<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number
PIONEER COMPANIES, INC.
------------------------------------------------------
(Exact Name of registrant as specified in its charter)
Delaware 06-1215192
-------- ----------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
165 Mason Street, Greenwich, CT 06830
------------------------------------------------------
(Address of principal executive offices)
(Zip Code)
(203) 629-8014
------------------------------------------------------
(Registrant's telephone number, including area code)
------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS:
Number of Common Shares outstanding at August 7, 1995: 7,769,438 of Class A and
769,354 of Class B, both reflecting the one-for-four reverse stock split
effective April 27, 1995. Exhibit index located at sequential page No.29.
<PAGE>
TABLE OF CONTENTS
Part I - Financial Information
<TABLE>
<CAPTION>
Page
<S> <C> <C> <C>
Item 1 Consolidated Financial Statements
[ ] Consolidated Balance Sheets - June 30,
1995, December 31, 1994 and Predecessor
Company December 31, 1994 3
[ ] Consolidated Statements of Operations
- Three Months Ended June 30, 1995 and
1994, Six Months Ended June 30, 1995 and
1994 and Predecessor Company Three Months
Ended June 30, 1994 and Six Months Ended
June 30, 1994 5
[ ] Consolidated Statements of Cash Flows
- Six Months Ended June 30, 1995 and
1994 and Predecessor Company Six Months
Ended June 30, 1994 6
[ ] Notes to Consolidated Financial Statements 8
Item 2 [ ] Management's Discussion and Analysis of
Financial Condition and Results of 23
Operations
</TABLE>
Part II - Other Information
<TABLE>
<CAPTION>
Item 2 Changes in Securities
Page
<S> <C> <C> <C>
Item 6 [ ] Exhibits and Reports on Form 8-K 27
</TABLE>
Page 2
<PAGE>
Part I - Financial Information
PIONEER COMPANIES, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
| PREDECESSOR
| COMPANY
JUNE 30 DECEMBER 31 | DECEMBER 31
1995 1994 (1) | 1994 (1)
------- -------- | --------
<S> <C> <C> | <C>
Assets |
Current assets: |
Cash and cash equivalents $ 2,703 $880 | $ 3,310
Accounts receivable, less allowance |
for doubtful accounts of $1,336 and |
$2,037 at June 30, 1995 |
and December 31, 1994 (Predecessor Company) 27,234 - | 26,169
Inventories 13,338 - | 12,237
Prepaid expenses 3,620 - | 1,845
-------- ---- | ---------
Total current assets 46,895 880 | 43,561
|
Property, plant and equipment |
Land 807 - | 11,203
Buildings and improvements 13,507 - | 13,890
Machinery and equipment 59,745 71 | 107,857
Cylinders and tanks 4,295 - | 4,337
Construction in progress 8,577 - | 3,392
-------- ---- | ---------
86,931 71 | 140,679
|
Less accumulated depreciation (2,269) (39) | (56,267)
-------- ---- | ---------
84,662 32 | 84,412
|
Investment in Victory Valley Land |
Company, L.P.("VVLC") - - | 1,612
Investment in Basic Investments, Inc. |
("BII") - - | 15,705
|
Other assets, net of accumulated |
amortization of $266 and $11,302 |
at June 30, 1995 and |
December 31, 1994 (Predecessor Company) 12,120 - | 9,197
Excess cost over fair value of net |
assets acquired, net of accumulated |
amortization of $802 and $2,722 at |
June 30, 1995 and December 31, 1994 (Predecessor Company) 110,458 - | 10,044
-------- ---- | ---------
Total assets $254,135 $912 | $ 164,531
======== ==== | =========
</TABLE>
---------------
(1) The balance sheets at December 31, 1994 have been derived from the audited
financial statements at that date but do not include all of the information
and footnotes required by generally accepted accounting principles for
complete financial statements.
See notes to consolidated financial statements.
Page 3
<PAGE>
PIONEER COMPANIES, INC.
CONSOLIDATED BALANCE SHEETS (CONTINUED)
(in thousands, except share data)
<TABLE>
<CAPTION>
| PREDECESSOR
| COMPANY
JUNE 30 DECEMBER 31 | DECEMBER 31
1995 1994 (1) | 1994 (1)
------- -------- | --------
<S> <C> <C> | <C>
|
Liabilities and stockholders' equity |
|
Current liabilities: |
Accounts payable $ 17,548 $ 20 | $ 13,104
Accrued liabilities 18,090 130 | 16,548
Returnable deposits 3,317 - | 3,423
Future tax effects - - | 2,781
Current maturities of long-term debt - - | 12,056
-------- -------- | --------
Total current liabilities 38,955 150 | 47,912
|
Bank Credit Facility 3,000 - | -
13 3/8% Senior Notes due 2005 135,000 - | -
Seller Notes 11,452 - | -
Long-term debt - - | 36,757
Returnable deposits 3,801 - | 3,788
Accrued pension and other employee |
benefits 13,364 - | 10,794 |
Future tax effects - - | 19,799
Other long-term liabilities 13,211 - | 13,327
|
Commitments and contingencies |
|
Redeemable preferred stock - - | 6,227
Redeemable stock put warrants - - | 2,825
Stockholders' equity: |
Preferred stock: $.01 par value, |
authorized 10,000,000 shares, |
none issued |
Common stock: $.01 par value, |
Class A authorized 46,000,000 |
shares, issued and outstanding |
7,769,438 at June 30, 1995 and |
3,768,499 at December 31, 1994 78 38 | -
Class B authorized 4,000,000 |
shares, issued and |
outstanding 769,354 at June |
30, 1995 and at December 31, 1994, |
convertible share-for-share into |
Class A shares 8 8 | -
Common stock, $.01 par value, |
authorized 3,000,000 shares, |
issued and outstanding 1,509,343 |
at December 31, 1994 - - | 15
Additional paid-in capital 36,418 1,869 | 4,186
Retained earnings (deficit) (1,152) (1,153) | 18,901
-------- -------- | --------
Total stockholders' equity 35,352 762 | 23,102
-------- -------- | --------
Total liabilities and stockholders' |
equity $254,135 $ 912 | $164,531
======== ======== | ========
</TABLE>
(1) The balance sheets at December 31, 1994 have been derived from the audited
financial statements at that date but do not include all of the information
and footnotes required by generally accepted accounting principles for
complete financial statements.
See notes to consolidated financial statements.
Page 4
<PAGE>
PIONEER COMPANIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
<TABLE>
<CAPTION>
| PREDECESSOR
| PREDECESSOR COMPANY
THREE MONTHS THREE MONTHS SIX MONTHS SIX MONTHS | COMPANY SIX MONTHS
ENDED ENDED ENDED ENDED | THREE MONTHS ENDED ENDED
JUNE 30 JUNE 30 JUNE 30 JUNE 30 | JUNE 30 JUNE 30
1995 1994 1995 1994 | 1994 1994
------------ ----------- --------- --------- | ----------------- ----------
<S> <C> <C> <C> <C> | <C> <C>
Revenues $36,405 $ - $36,405 $ - | $ 39,128 $ 73,355
|
Cost and expenses: |
Cost of sales 24,901 - 24,901 - | 33,500 63,411
Cost of sales-acquisition |
related inventory |
step up 1,671 - 1,671 - | - -
Selling, general and |
administrative 5,558 93 5,741 119 | 5,290 9,815
Interest expense, net 3,817 (5) 3,812 (5) | 1,684 3,245
Other income (loss), net 349 - 349 - | 330 ( 316)
------- ------ ------- ------ | -------- --------
|
Income (loss) before tax 807 (88) 629 (114) | (1,016) (3,432)
Income tax provision |
(benefit) 628 - 628 - | (356) (1,224)
------- ------ ------- ------ | -------- --------
|
Net income (loss) $ 179 $ (88) $ 1 $ (114) | $ (660) $(2,208)
======= ====== ======= ====== | ======== ========
Net income (loss) per |
share $.02 $(.02) $.00 $(.03) |
======= ====== ======= ====== |
Average number of shares of common |
stock outstanding 7,665 4,538 6,106 4,538 |
======= ====== ======= ====== |
</TABLE>
See notes to consolidated financial statements.
Page 5
<PAGE>
PIONEER COMPANIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
| PREDECESSOR
| COMPANY
SIX MONTHS ENDED SIX MONTHS ENDED | SIX MONTHS ENDED
JUNE 30 JUNE 30 | JUNE 30
1995 1994 | 1994
----------------- ----------------- | -----------------
<S> <C> <C> | <C>
Operating activities |
Net income (loss) $ 1 $ (114) | $ (2,208)
Adjustments to reconcile net income |
(loss) to net cash provided by (used |
in) operating activities: |
Depreciation and amortization 3,507 3 | 6,738
Provision for bad debts 30 - | 94
Gain on disposal of property, |
plant and equipment - - | (205)
Provision for SARS - - | 968
Equity in earnings of BII & VVLC - - | (79)
Future tax effects - - | (1,534)
Changes in operating assets and |
liabilities (net of acquisition): |
Accounts receivable 2,749 - | (4,214)
Income taxes receivable - - | 1,680
Inventories 1,208 - | (382)
Prepaid expenses (184) - | 898
Other assets (3,206) 24 | 534
Accounts payable (2,746) - | 210
Accrued liabilities 3,083 (83) | 1,262
Returnable deposits 166 - | 212
Other long-term liabilities (30) - | -
Accrued pension and other |
employee benefits 268 - | 646
--------- ------ | --------
Total adjustments 4,845 (56) | 6,828
--------- ------ | --------
Net cash provided by (used in) |
operating activities 4,846 (170) | 4,620
|
Investing activities: |
Purchase of Predecessor Company (154,948) - | -
Capital expenditures (3,271) - | (1,803)
Proceeds from sale of property, plant |
and equipment - - | 665
--------- ------ | --------
Net cash used in investing activities (158,219) - | (1,138)
|
Financing activities: |
Payments on revolving credit facility (24,500) - | -
Proceeds from borrowings on revolving |
credit facility 18,500 - | -
Proceeds from borrowings on 13 3/8% |
Senior Notes due 2005 135,000 - | -
Payments on long-term debt - - | (4,797)
Proceeds from borrowings on long-term |
debt - - | 2,200
Proceeds from issuance of common stock 21,037 1,102 | 135
--------- ------ | --------
Net cash provided by (used in) |
financing activities 150,037 1,102 | (2,462)
--------- ------ | --------
Net increase (decrease) in cash (3,336) 932 | 1,020
Cash at beginning of period 6,039 104 | 1,769
--------- ------ | --------
Cash at end of period $ 2,703 $1,036 | $ 2,789
========= ====== | ========
</TABLE>
See notes to consolidated financial statements.
Page 6
<PAGE>
PIONEER COMPANIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(in thousands)
<TABLE>
<CAPTION>
| PREDECESSOR
| COMPANY
SIX MONTHS ENDED SIX MONTHS ENDED | SIX MONTHS ENDED
JUNE 30 JUNE 30 | JUNE 30
1995 1994 | 1994
----------------- ---------------- | ----------------
<S> <C> <C> | <C>
|
Supplemental disclosures of cash flow |
information: |
Cash paid during the period for: |
Interest $ 32 $ - | $1,827
==== ===== | ======
Income taxes $165 $ - | $ -
==== ===== | ======
Supplemental schedule of non cash
investing and financing activities:
The allocation of the $ 166,400
purchase price (including fees
and expenses) is summarized
as follows (in thousands):
Fair value of assets
acquired $ 269,600
Cash paid for acquisition (154,948)
Seller Notes issued (11,452)
NOL benefit recognized (13,600)
---------
Liabilities assumed $ 89,600
=========
</TABLE>
See notes to consolidated financial statements.
Page 7
<PAGE>
PIONEER COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The consolidated balance sheet at June 30, 1995 and consolidated statements of
operations and cash flows for all periods are unaudited and reflect all
adjustments, consisting of normal recurring items, which management considers
necessary for a fair presentation. Operating results for 1995 interim periods
are not necessarily indicative of results to be expected for the year ending
December 31, 1995.
For purposes of comparability, the consolidated financial information of Pioneer
Americas, Inc. ("Pioneer" or the "Predecessor Company") has been included. The
consolidated balance sheet of the Predecessor Company at December 31, 1994
represents the balance sheet included in the audited historical financial
information of the Predecessor Company that appeared in the Form 8-K and Form
8-K/A of Pioneer Companies, Inc. ("PCI" or the "Company") dated April 20,1995
reporting its acquisition of all of the outstanding stock and other common
equity interests of the Predecessor Company.
The financial information for the periods presented for the Predecessor Company
has been prepared by the Company from the accounting records of the Predecessor
Company applying the same methodology and assumptions as were applied in the
preparation of the audited historical financial information of the Predecessor
Company that appeared in the Company's Form 8-K and Form 8-K/A dated April 20,
1995.
Share and per share information has been retroactively restated to reflect the
one-for-four reverse stock split of the Company's Class A and Class B Common
Stock, effective April 27, 1995. Income (loss) per common share is computed
using the weighted average number of Class A and Class B common shares
outstanding during the period.
BASIS OF PRESENTATION EFFECTIVE APRIL 20, 1995
On March 31, 1995, the registrant's shareholders approved a change in name from
GEV Corporation to Pioneer Companies, Inc. This name change was effected in
conjunction with the following acquisition:
On April 20, 1995, pursuant to a Stock Purchase Agreement, dated as of March 24,
1995 (the "Acquisition Agreement"), by and among PCI, Pioneer Americas
Acquisition Corp., a newly-formed wholly-owned subsidiary of PCI ("PAAC") , and
the holders of the outstanding common stock and other common equity interests
(the "Sellers") of the Predecessor Company, PAAC acquired all of such stock and
interests (the "Acquisition") for a purchase price equal to the sum of
approximately (i) $102 million, paid in cash, (ii) $11.5 million aggregate
principal amount of subordinated promissory notes of PCI (the "Seller Notes")
and (iii) certain amounts payable pursuant to a Contingent Payment Agreement
among PCI, PAAC and the Sellers ("Contingent Payment Agreement") after the
closing based upon earnings or proceeds attributable to certain of Pioneer's
direct and indirect real estate holdings ("Contingent Payment Properties") which
are not necessary for Pioneer's business. In addition, as further consideration
for the Acquisition, PAAC paid approximately $45.5 million to retire all
outstanding indebtedness (net of available cash) of the Predecessor Company and
$5.0 million to redeem the Predecessor Company's outstanding preferred stock for
a total purchase price of $166.4 million including $2.4 million of expenses.
Page 8
<PAGE>
1. BASIS OF PRESENTATION (CONTINUED)
In connection with the consummation of the Acquisition, (i) PAAC issued and sold
$135 million aggregate principal amount of 13 3/8% Senior Notes (the "Initial
Offering" or "Senior Notes"), (ii) PCI issued and sold the Seller Notes in
exchange for certain of the outstanding shares of Pioneer, which PCI contributed
to PAAC, (iii) the Company issued and sold to Interlaken Investment Partners,
L.P., a Delaware limited partnership (the "Interlaken Partnership"), 2,840,909
shares of Class A Common Stock of PCI for an aggregate purchase price of $15
million (the "Interlaken Partnership Purchase"), the proceeds of which were
contributed to PAAC, (iv) PCI issued and sold to certain employees and directors
of the Predecessor Company (collectively, the "Management Investors"), 1,136,363
shares of Class A Common Stock of PCI for an aggregate purchase price of $6
million (the "Management Purchase"), the proceeds of which were contributed to
PAAC, and (v) Pioneer and its subsidiaries entered into a new bank revolving
credit facility (the "Bank Credit Facility") providing for borrowings of up to
$30 million. The net proceeds of the Initial Offering, the Interlaken
Partnership Purchase, the Management Purchase and a borrowing under the Bank
Credit Facility were used to pay the cash portion of the purchase price of the
Acquisition, to retire the outstanding Predecessor Company indebtedness, to
redeem the Predecessor Company's outstanding preferred stock and to pay certain
transaction costs associated with the Acquisition.
The Acquisition has been accounted for by the purchase method of accounting.
The excess of the purchase price over the estimated fair value of the net assets
acquired of approximately $111 million will be amortized on a straight line
basis over periods of up to 25 years. The purchase price allocation is based on
preliminary estimates of the fair value of the net assets acquired and
liabilities assumed and is subject to adjustment as additional information
becomes available. Such information relates principally to appraisals of plant,
property and equipment which management expects to obtain as soon as is
practical.
The following pro forma financial data presents the consolidated financial
results of operations as if the Acquisition, the Initial Offering, the
Interlaken Partnership Purchase, the Management Purchase and the borrowing under
the Bank Credit Facility had occurred at the beginning of the periods presented
and does not purport to be indicative of either future results of operations or
results that would have occurred had the Acquisition actually been made as of
such dates.
Page 9
<PAGE>
1. BASIS OF PRESENTATION (CONTINUED)
PIONEER COMPANIES, INC.
Pro Forma Combined Statements of Operations
(in thousands, except per share data)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30
1995 1994
------- --------
<S> <C> <C>
Revenue $94,253 $ 73,355
Depreciation and amortization 8,451 8,516
Interest expense, net 9,498 9,365
Income (loss) before income taxes and
extraordinary items 7,387 (9,083)
Income (loss) before extraordinary item 3,660 (6,188)
Extraordinary item, early
extinguishment of debt (net of income
tax benefit of $2,140) 3,420 -
Net income (loss) 240 (6,188)
Average number of shares of common
stock outstanding 8,531 8,152
Per Share Data
Income (loss) before extraordinary item $ 0.43 $ (0.76)
Extraordinary item (0.40) -
Net income (loss) per share 0.03 (0.76)
</TABLE>
The pro forma combined statements of operations reflect the inclusion of the
Predecessor Company's results of operations for the period from January 1, 1995
through April 20, 1995 and for the six months ended June 30, 1994 as applicable,
adjusted for: depreciation and amortization on property, plant and equipment
valuation increases of $254,630 and $416,667, excess cost over fair value of net
assets acquired and financing costs of $1.5 million and $2.5 million; interest
expense on financing in connection with the Acquisition of $5.8 million and $9.4
million; adjustment of the income tax provision of $1.7 million and $1.7
million; and elimination of historical interest expense of $1.7 million and
$3.3 million, amortization of excess cost over fair value of net assets acquired
and amortization of organization costs of $1.2 million and $1.2 million and
equity income from certain real estate investments of $0.2 million and $0.0
million. The results of operations for the six months ended June 30, 1995
include the effects of an increase to cost of sales due to a step up in value of
inventory in connection with the Acquisition of $1.7 million ($0.12 per share.)
