank:
a. Amount reflected in demand deposits (included in Schedule RC-E, Part I, item 4 or 5,
column B) 2314 0 6.a.
b. Amount reflected in time and savings deposits (1) (included in Schedule
RC-E, Part I, item 4 or 5, column A or C, but not column B) 2315 0 6.b.
7. Unamortized premiums and discounts on time and savings deposits:(1),(2)
a. Unamortized premiums 5516 0 7.a.
b. Unamortized discounts 5517 0 7.b.
8. To be completed by banks with "Oakar deposits."
a. Deposits purchased or acquired from other FDIC-insured institutions during
the quarter (exclude deposits purchased or acquired from foreign offices other
than insured branches in Puerto Rico and U.S. territories and possessions):
(1) Total deposits purchased or acquired from other FDIC-insured institutions
during the quarter A531 0 8.a.(1)
(2) Amount of purchased or acquired deposits reported in item 8.a.(1) above
attributable to a secondary fund (i.e., BIF members report deposits
attributable to SAIF; SAIF members report deposits attributable to BIF) A532 0 8.a.(2)
b. Total deposits sold or transferred to other FDIC-insured institutions during
the quarter (exclude sales or transfers by the reporting bank of deposits in
foreign offices other than insured branches in Puerto Rico and U.S. territories
and possessions) A533 0 8.b.
</TABLE>
- - ----------
(1) For FDIC insurance and FICO assessment purposes, "time and savings
deposits" consists of nontransaction accounts and all transaction accounts
other than demand deposits.
(2) Exclude core deposit intangibles.
<PAGE>
Legal Title of Bank: CRESTAR BANK
Address: P.O. Box 26665
City, State Zip: Richmond, VA 23261-6665
FDIC Certificate No.: 12543
Call Date: 6/30/97 ST-BK: 51-2430 FFIEC 031
Page RC-22
Schedule RC-O--Continued
<TABLE>
<CAPTION>
Dollar Amounts in Thousands RCON Bil Mil Thou
<S> <C> <C>
9. Deposits in lifeline accounts 5596 9.
10. Benefit-responsive "Depository Institution Investment Contracts" (included
in total deposits in domestic offices) 8432 0 10.
11. Adjustments to demand deposits in domestic offices and in insured branches in
Puerto Rico and U.S. territories and possessions reported in Schedule RC-E for
certain reciprocal demand balances:
a. Amount by which demand deposits would be reduced if the reporting bank's
reciprocal demand balances with the domestic offices of U.S. banks and
savings associations and insured branches in Puerto Rico and U.S. territories
and possessions that were reported on a gross basis in Schedule RC-E had
been reported on a net basis 8785 0 11.a.
b. Amount by which demand deposits would be increased if the reporting bank's
reciprocal demand balances with foreign banks and foreign offices of other U.S.
banks (other than insured branches in Puerto Rico and U.S. territories and possessions)
that were reported on a net basis in Schedule RC-E had been reported on a gross basis A181 0 11.b.
c. Amount by which demand deposits would be reduced if cash items in process of
collection were included in the calculation of the reporting bank's net reciprocal
demand balances with the domestic offices of U.S. banks and savings associations and
insured branches in Puerto Rico and U.S. territories and possessions in Schedule RC-E A182 0 11.c.
12. Amount of assets netted against deposit liabilities in domestic offices and in
insured branches in Puerto Rico and U.S. territories and possessions on the balance
sheet (Schedule RC) in accordance with generally accepted accounting principles
(exclude amounts related to reciprocal demand balances):
a. Amount of assets netted against demand deposits A527 0 12.a.
b. Amount of assets netted against time and savings deposits A528 0 12.b.