The June 30, 1994 pro forma information also reflects the elimination of the
expense related to special appreciation rights granted to a subordinated debt
holder of $968,000 and contingent bank fees of $1.4 million.
Page 10
<PAGE>
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
Periods prior to April 1, 1995 include the accounts of PCI (formerly GEV
Corporation). The 1995 financial statements for periods beginning April
1, 1995 include the accounts and operations of PCI since April 1, 1995 and its
wholly owned subsidiaries, PAAC and Pioneer, since April 20, 1995. All
intercompany accounts and transactions have been eliminated.
INVENTORIES
Inventories are valued at the lower of cost or market. Finished goods and work-
in-process costs are calculated under the average cost method, which includes
appropriate elements of material, labor and manufacturing overhead costs, while
the first-in, first-out method is utilized for raw materials, supplies and
parts. The results of operations for the three months and six months ended June
30, 1995 include the effects of an increase to cost of sales due to a step up in
value of inventory in connection with the Acquisition of $1.7 million ($0.13 per
share and $0.16 per share, respectively).
PROPERTY, PLANT AND EQUIPMENT
Depreciation for financial reporting purposes is computed under the straight-
line method over the estimated remaining useful lives of the assets.
OTHER ASSETS
Other assets include amounts for organization costs and deferred financing costs
which are being amortized on a straight-line basis over their estimated useful
lives. Deferred financing costs are being amortized on a straight-line basis
over the term of the related debt. Amortization expense for other assets was
approximately $266,000 for the three months and six months ended June 30, 1995.
EXCESS COST OVER THE FAIR VALUE OF NET ASSETS ACQUIRED
Excess cost over the fair value of net assets acquired of approximately $111
million is amortized on a straight-line basis over periods of up to 25 years.
The carrying value of excess cost over the fair value of net assets acquired is
reviewed quarterly and if this review indicates that such excess cost will not
be recoverable, as determined based on the undiscounted cash flows of the entity
acquired over the remaining amortization period, the Company's carrying value of
the excess cost over the fair value of net assets acquired will be reduced by
the estimated shortfall of cash flows. Amortization expense for excess cost
over the fair value of net assets acquired was approximately $802,000 for the
three months and six months ended June 30, 1995.
CONCENTRATION OF CREDIT RISK
The Company manufactures and sells chlorine and caustic-based products to
companies in diverse industries. The Company performs periodic credit
evaluations of its customers' financial condition and generally does not require
collateral. Sales are primarily to customers in the western and southeastern
regions of the United States.
Page 11
<PAGE>
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
ENVIRONMENTAL EXPENDITURES
Environment-related restoration and remediation costs are recorded as
liabilities and expensed when site restoration and environmental remediation and
clean-up obligations are either known or considered probable and the related
costs can be reasonably estimated. Other environmental expenditures, principally
maintenance or preventative in nature, are recorded when expended and are
expensed or capitalized as appropriate.
RETURNABLE DEPOSITS
Customers are required to pay a security deposit on cylinders, tanks and
containers. These deposits are refunded to the customer upon the termination of
service and return of cylinders, tanks and containers.
INCOME TAXES
The Company and its subsidiaries file a consolidated tax return. The Company has
entered into a tax sharing agreement with PAAC whereby PAAC will make tax
sharing payments to PCI with respect to federal cash income taxes reflecting the
consolidated cash tax liability of PCI. State income taxes are included in
income taxes payable.
FUTURE TAX EFFECTS
Future tax effects are computed under the provisions of SFAS No. 109
("Accounting for Income Taxes") and result from temporary differences in the
recognition of expenses for financial reporting and tax purposes. Temporary
differences include differences in methods of computing depreciation for
financial statement and tax purposes and differences in the financial statement
basis and tax basis of assets and liabilities acquired, primarily excess cost
over fair value of net assets acquired.
3. INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
JUNE 30, 1995 DECEMBER 31, 1994
------------- -------------------
<S> <C> <C>
(IN THOUSANDS)
Raw materials, supplies, and parts $ 9,381 $ 9,112
Finished goods and work-in-process 3,957 3,125
------- -------
$13,338 $12,237
======= =======
</TABLE>
Page 12
<PAGE>
4. ACCRUED LIABILITIES
Accrued liabilities consist of the following:
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
JUNE 30, 1995 DECEMBER 31, 1994 DECEMBER 31, 1994
------------- ----------------- -------------------
(IN THOUSANDS)
<S> <C> <C> <C>
Exchanges payable $ 1,495 $ $ 1,492
Payroll, benefits and pension 2,707 - 4,299
Interest and bank fees 3,840 - 2,454
Other accrued liabilities 10,048 130 8,303
------- ---- -------
$18,090 $130 $16,548
======= ==== =======
</TABLE>
Exchanges payable result from exchange product transactions which are entered
into between the Company and other producers that manufacture homogeneous
products, whereby other producers ship product on behalf of the Company to its
customers. These exchanges, which are recorded as payables, generally are
settled by the Company's shipment of product to such producers' customers.
5. PENSION AND OTHER EMPLOYEE BENEFITS
Annual pension costs and liabilities for the Company under its two defined-
benefit plans are determined by actuaries using various methods and assumptions.
For purposes of determining annual expenses and funding contributions, the
following assumptions were used for the year ended December 31:
<TABLE>
<CAPTION>
PREDECESSOR COMPANY 1994
-------------------------
<S> <C>
Rate of return on plan assets 8.0%
Discount rate 7.5%
Annual compensation increase 5.0%
</TABLE>
Pension expense was comprised of:
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
DECEMBER 31, 1994
------------------------
(IN THOUSANDS)
<S> <C>
Service cost $ 571
Interest cost 770
Return on plan assets (537)
Amortization of prior service cost and
other 225
------
$1,029
======
</TABLE>
The actuarial present value of accumulated benefit obligations is:
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
DECEMBER 31, 1994
------------------------
(IN THOUSANDS)
<S> <C>
Vested $7,919
Nonvested 1,444
------
$9,363
======
</TABLE>
Page 13
<PAGE>
5. PENSION AND OTHER EMPLOYEE BENEFITS (CONTINUED)
The reconciliation of the funded status of the plans is:
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
DECEMBER 31, 1994
--------------------
(IN THOUSANDS)
<S> <C>
Projected benefit obligation $11,420
Plan assets at fair value 7,340
-------
Projected benefit obligation in excess
of plan assets 4,080
Unrecognized gain 592
Unrecognized prior service cost (17)
-------
Pension obligation $ 4,655
=======
</TABLE>
Approximately $49,000 was contributed to defined-contribution savings plans
for the three months and six months ended June 30, 1995.
In addition to providing pension benefits, one of the Company's subsidiaries
provides certain health care and life insurance benefits for retired employees.
Substantially all of the subsidiary's employees may become eligible for those
benefits if they reach normal retirement age while working for the subsidiary.
The following table presents the plan's funded status reconciled with amounts
recognized in the Company's balance sheet:
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
DECEMBER 31, 1994
--------------------
(IN THOUSANDS)
<S> <C>
Accumulated postretirement benefit
obligation:
Retirees $(1,843)
Fully eligible active plan
participants (2,103)
Other active plan participants (3,758)
-------
(7,704)
Unrecognized net loss 828
Unrecognized transition obligation 385
-------
Accrued postretirement benefit cost $(6,491)
=======
Net periodic postretirement benefit
cost includes the following
components:
Service cost $ 324
Interest cost 519
Amortization of transition obligation 32
over 20 years -------
Net periodic postretirement benefit cost $ 875
=======
</TABLE>
The weighted-average annual assumed rate of increase in the per capita cost of
covered benefits (i.e., health care cost trend rate) is 10.5% for 1995 and is
assumed to decrease gradually to 6% for 2010 and remain at that level
thereafter. The health care cost trend rate assumption has a significant effect
on the amounts reported. For example, increasing the assumed health care cost
trend rates by one percentage point in each year would increase the accumulated
postretirement benefit obligation as of December 31, 1994 by $633,000 and the
aggregate of the service and interest cost components of the net periodic
postretirement benefit cost for 1994 by $82,000.
The weighted-average discount rate used in determining the accumulated
postretirement benefit obligation was 7.5% at December 31, 1994.
Page 14
<PAGE>
6. BANK CREDIT FACILITY
In April 1995, Pioneer entered into a credit agreement, which provides for a
three year Bank Credit Facility with Bank of America, Illinois ("BAI") due April
20, 1998. Pioneer may borrow up to $30.0 million, subject to certain borrowing
base limitations. At June 30, 1995, approximately $3.0 million was owed under
the Bank Credit Facility. The revolving loan bears interest at a rate equal to,
at Pioneer's option, (i) the reference rate set by BAI or (ii) the LIBOR Base
Rate. At June 30, 1995, Pioneer utilized the reference rate set by BAI of 9%.
The Bank Credit Facility requires Pioneer to pay a fee equal to one-half of one
percent per annum on the total unused balance. Indebtedness outstanding under
the Bank Credit Facility is collateralized by a security interest in all
of Pioneer's inventory, accounts receivable and certain other assets. Up to $6
million of the Borrowing Base, as defined in the Bank Credit Facility, can be
utilized for letters of credit. The Borrowing Base at June 30, 1995 was
approximately $22 million. After consideration of the outstanding letters of
credit of approximately $2.7 million and the use of the revolver of $3.0
million, the unused availability of the Borrowing Base was approximately $16.3
million at June 30, 1995.
The Bank Credit Facility contains restrictive covenants that, among other things
and under certain conditions, limit the ability of Pioneer to incur
additional indebtedness, to issue preferred stock, to acquire or dispose of
assets or operations, to make capital expenditures and to pay dividends or
redeem shares of stock.
7. 13 3/8% SENIOR NOTES DUE 2005
In April 1995, PAAC issued and sold $135 million of Senior Notes. Interest is
payable on April 1 and October 1 of each year. The Senior Notes are senior
secured obligations of PAAC, ranking senior in right of payment to all
subordinated indebtedness of PAAC (including the Seller Notes) and pari passu in
right of payment with each other and with all existing and future senior
indebtedness, including indebtedness under the Bank Credit Facility.
PAAC has agreed to file a Registration Statement with the Securities and
Exchange Commission pursuant to which it will propose to offer to exchange (the
"Exchange Offer") up to $135 million aggregate principal amount of 13 3/8%
Senior Notes due 2005 (the "Exchange Notes") for up to $135 million aggregate
principal amount of its outstanding Senior Notes. PAAC expects to secure the
Senior Notes with first mortgage liens on certain Pioneer manufacturing
facilities prior to the effectiveness of such Registration Statement. If the
Registration Statement becomes effective and PAAC proceeds with the Exchange
Offer, the terms of the Exchange Notes and Senior Notes will be substantially
identical, except that the Exchange Notes will be freely transferable subject to
certain provisions. If the Registration Statement is not declared effective by
August 13, 1995 or the Exchange Offer is not consummated by September 12, 1995
(each, a "Registration Default"), the interest rate borne by the Senior Notes
will be increased by 25 basis points per annum for the 90-day period following
such Registration Default. Such interest rate will increase by an additional 25
basis points per annum at the beginning of each subsequent 90-day period, up to
a maximum aggregate increase of 150 basis points per annum. PAAC does not expect
that the Registration Statement will be declared effective by August 13, 1995 or
that the Exchange Offer will be consummated by September 12, 1995. If,
subsequently, such Registration Default is cured, the interest rate borne by the
Senior Notes will be reduced by the amount of any such increase.
The Senior Notes are redeemable at PAAC's option on and after April 1, 2000. In
addition, PAAC may also redeem at its option at any time prior to April 1, 1998
up to $35.0 million of the Senior Notes at 113% of the principal amount thereof
with funds raised in a public offering of common stock of PAAC or of common
stock of PCI to the extent such proceeds are contributed to PAAC. Upon a change
of control, as defined in the Senior Notes' indenture, PAAC will be required to
offer to repurchase the Senior Notes at a purchase price equal to 101%.
The Senior Notes contain restrictive covenants that, among other things and
under certain conditions, limit the ability of PAAC to incur additional
indebtedness, to issue preferred stock, to acquire or dispose of assets or
operations, to make capital expenditures and to pay dividends or redeem shares
of stock.
8. SELLER NOTES
At the Closing of the Acquisition, the Company delivered to the Sellers, Seller
Notes in the aggregate principal amount of $11.5 million, after adjustments
resulting from terms and conditions defined in the Acquisition Agreement.
Interest on the Seller Notes is payable at a rate of 8% per annum on a quarterly
basis. The principal is payable in five equal annual installments commencing on
April 20, 2001.
Page 15
<PAGE>
8. SELLER NOTES (CONTINUED)
The Seller Notes contain restrictive covenants that, among other things and
under certain conditions, limit the ability of the Company to incur additional
indebtedness, to issue preferred stock, to acquire or dispose of assets or
operations, to make capital expenditures and to pay dividends or redeem shares
of stock.
9. COMMITMENTS AND CONTINGENCIES
LETTERS OF CREDIT
At June 30, 1995, the Company had letters of credit and performance bonds
outstanding of approximately $2,713,000 and $6,665,000, respectively. These
letters of credit and performance bonds were issued for the benefit of customers
under sales agreements securing delivery of products sold and as guaranties for
payment of certain utility and regulatory liabilities. The letters of credit
expire at various dates during 1995 and 1996.
PURCHASE COMMITMENTS
One of the Company's subsidiaries has committed to purchase electrical power and
transmission services for its chlor alkali plants through September 30, 2017. At
the current base price, allocated capacity, and allocated energy per the
contract terms, this commitment would approximate $5,020,000 for the last six
months of 1995; $2,546,000 for each of the years 1996 through 2000; $1,261,000
for each of the years 2001 through 2008; and $1,017,000 for each of the years
2009 through 2017. The allocated capacity is subject to adjustment for other
priority users. The subsidiary purchased approximately $3,604,000 in electrical
power and transmission services for the three months and six months ended June
30, 1995.
In addition, the subsidiary has committed to purchase salt used in the
production process under contracts which continue through December 31, 2003.
Based on the contract terms, a minimum of 278,000 tons of salt are to be
purchased in the last six months of 1995; 442,000 tons in 1996 and 1997; 279,000
tons in 1998; and 225,000 tons in years 1999 through 2003. The future minimum
salt commitments are as follows (in thousands):
<TABLE>
<S> <C>
Period from July 1, 1995 through
December 31, 1995 $2,794
1996 4,172
1997 4,305
1998 2,377
1999 1,753
Thereafter 7,277
</TABLE>
The subsidiary purchased approximately $1.7 million of salt for the three months
and six months ended June 30, 1995. Substantially all of the salt has been used
in production during the three months and six months ended June 30, 1995 and
therefore has been included in cost of sales.
Page 16
<PAGE>
9. COMMITMENTS AND CONTINGENCIES (CONTINUED)
OPERATING LEASES
The Company and its subsidiaries lease certain of their manufacturing and
distribution facilities, computer equipment, and administrative offices under
noncancelable leases. Minimum future rental payments on such leases with terms
in excess of one year in effect at June 30, 1995 are (in thousands):
<TABLE>
<S> <C>
Period from July 1, 1995 through
December 31, 1995 $3,708
1996 6,291
1997 5,589
1998 4,556
1999 3,906
Thereafter 1,712
</TABLE>
Lease expense charged to operations for the three months and six months ended
June 30, 1995 was approximately $1.4 million.
SALES COMMITMENTS
Pioneer has a sales contract with a customer which requires Pioneer to sell
and the customer to purchase amounts of chlorine and caustic soda of not less
than the percentage of the customer's use of chlorine and caustic soda supplied
by Pioneer in the 12-month period ended July 31, 1987 (base period). Pioneer
supplied approximately 91,000 tons of chlorine and 21,000 tons of caustic soda
in the base period. The contract, which expires on December 31, 1997, states
that the sales price will not be less than Pioneer's standard cost as calculated
based on 1987 amounts and adjusted thereafter for price changes for raw
materials and changes in other costs as reflected in the producer price index.
LITIGATION
Pioneer settled litigation with an insurance company in December 1992 relating
to claims resulting from a chlorine release in 1991. In accordance with the
settlement, the insurance company paid Pioneer $2.1 million relating to claims
paid by Pioneer prior to November 1, 1992 and agreed to pay Pioneer (a) upon
proof of same, $100,000 relative to claims and expenses incurred after July 31,
1992 but prior to November 1, 1992 and (b) all claims after November 1, 1992
until an aggregate total of $3.8 million had been paid. As of April 20, 1995, a
total of approximately $3.8 million in claims had been paid. It is the opinion
of management, based on advice of counsel, that the ultimate resolution of this
contingency, to the extent not previously provided for, will not have a material
effect on the consolidated financial statements of the Company.
During 1993, one of Pioneer's subsidiaries, Imperial West, was awarded $1.38
million as the result of a breach of contract claim it asserted against the
lessor of one of Imperial West's plants. The judgment has been appealed and the
consolidated financial statements do not include any receivable for the award
that could result from the judgment. The lessor subsequently filed suit alleging
that Imperial West is required to remediate alleged contamination prior to the
termination of the lease in July 1995. The parties have agreed to settle that
action under terms which will require (i) Imperial West to pay the lessor
$900,000 upon the termination of the lease, and (ii) the lessor to transfer
title to the property to Imperial West. In addition, Imperial West has agreed to
indemnify the lessor against any future environmental liability with respect to
the property. The settlement will not affect the appeal pending with respect to
the breach of contract judgment. Certain insurers have agreed to pay a portion
of Imperial West's defense costs in connection with the subsequent lawsuit by
the lessor. Imperial West is pursuing a claim for contribution from the insurers
with respect to the cost incurred in settling the action.
Page 17
<PAGE>
9. COMMITMENTS AND CONTINGENCIES (CONTINUED)
In October 1994, the trustee in the bankruptcy of a company which was a customer
of Pioneer filed suit against Pioneer, seeking the recovery of up to $2.2
million in payments made to Pioneer on a basis which the trustee alleges were
preferential to other creditors' claims. Management has been advised by counsel
that the range of any loss which may be incurred as the result of the suit will
be substantially below the amount claimed, and Pioneer is vigorously contesting
the action. The Company has established a reserve consistent with its estimate
of its liability related to such transactions.
The Company and its subsidiaries are parties to other legal proceedings and
potential claims arising in the ordinary course of their businesses. In the
opinion of management, the Company and its subsidiaries have adequate legal
defenses and/or insurance coverage with respect to these matters and management
does not believe that they will materially affect the Company's operations or
financial position.
10. INCOME TAXES
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax liabilities and assets are as follows:
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
JUNE 30, 1995 DECEMBER 31, 1994
------------- -------------------
(IN THOUSANDS)
<S> <C> <C>
Deferred tax liabilities:
Book basis in excess of tax
basis of property, plant and
equipment $21,660 $19,964
Investment in BII and VVLC - 6,509
Other - net 1,981 5,585
------- -------
Total deferred tax liabilities 23,641 32,058
Deferred tax assets:
OPEB obligation 3,492 2,499
Pension liability 1,875 1,885
Bad debt provision 734 784
Net operating loss carry forward 27,164 -
Other accrued liabilities 5,000 4,310
------- -------
Total deferred tax assets 38,265 9,478
Valuation allowance for deferred tax 14,624 -
assets ------- -------
Net deferred tax assets 23,641 9,478
------- -------
Net deferred tax liabilities $ - $22,580
======= =======
</TABLE>
Page 18
<PAGE>
10. INCOME TAXES (CONTINUED)
Significant components of the provision (benefit) for income taxes are as
follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED PREDECESSOR COMPANY
JUNE 30, 1995 DECEMBER 31, 1994
----------------- -------------------
(IN THOUSANDS)
<S> <C> <C>
Current:
Federal $ 561 $ 3,930
State 359 568
------ -------
Total current 920 4,498
Deferred:
Federal (143) (1,010)
State (149) (246)
------ -------
Total deferred (292) (1,256)
------ -------
$ 628 $ 3,242
====== =======
</TABLE>
The reconciliation of income tax computed at the U.S. federal statutory tax
rates to income tax expense is presented below. Other net increases to income
tax expense are primarily due to amortization of excess cost over fair value of
net assets acquired and certain acquisition costs that are not deductible for
income tax purposes.
<TABLE>
<CAPTION>
SIX MONTHS ENDED PREDECESSOR COMPANY
JUNE 30, 1995 DECEMBER 31, 1994
--------------------------- ----------------------------
AMOUNT PERCENTAGE AMOUNT PERCENTAGE
--------------- ---------- --------------- -----------
(IN THOUSANDS) (IN THOUSANDS)
<S> <C> <C> <C> <C>
Tax at U.S. statutory rates $220 35% $2,936 35%
State income taxes, net of
federal tax benefit 25 4 321 4
Amortization of excess cost over the
fair value of net assets acquired 340 54 - -
Other, net 43 7 (15) -
---- --- ------ --
$628 100% $3,242 39%
==== === ====== ==
</TABLE>
At June 30, 1995, PCI had available to it on a consolidated tax return basis
approximately $77 million of net operating loss carryforward ("NOL") for income
tax reporting purposes (expiring 2003 to 2010). The NOL is available for offset
against future taxable income if generated during the carryforward period.
The Internal Revenue Code limits the amount of a corporation's NOL's that may be
used each year to offset future income after an "ownership change" (as defined).
PCI does not believe that either the reorganization resulting from certain
previous Chapter 11 proceedings or the Acquisition resulted in an ownership
change.
Upon adoption of Statement of Financial Accounting Standard No. 109, "Accounting
for Income Taxes," PCI established a deferred tax asset based upon the future
utilization of the net operating loss carryforward. However, since PCI had no
operating subsidiaries at December 31, 1994 with which to generate taxable
income, a 100% valuation reserve was recorded against this asset. Due to the
reorganization, any future utilization of this NOL by PCI will be recognized as
an increase to additional paid-in capital. Approximately $13.6 million was
recognized as an increase to additional paid-in capital at April 20, 1995.
Page 19
<PAGE>
11. OTHER LONG-TERM LIABILITIES - ENVIRONMENTAL
The Company's operations are subject to extensive environmental laws and
regulations related to protection of the environment, including those applicable
to waste management, discharge of pollutants into the air and water, clean-up
liability from historical waste disposal practices, and employee health and
safety. The Company believes that it is in substantial compliance with existing
governmental regulations.
In connection with the October, 1988, acquisition of the chlor alkali business
by the Predecessor Company, ICI Delaware Holdings, Inc. ("ICI") and ICI
Americas, Inc. ("ICI Americas") (such companies or their successors, the "ZENECA
Companies") agreed to indemnify the Predecessor Company for certain
environmental liabilities (the "ZENECA Indemnity"), including liabilities
associated with operations at the Company's plant located in Henderson, Nevada
(the "Henderson Plant"). In general, the ZENECA Companies agreed to indemnify
the Predecessor Company from environmental costs which arise from or relate to
pre-closing actions which involved disposal, discharge, or release of materials
resulting from non-chlor alkali manufacturing operations at the Henderson Plant
and at other properties within the same industrial complex. Payments under the
indemnity cannot exceed approximately $65 million.
Due to the Acquisition of the Predecessor Company by PAAC, the ZENECA Indemnity
will terminate on April 20, 1999, four years after consummation of the
Acquisition. The ZENECA Indemnity will continue to cover claims after the
expiration of the term of the indemnity provided that, prior to the expiration
of the indemnity, proper notice to the ZENECA Companies is given and the Company
has taken certain other actions. The Company believes that the ZENECA Companies
will continue to honor their obligations under the ZENECA Indemnity for claims
properly presented by the Company. It is possible, however, that disputes could
arise between the parties and that the Company would have to subject its claims
for clean-up expenses, which could be substantial, to the contractually
established arbitration process.
In the Acquisition Agreement, the Sellers have agreed to indemnify PCI, PAAC and
their affiliates for certain environmental liabilities that result from certain
discharges of hazardous materials, or violations of environmental laws, arising
prior to April 20, 1995 (the "Closing Date") from or relating to the Pioneer
plant sites or arising before or after the Closing Date with respect to certain
environmental liabilities relating to the Contingent Payment Properties
("Sellers' Indemnity"). Amounts payable pursuant to the Sellers' Indemnity will
generally be payable as follows: (i) out of certain reserves established on
Pioneer's balance sheet at December 31, 1994; (ii) either by offset against
the amounts payable under the Seller Notes or from amounts held pursuant to
the Contingent Payment Agreement, and (iii) in certain circumstances and subject
to specified limitations, out of the personal assets of the Sellers. Subject to
certain exceptions and limitations set forth in the Acquisition Agreement, a
claim notice with respect to amounts payable pursuant to the Sellers' Indemnity
must generally be given within 15 years after the Closing Date. The Company is
required to reimburse the Sellers for amounts paid under the Sellers' Indemnity
with amounts recovered under the ZENECA Indemnity or from other third parties.
The Company and the Sellers have agreed that they will cooperate in matters
relating to the ZENECA Indemnity.
Page 20
<PAGE>
11. OTHER LONG-TERM LIABILITIES - ENVIRONMENTAL (CONTINUED)
Liabilities related to environmental matters are recorded when site restoration
and environmental remediation and clean-up obligations are either known or
considered probable and are reasonably determinable. The liabilities are based
upon all available facts, existing technology, past experience and cost-sharing
arrangements, including the viability of other parties. Charges made against
income for recurring environmental matters, included in "cost of sales" on the
statements of operations, and capital expenditures for environmental related
matters at existing facilities were immaterial for the three months and six
months ended June 30, 1995. Future environmental-related capital expenditures
will depend upon regulatory requirements, as well as timing related to obtaining
necessary permits and approvals.
Estimates of future environmental restoration and remediation costs are
inherently imprecise due to currently unknown factors such as the magnitude of
possible contamination, the timing and extent of such restoration and
remediation, the extent to which such costs are recoverable from third parties,
and the extent to which environmental laws and regulations may change in the
future. The Predecessor Company established a reserve of approximately $9.0
million at the time of its acquisition of its Henderson, Nevada and St. Gabriel,
Louisiana facilities with respect to potential remediation costs relating to
matters not covered by the ZENECA Indemnity, consisting primarily of remediation
costs that may be incurred by Pioneer for chlor alkali-related remediation of
the Henderson and St. Gabriel facilities. The recorded accrual includes certain
amounts related to anticipated closure and post-closure actions that may be
required when operation of the present chlor alkali plants ceases. However, a
complete analysis and study have not been completed and therefore additional
future charges may be recorded at the time a decision for closure is made.
In 1994, the Predecessor Company recorded an additional $3.2 million
environmental reserve related to pre-closing actions at sites that are the
responsibility of the ZENECA Companies. Other assets include an account
receivable of the same amount from the ZENECA Companies. Certain other
environmental matters exist for which the Company has not determined the
specific strategy for or cost of remediation. It is possible that additional
costs, depending on the final choice of remediation strategies, may be incurred
in the future. As additional information becomes available, changes in the
estimates of liabilities will be recorded. If such costs are incurred,
additional annual operating and maintenance costs may also be required. The
Company believes it will be reimbursed by the ZENECA Companies for substantially
all of such costs that are incurred at the Henderson Plant and BII properties.
Additionally, certain other environmental matters exist which have been assumed
directly by the ZENECA Companies. No assurance can be given that actual costs
will not exceed accrued amounts or the amounts currently estimated. The
imposition of more stringent standards or requirements under environmental laws
or regulations, new developments or changes respecting site cleanup costs, or a
determination that the Company is potentially responsible for the release of
hazardous substances at other sites could result in expenditures in excess of
amounts currently estimated by the Company to be required for such matters.
Further, there can be no assurance that additional environmental matters will
not arise in the future.
Page 21
<PAGE>
12. RELATED PARTY TRANSACTIONS
The Company has a 15% partnership interest in Saguaro Power Company ("Saguaro"),
which owns a cogeneration plant located in Henderson, Nevada. The Company sells
certain services to and purchases steam from Saguaro at market prices. Balances
with Saguaro are as follows:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED PREDECESSOR COMPANY
JUNE 30 YEAR ENDED
1995 DECEMBER 31, 1994
---------- -------------------
(IN THOUSANDS)
<S> <C> <C>
Sales to Saguaro $ 223 $1,295
Purchases from Saguaro 370 2,097
Due from Saguaro 90 116
Due to Saguaro 313 186
</TABLE>
The Company received a distribution of partnership income of $150,000 from
Saguaro during the six months ended June 30, 1995.
Page 22
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion and analysis should be read in conjunction with the
financial statements and the notes thereto.
This item will discuss and analyze the financial condition of the Company at
June 30, 1995 and the results of operations of the Company for the three months
and six months ended June 30, 1995 and the Predecessor Company for the
three months and six months ended June 30, 1994. For comparative purposes the
Company's results of operations for the three months ended June 30, 1995 include
the Predecessor Company's operating results from April 1, 1995 through April 20,
1995 and the Company's operating results for the six months ended June 30, 1995
include the Predecessor Company's operating results from January 1, 1995 through
April 20, 1995. The Predecessor Company's operating results for both periods
exclude $1.0 million of transaction costs related to the Acquisition. The
Company believes that this provides a meaningful basis for comparison.
The following table sets forth certain operating data of the Company for the
periods indicated as adjusted for comparative purposes as discussed above.
<TABLE>
<CAPTION>
PREDECESSOR
PREDECESSOR COMPANY
THREE MONTHS THREE MONTHS COMPANY SIX MONTHS SIX MONTHS SIX MONTHS
ENDED ENDED THREE MONTHS ENDED ENDED ENDED ENDED
JUNE 30 JUNE 30 JUNE 30 JUNE 30 JUNE 30 JUNE 30
1995 1994 1994 1995 1994 1994
------------ ------------- ------------------- ---------- ----------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Revenues $46,411 $ - $ 39,128 $94,253 $ - $ 73,355
Cost of sales 31,674 - 33,500 62,302 - 63,411
Cost of sales - acquisition
related inventory step
up 1,671 - - 1,671 - -
Selling, general and
administrative expenses 7,364 93 5,290 12,788 119 9,815
Interest 4,107 (5) 1,684 5,477 (5) 3,245
Other income/(expense) 392 - 330 1,206 - (316)
------- ----- -------- ------- ------ --------
Income (loss) before
income taxes and
extraordinary item 1,987 (88) (1,016) 13,221 (114) (3,432)
Provision (benefit) for
income taxes 1,184 - (356) 5,437 - (1,224)
------- ----- -------- ------- ------ --------
Net income (loss) before
extraordinary expense 803 (88) (660) 7,784 (114) (2,208)
Extraordinary expense - - - 3,420 - -
------- ----- -------- ------- ------ --------
Net income (loss) $ 803 $ (88) $ (660) $ 4,364 $ (114) $ (2,208)
======= ===== ======== ======= ====== ========
</TABLE>
Page 23
<PAGE>
RESULTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1995 COMPARED TO SIX MONTHS ENDED JUNE 30, 1994
REVENUES
Revenues increased by $20.9 million or 28% to $94.3 million for the six months
ended June 30, 1995 from $73.4 million for the six months ended June 30, 1994.
This increase was primarily due to a $16.1 million increase in chlor-alkali
sales, a result of industry-wide strengthening of electrochemical unit ("ECU")
prices. The six month average ECU price at June 30, 1995 increased 47% over the
same period in 1994. In addition, in May 1994, the Predecessor Company acquired
an entity which contributed approximately $5.1 million in revenues during the
first six months of 1995 compared to $1.8 million in 1994.
COST OF SALES
Cost of sales increased by $0.6 million or 1% to $64.0 million for the six
months ended June 30, 1995 from $63.4 million for the six months ended June 30,
1994. This increase represented primarily the $1.0 million impact of an
acquisition by the Predecessor Company in May 1994, annual performance raises
and associated benefits costs of $2.5 million, higher operating and maintenance
material costs of $1.5 million due to an increase in non-critical scheduled
maintenance, net of capitalized maintenance costs and additional miscellaneous
items. Additionally, $1.7 million was charged to cost of sales due to the
acquisition related inventory step up. These increases were partially offset by
$6.3 million of lower raw material costs, purchases and exchange activity.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE
Selling, general and administrative expense increased by $3.0 million or 31% to
$12.8 million for the six months ended June 30, 1995 from $9.8 million for the
six months ended June 30, 1994. This increase was primarily the result of a
$1.3 million impact of an acquisition by the Predecessor Company in May 1994,
$0.4 million of increased outside services, and $0.8 million of increased
amortization as a result of the Acquisition.
INTEREST
Interest expense increased by $2.2 million or 67% to $5.5 million for the six
months ended June 30, 1995 from $3.3 million for the six months ended June 30,
1994. This increase was a result of debt incurred in connection with the
Acquisition.
INCOME BEFORE TAXES AND EXTRAORDINARY ITEM
As a result of the above, net income before taxes and extraordinary expense
increased $16.6 million to $13.2 million of income for the six months ended June
30, 1995 from a $3.4 million loss for the six months ended June 30, 1994.
EXTRAORDINARY ITEM
An extraordinary expense of $3.4 million net of income taxes of $2.1 million for
the six months ended June 30, 1995 was due to costs incurred, and previously
capitalized costs written off, pertaining to debt refinanced by the Predecessor
Company in the 1995 period prior to the Acquisition.
Page 24
<PAGE>
THREE MONTHS ENDED JUNE 30, 1995 COMPARED TO THREE MONTHS ENDED JUNE 30, 1994
REVENUES
Revenues increased by $7.3 million or 19% to $46.4 million for the three months
ended June 30, 1995 from $39.1 million for the three months ended June 30, 1994.
This increase was primarily due to a $5.7 million increase in chlor-alkali
sales, a result of industry-wide strengthening of ECU prices. The three month
average ECU price at June 30, 1995 increased 44% over the same period in 1994.
In addition, in May 1994, the Predecessor Company acquired an entity which
contributed approximately $3.2 million in revenues during 1995 compared to $1.8
million in 1994.
COST OF SALES
Cost of sales decreased by $0.2 million to $33.3 million for the three months
ended June 30, 1995 from $33.5 million for the three months ended June 30, 1994.
This decrease was primarily a result of $4.2 million of lower raw material
costs, purchases and exchange activity, partially offset by the $1.0 million
impact of an acquisition by the Predecessor Company in May 1994, higher salaries
and fringe benefits of $1.5 million and additional miscellaneous items.
Additionally, $1.7 million was charged to cost of sales due to the Acquisition
related inventory step up.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE
Selling, general and administrative expense increased by $2.1 million or 40% to
$7.4 million for the three months ended June 30, 1995 from $5.3 million for the
three months ended June 30, 1994. This increase was primarily the result of a
$0.5 million impact of an acquisition by the Predecessor Company in May 1994,
$0.7 million of increased outside services, and $0.3 million of increased
amortization as a result of the Acquisition.
INTEREST
Interest expense increased $2.4 million or 141% to $4.1 million for the three
months ended June 30, 1995 from $1.7 million for the three months ended June 30,
1994. This increase was a result of debt due to the Acquisition.
INCOME BEFORE TAXES AND EXTRAORDINARY ITEM
As a result of the above, net income before taxes and extraordinary expense
increased $3.0 million to $2.0 million for the three months ended June 30, 1995
from a $1.0 million loss for the three months ended June 30, 1994.
LIQUIDITY AND CAPITAL RESOURCES
A subsidiary of the Company has entered into a Bank Credit Facility, which
provides for borrowings of up to $30.0 million subject to borrowing base
limitations that relate to the level of accounts receivable and inventory of the
Company's subsidiaries. The Bank Credit Facility is secured by the accounts
receivable and inventory of the Company's subsidiaries and certain other
collateral. It has a term of three years and bears interest at a rate equal to
at the Company's option (i) the reference rate set by the Bank or (ii) the LIBOR
Base Rate.