</TABLE>
Memoranda (to be completed each quarter except as noted)
<TABLE>
<CAPTION>
Dollar Amounts in Thousands RCON Bil Mil Thou
<S> <C> <C> <C>
1. Total deposits in domestic offices of the bank (sum of Memorandum items 1.a.
(1) and 1.b.(1) must equal schedule RC, item 13.a):
a. Deposit accounts of $100,000 or less:
(1) Amount of deposit accounts of $100,000 or less 2702 11,091,220 M.1.a.(1)
(2) Number of deposit accounts of $100,000 or less
(to be completed for the June report only) Number
RCON 3779 2,018,487 M.1.a.(2)
b. Deposit accounts of more than $100,000:
(1) Amount of deposit accounts of more than $100,000 2710 4,816,374 M.1.b.(1)
Number
(2) Number of deposit accounts of more than $100,000 RCON 2722 16,215 M.1.b.(2)
2. Estimated amount of uninsured deposits in domestic offices of the bank:
a. An estimate of your bank's uninsured deposits can be determined by
multiplying the number of deposit accounts of more than $100,000
reported in Memorandum item 1.b.(2) above by $100,000 and subtracting
the result from the amount of deposit accounts of more than $100,000
reported in Memorandum item 1.b.(1) above.
Indicate in the appropriate box at the right whether your bank has a
method or procedure for determining a better estimate of uninsured
deposits than the estimate described above Yes No
6861 X M.2.a.
b. If the box marked YES has been checked, report the estimate of uninsured RCON Bil Mil Thou
deposits determined by using your bank's method or procedure 5597 N/A M.2.b.
3. Has the reporting institution been consolidated with a parent bank or
savings association in that parent bank's or parent savings association's
Call Report or Thrift Financial Report? If so, report the legal title and
FDIC Certificate Number of the parent bank or parent savings association:
FDIC Cert No.
TEXT A545 N/A RCON A545 N/A M.3.
</TABLE>
<PAGE>
Legal Title of Bank: CRESTAR BANK
Address: P.O. Box 26665
City, State Zip: Richmond, VA 23261-6665
FDIC Certificate No.: 12543
Call Date: 6/30/97 ST-BK: 51-2430 FFIEC 031
Page RC-23
Schedule RC-R--Regulatory Capital
This schedule must be completed by all banks as follows: Banks that reported
total assets of $1 billion or more in Schedule RC, item 12, for June 30, 1996,
must complete items 2 through 9 and Memoranda items 1 and 2. Banks with assets
of less than $1 billion must complete items 1 through 3 below or Schedule RC-R
in its entirety, depending on their response to item 1 below.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
1. Test for determining the extent to which Schedule RC-R must be completed.
To be completed only by banks with total assets of less than $1 billion. C480
Indicate in the appropriate box at the right whether the bank has total capital Yes No
greater than or equal to eight percent of adjusted total assets. RCFD 6056 1.
</TABLE>
For purposes of this test, adjusted total assets equals total assets less
cash, U.S. Treasuries, U.S. Government agency obligations, and 80 percent
of U.S. Government-sponsored agency obligations plus the allowance for
loan and lease losses and selected off-balance sheet items as reported on
Schedule RC-L (see instructions).
If the box marked YES has been checked, then the bank only has to complete
items 2 and 3 below. If the box marked NO has been checked, the bank must
complete the remainder of this schedule.
A NO response to item 1 does not necessarily mean that the bank's actual
risk-based capital ratio is less than eight percent or that the bank is
not in compliance with the risk-based capital guidelines.
NOTE: All banks are required to complete items 2 and 3 below. See optional
worksheet for items 3.a through 3.f.
<TABLE>
<CAPTION>
Dollar Amounts in Thousands RCFD Bil Mil Thou
<S> <C> <C> <C>
2. Portion of qualifying limited-life capital instruments (original weighted
average maturity of at least five years) that is includible in Tier 2
capital:
a. Subordinated debt(1) and intermediate term preferred stock A515 279,000 2.a.
b. Other limited-life capital instruments A516 0 2.b.
3. Amounts used in calculating regulatory capital ratios
(report amounts determined by the bank for its own
internal regulatory capital analyses consistent with applicable
capital standards):
a. Tier 1 capital 8274 1,587,035 3.a.
b. Tier 2 capital 8275 505,749 3.b.
c. Total risk-based capital 3792 2,092,784 3.c.
d. Excess allowance for loan and lease losses (amount that exceeds
1.25% of gross risk-weighted assets) A222 51,789 3.d.
e. Net risk-weighted assets (gross risk-weighted assets less excess
allowance reported in item 3.d above and all other deductions) A223 18,139,285 3.e.
f. "Average total assets" (quarterly average reported in Schedule RC-K,
item 9, less all assets deducted from Tier 1 capital)(2) A224 20,412,136 3.f.