Page 25
<PAGE>
The Company estimates that cash flow from current levels of operations, together
with the availability under the Bank Credit Facility, will be adequate to make
required payments of principal and interest on the outstanding indebtedness as
well as to fund capital expenditures.
The Company incurred $3.3 million of capital expenditures for the three months
and six months ended June 30, 1995, and anticipates capital expenditures for
1995 to be approximately $12 million, including approximately $4.5 million for
environmental compliance matters.
ENVIRONMENTAL REGULATION
Liabilities are recorded when site restoration and environmental remediation and
clean-up obligations are either known or considered probable and are reasonably
determinable. The liabilities are based upon all available facts, existing
technology, past experience and cost-sharing arrangements, including the
viability of other parties. Charges made against income for recurring
environmental matters, included in "cost of sales" on the statements of
operations and capital expenditures for environmental related matters at
existing facilities were immaterial for the three months and six months ended
June 30, 1995. Future environmental-related capital expenditures will depend
upon regulatory requirements, as well as timing related to obtaining necessary
permits and approvals.
Page 26
<PAGE>
PART II - OTHER INFORMATION
Item 2 Changes in Securities
The Seller Notes contain restrictive covenants that, among other things and
under certain conditions, limit the ability of the Company to incur additional
indebtedness, to issue preferred stock, to acquire or dispose of assets or
operations, to make capital expenditures and to pay dividends or redeem shares
of stock.
Item 6 Exhibits and Reports on Form 8-K
(a) Exhibits
4.1 Indenture, dated as of April 1, 1995, by and among
Pioneer Americas Acquisition Corp., the Subsidiary
Guarantors and IBJ Schroder Bank & Trust Company,
as trustee, relating to $135,000,000 principal
amount of 13 3/8% Senior Notes due 2005, including
form of Senior Note and Guarantee.
4.2(a) Loan and Security Agreement, dated as of
April 12, 1995, by and among Pioneer Americas,
Inc. and certain other Subsidiary Guarantors,
the lenders party thereto and Bank of America
Illinois, as Agent (the "Bank Credit Agreement").
4.2(b) Master Corporate Guaranty, dated April 12, 1995,
executed by each of the Subsidiary Guarantors
party thereto, as guarantor, respectively, in
favor of Bank of America Illinois, as Agent, for
the ratable benefit of the lenders, guaranteeing
the obligations of one another under the Bank
Credit Agreement.
4.2(c) Master Security Agreement, dated April 12, 1995,
executed by each of the Subsidiary Guarantors
party thereto, as debtor, respectively, in favor
of Bank of America Illinois, as Agent, for the
ratable benefit of the lenders.
10.1 Employment Agreement, dated April 20, 1995,
between the Registrant (formerly GEV Corporation)
and Richard C. Kellogg, Jr.
10.2 Employment Agreement, dated April 12, 1995,
between Pioneer Americas, Inc. and Frans G.J.
Speets.
27 Financial Data Schedule
(b) Reports on Form 8-K
During the quarter ended June 30, 1995 Registrant filed
a current report on Form 8-K, as amended by a Form
8-K/A, which announced that on April 20, 1995
Registrant had acquired the outstanding stock and other
common equity interests of Pioneer Americas, Inc., a
Delaware corporation.
Page 27
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PIONEER COMPANIES, INC.
Date: August 14, 1995 By: /s/ George T. Henning, Jr.
----------------------------------------
Name:
Title: Chief Financial
Officer and Treasurer
Page 28
<PAGE>
EXHIBIT INDEX
Exhibit
-------
4.1 Indenture, dated as of April 1, 1995, by and among
Pioneer Americas Acquisition Corp., the Subsidiary
Guarantors and IBJ Schroder Bank & Trust Company,
as trustee, relating to $135,000,000 principal
amount of 13 3/8% Senior Notes due 2005, including
form of Senior Note and Guarantee.
4.2(a) Loan and Security Agreement, dated as of
April 12, 1995, by and among Pioneer Americas, Inc.
and certain other Subsidiary Guarantors, the lenders
party thereto and Bank of America Illinois, as Agent
(the "Bank Credit Agreement").
4.2(b) Master Corporate Guaranty, dated April 12, 1995,
executed by each of the Subsidiary Guarantors
party thereto, as guarantor, respectively, in
favor of Bank of America Illinois, as Agent, for
the ratable benefit of the lenders, guaranteeing
the obligations of one another under the Bank
Credit Agreement.
4.2(c) Master Security Agreement, dated April 12, 1995,
executed by each of the Subsidiary Guarantors
party thereto, as debtor, respectively, in favor
of Bank of America Illinois, as Agent, for the
ratable benefit of the lenders.
10.1 Employment Agreement, dated April 20, 1995,
between the Registrant (formerly GEV Corporation)
and Richard C. Kellogg, Jr.
10.2 Employment Agreement, dated April 12,
1995, between Pioneer Americas, Inc. and
Frans G.J. Speets.
27 Financial Data Schedule
<PAGE>
EXHIBIT 4.1
PIONEER AMERICAS ACQUISITION CORP.
as Issuer,
PIONEER AMERICAS, INC.,
PIONEER CHLOR ALKALI COMPANY,
IMPERIAL WEST CHEMICAL CO.,
ALL-PURE CHEMICAL CO., INC.,
BLACK MOUNTAIN POWER COMPANY,
ALL-PURE CHEMICAL NORTHWEST, INC.,
PIONEER-CHLOR-ALKALI INTERNATIONAL, LTD.,
G.O.W. CORPORATION,
as Subsidiary Guarantors
and
IBJ SCHRODER BANK & TRUST COMPANY
as Trustee
________________________
INDENTURE
Dated as of April 1, 1995
_______________________
$135,000,000
13 3/8% Senior Notes due 2005
<PAGE>
TABLE OF CONTENTS
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PARTIES........................................................ 1
RECITALS....................................................... 1
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS OF
GENERAL APPLICATION
Section 101. Definitions............................... 2
Acquisition.......................................... 2
Affiliate............................................ 2
Asset Sale........................................... 3
Attributable Indebtedness............................ 3
Bank Credit Facility................................. 4
Bankruptcy Law....................................... 4
Board of Directors................................... 4
Board Resolution..................................... 4
Borrowing Base....................................... 4
Business Day......................................... 4
Capital Stock........................................ 4
Capitalized Lease Obligation......................... 5
Cash Equivalents..................................... 5
Cash Flow............................................ 5
Change of Control.................................... 5
Closing Date......................................... 6
Code................................................. 6
Commission........................................... 6
Company.............................................. 6
Company Common Stock................................. 6
Company Request" or "Company Order................... 6
Consolidated Cash Flow Coverage Ratio................ 7
Consolidated Indebtedness............................ 8
Consolidated Interest Expense........................ 8
Consolidated Net Income.............................. 8
Consolidated Net Worth............................... 9
Contingent Payment Agreement......................... 10
Corporate Trust Office............................... 10
Default.............................................. 10
Depositary........................................... 10
Eligible Investments................................. 10
Equity Interests..................................... 10
Event of Default..................................... 11
Excess Land.......................................... 11
</TABLE>
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Exchange Act......................................... 11
Exchange Notes....................................... 11
Exchange Offer....................................... 11
Exchange Offer Registration Statement................ 11
Existing Affiliate Agreements........................ 11
Existing Indebtedness................................ 11
Fair Market Value.................................... 11
GAAP................................................. 12
GEV.................................................. 12
Guarantee............................................ 12
Hedging Obligations.................................. 12
Holder............................................... 12
Imperial West........................................ 12
Imperial West Joint Venture.......................... 12
incur................................................ 12
Indebtedness......................................... 13
Indenture Obligations................................ 14
Independent Director................................. 14
Initial Securities................................... 14
Institutional Accredited Investor.................... 15
Interest Payment Date................................ 15
Investment........................................... 15
Lien................................................. 15
Maturity............................................. 15
Moody's.............................................. 15
Net Cash Proceeds.................................... 15
Net Income........................................... 15
Net Proceeds......................................... 16
Officers' Certificate................................ 16
Opinion of Counsel................................... 16
Opinion of Independent Counsel....................... 16
Outstanding.......................................... 17
Paying Agent......................................... 18
PCAC................................................. 18
Permitted Indebtedness............................... 18
Permitted Investment................................. 20
Permitted Liens...................................... 20
Person............................................... 21
Predecessor Security................................. 21
Preferred Stock...................................... 22
Private Placement Legend............................. 22
QIB.................................................. 22
Redeemable Stock..................................... 22
Redemption Date...................................... 22
Redemption Price..................................... 22
Registration Rights Agreement........................ 22
Registration Statement............................... 22
Regular Record Date.................................. 23
Related Business..................................... 23
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(ii)
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Resale Restriction Termination Date.................. 23
Responsible Officer.................................. 23
Restricted Investment................................ 23
Restricted Subsidiary................................ 23
Rule 144A............................................ 24
S&P.................................................. 24
Sale and Leaseback Transaction....................... 24
Securities........................................... 24
Securities Act....................................... 24
Security Register" and "Security Registrar........... 24
Seller Notes......................................... 24
Senior Indebtedness.................................. 24
Shelf Registration Statement......................... 25
Special Record Date.................................. 25
Stated Maturity...................................... 25
Subordinated Indebtedness............................ 25
Subsidiary........................................... 25
Subsidiary Guarantor................................. 25
Substantial Shareholder.............................. 25
Tax Sharing Agreement................................ 26
Trust Indenture Act.................................. 26
Trustee.............................................. 26
Unrestricted Subsidiary.............................. 26
U.S. Government Obligations.......................... 26
Voting Stock......................................... 26
Section 102. Other Definitions......................... 27
Section 103. Compliance Certificates and Opinions...... 27
Section 104. Form of Documents Delivered to
Trustee................................. 28
Section 105. Acts of Holders........................... 29
Section 106. Notices, etc., to Trustee, the Company
and any Subsidiary Guarantor............ 30
Section 107. Notice to Holders; Waiver................. 31
Section 108. Conflict with Trust Indenture Act......... 32
Section 109. Effect of Headings and Table of
Contents................................ 32
Section 110. Successors and Assigns.................... 32
Section 111. Separability Clause....................... 32
Section 112. Benefits of Indenture..................... 32
Section 113. Governing Law............................. 32
Section 114. Legal Holidays............................ 33
Section 115. Schedules and Exhibits.................... 33
Section 116. Counterparts.............................. 33
Section 117. Communication by Holders with Other
Holders................................. 33
Section 118. No Recourse Against Others................ 33
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(iii)
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ARTICLE TWO
SECURITY FORMS
Section 201. Forms Generally........................... 34
Section 202. Restrictive Legends....................... 34
Section 203. Form of Face of Security.................. 36
Section 204. Form of Reverse of Securities............. 39
Section 205. Form of Trustee's Certificate of
Authentication.......................... 45
Section 206. Form of Guarantee of Each of the
Subsidiary Guarantors................... 45
ARTICLE THREE
THE SECURITIES
Section 301. Title and Terms........................... 48
Section 302. Denominations............................. 49
Section 303. Execution, Authentication, Delivery and
Dating.................................. 49
Section 304. Temporary Securities...................... 50
Section 305. Registration of Transfer and Exchange..... 51
Section 306. Book-Entry Provisions for U.S. Global
Security................................ 53
Section 307. Special Transfer Provisions............... 54
Section 308. Mutilated, Destroyed, Lost and Stolen
Securities.............................. 57
Section 309. Payment of Interest; Interest Rights
Preserved............................... 58
Section 310. Persons Deemed Owners..................... 59
Section 311. Cancellation.............................. 59
Section 312. Computation of Interest................... 60
Section 313. Deposit of Moneys......................... 60
Section 314. CUSIP Number.............................. 60
ARTICLE FOUR
DEFEASANCE AND COVENANT DEFEASANCE
Section 401. Company's Option to Effect Defeasance
or Covenant Defeasance.................. 60
Section 402. Defeasance and Discharge.................. 61
Section 403. Covenant Defeasance....................... 61
Section 404. Conditions to Defeasance or Covenant
Defeasance.............................. 62
</TABLE>
(iv)
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Section 405. Deposited Money and U.S. Government
Obligations to Be Held in Trust;
Other Miscellaneous Provisions.......... 64
Section 406. Reinstatement............................. 65
Section 407. Repayment of the Company.................. 65
ARTICLE FIVE
REMEDIES
Section 501. Events of Default......................... 66
Section 502. Acceleration.............................. 68
Section 503. Other Remedies............................ 69
Section 504. Waiver of Past Defaults................... 69
Section 505. Control by Majority....................... 70
Section 506. Limitation on Suits....................... 70
Section 507. Rights of Holders to Receive Payment...... 70
Section 508. Collection Suit by Trustee................ 71
Section 509. Trustee May File Proofs of Claim.......... 71
Section 510. Priorities................................ 72
Section 511. Undertaking for Costs..................... 73
Section 512. Waiver of Stay, Extension or Usury Laws... 73
ARTICLE SIX
THE TRUSTEE
Section 601. Notice of Defaults........................ 74
Section 602. Certain Rights of Trustee................. 74
Section 603. Trustee Not Responsible for Recitals,
Dispositions of Securities or
Application of Proceeds Thereof......... 75
Section 604. Trustee and Agents May Hold Securities;
Collections; etc........................ 76
Section 605. Money Held in Trust....................... 76
Section 606. Compensation and Indemnification of
Trustee and Its Prior Claim............. 76
Section 607. Conflicting Interests..................... 77
Section 608. Corporate Trustee Required;
Eligibility............................. 77
Section 609. Resignation and Removal; Appointment of
Successor Trustee....................... 78
Section 610. Acceptance of Appointment by Successor.... 80
Section 611. Merger, Conversion, Consolidation or
Succession to Business.................. 81
Section 612. Preferential Collection of Claims
Against Company......................... 81
Section 613. Certain Duties and Responsibilities....... 82
</TABLE>
(v)
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ARTICLE SEVEN
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
Section 701. Company to Furnish Trustee Names and
Addresses of Holders.................... 82
Section 702. Disclosure of Names and Addresses of
Holders................................. 83
Section 703. Reports by Trustee........................ 83
Section 704. Reports by Company and Subsidiary
Guarantors.............................. 83
ARTICLE EIGHT
CONSOLIDATION, MERGER,
CONVEYANCE, TRANSFER OR LEASE
Section 801. When the Company May Merge, Etc. ......... 84
Section 802. Successor Substituted..................... 86
ARTICLE NINE
SUPPLEMENTAL INDENTURES
Section 901. Supplemental Indentures and Agreements
without Consent of Holders.............. 87
Section 902. Supplemental Indentures and Agreements
with Consent of Holders................. 88
Section 903. Execution of Supplemental Indentures
and Agreements.......................... 89
Section 904. Revocation Effect of Supplemental
Indentures.............................. 90
Section 905. Conformity with Trust Indenture Act....... 90
Section 906. Reference in Securities to Supplemental
Indentures.............................. 90
ARTICLE TEN
COVENANTS
Section 1001. Payment of Principal...................... 90
Section 1002. Maintenance of Office or Agency........... 90
Section 1003. Compliance Certificate.................... 91
Section 1004. Taxes..................................... 92
Section 1005. Limitations on Investments................ 92
Section 1006. Limitation on Restricted Payments......... 92
Section 1007. Limitations on Payment Restrictions
Affecting Restricted Subsidiaries....... 95
Section 1008. Limitations on Indebtedness............... 96
Section 1009. Asset Sales............................... 97
</TABLE>
(vi)
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Section 1010. Limitation on Sale and Leaseback
Transactions............................ 99
Section 1011. Limitation on Transactions With
Affiliates.............................. 99
Section 1012. Limitation on Liens....................... 101
Section 1013. Corporate Existence....................... 102
Section 1014. Change of Control......................... 103
Section 1016. Maintenance of Insurance.................. 106
Section 1017. [Intentionally omitted]................... 106
Section 1018. Money for Security Payments to Be Held
in Trust................................ 106
Section 1019. Subsidiary Guarantees..................... 107
Section 1020. Limitation on Ownership of Restricted
Subsidiary Stock........................ 108
Section 1021. Limitation on Applicability of Certain
Covenants............................... 109
ARTICLE ELEVEN
REDEMPTION OF SECURITIES
Section 1101. Rights of Redemption...................... 109
Section 1102. Applicability of Article.................. 110
Section 1103. Election to Redeem; Notice to Trustee..... 110
Section 1104. Selection by Trustee of Securities to Be
Redeemed................................ 111
Section 1105. Notice of Redemption...................... 111
Section 1106. Deposit of Redemption Price............... 112
Section 1107. Securities Payable on Redemption Date..... 112
Section 1108. Securities Redeemed or Purchased in Part.. 113
Section 1109. Asset Sale Offers......................... 113
ARTICLE TWELVE
SATISFACTION AND DISCHARGE
Section 1201. Satisfaction and Discharge of Indenture... 116
Section 1202. Application of Trust Money................ 117
ARTICLE THIRTEEN
GUARANTEE
Section 1301. Subsidiary Guarantors' Guarantee.......... 118
Section 1302. Continuing Guarantee; No Right of Set-
Off; Independent Obligation............. 118
Section 1303. Guarantee Absolute........................ 119
Section 1304. Right to Demand Full Performance.......... 121
Section 1305. Waivers................................... 122
Section 1306. The Subsidiary Guarantors Remain
</TABLE>
(vii)
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Obligated in Event the Company Is
No Longer Obligated to Discharge
Indenture Obligations................... 122
Section 1307. Fraudulent Conveyance; Subrogation........ 123
Section 1308. Guarantee Is in Addition to Other
Security................................ 123
Section 1309. Contribution.............................. 123
Section 1310. No Bar to Further Actions................. 124
Section 1311. Failure to Exercise Rights Shall Not
Operate as a Waiver..................... 124
Section 1312. Trustee's Duties; Notice to Trustee....... 125
Section 1313. Successors and Assigns.................... 125
Section 1314. Release of Guarantee...................... 125
Section 1315. Execution of Guarantee.................... 126
Section 1316. Payment Permitted by Each of the
Subsidiary Guarantors if No Default..... 126
Section 1317. Notice to Trustee by Each of the
Subsidiary Guarantors................... 126
Section 1318. Article Applicable to Paying Agents....... 127
Section 1319. No Suspension of Remedies................. 127
</TABLE>
EXHIBIT A Form of Certificate to be Delivered in Connection with Transfers
to Non-QIB Accredited Investors
SCHEDULE 1 Existing Affiliate Agreements
SCHEDULE 2 Existing Indebtedness
(viii)
<PAGE>
Reconciliation and tie between Trust Indenture Act of 1939
and Indenture, dated as of April 1, 1995
<TABLE>
<CAPTION>
Trust Indenture Indenture
Act Section Section
--------------- ---------
<S> <C>
(S) 310(a)(1) ..................... 608
(a)(2) ..................... 608
(a)(3) ..................... N.A.
(a)(4) ..................... N.A.
(b) ..................... 607, 609
(c) ..................... N.A.
(S) 311(a) ..................... 612
(b) ..................... 612
(c) ..................... N.A.
(S) 312(a) ..................... 701
(b) ..................... 117
(c) ..................... 117
(S) 313(a) ..................... 703
(b)(1) ..................... N.A.
(b)(2) ..................... 703
(c) ..................... 703
(d) ..................... 703
(S) 314(a) ..................... 704, 1003
(b) ..................... N.A.
(c)(1) ..................... 103
(c)(2) ..................... 103
(c)(3) ..................... N.A.
(d) ..................... N.A.
(e) ..................... 103
(f) ..................... N.A.
(S) 315(a) ..................... 602, 613, 903
(b) ..................... 601, 602, 903
(c) ..................... 602, 903
(d) ..................... 602, 903
(e) ..................... 512
(S) 316(a)(last
sentence) ..................... 101 ("Outstanding")
(a)(1)(A) ..................... 502, 505
(a)(1)(B) ..................... 504
(a)(2) ..................... N.A.
(b) ..................... 507
(c) ..................... 105
(S) 317(a)(1) ..................... 508
(a)(2) ..................... 509
(b) ..................... N.A.
(S) 318(a) ..................... 310
</TABLE>
N.A. means not applicable.
________________________________
Note: This reconciliation and tie shall not, for any purpose, be deemed to
be a part of this Indenture.
<PAGE>
INDENTURE, dated as of April 1, 1995, among PIONEER AMERICAS
ACQUISITION CORP., a Delaware corporation (the "Company"), PIONEER AMERICAS,
INC., PIONEER CHLOR ALKALI COMPANY, each a Delaware corporation, IMPERIAL WEST
CHEMICAL CO., a Nevada corporation, ALL-PURE CHEMICAL CO., INC., a California
corporation, BLACK MOUNTAIN POWER COMPANY, a Texas corporation, ALL-PURE
CHEMICAL NORTHWEST, INC., a Washington corporation, PIONEER-CHLOR-ALKALI
INTERNATIONAL, LTD., a Barbados corporation, and G.O.W. CORPORATION, a Nevada
corporation, (collectively, the "Subsidiary Guarantors"), and IBJ SCHRODER BANK
& TRUST COMPANY, as trustee (the "Trustee").
RECITALS OF THE COMPANY
The Company has duly authorized the creation of an issue of 13 3/8%
Senior Notes due 2005 (the "Securities"), of substantially the tenor and amount
hereinafter set forth, and to provide therefor the Company has duly authorized
the execution and delivery of this Indenture and the Securities;
Each Subsidiary Guarantor has duly authorized the issuance of a
guarantee (the "Guarantees") of the Securities, of substantially the tenor
hereinafter set forth, and to provide therefor, each Subsidiary Guarantor has
duly authorized the execution and delivery of this Indenture and the Guarantee.
This Indenture is subject to, and shall be governed by, the provisions
of the Trust Indenture Act that are required to be part of and to govern
indentures qualified under the Trust Indenture Act.
All things necessary have been done to make (i) the Securities, when
executed by the Company and authenticated and delivered hereunder and duly
issued by the Company, the valid obligations of the Company, (ii) the
Guarantees, when executed by each of the Subsidiary Guarantors and authenticated
and delivered hereunder, the valid obligation of each of the Subsidiary
Guarantors and (iii) this Indenture a valid agreement of the Company and each of
the Subsidiary Guarantors in accordance with the terms of this Indenture.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the
Securities by the Holders thereof, it is covenanted and agreed, for the benefit
of each other and for the equal and proportionate benefit of the Holders of the
Securities issued under this Indenture, as follows:
<PAGE>
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:
(a) the terms defined in this Article have the meanings assigned to
them in this Article, and include the plural as well as the singular;
(b) all other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference therein, have the meanings
assigned to them therein;
(c) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with GAAP;
(d) 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; and
(e) all references to $, US$, dollars or United States dollars shall
refer to the lawful currency of the United States of America.
"Acquisition" means the acquisition by the Company of all of the
outstanding common stock and other common equity interests of Pioneer Americas,
Inc. pursuant to a Stock Purchase Agreement dated as of March 22, 1995 among the
Company, GEV and the Sellers named therein.
"Affiliate" means, with respect to any party, any Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such party including any estate or trust under will of such party.
For purposes of this definition, "control" (including, with correlative
meanings, the terms "controlling," "controlled by" and "under common control
with"), as used with respect to any Person, means the possession, directly or
indirectly, of the power to direct or cause the direction of the management or
policies of such Person, whether through the ownership of voting securities, by
agreement or otherwise; provided, however, that beneficial ownership of 5% or
-------- -------
more of the voting securities of a Person shall be deemed to be control.
- 2 -
<PAGE>
"Asset Sale" means, with respect to the Company or any Restricted
Subsidiary, the sale, lease, conveyance or other disposition (including, without
limitation, by way of merger or consolidation, and whether by operation of law
or otherwise) to any Person other than the Company or a wholly-owned Restricted
Subsidiary of any of the Company's or such Restricted Subsidiary's assets
(including, without limitation, (x) any sale or other disposition of Equity
Interests of any Restricted Subsidiary and (y) any sale or other disposition of
any noncash consideration received by the Company or such Restricted Subsidiary
from any prior transaction or series of related transactions that constituted an
Asset Sale under the Indenture), whether owned on the Closing Date or
subsequently acquired, in one transaction or a series of related transactions:
provided, however, that the following shall not constitute Asset Sales: (i)
-------- -------
transactions (other than transactions described in clause (y) above) in any
calendar year with aggregate cash and/or Fair Market Value of any other
consideration received (including, without limitation, the unconditional
assumption of Indebtedness) of less than $500,000; (ii) a transaction or series
of related transactions that results in a Change in Control; (iii) any sale of
assets of the Company and its Restricted Subsidiaries or merger permitted under
Article Eight; (iv) any sale or other disposition of inventory, property
(whether real, personal or mixed) or equipment that has become worn out,
obsolete or damaged or otherwise unsuitable or no longer needed for use in
connection with the business of the Company or any Restricted Subsidiary, as the
case may be, in the good faith determination of the Board of Directors; and (v)
any sale of inventory to customers in the ordinary and customary course of
business.
"Attributable Indebtedness" means, with respect to any Sale and
Leaseback Transaction, as at the time of determination, the greater of (i) the
Fair Market Value of the property subject to such transaction and (ii) the
present value (discounted at a rate equivalent to the Company's then current
weighted average cost of funds for borrowed money, compounded on a semi-annual
basis) of the total net obligations of the lessee for rental payments during the
remaining term of the lease included in such arrangement (including any period
for which such lease has been extended). As used in the preceding sentence, the
"total net obligations of the lessee for rental payments" under any lease for
any such period means the sum of rental and other payments required to be paid
with respect to such period by the lessee thereunder excluding any amounts
required to be paid by such lessee on account of maintenance and repairs,
insurance, taxes, assessments, water rates or similar charges. In the case of
any lease which is terminable by the lessee upon payment of a penalty, such net
amount of rent also includes the amount of such penalty, but no rent shall be
considered as required to be paid under such lease subsequent to the first date
upon which it may be so terminated.
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"Bank Credit Facility" means the Loan and Security Agreement among
Pioneer Americas, Inc., as borrower, Bank of America Illinois, as agent and a
lender, and the other lenders party thereto, dated as of April 12, 1995, as
amended from time to time.
"Bankruptcy Law" means chapter 11 of Title 11 of the United States
Code, 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.
"Board of Directors" means the Board of Directors of the Company or
any committee thereof duly authorized to act on behalf of such Board.
"Board Resolution" of any corporation means a copy of a resolution
certified by the Secretary or an Assistant Secretary of such corporation to have
been duly adopted by the board of directors of such entity and to be in full
force and effect on the date of such certification and delivered to the Trustee.
"Borrowing Base" means, as of any date, an amount equal to the sum of
(a) 85% of the net book value of all accounts receivable of the Company and its
Restricted Subsidiaries as of such date, and (b) 50% of the net book value of
all inventory owned by the Company and its Restricted Subsidiaries as of such
date, all calculated on a consolidated basis and in accordance with GAAP. To
the extent that information is not available as to the amount of accounts
receivable or inventory, the Company and its subsidiaries may utilize the most
recent available quarterly or annual financial report for purposes of
calculating the Borrowing Base.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which banking institutions in The City of New York
or the city in which the Corporate Trust Office is located are authorized or
obligated by law or executive order to close.
"Capital Stock" means, with respect to any Person, any common stock,
preferred stock and any other capital stock of such Person and shares, interest,
participations or other ownership interest (however designated), of any Person
and any rights (other than debt securities convertible into, or exchangeable
for, capital stock), warrants or options to purchase any of the foregoing,
including (without limitation) each class of common stock and preferred stock of
such Person if such Person is a corporation and each general and limited
partnership interest of such Person if such Person is a partnership.
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"Capitalized Lease Obligation" means Indebtedness represented by
obligations under a lease that is required to be capitalized for financial
reporting purposes in accordance with GAAP and the amount of such Indebtedness
shall be the capitalized amount of such obligations determined in accordance
with GAAP.
"Cash Equivalents" means, (i) any evidence of Indebtedness with a
maturity of one year or less from the date of acquisition 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); (ii) certificates of deposit
or acceptances with a maturity of one year or less from the date of acquisition
of any financial institution that is a member of the Federal Reserve System
having combined capital and surplus and undivided profits of not less than
$250,000,000; (iii) commercial paper with a maturity of one year or less from
the date of acquisition issued by a corporation that is not an Affiliate of the
Company organized under the laws of any state of the United States of America or
the District of Columbia and rated at least A-1 by S&P or at least P-1 by
Moody's or at least an equivalent rating category of another nationally
recognized securities rating agency; (iv) any money market deposit accounts
issued or offered by a domestic commercial bank having capital and surplus in
excess of $250,000,000; and (v) repurchase agreements and reverse repurchase
agreements relating to marketable direct obligations issued or unconditionally
guaranteed by the government of the United States of America or issued by any
agency thereof and backed by the full faith and credit of the United States of
America, in each case maturing within one year from the date of acquisition;
provided that the terms of such agreements comply with the guidelines set forth
--------
in the Federal Financial Agreements of Depository Institutions With Securities
Dealers and Others, as adopted by the Comptroller of the Currency on October 31,
1985.
"Cash Flow" for any period means the Consolidated Net Income of the
Company and its Restricted Subsidiaries for such period, plus the following to
the extent included in calculating such Consolidated Net Income: (i)
Consolidated Interest Expense, (ii) income tax expense and (iii) depreciation,
depletion and amortization expense.
A "Change of Control" means the occurrence of any of the following:
(i) a "person" or "group" (as such terms are used in Sections 14(d)(2) and
13(d)(3), respectively, of the Exchange Act), other than Substantial
Shareholders, is or becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act) of at least 50% of the outstanding voting power of the
fully diluted Voting Stock of GEV or the Company, (ii) the adoption of a plan
relating to the liquidation or dissolution of GEV or the Company, (iii) the
merger or consolidation of GEV or the Company
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with or into another corporation with the effect that the stockholders of GEV or
the Company immediately prior to such merger or consolidation cease to be the
"beneficial owners" (as defined in Rule 13d-3 under the Exchange Act) of 50% or
more of the combined voting power of the securities of the surviving corporation
of such merger or the corporation resulting from such merger or consolidation
ordinarily (and apart from rights arising under special circumstances) having
the right to vote in the election of directors outstanding immediately after
such merger or consolidation or (iv) during any period of two consecutive
calendar years individuals who at the beginning of such period constituted the
board of directors of GEV or the Company (together with any new directors whose
election by the board of directors of GEV or the Company, or whose nomination
for election by the shareholders of GEV or the Company, was approved by a vote
of a majority of the directors then still in office who either were 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
directors of GEV or the Company then in office. Notwithstanding the foregoing,
a Change of Control shall not be deemed to have occurred under clause (iii)
above solely as a result of a merger or consolidation of the Company with or
into GEV provided that such merger or consolidation is permitted by Article
Eight of this Indenture.
"Closing Date" means the date of consummation of the offering and sale
of the Initial Securities.
"Code" means the Internal Revenue Code of 1986, as amended.
"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.
"Company" means Pioneer Americas Acquisition Corp., a corporation
incorporated under the laws of Delaware, 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 Common Stock" means the common stock, par value $.01 share,
of the Company.
"Company Request" or "Company Order" means a written request or order
signed in the name of the Company by any one of its Chairman of the Board of
Directors, its President or a Vice President (regardless of vice presidential
designation), and by
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any one of its Treasurer, an Assistant Treasurer, its Secretary or an Assistant
Secretary, and delivered to the Trustee.
"Consolidated Cash Flow Coverage Ratio" as of any date of
determination means the ratio of (i) the aggregate amount of Cash Flow for the
period of the most recent four consecutive fiscal quarters for which internal
financial statements are available prior to the date of such determination to
(ii) Consolidated Interest Expense for such four fiscal quarters of the Company
and its Restricted Subsidiaries; provided, however, that (A) if the Company or
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any Restricted Subsidiary has incurred any Indebtedness since the beginning of
such period that remains outstanding or if the transaction giving rise to the
need to calculate the Consolidated Cash Flow Coverage Ratio is an incurrence of
Indebtedness, or both, Cash Flow and Consolidated Interest Expense for such
period shall be calculated after giving effect on a pro forma basis to such
Indebtedness as if such Indebtedness had been issued on the first day of such
period and the discharge of any other Indebtedness repaid, repurchased, defeased
or otherwise discharged with the proceeds of such new Indebtedness as if such
discharge had occurred on the first day of such period, (B) if since the
beginning of such period the Company or any Restricted Subsidiary has made any
Asset Sale, the Cash Flow for such period shall be reduced by an amount equal to
the Cash Flow (if positive), directly attributable to the assets which are the
subject of such Asset Sale for such period, or increased by an amount equal to
the Cash Flow (if negative), directly attributable thereto for such period and
Consolidated Interest Expense for such period shall be reduced by an amount
equal to the Consolidated Interest Expense directly attributable to any
Indebtedness of the Company or any Restricted Subsidiary repaid, repurchased,
defeased or otherwise discharged with respect to the Company and its continuing
Restricted Subsidiaries in connection with any such sale or other disposition
for such period (or, if the Capital Stock of any Subsidiary is sold, the
Consolidated Interest Expense for such period directly attributable to the
Indebtedness of such Subsidiary to the extent the Company and its continuing
Restricted Subsidiaries are no longer liable for such Indebtedness after such
sale), (C) if since the beginning of such period the Company or any Restricted
Subsidiary (by merger or otherwise) has made an Investment in any Restricted
Subsidiary (or any Person which becomes a Restricted Subsidiary) or an
acquisition of assets, including any acquisition of assets occurring in
connection with a transaction causing a calculation to be made under the
Indenture, which constitutes all or substantially all of an operating unit of a
business, Cash Flow and Consolidated Interest Expense for such period shall be
calculated after giving pro forma effect thereto (including the incurrence of
any Indebtedness) as if such Investment or acquisition occurred on the first day
of such period and (D) in making such computation, Consolidated Interest
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Expense attributable to any Indebtedness incurred under any revolving credit
facility shall be computed based on the average daily balance of such
Indebtedness during such period. For purposes of this definition, whenever pro
forma effect is to be given to an acquisition of assets, the amount of income or
earnings relating thereto, and the amount of Consolidated Interest Expense
associated with any Indebtedness incurred in connection therewith, the pro forma
calculations shall be determined in good faith by a responsible financial or
accounting officer of the Company. If any Indebtedness bears a floating rate of
interest and is being given pro forma effect, the interest on such Indebtedness
shall be calculated as if the rate in effect on the date of determination had
been the applicable rate for the entire period.
"Consolidated Indebtedness" means the Indebtedness of the Company and
its consolidated Restricted Subsidiaries determined on a consolidated basis in
conformity with GAAP.
"Consolidated Interest Expense" means, for any period, the total
interest expense of the Company and its consolidated Restricted Subsidiaries,
excluding amortization of any deferred financing fees, plus, to the extent not
included in such interest expense, (i) interest expense attributable to
Capitalized Lease Obligations, (ii) amortization of debt discount and debt
insurance cost, (iii) capitalized interest, (iv) non-cash interest expense, (v)
commissions, discounts and other fees and charges owed with respect to letters
of credit and bankers' acceptance financing, (vi) interest actually paid by the
Company or any such Restricted Subsidiary under any guarantee of Indebtedness or
other obligation of any other Person, (vii) net costs associated with Hedging
Obligations (including amortization of fees), (viii) Preferred Stock dividends
in respect of all Redeemable Stock of the Company held by Persons other than the
Company or a wholly-owned Restricted Subsidiary and (ix) the cash contributions
to any employee stock ownership plan or similar trust to the extent such
contributions are used by such plan or trust to pay interest or fees to any
Person (other than the Company) in connection with loans incurred by such plan
or trust to purchase newly issued or treasury shares of the Capital Stock of the
Company.