</TABLE>
Items 4-9 and Memoranda items 1 and 2 are to be completed by banks that
answered NO to item 1 above and by banks with total assets of $1 billion or
more.
<TABLE>
<CAPTION>
(Column A) (Column B)
Assets Credit Equiv-
Recorded alent Amount
on the of Off-Balance
Balance Sheet Sheet Items(3)
RCFD Bil Mil Thou RCFD Bil Mil Thou
<S> <C> <C> <C> <C> <C>
4. Assets and credit equivalent amounts of off-balance sheet items
assigned to the Zero percent risk category:
a. Assets recorded on the balance sheet 5163 1,042,857 4.a.
b. Credit equivalent amount of off-balance sheet items 3796 0 4.b.
</TABLE>
- - ----------
(1) Exclude mandatory convertible debt reported in Schedule RC-M, item 7.
(2) Do not deduct excess allowance for loan and lease losses.
(3) Do not report in column B the risk-weighted amount of assets reported in
column A.
<PAGE>
Legal Title of Bank: CRESTAR BANK
Address: P.O. Box 26665
City, State Zip: Richmond, VA 23261-6665
FDIC Certificate No.: 12543
Call Date: 6/30/97 ST-BK: 51-2430 FFIEC 031
Page RC-24
Schedule RC-R--Continued
<TABLE>
<CAPTION>
(Column A) (Column B)
Assets Credit Equiv-
Recorded alent Amount
on the of Off-Balance
Balance Sheet Sheet Items (1)
Dollar Amounts in Thousands RCFD Bil Mil Thou RCFD Bil Mil Thou
<S> <C> <C> <C> <C> <C>
5. Assets and credit equivalent amounts of off-balance
sheet items assigned to the 20 percent risk category:
a. Assets recorded on the balance sheet 5165 5,378,724 5.a.
b. Credit equivalent amount of off-balance sheet items 3801 34,753 5.b.
6. Assets and credit equivalent amounts of off-balance
sheet items assigned to the 50 percent risk category:
a. Assets recorded on the balance sheet 3802 4,008,880 6.a.
b. Credit equivalent amount of off-balance sheet items 3803 916,911 6.b.
7. Assets and credit equivalent amounts of off-balance sheet
items assigned to the 100 percent risk category:
a. Assets recorded on the balance sheet 3804 12,129,943 7.a.
b. Credit equivalent amount of off-balance sheet items 3805 2,672,593 7.b.
8. On-balance sheet asset values excluded from and deducted in
the calculation of the risk-based capital ratio (2) 3806 (28,733) 8.
9. Total assets recorded on the balance sheet (sum of items
4.a, 5.a, 6.a, 7.a, and 8, column A)(must equal Schedule RC,
item 12 plus items 4.b and 4.c) 3807 22,531,671 9.
</TABLE>
Memoranda
<TABLE>
<CAPTION>
Dollar Amounts in Thousands RCFD Bil Mil Thou
<S> <C> <C> <C>
1. Current credit exposure across all off-balance sheet derivative contracts
covered by the risk-based capital standards 8764 25,456 M.1.
</TABLE>
<TABLE>
<CAPTION>
With a remaining maturity of
(Column A) (Column B) (Column C)
One year or less Over one year Over five years
through five years
RCFD Tril Bil Mil Thou RCFD Tril Bil Mil Thou RCFD Tril Bil Mil Thou
<S> <C> <C> <C> <C> <C> <C> <C>
2. Notional principal amounts of
off-balance sheet derivative
contracts (3):
a. Interest rate contracts 3809 54,764 8766 4,597,060 8767 286,927 M.2.a.
b. Foreign exchange contracts 3812 22,813 8769 0 8770 0 M.2.b.
c. Gold contracts 8771 0 8772 0 8773 0 M.2.c.
d. Other precious metals contracts 8774 0 8775 0 8776 0 M.2.d.
e. Other commodity contracts 8777 0 8778 0 8779 0 M.2.e.
f. Equity derivative contracts A000 0 A001 0 A002 0 M.2.f.
</TABLE>
- - ----------
(1) Do not report in column B the risk-weighted amount of assets reported in
column A.