"Consolidated Net Income" means, for any period, and as to any Person,
the aggregate Net Income of such Person and its Subsidiaries (other than, in the
case of the Company, the Unrestricted Subsidiaries of the Company) for such
period determined in accordance with GAAP; provided that (i) the Net Income of
any Person which is not a Subsidiary of such Person but which is consolidated
with such Person or is accounted for by such Person by the equity method of
accounting shall be included only to the extent of the amount of cash dividends
or cash distributions paid to such Person or a wholly-owned Subsidiary of
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such Person (other than, in the case of the Company, the Unrestricted
Subsidiaries of the Company), (ii) the Net Income of any Person acquired by such
Person or a Subsidiary of such Person in a pooling of interests transaction for
any period prior to the date of such acquisition shall be excluded, (iii) the
Net Income of any Subsidiary of such Person that is subject to restrictions,
direct or indirect, on the payment of dividends or the making of distributions
to such Person shall be excluded to the extent of such restrictions, (iv) the
Net Income of (A) any Unrestricted Subsidiary and (B) any Subsidiary less than
80% of whose securities having the right (apart from the right under special
circumstances) to vote in the election of directors are owned by the Company or
its wholly-owned Restricted Subsidiaries shall be included only to the extent of
the amount of cash dividends or cash distributions actually paid by such
Subsidiary to the Company or a wholly-owned Restricted Subsidiary of the
Company, (v) in the case of the Company, the Net Income attributable to any
business, properties or assets acquired (by way of merger, consolidation,
purchase or otherwise) by the Company or any Restricted Subsidiary of the
Company for any period prior to the date of such acquisition shall be excluded,
(vi) all extraordinary gains and losses, and any gain or loss realized upon the
termination of any employee pension benefit plan, in respect of dispositions of
assets other than in the ordinary course of business and any one-time increase
or decrease to Net Income which is required to be recorded because of the
adoption of new accounting policies, practices or standards required by GAAP
(together, in each case, with any provision for taxes) shall be excluded, and
(vii) all amounts of "other income, net" classified as such on one or more lines
of such Person's statement of operations, in accordance with GAAP, net of
applicable income taxes, shall be excluded from such Person's aggregate Net
Income; provided that in the case of the Company the foregoing exclusion shall
not apply to cash dividends or cash distributions paid to the Company in respect
of the Company's indirect equity interest in Saguaro Power Company, a Limited
Partnership, to the extent included in clause (i) of this definition.
"Consolidated Net Worth" means, for any Person, the total of the
amounts shown on the balance sheet of such Person and its consolidated
Subsidiaries, determined on a consolidated basis without duplication in
accordance with GAAP, as of the end of the most recent fiscal quarter of such
Person ending at least 45 days prior to the taking of any action for the purpose
of which the determination is being made, as (i) the amount of Capital Stock
(other than Redeemable Stock) plus (ii) the amount of surplus and retained
earnings (or, in the case of a surplus or retained earnings deficit, minus the
amount of such deficit).
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"Contingent Payment Agreement" means the Contingent Payment Agreement
dated as of April 20, 1995 among the Company, GEV and the Sellers named therein.
"Corporate Trust Office" means the office of the Trustee or an
affiliate or agent thereof at which at any particular time the corporate trust
business for the purposes of this Indenture shall be principally administered,
which office at the date of execution of this Indenture is located at One State
Street, New York, New York, 10004, Attention: Corporate Trust and Agency
Administration.
"Default" means any event which is, or after notice or passage of any
time or both would be, an Event of Default.
"Depositary" means The Depository Trust Company, its nominees and
their respective successors.
"Eligible Investments" means, (i) securities 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) having maturities of not more
than 90 days from the date of acquisition, (ii) time deposits and certificates
of deposit with maturities of not more than 90 days from the date of
acquisition, of any commercial banking institution that is a member of the
Federal Reserve System having capital and surplus in excess of $500,000,000,
whose debt has a rating at the time of any such investment of at least "A-2" or
the equivalent thereof by S&P or at least "P-2" or the equivalent thereof by
Moody's or any bank or financial institution party to the Bank Credit Facility
or any Refinancing thereof, (iii) fully secured repurchase obligations with a
term of not more than seven days for underlying securities of the types
described in clause (i) entered into with any bank or financial institution
meeting the qualifications specified in clause (ii) above, (iv) commercial paper
issued by the parent corporation of any commercial banking institution that is a
member of the Federal Reserve System having capital and surplus in excess of
$500,000,000 and commercial paper or master notes of issuers, rated at the time
of any such investment at least "A-2" or the equivalent thereof by S&P or at
least "P-2" or the equivalent thereof by Moody's or any bank or financial
institution party to the Bank Credit Facility or any Refinancing thereof, and in
each case maturing within 270 days after the date of acquisition, and (v) any
shares in an open-end mutual fund organized by a bank or financial institution
having combined capital and surplus of at least $500,000,000 investing solely in
investments permitted by the foregoing clauses (i), (ii) and (iv).
"Equity Interests" means shares, interests, participations or other
equivalents (however designated) of
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Capital Stock and all warrants, options or other rights to acquire Capital Stock
(but excluding any debt security which is convertible into, or exchangeable for,
Capital Stock).
"Event of Default" has the meaning specified in Article Five of this
Indenture.
"Excess Land" means certain real property adjoining the sites of
PCAC's Henderson, Nevada and St. Gabriel, Louisiana plants and the Mojave,
California plant of Imperial West that is not used in the business conducted at
such sites, which real property is referred to and defined in the Contingent
Payment Agreement as the "Subject Parcels."
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Notes" means senior notes issued pursuant to any Exchange
Offer Registration Statement and guaranteed by the Subsidiary Guarantors.
"Exchange Offer" means the offer which may be made by the Company
pursuant to the Registration Rights Agreement to exchange the Initial Securities
for the Exchange Notes.
"Exchange Offer Registration Statement" means the registration
statement to be filed by the Company and the Subsidiary Guarantors with the
Commission with respect to an offer to exchange the Securities for another
series of senior notes of the Company and guarantees by the Subsidiary
Guarantors registered under the Securities Act with substantially identical
terms to the Initial Securities (except that the Guarantee of PCAC may be
secured by Liens on PCAC's St. Gabriel, Louisiana and Henderson, Nevada plants).
"Existing Affiliate Agreements" means (i) agreements between the
Company or any of its subsidiaries and Saguaro Power Company, a Limited
Partnership, relating to the delivery of steam and other services, existing on
the Closing Date and listed on Schedule 1 hereto, (ii) the Tax Sharing Agreement
and (iii) agreements between the Company or any of its subsidiaries and Basic
Investments, Inc. relating to the delivery of water and power, power
transmission services, and other services, existing on the Closing Date and
listed on Schedule 1 hereto.
"Existing Indebtedness" means all Indebtedness (other than
Indebtedness outstanding pursuant to the Bank Credit Facility) of the Company or
any Restricted Subsidiary existing on the Closing Date and listed on Schedule 2
hereto.
"Fair Market Value" means, with respect to any asset or property, the
price which could be negotiated in an arm's-length
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<PAGE>
transaction, for cash, between a willing seller and a willing buyer, neither of
whom is under undue pressure or compulsion to complete the transaction. Fair
Market Value shall be determined by a majority of the members of the Board of
Directors, and a majority of the disinterested members of such Board of
Directors, if any, acting in good faith and shall be evidenced by a duly and
properly adopted resolution of the Board of Directors.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as approved by a significant segment of the accounting profession,
which are in effect from time to time.
"GEV" means GEV Corporation, a Delaware corporation, and any successor
thereto.
"Guarantee" means the guarantee by any Subsidiary Guarantor of the
Company's Indenture Obligations pursuant to a guarantee given in accordance with
this Indenture, including, without limitation, the Guarantees by the Subsidiary
Guarantors included in Article Thirteen of this Indenture and any Guarantee
delivered pursuant to Section 1019 hereof.
"Hedging Obligations" means the obligations of any Person or entity
pursuant to any swap or cap agreement, exchange agreement, collar agreement,
option, futures or forward hedging contract, derivative instrument or other
similar agreement or arrangement designed to protect such Person or entity
against fluctuations in interest rates or foreign exchange rates or the price of
raw materials and other chemical products used or produced in the Company's
business, as the case may be.
"Holder" means a Person in whose name a Security is registered in the
Security Register.
"Imperial West" means Imperial West Chemical Co., a Nevada
corporation, and any successor thereto.
"Imperial West Joint Venture" means the initial transfer of assets of
Imperial West in connection with the establishment of a joint venture between
Imperial West and a European chemical company in which the joint venturers would
equally own a company organized under the laws of the United States of America,
any state thereof or the District of Columbia and established to sell water
treatment chemicals for municipal and industrial purposes.
"incur" has the meaning ascribed in Section 1008 hereof; provided that
with respect to any Indebtedness of any
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<PAGE>
Restricted Subsidiary of the Company that is owing to the Company or another
Restricted Subsidiary of the Company, (a) any disposition, pledge or transfer of
such Indebtedness to any Person (other than the Company or a wholly-owned
Restricted Subsidiary) shall be deemed to be an incurrence of such Indebtedness
and (b) with respect to any Indebtedness of the Company or a Restricted
Subsidiary that is owing to another Restricted Subsidiary, any transaction
pursuant to which a wholly-owned Restricted Subsidiary to which such
Indebtedness is owing ceases to be a wholly-owned Restricted Subsidiary shall be
deemed to be an incurrence of such Indebtedness, and provided, further that any
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Indebtedness of a Person existing at the time such Person becomes a Restricted
Subsidiary shall be deemed to be incurred by such Restricted Subsidiary at the
time it becomes a Restricted Subsidiary. The term "incurrence" has a
corresponding meaning.
"Indebtedness" of any Person means, without duplication, all
liabilities with respect to (i) indebtedness for money borrowed or which is
evidenced by a bond, debenture, note or other similar instrument or agreement,
but excluding trade credit evidenced by any such instrument or agreement; (ii)
reimbursement obligations, letters of credit and bankers' acceptances; (iii)
indebtedness with respect to Hedging Obligations; (iv) Capitalized Lease
Obligations; (v) indebtedness, secured or unsecured, created or arising in
connection with the acquisition or improvement of any property or asset or the
acquisition of any business; (vi) all indebtedness secured by any Lien upon
property owned by such Person and all indebtedness secured in the manner
specified in this clause even if such Person has not assumed or become liable
for the payment thereof; (vii) 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 or otherwise representing the
deferred and unpaid balance of the purchase price of any such property,
including all indebtedness created or arising in the manner specified in this
clause 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; (viii) guarantees, direct or indirect, of any indebtedness of other
Persons referred to in clauses (i) through (vii) above, or of dividends or
leases, taxes or other obligations of other Persons, excluding any guarantee
arising out of the endorsement of negotiable instruments for collection in the
ordinary course of business; (ix) contingent obligations in respect of, or to
purchase or otherwise acquire or be responsible or liable for, through the
purchase of products or services, irrespective of whether such products are
delivered or such services are rendered, or otherwise, any such indebtedness
referred to in clauses (i) through (vii) above; (x) any obligation, contingent
or otherwise, arising under any surety, performance or maintenance bond; and
(xi) Redeemable Stock of the
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Company valued at the greater of its voluntary or involuntary maximum fixed
repurchase price plus accrued and unpaid dividends; which indebtedness,
Capitalized Lease Obligation, guarantee or contingent or other obligation such
Person has directly or indirectly created, incurred, assumed, guaranteed or
otherwise become liable or responsible for, whether then outstanding or
thereafter created in the case of (i) through (x) above, to the extent any of
the foregoing indebtedness (other than letters of credit and Hedging
Obligations) would appear as a liability on the balance sheet of such Person in
accordance with GAAP. For purposes of the foregoing definition, the "maximum
fixed repurchase price" of any Redeemable Stock which does not have a fixed
repurchase price shall be calculated in accordance with the terms of such
Redeemable Stock as if such Redeemable Stock were purchased on any date on which
Indebtedness is required to be determined pursuant to the Indenture. As used
herein, Indebtedness with respect to any Hedging Obligation means, with respect
to any specified Person on any date, the net amount (if any) that would be
payable by such specified Person upon the liquidation, close-out or early
termination on such date of such Hedging Obligation. For purposes of the
foregoing, any settlement amount payable upon the liquidation, close-out or
early termination of a Hedging Obligation shall be calculated by the Company in
good faith and in a commercially reasonable manner on the basis that such
liquidation, close-out or early termination results from an event of default or
other similar event with respect to such specified Person. Any reference in
this definition to indebtedness shall be deemed to include any renewals,
extensions and refundings of any such indebtedness or any indebtedness issued in
exchange for such indebtedness.
"Indenture Obligations" means the obligations of the Company and any
other obligor under this Indenture or under the Securities, including any
Subsidiary Guarantor, to pay principal, premium, if any, and interest when due
and payable, and all other amounts due or to become due under or in connection
with this Indenture (including, without limitation, all sums due to the Trustee
pursuant to Section 606 hereof), the Securities and the performance of all other
obligations to the Trustee and the Holders under this Indenture and the
Securities, according to the terms hereof and thereof.
"Independent Director" means a director of the Company other than a
director (i) who (apart from being a director of the Company or any of its
Subsidiaries) is an employee, insider, associate or Affiliate of the Company or
any of its Subsidiaries or has held any such position during the previous year
or (ii) who is a director, an employee, insider, associate or Affiliate of
another party to the transaction in question.
"Initial Securities" means the Securities issued on the Closing Date
and guaranteed by the Subsidiary Guarantors.
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"Institutional Accredited Investor" means an institution that is an
"accredited investor" as that term is defined in Rule 501(a)(1), (2), (3) or (7)
under the Securities Act.
"Interest Payment Date" means the Stated Maturity of an installment of
interest on the Securities.
"Investment" means any direct or indirect advance, loan, other
extension of credit or capital contribution (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) to, purchase or acquisition of Equity Interests, bonds, notes,
debentures or other securities of, or purchase or other acquisition of all or a
substantial part of the business, Equity Interests or other evidence of
beneficial ownership of, or any other investment in or guarantee of any
Indebtedness of, any Person or any other item that would be classified as an
investment on a balance sheet prepared in accordance with GAAP. Investments do
not include advances to customers and suppliers in the ordinary course of
business and on commercially reasonable terms.
"Lien" means any mortgage, pledge, lien, security interest, charge or
encumbrance of any kind (including any conditional sale or other title retention
agreement and any lease in the nature thereof).
"Maturity" when used with respect to any Security means the date on
which the principal of such Security becomes due and payable as therein provided
or as provided in this Indenture, whether at Stated Maturity, the Asset Sale
Purchase Date, the Change of Control Payment Date, or the Redemption Date and
whether by declaration of acceleration, Change of Control, call for redemption
or otherwise.
"Moody's" means Moody's Investors Service, Inc. or any successor
rating agency.
"Net Cash Proceeds" means, with respect to any issuance or sale of
Equity Interests or debt securities that have been converted into or exchanged
for Equity Interests, as referred to under Section 1006 hereof, the proceeds of
such issuance or sale in the form of cash or cash equivalents, net of attorneys'
fees, accountants' fees and brokerage, consultation, underwriting and other fees
and expenses actually incurred in connection with such issuance or sale and net
of taxes paid or payable as a result thereof.
"Net Income" of any Person, for any period, means the net income
(loss) of such Person and its subsidiaries (other
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<PAGE>
than, in the case of the Company, its Unrestricted Subsidiaries) determined in
accordance with GAAP.
"Net Proceeds" means the aggregate cash proceeds received by the
Company or any of its Restricted Subsidiaries in respect of any Asset Sale
(including, without limitation, the proceeds of insurance paid on account of the
loss of or damage to any property, or compensation or other proceeds for any
property taken by condemnation, eminent domain or similar proceedings, and any
non-cash consideration received by the Company or any Restricted Subsidiary from
any Asset Sale that is converted into or sold or otherwise disposed of for cash
within 90 days after the relevant Asset Sale), net of (i) the direct costs
relating to such Asset Sale (including, without limitation, legal, accounting
and investment banking fees and sales commissions), (ii) any taxes paid or
payable as a result thereof, (iii) all amounts required to be applied to the
repayment of, or representing the amount of permanent reductions in the
commitments relating to, Indebtedness secured by a Lien on the asset or assets
the subject of such Asset Sale which Lien is permitted pursuant to the terms of
the Indenture, (iv) any reserve for adjustment in respect of the sale price of
such asset or assets required by GAAP, (v) all distributions and other payments
required to be made (including any amounts held pending distribution) to
minority interest holders in Subsidiaries or joint ventures as a result of such
Asset Sale, and (vi) all payments due under Existing Affiliate Agreements
arising out of an Asset Sale. The amount of any taxes required to be accrued as
a liability under GAAP as a consequence of an Asset Sale shall be the amount
thereof as determined in good faith by the Board of Directors.
"Offering Memorandum" means the offering memorandum of the Company,
dated April 13, 1995, in connection with the offer and sale of the Securities.
"Officers' Certificate" means a certificate signed by the Chairman of
the Board, Vice Chairman, the President or a Vice President (regardless of vice
presidential designation), and by the Treasurer, an Assistant Treasurer, the
Secretary or an Assistant Secretary, of the Company or any Subsidiary Guarantor,
as the case may be, and delivered to the Trustee.
"Opinion of Counsel" means a written opinion of counsel, who may be
counsel for the Company, any of the Subsidiary Guarantors or the Trustee, unless
an Opinion of Independent Counsel is required pursuant to the terms of this
Indenture, and who shall be reasonably acceptable to the Trustee.
"Opinion of Independent Counsel" means a written opinion of counsel
issued by someone who is not an employee or consultant of the Company or any
Subsidiary Guarantor and who shall be reasonably acceptable to the Trustee.
- 16 -
<PAGE>
"Outstanding" when used with respect to Securities means, as of the
date of determination, all Securities theretofore authenticated and delivered
under this Indenture, except:
(a) Securities theretofore canceled by the Trustee or delivered to the
Trustee for cancellation;
(b) Securities, or portions thereof, for whose payment or redemption
money in the necessary amount has been theretofore deposited with the
Trustee or any Paying Agent (other than the Company) in trust or set aside
and segregated in trust by the Company (if the Company shall act as its own
Paying Agent) for the Holders; provided that if such Securities are to be
--------
redeemed, notice of such redemption has been duly given pursuant to this
Indenture or provision therefor reasonably satisfactory to the Trustee has
been made;
(c) Securities, except to the extent provided in Sections 402 and 403
hereof, with respect to which the Company has effected defeasance or
covenant defeasance as provided in Article Four; and
(d) Securities in exchange for or in lieu of which other Securities
have been authenticated and delivered pursuant to this Indenture, other
than any such Securities in respect of which there shall have been
presented to the Trustee proof reasonably satisfactory to it that such
Securities are held by a bona fide purchaser in whose hands the Securities
are valid obligations of the Company;
provided, however, that in determining whether the Holders of the requisite
-------- -------
principal amount of Outstanding Securities have given any request, demand,
authorization, direction, notice, consent or waiver hereunder, Securities owned
by the Company, any Subsidiary Guarantor, or any other obligor upon the
Securities or any Affiliate of the Company, any Subsidiary Guarantor, or such
other obligor shall be disregarded and deemed not to be Outstanding, except
that, in determining whether the Trustee shall be protected in relying upon any
such request, demand, authorization, direction, notice, consent or waiver, only
Securities which the Trustee knows to be so owned shall be so disregarded.
Securities so owned which have been pledged in good faith may be regarded as
Outstanding if the pledgee establishes to the reasonable satisfaction of the
Trustee the pledgee's right so to act with respect to such Securities and that
the pledgee is not the Company, any guarantor or any other obligor upon the
Securities or any Affiliate of the Company, any Subsidiary Guarantor or such
other obligor.
- 17 -
<PAGE>
"Paying Agent" means any person authorized by the Company to pay the
principal of, premium, if any, or interest on any Securities on behalf of the
Company.
"PCAC" means Pioneer Chlor Alkali Company, Inc., a Delaware
corporation, and any successor thereto.
"Permitted Indebtedness" means, collectively, the following:
(a) Indebtedness of the Company evidenced by the Initial Securities
and Indebtedness of any Subsidiary Guarantor evidenced by the Guarantees;
(b) Indebtedness of the Company evidenced by the Exchange Notes and
Indebtedness of any Subsidiary Guarantor evidenced by the guarantees with
respect to the Exchange Notes;
(c) Indebtedness of the Company incurred in connection with any
refinancing, refunding or defeasance of the Initial Securities or the
Exchange Notes, provided that the net proceeds of such Indebtedness is used
by the Company to repay or defease all or a portion, as applicable, of the
Initial Securities and/or the Exchange Notes, as the case may be, within 60
days of the incurrence of such Indebtedness;
(d) Indebtedness of the Company or any Restricted Subsidiary
constituting Existing Indebtedness and any extension, deferral, renewal,
refinancing or refunding thereof;
(e) Indebtedness of the Company or any Restricted Subsidiary incurred
under the Bank Credit Facility in an aggregate principal amount at any one
time outstanding not to exceed the greater of (i) the Borrowing Base at the
time such Indebtedness was incurred or (ii) $30,000,000, or any
refinancing, refunding, deferral, renewal or extension thereof not in
excess of such amount, in each case less the aggregate amount of all
permanent repayments of revolving loans under the Bank Credit Facility made
in accordance with the second paragraph of the covenant described under
Section 1009 hereof;
(f) Capitalized Lease Obligations of the Company or any Restricted
Subsidiary and Indebtedness of the Company or any Restricted Subsidiary
secured by Liens that secure the payment of all or part of the purchase
price of assets or property acquired or constructed in the ordinary course
of business after the Closing Date; provided, however, that the aggregate
-------- -------
principal amount of such Capitalized Lease
- 18 -
<PAGE>
Obligations plus such Indebtedness of the Company and all of the Restricted
Subsidiaries does not exceed $7,000,000 outstanding at any time;
(g) Indebtedness of the Company to any Restricted Subsidiary or of any
Restricted Subsidiary to the Company or another Restricted Subsidiary (but
only so long as such Indebtedness is held by the Company or a Restricted
Subsidiary);
(h) Indebtedness under Hedging Obligations, provided, however, that,
-------- -------
in the case of foreign currency exchange or similar agreements which relate
to other Indebtedness, such agreements do not increase the Indebtedness of
the Company or any Restricted Subsidiary outstanding other than as a result
of fluctuations in foreign currency exchange rates, and in the case of
interest rate protection agreements, only if the notional principal amount
of such interest rate protection agreement does not exceed the principal
amount of the Indebtedness to which such interest rate protection agreement
relates;
(i) Indebtedness in respect of performance, completion, guarantee,
surety and similar bonds, banker's acceptances or letters of credit
provided by the Company or any Restricted Subsidiary in the ordinary course
of business;
(j) In addition to any Indebtedness otherwise permitted to be Incurred
under the Indenture, up to $5,000,000 aggregate principal amount of
Indebtedness at any one time outstanding; and
(k) Any refinancing, refunding, deferral, renewal or extension (each,
a "Refinancing") of any Indebtedness of the Company or any Restricted
Subsidiary permitted by the initial paragraph of Section 1008 hereof (the
"Refinancing Indebtedness"); provided, however, that (i) such Refinancing
-------- -------
does not increase the total Consolidated Indebtedness of the Company and
its Restricted Subsidiaries outstanding at the time of such Refinancing,
(ii) the Refinancing Indebtedness does not provide for any mandatory
redemption, amortization or sinking fund requirement in an amount greater
than or at a time prior to the amounts and times specified in the
Indebtedness being refinanced, refunded, deferred, renewed or extended and
(iii) if the Indebtedness being refinanced, refunded, deferred, renewed or
extended is subordinated to the Securities, the Refinancing Indebtedness
incurred to refinance, refund, defer, renew or extend such Indebtedness is
subordinated in right of payment to the Securities on terms at least as
favorable to the Holders as those contained in the documentation governing
the Indebtedness
- 19 -
<PAGE>
being so refinanced, refunded, deferred, renewed or extended.
"Permitted Investment" means (i) any Eligible Investment, (ii) any
Investment in the Company, (iii) Investments in existence on the Closing Date,
and any such Investment in Basic Investments, Inc., Basic Land Company, Basic
Management, Inc., Basic Water Company or Victory Valley Land Company, L.P. which
has been reclassified or converted into an alternate form of Investment in the
same or a successor entity, (iv) intercompany notes permitted under clause (g)
of Section 1008 hereof, (v) Investments in any wholly-owned Restricted
Subsidiary or any Person which, as a result of such Investment, becomes a
wholly-owned Restricted Subsidiary; provided that such wholly-owned Restricted
Subsidiary is engaged in a Related Business, (vi) the Imperial West Joint
Venture and (vii) other Investments that do not at any one time outstanding
exceed $5,000,000 plus an amount equal to 50% of the cumulative positive
difference between the Company's provision for income taxes and actual cash tax
expense for the period from January 1, 1995 to and including the last day of the
Company's last fiscal quarter ending prior to the date of computation, in joint
ventures, corporations, limited liability companies, partnerships or
Unrestricted Subsidiaries engaged in a Related Business; provided that the
amount of Investments pursuant to this clause (vii) shall be included in the
calculation of Restricted Payments pursuant to Section 1006 hereof.
"Permitted Liens" means as of any particular time, any one or more of
the following:
(a) Liens for taxes, rates and assessments not yet past due or, if
past due, the validity of which is being contested in good faith by the
Company or any Restricted Subsidiary by appropriate proceedings promptly
instituted and diligently conducted and against which the Company has
established appropriate reserves in accordance with GAAP;
(b) the Lien of any judgment rendered which is being contested in good
faith by the Company or any of its Restricted Subsidiaries by appropriate
proceedings promptly instituted and diligently conducted and against which
the Company has established appropriate reserves in accordance with GAAP
and which does not have a material adverse effect on the ability of the
Company and its Restricted Subsidiaries to operate their business or
operations;
(c) other than in connection with Indebtedness, any Lien arising in
the ordinary course of business (i) to secure payments of workers'
compensation, unemployment insurance, pension or other social security or
retirement benefits, or to secure the performance of bids, tenders,
- 20 -
<PAGE>
leases, progress payments, contracts (other than for the payment of money)
or to secure public or statutory obligations of the Company, or any
Restricted Subsidiary, or to secure surety or appeal bonds to which the
Company or any Restricted Subsidiary is a party, (ii) imposed by law
dealing with materialmen's, mechanics', workmen's, repairmen's,
warehousemen's, landlords', vendors' or carriers' Liens created by law, or
deposits or pledges which are not yet due or, if due, the validity of which
is being contested in good faith by the Company or any Restricted
Subsidiaries by appropriate proceedings promptly instituted and diligently
conducted and against which the Company has established appropriate
reserves in accordance with GAAP and (iii) rights of financial institutions
to setoff and chargeback arising by operation of law; and (iv) similar
Liens;
(d) servitudes, licenses, easements, encumbrances, restrictions,
rights-of-way and rights in the nature of easements or similar charges
which shall not in the aggregate materially adversely impair the use of the
subject property by the Company or a Restricted Subsidiary;
(e) zoning and building by-laws and ordinances, municipal bylaws and
regulations, and restrictive covenants, which do not materially interfere
with the use of the subject property by the Company or a Restricted
Subsidiary as such property is used as of the Closing Date; and
(f) any extension, renewal, substitution or replacement (or successive
extensions, renewals, substitutions or replacements), as a whole or in
part, of any of the Liens referred to in clauses (a) through (e) of this
definition or the Indebtedness secured thereby; provided that (i) such
extension, renewal, substitution or replacement Lien is limited to that
portion of the property or assets, now owned or hereafter acquired, that
secured the Lien prior to such extension, renewal, substitution or
replacement Lien and (ii) the Indebtedness secured by such Lien (assuming
all available amounts were borrowed) at such time is not increased.
"Person" means any individual, corporation, partnership, limited
liability company, joint venture, association, joint-stock company, trust,
unincorporated organization, government or any agency or political subdivision
thereof or any other entity.
"Predecessor Security" of any particular Security means every previous
Security evidencing all or a portion of the same debt as that evidenced by such
particular Security; and, for the purposes of this definition, any Security
authenticated and
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<PAGE>
delivered under Section 308 hereof in exchange for a mutilated Security or in
lieu of a lost, destroyed or stolen Security shall be deemed to evidence the
same debt as the mutilated, lost, destroyed or stolen Security.
"Preferred Stock," as applied to the Equity Interests of any
corporation, means stock of any class or classes (however designated) which is
preferred over shares of stock of any other class of such corporation as to the
distribution of assets on any voluntary or involuntary liquidation or
dissolution of such corporation or as to dividends.
"Private Placement Legend" means the legend initially set forth on the
Securities in the form set forth in the first paragraph of Section 202 hereof.
"QIB" means a "qualified institutional buyer" as defined in Rule 144A.
"Redeemable Stock" means any Equity Interest that by its terms or
otherwise (i) is required to be redeemed prior to the maturity of the
Securities, (ii) matures or is redeemable, in whole or in part, at the option of
the Company, any Subsidiary or the holder thereof or pursuant to a mandatory
sinking fund at any time prior to the maturity of the Securities, or (iii) is
convertible into or exchangeable for debt securities which provide for any
scheduled payment of principal prior to the maturity of the Securities at the
option of the issuer at any time prior to the maturity of the Securities, until
the right to so convert or exchange is irrevocably relinquished.
"Redemption Date" when used with respect to any Security to be
redeemed pursuant to any provision in this Indenture means the date fixed for
such redemption by or pursuant to this Indenture.
"Redemption Price" when used with respect to any Security to be
redeemed pursuant to any provision in this Indenture means the price at which it
is to be redeemed pursuant to this Indenture.
"Registration Rights Agreement" means the Exchange and Registration
Rights Agreement dated as of April 20, 1995, by and among the Company, the
Subsidiary Guarantors, Wertheim Schroder & Co. Incorporated and Smith Barney
Inc., as the same may be modified and supplemented and in effect from time to
time.
"Registration Statement" means a Registration Statement as defined and
described in the Registration Rights Agreement.
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<PAGE>
"Regular Record Date" for the interest payable on any Interest Payment
Date means the March 15 or September 15 (whether or not a Business Day) next
preceding such Interest Payment Date.
"Related Business" means any corporation or other entity engaged in,
and any asset utilized in, the manufacture or distribution of chlorine, caustic
soda, bleach, hydrochloric acid, iron chlorides and aluminum sulfate, and in
lines of business reasonably related thereto.
"Resale Restriction Termination Date" means the date which is three
years after the later of the date of original issue of the Securities and the
last date on which the Company or any Affiliate of the Company was the owner of
such Securities (or any predecessor thereto).
"Responsible Officer" when used with respect to the Trustee means any
officer assigned to the Corporate Trust Office or the agent of the Trustee
appointed hereunder, including any vice president, assistant vice president,
assistant secretary, or any other officer or assistant officer of the Trustee or
the agent of the Trustee appointed hereunder to whom any corporate trust matter
is referred because of his or her knowledge of and familiarity with the
particular subject.
"Restricted Investment" means any Investment other than a Permitted
Investment.
"Restricted Subsidiary" means (i) any Subsidiary Guarantor, (ii) any
Subsidiary of the Company in existence on the date hereof to which any line of
business or division (and the assets associated therewith) of any Subsidiary
Guarantor are transferred after the Closing Date, (iii) any Subsidiary of the
Company organized or acquired after the Closing Date, unless such Subsidiary has
been designated as an Unrestricted Subsidiary by a resolution of the Board of
Directors as provided in the definition of "Unrestricted Subsidiary" and (iv)
any Unrestricted Subsidiary which is designated as a Restricted Subsidiary by
the Board of Directors; provided, that immediately after giving effect to any
--------
such designation (A) no Default or Event of Default has occurred and is
continuing and (B) in the case of any designation referred to in clause (iii) or
(iv) hereof, the Company could incur at least $1.00 of Indebtedness pursuant to
the initial paragraph under Section 1008 hereof, on a pro forma basis taking
into account such designation. The Company shall evidence any such designation
to the Trustee by promptly filing with the Trustee an Officers' Certificate
certifying that such designation has been made and complies with the
requirements of the immediately preceding sentence. Notwithstanding any
provision of the Indenture to the contrary, each Subsidiary Guarantor shall be a
Restricted Subsidiary.
- 23 -
<PAGE>
"Rule 144A" means Rule 144A under the Securities Act.
"S&P" means Standard & Poor's Ratings Group or any successor rating
agency.
"Sale and Leaseback Transaction" with respect to any Person, means any
arrangement with another Person for the leasing of any real or tangible personal
property, which property has been or is to be sold or transferred by such Person
to such other Person in contemplation of such leasing.
"Securities" means any of the securities, as defined in the first
paragraph of the recitals hereof, that are authenticated and delivered under
this Indenture. For all purposes of this Indenture, the term "Securities" shall
include any Exchange Notes to be issued and exchanged for any Initial Securities
pursuant to the Registration Rights Agreement and this Indenture and, for
purposes of this Indenture, all Initial Securities and Exchange Notes shall vote
together as one series of securities under this Indenture.
"Securities Act" means the Securities Act of 1933, as amended.
"Security Register" and "Security Registrar" have the respective
meanings specified in Section 305 hereof.
"Seller Notes" means the subordinated installment notes of GEV issued
in connection with the Acquisition.
"Senior Indebtedness" means the principal of, premium, if any, and
interest on any Indebtedness of the Company or its Restricted Subsidiaries,
whether outstanding on the Closing Date or thereafter incurred as permitted
herein, unless, in the case of any particular Indebtedness, the agreement or
instrument creating or evidencing the same or pursuant to which the same is
outstanding expressly provides that such Indebtedness is junior or subordinated
in right of payment to any item of Indebtedness of the Company or its Restricted
Subsidiaries. Without limiting the generality of the foregoing, "Senior
Indebtedness" includes the principal of, premium, if any, and interest and all
other obligations of every nature of Pioneer Americas, Inc. from time to time
owed to the lenders (or their agent) under the Bank Credit Facility or any
Refinancing thereof permitted under clause (e) of the definition of Permitted
Indebtedness. Notwithstanding the foregoing, "Senior Indebtedness" does not
include (i) in the case of the obligation of the Company in respect of each
Security, the obligation of the Company in respect of the other Securities, (ii)
any liability for foreign, federal, state, local or other taxes owed or owing by
the Company or any Restricted Subsidiary to the extent that such liability
constitutes Indebtedness, (iii) Indebtedness of the Company to
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<PAGE>
any Restricted Subsidiary or of any Restricted Subsidiary to the Company or
another Restricted Subsidiary, (iv) that portion of any Indebtedness which at
the time of issuance is issued in violation of the Indenture and (v)
Indebtedness and amounts incurred in connection with obtaining goods, materials
or services in the ordinary course of business (other than such Indebtedness
which is owed to banks and other financial institutions or secured by the goods
or materials which were purchased with such Indebtedness).
"Shelf Registration Statement" means any registration statement filed
by the Company and the Subsidiary Guarantors with the Commission pursuant to the
Registration Rights Agreement, other than an Exchange Offer Registration
Statement.
"Special Record Date" for the payment of any Defaulted Interest means
a date fixed by the Trustee pursuant to Section 309 hereof.
"Stated Maturity" when used with respect to any Indebtedness or any
installment of interest thereon, means the date specified in such Indebtedness
as the fixed date on which the principal of such Indebtedness or such
installment of interest is due and payable.
"Subordinated Indebtedness" means Indebtedness of the Company or any
Subsidiary Guarantor subordinated in right of payment to the Securities or any
Guarantee, as the case may be.
"Subsidiary" means, with respect to the Company, (i) any corporation
of which the outstanding Capital Stock having at least a majority of the votes
entitled to be cast in the election of directors, under ordinary circumstances,
is at the time owned, directly or indirectly, by the Company, by the Company and
one or more of its Subsidiaries or by one or more of the Company's Subsidiaries
or (ii) any other Person or entity of which at least a majority of voting
interest, under ordinary circumstances, is at the time owned, directly or
indirectly, by the Company, by the Company and one or more of its Subsidiaries
or by one or more of the Company's Subsidiaries.