(2) Include the difference between the fair value and the amortized cost of
available-for-sale debt securities in item 8 and report the amortized cost
of these debt securities in items 4 through 7 above. For
available-for-sale equity securities, if fair value exceeds cost, include
the difference between the fair value and the cost in item 8 and report
the cost of these equity securities in items 5 through 7 above; if cost
exceeds fair value, report the fair value of these equity securities in
items 5 through 7 above and include no amount in item 8. Item 8 also
includes on-balance sheet asset values (or portions thereof) of
off-balance sheet interest rate, foreign exchange rate, and commodity
contracts and those contracts (e.g., futures contracts) not subject to
risk-based capital. Exclude from item 8 margin accounts and accrued
receivables not included in the calculation of credit equivalent amounts
of off-balance sheet derivatives as well as any portion of the allowance
for loan and lease losses in excess of the amount that may be included in
Tier 2 capital.
(3) Exclude foreign exchange contracts with an original maturity of 14 days or
less and all futures contracts.
<PAGE>
Legal Title of Bank: CRESTAR BANK
Address: P.O. Box 26665
City, State Zip: Richmond, VA 23261-6665
FDIC Certificate No.: 12543
Call Date: 6/30/97 ST-BK: 51-2430 FFIEC 031
Page RC-25
Optional Narrative Statement Concerning the Amounts Reported in the Reports of
Condition and Income at close of business on June 30, 1997
CRESTAR BANK Richmond, Virginia
Legal Title of Bank City State
The management of the reporting bank may, if it wishes, submit a brief
narrative statement on the amounts reported in the Reports of Condition and
Income. This optional statement will be made available to the public, along
with the publicly available data in the Reports of Condition and Income, in
response to any request for individual bank report data. However, the
information reported in column A and in all of Memorandum item 1 of Schedule
RC-N is regarded as confidential and will not be released to the public. BANKS
CHOOSING TO SUBMIT THE NARRATIVE STATEMENT SHOULD ENSURE THAT THE STATEMENT
DOES NOT CONTAIN THE NAMES OR OTHER IDENTIFICATIONS OF INDIVIDUAL BANK
CUSTOMERS, REFERENCES TO THE AMOUNTS REPORTED IN THE CONFIDENTIAL ITEMS IN
SCHEDULE RC-N, OR ANY OTHER INFORMATION THAT THEY ARE NOT WILLING TO HAVE MADE
PUBLIC OR THAT WOULD COMPROMISE THE PRIVACY OF THEIR CUSTOMERS. Banks choosing
not to make a statement may check the "No comment" box below and should make
no entries of any kind in the space provided for the narrative statement;
i.e., DO NOT enter in this space such phrases as "No statement," "Not
applicable," "N/A," "No comment," and "None."
The optional statement must be entered on this sheet. The statement should not
exceed 100 words. Further, regardless of the number of words, the statement
must not exceed 750 characters, including punctuation, indentation, and
standard spacing between words and sentences. If any submission should exceed
750 characters, as defined, it will be truncated at 750 characters with no
notice to the submitting bank and the truncated statement will appear as the
bank's statement both on agency computerized records and in computer-file
releases to the public.
All information furnished by the bank in the narrative statement must be
accurate and not misleading. Appropriate efforts shall be taken by the
submitting bank to ensure the statement's accuracy. The statement must be
signed, in the space provided below, by a senior officer of the bank who
thereby attests to its accuracy.
If, subsequent to the original submission, material changes are submitted for
the data reported in the Reports of Condition and Income, the existing
narrative statement will be deleted from the files, and from disclosure; the
bank, at its option, may replace it with a statement, under signature,
appropriate to the amended data.
The optional narrative statement will appear in agency records and in release
to the public exactly as submitted (or amended as described in the preceding
paragraph) by the management of the bank (except for the truncation of
statements exceeding the 750-character limit described above). THE STATEMENT
WILL NOT BE EDITED OR SCREENED IN ANY WAY BY THE SUPERVISORY AGENCIES FOR
ACCURACY OR RELEVANCE. DISCLOSURE OF THE STATEMENT SHALL NOT SIGNIFY THAT ANY
FEDERAL SUPERVISORY AGENCY HAS VERIFIED OR CONFIRMED THE ACCURACY OF THE
INFORMATION CONTAINED THEREIN. A STATEMENT TO THIS EFFECT WILL APPEAR ON ANY
PUBLIC RELEASE OF THE OPTIONAL STATEMENT SUBMITTED BY THE MANAGEMENT OF THE
REPORTING BANK.
No comment [] (RCON 6979) C471 C472
BANK MANAGEMENT STATEMENT (please type or print clearly):
(TEXT 6980)
------------------------------------- -----------------
Signature of Executive Officer of Bank Date of Signature
35
<PAGE>
Legal Title of Bank: CRESTAR BANK
Address: P.O. Box 26665
City, State Zip: Richmond, VA 23261-6665
FDIC Certificate No.: 12543
Call Date: 6/30/97 ST-BK: 51-2430 FFIEC 031
Page RC-26
THIS PAGE IS TO BE COMPLETED BY ALL BANKS
<TABLE>
<S> <C>
CRESTAR BANK OMB No. for OCC: 1557-0081
P.O. BOX 26665 OMB No. For FDIC: 3064-0052
RICHMOND, VA 23261 OMB No. For Federal Reserve: 7100-0036
E512430000 55124300000 Expiration Date: 3/31/2000
</TABLE>
SPECIAL REPORT
<TABLE>
<CAPTION>
June 30, 1997 (Dollar Amounts in Thousands)
<S> <C> <C>
CLOSE OF BUSINESS FDIC Certificate Number
DATE
6/30/97 12543 C-700
</TABLE>
LOANS TO EXECUTIVE OFFICERS (Complete as of each Call Report Date)
The following information is required by Public Laws 90-44 and 102- 242, but
does not constitute a part of the Report of Condition. With each Report of
Condition, these Laws require all banks to furnish a report of all loans or
other extensions of credit to their executive officers made since the date of
the previous Report of Condition. Data regarding individual loans or other
extensions of credit are not required. If no such loans or other extensions of
credit were made during the period, insert "none" against subitem (a).
(Exclude the first $15,000 of indebtedness of each executive officer under
bank credit card plan.) See Sections 215.2 and 215.3 of Title 12 of the Code
of Federal Regulations (Federal Reserve Board Regulation O) for the
definitions of "executive officer" and "extension of credit," respectively.
Exclude loans and other extensions of credit to directors and principal
shareholders who are not executive officers.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
a. Number of loans made to executive officers since the
previous Call Report date RCFD 3561 0 a.
b. Total dollar amount of above loans (in thousands of
dollars) RCFD 3562 0 b.
c. Range of interest charged on above loans
(example: 9 3/4% = 9.75) RCFD 7701 0.00% to
RCFD 7702 0.00% c.
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
Illegible Senior Vice President July 31, 1997
SIGNATURE AND TITLE OF OFFICER AUTHORIZED TO SIGN REPORT DATE (Month, Day, Year)
</TABLE>
<TABLE>
<S> <C>
NAME AND TITLE OF PERSON TO WHOM INQUIRIES MAY BE DIRECTED (TEXT 8903) AREA CODE/PHONE NUMBER/EXTENSION
(TEXT 8904)
NATIE P. HENNELLY (804)782-5320
</TABLE>
FDIC 8040/53 (6/95)
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
EXHIBIT 27.1
This schedule contains summary financial information extracted from the
accompanying balance sheet of Bear Island Paper Company, L.P. as of
September 30, 1997 and the related statement of income for the nine months
ended September 30, 1997 and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<CIK> 0001051249
<NAME> BEAR ISLAND PAPER COMPANY, L.P.
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 13,306
<SECURITIES> 0
<RECEIVABLES> 13,274
<ALLOWANCES> 73
<INVENTORY> 13,853
<CURRENT-ASSETS> 40,898
<PP&E> 241,416
<DEPRECIATION> 126,509
<TOTAL-ASSETS> 156,235
<CURRENT-LIABILITIES> 18,197
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 97,593
<TOTAL-LIABILITY-AND-EQUITY> 156,235
<SALES> 85,373
<TOTAL-REVENUES> 85,858
<CGS> 77,225
<TOTAL-COSTS> 3,229
<OTHER-EXPENSES> 8
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,592
<INCOME-PRETAX> 1,804
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,804
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,804
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