"Subsidiary Guarantor" means the Subsidiaries listed as Subsidiary
Guarantors in this Indenture or any other guarantor of the Indenture
Obligations.
"Substantial Shareholder" means each of William R. Berkley and his
Affiliates, Interlaken Capital, Inc. and its Affiliates, Richard C. Kellogg, Jr.
and his Affiliates and/or Frans G.J. Speets and his Affiliates.
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<PAGE>
"Tax Sharing Agreement" means the Tax Sharing Agreement among GEV and
its Subsidiaries dated as of April 20, 1995 among GEV and its subsidiaries.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as
amended.
"Trustee" means the Person named as the "trustee" in the first
paragraph of this instrument, until a successor trustee shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Trustee" shall mean such successor trustee.
"Unrestricted Subsidiary" means, until such time as it may be
designated as a Restricted Subsidiary by the Board of Directors as provided in
and in compliance with the definition of "Restricted Subsidiary," (i) any
Subsidiary of the Company organized or acquired after the Closing Date
designated as an Unrestricted Subsidiary by the Board of Directors in which all
investments by the Company or any Restricted Subsidiary are made only from funds
available for the making of Restricted Payments as described under Section 1006
hereof and (ii) any Subsidiary of an Unrestricted Subsidiary. The Board of
Directors may designate any Subsidiary of the Company (including any newly
acquired or newly formed Subsidiary) to be an Unrestricted Subsidiary unless
such Subsidiary owns any Equity Interests of, or owns, or holds any Lien upon,
any property of, any Subsidiary of the Company which is not a Subsidiary of such
Subsidiary to be so designated; provided that each Subsidiary to be so
designated and each of its Subsidiaries has not, at the time of designation, and
does not thereafter, directly or indirectly, incur any Indebtedness pursuant to
which the lender has recourse to any of the assets of the Company or any of its
Restricted Subsidiaries. The Company shall evidence any such designation by
promptly filing with the Trustee an Officers' Certificate certifying that such
designation has been made and complies with the requirements of the immediately
preceding sentence.
"U.S. Government Obligations" means securities that are (i) direct
obligations of the United States of America for the payment of which its full
faith and credit is pledged or (ii) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States of
America the payment of which is unconditionally guaranteed as a full faith and
credit obligation by the United States of America, which, in either case under
clause (i) or (ii) above, are not callable or redeemable at the option of the
issuer thereof.
"Voting Stock" of any Person means Capital Stock of such Person which
ordinarily has voting power for the election of directors (or Persons performing
similar functions) of such Person, whether at all times or only so long as no
senior class
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<PAGE>
of securities has such voting power by reason of any contingency.
Section 102. Other Definitions.
-----------------
<TABLE>
<CAPTION>
Defined in
Term Section
---- -----------
<S> <C>
"Act" 105
"Adjusted Net Assets" 1309
"Agent Members" 306
"Asset Sale Offer" 1009
"Asset Sale Offer Amount" 1109
"Asset Sale Offer Period" 1109
"Asset Sale Purchase Date" 1109
"Asset Sale Purchase Price" 1009
"Change of Control Date" 1014
"Change of Control Offer" 1014
"Change of Control Payment Date" 1014
"Change of Control Purchase Price" 1014
"Commencement Date" 1109
"Computation Date" 1006
"Computation Period" 1006
"covenant defeasance" 403
"Custodian" 501
"Defaulted Interest" 309
"defeasance" 402
"Defeasance Redemption Date" 404
"Defeased Securities" 401
"Excess Proceeds" 1009
"Funding Subsidiary Guarantor" 1309
"Physical Securities" 201
"Refinancing" 101*
"Refinancing Indebtedness" 101*
"Registration Default" 203
"Required Filing Date" 704
"Restricted Payment" 1006
"U.S. Global Security" 201
</TABLE>
-----------------
* See "Permitted Indebtedness", paragraph (k)
Section 103. Compliance Certificates and Opinions.
------------------------------------
Upon any application or request by the Company or any Subsidiary
Guarantor to the Trustee to take any action under any provision of this
Indenture, the Company, any Subsidiary Guarantor and any other obligor on the
Securities shall furnish to the Trustee an Officers' Certificate stating that
all conditions precedent, if any, provided for in this Indenture (including any
covenants compliance with which constitutes a condition precedent) relating to
the proposed action have been complied with, an Opinion of Counsel stating that
in the opinion of such counsel all such conditions precedent, if any, have been
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<PAGE>
complied with, except that, in the case of any such application or request as to
which the furnishing of such documents, certificates and/or opinions 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 of Counsel with respect to compliance
with a condition or covenant provided for in this Indenture shall include:
(a) a statement that each individual signing such certificate or
opinion has read such covenant or condition and the definitions herein
relating thereto;
(b) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinion contained in such
certificate or opinion are based;
(c) a statement that, in the opinion of each such individual, he has
made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or condition
has been complied with; and
(d) a statement as to whether, in the opinion of each such individual,
such condition or covenant has been complied with.
Section 104. 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 Company, any
Subsidiary Guarantor or other obligor of the Securities may be based, insofar as
it relates to legal matters, upon a certificate or opinion of, or
representations by, counsel, unless such officer knows that the certificate or
opinion or representations with respect to the matters upon which his
certificate or opinion is based are erroneous. Any such certificate or opinion
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 Company, any
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<PAGE>
Subsidiary Guarantor or other obligor of the Securities stating that the
information with respect to such factual matters is in the possession of the
Company, any Subsidiary Guarantor or other obligor of the Securities, unless
such counsel knows that the certificate or opinion or representations with
respect to such matters are erroneous. Opinions of Counsel required to be
delivered to the Trustee may have qualifications customary for opinions of the
type required and counsel delivering such Opinions of Counsel may rely on
certificates of the Company or government or other officials customary for
opinions of the type required, including certificates certifying as to matters
of fact, including that various financial covenants have been complied with.
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 105. 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 may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Holders in person or by an agent duly
appointed in writing; and, 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 Company. 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, if made in the manner provided in this Section. The fact and date of
the execution by any Person 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 in accordance with such reasonable rules as the
Trustee may determine.
(b) The ownership of Securities shall be proved by the Security
Register.
(c) Any request, demand, authorization, direction, notice, consent,
waiver or other action by the Holder of any Security shall bind every future
Holder of the same Security or the Holder of every Security issued upon the
transfer thereof or in exchange therefor or in lieu thereof, in respect of
anything done, suffered or omitted to be done by the Trustee, any Paying Agent
or the Company or any Subsidiary Guarantor in reliance
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<PAGE>
thereon, whether or not notation of such action is made upon such Security.
(d) If the Company shall solicit from the Holders any request, demand,
authorization, direction, notice, consent, waiver or other Act, the Company may,
at its option, by or pursuant to a Board Resolution, fix in advance a record
date for the determination of such Holders entitled to give such request,
demand, authorization, direction, notice, consent, waiver or other Act, but the
Company shall have no obligation to do so. Notwithstanding Trust Indenture Act
Section 316(c), any such record date shall be the record date specified in or
pursuant to such Board Resolution, which shall be a date not more than 30 days
prior to the first solicitation of Holders generally in connection therewith and
no later than the date such solicitation is completed.
In the absence of any such record date fixed by the Company,
regardless as to whether a solicitation of the Holders is occurring on behalf of
the Company or any Holder, the Trustee may, at its option, fix in advance a
record date for the determination of such Holders entitled to give such request,
demand, authorization, direction, notice, consent, waiver or other Act, but the
Trustee shall have no obligation to do so. Any such record date shall be a date
not more than 30 days prior to the first solicitation of Holders generally in
connection therewith and no later than a 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 purposes of determining
whether Holders of the requisite proportion of Securities then outstanding have
authorized or agreed or consented to such request, demand, authorization,
direction, notice, consent, waiver or other Act, and for this purpose the
Securities then Outstanding shall be computed as of such record date; provided
--------
that no such request, demand, authorization, direction, notice, consent, waiver
or other Act 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 six months after the record date.
Section 106. Notices, etc., to Trustee, the Company and any
----------------------------------------------
Subsidiary Guarantor.
--------------------
Any request, demand, authorization, direction, notice, consent, waiver
or Act of Holders or other document provided or
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<PAGE>
permitted by this Indenture to be made upon, given or furnished to, or filed
with:
(a) the Trustee by any Holder or by the Company or any Subsidiary
Guarantor or any other obligor of the Securities shall be sufficient for
every purpose hereunder if in writing (including telecopy, with respect to
the Company or any Subsidiary Guarantor only) and mailed, first-class
postage prepaid, telecopied, hand delivered, or delivered by recognized
overnight courier, to or with the Trustee at One State Street, New York,
New York, 10004, Attention: Corporate Trust & Agency Administration,
telecopy: 212-858-2952 or at any other address previously furnished in
writing to the Holders, the Company, any Subsidiary Guarantor or any other
obligor of the Securities by the Trustee; or
(b) the Company or any Subsidiary Guarantor shall be sufficient for
every purpose hereunder if in writing (including telecopy) and mailed,
first-class postage prepaid, telecopied, hand delivered, or delivered by
recognized overnight courier, to the Company or such Subsidiary Guarantor
addressed to it at 4200 NationsBank Center, 700 Louisiana Street, Houston,
TX 77002, Attention: Vice President, General Counsel and Secretary,
telecopy: 713-225-4426 or at any other address previously furnished in
writing to the Trustee.
Section 107. Notice to Holders; Waiver.
-------------------------
Where this Indenture provides for notice to Holders of any event, such
notice shall be sufficiently given (unless otherwise herein expressly provided)
if in writing and mailed, first-class postage prepaid, or delivered by
recognized overnight courier, to each Holder affected by such event, at his
address as it appears in the Security 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 when mailed to a Holder in the aforesaid manner shall
be conclusively deemed to have been received by such Holder whether or not
actually received by such Holder. 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.
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<PAGE>
In case by reason of the suspension of regular mail service or by
reason of any other cause, it shall be impracticable to mail notice of any event
as required by any provision of this Indenture, then any method of giving such
notice as shall be reasonably satisfactory to the Trustee shall be deemed to be
a sufficient giving of such notice.
Section 108. Conflict with Trust Indenture Act.
---------------------------------
If any provision hereof limits, qualifies or conflicts with any
provision of the Trust Indenture Act or another provision which is required or
deemed to be included in this Indenture by any of the provisions of the Trust
Indenture Act, the provision or requirement of the Trust Indenture Act shall
control. If any provision of this Indenture modifies or excludes any provision
of the Trust Indenture Act that may be so modified or excluded, the latter
provision shall be deemed to apply to this Indenture as so modified or to be
excluded, as the case may be.
Section 109. 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 110. Successors and Assigns.
----------------------
All covenants and agreements in this Indenture by the Company and the
Subsidiary Guarantors shall bind their successors and assigns, whether so
expressed or not.
Section 111. Separability Clause.
-------------------
In case any provision in this Indenture or in the Securities 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 112. Benefits of Indenture.
---------------------
Nothing in this Indenture or in the Securities or the Guarantees,
express or implied, shall give to any Person (other than the parties hereto and
their successors hereunder, any Paying Agent and the Holders) any benefit or any
legal or equitable right, remedy or claim under this Indenture.
- 32 -
<PAGE>
Section 113. Governing Law.
-------------
This Indenture and the Securities and the Guarantees shall be governed
by, and construed in accordance with, the laws of the State of New York.
Section 114. Legal Holidays.
--------------
In any case where any Interest Payment Date, Redemption Date or Stated
Maturity of any Security shall not be a Business Day, then (notwithstanding any
other provision of this Indenture or of the Securities) payment of interest or
principal or premium, if any, need not be made on such date, but may be made on
the next succeeding Business Day with the same force and effect as if made on
the Interest Payment Date or Redemption Date, or at the Stated Maturity and no
interest shall accrue with respect to such payment for the period from and after
such Interest Payment Date, Redemption Date or Stated Maturity, as the case may
be, to the next succeeding Business Day.
Section 115. Schedules and Exhibits.
----------------------
All schedules and exhibits attached hereto are by this reference made
a part hereof with the same effect as if herein set forth in full.
Section 116. Counterparts.
------------
This Indenture may be executed in any number of counterparts, each of
which shall be an original; but such counterparts shall together constitute but
one and the same instrument.
Section 117. Communication by Holders with Other Holders.
-------------------------------------------
Holders may communicate pursuant to Trust Indenture Act Section 312(b)
with other Holders with respect to their rights under this Indenture or the
Securities. The Company, the Subsidiary Guarantors, the Trustee, the Registrar
and anyone else shall have the protection of Trust Indenture Act Section 312(c).
Section 118. No Recourse Against Others.
--------------------------
A director, officer, employee or stockholder, as such, of the Company
or any of the Subsidiary Guarantors, shall not have any liability for any
obligations of the Company under the Securities or this Indenture for any
obligation of the Subsidiary Guarantors under the Guarantees or this Indenture
or for any claim based on, in respect of or by reason of such obligations or
their creation. By accepting a Security, each Holder shall waive
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<PAGE>
and release all such liability. The waiver and release shall be part of the
consideration for the issue of the Securities.
ARTICLE TWO
SECURITY FORMS
Section 201. Forms Generally.
---------------
The Securities, the Guarantees 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 the 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, any
organizational document or governing instrument or applicable law or as may,
consistently herewith, be determined by the officers executing such Securities,
as evidenced by their execution of the Securities. Any portion of the text of
any Security may be set forth on the reverse thereof, with an appropriate
reference thereto on the face of the Security.
Securities offered and sold in reliance on Rule 144A shall be issued
initially in the form of one or more permanent global Securities substantially
in the form set forth in this Article (the "U.S. Global Security") deposited
with the Trustee, as custodian for the Depositary, duly executed by the Company
and authenticated by the Trustee as hereinafter provided. The aggregate
principal amount of the U.S. Global Security may from time to time be increased
or decreased by adjustments made on the records of the Trustee, as custodian for
the Depositary or its nominee, as hereinafter provided.
Securities offered and sold other than as described in the preceding
paragraph shall be issued in the form of permanent certificated Securities in
registered form in substantially the form set forth in this Article (the
"Physical Securities").
The definitive Securities shall be printed, lithographed or engraved
or produced by any combination of these methods or may be produced in any other
manner permitted by the rules of any securities exchange on which the Securities
may be listed, all as determined by the officers executing such Securities, as
evidenced by their execution of such Securities.
Section 202. Restrictive Legends.
-------------------
Each U.S. Global Security and Physical Security shall bear the
following legend on the face thereof until after the
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<PAGE>
Resale Restriction Termination Date, unless and until a Security is exchanged
for an Exchange Note in connection with an effective registration pursuant to
the Registration Rights Agreement or another effective registration and resale
of the Securities occurs pursuant to the Registration Rights Agreement:
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR ANY STATE
SECURITIES LAWS, AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED
STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH
IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS
THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER
THE SECURITIES ACT) OR (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS
DEFINED IN RULE 501(A)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT) (AN
"INSTITUTIONAL ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND HAS
ACQUIRED THE SECURITIES EVIDENCED HEREBY OUTSIDE THE UNITED STATES IN AN
OFFSHORE TRANSACTION PURSUANT TO REGULATION S UNDER THE SECURITIES ACT; (2)
AGREES THAT IT WILL NOT PRIOR TO THE DATE WHICH IS THREE YEARS AFTER THE LATER
OF THE DATE OF ORIGINAL ISSUE OF THE SECURITIES EVIDENCED HEREBY AND THE LAST
DATE ON WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF SUCH
SECURITIES (OR ANY PREDECESSOR THERETO) (THE "RESALE RESTRICTION TERMINATION
DATE") RESELL OR OTHERWISE TRANSFER THE SECURITIES EVIDENCED HEREBY, EXCEPT (A)
TO THE COMPANY, (B) INSIDE THE UNITED STATES TO A QUALIFIED INSTITUTIONAL BUYER
IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C) INSIDE THE UNITED
STATES TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER,
FURNISHES TO THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND
AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THE SECURITIES EVIDENCED
HEREBY (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE), (D) OUTSIDE
THE UNITED STATES TO A NON-U.S. PERSON IN COMPLIANCE WITH REGULATION S UNDER THE
SECURITIES ACT, (E) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OR (F) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT IN EACH OF THE
FOREGOING CASES TO ANY REQUIREMENT OF LAW THAT THE DISPOSITION OF SUCH HOLDER'S
PROPERTY OR THE PROPERTY OF SUCH ACCOUNT AT ALL TIMES BE WITHIN ITS CONTROL AND
TO COMPLIANCE WITH APPLICABLE STATE SECURITIES LAWS; AND (3) AGREES THAT IT WILL
DELIVER TO EACH PERSON TO WHOM THE SECURITIES EVIDENCED HEREBY ARE TRANSFERRED A
NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY
TRANSFER OF THE SECURITIES EVIDENCED HEREBY PRIOR TO THE RESALE RESTRICTION
TERMINATION DATE, THE HOLDER MUST CHECK THE APPROPRIATE BOX SET FORTH ON THE
REVERSE HEREOF RELATING TO THE MANNER OF SUCH TRANSFER AND SUBMIT THIS
CERTIFICATE TO THE TRUSTEE AS TRANSFER AGENT, AND IF THE PROPOSED TRANSFEREE IS
AN INSTITUTIONAL ACCREDITED INVESTOR, THE HOLDER MUST, PRIOR TO SUCH TRANSFER,
FURNISH TO THE COMPANY AND THE TRUSTEE, AS TRANSFER
- 35 -
<PAGE>
AGENT, SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS THEY MAY
REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT. THIS LEGEND WILL BE REMOVED 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 IN REGULATION S UNDER THE SECURITIES ACT.
Each U.S. Global Security, whether or not an Exchange 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, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF
TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN
THE NAME OF CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY OR SUCH OTHER
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY OR SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY
(AND ANY PAYMENT HEREON IS MADE TO CEDE & CO.), ANY TRANSFER, PLEDGE OR
OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL
SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFER OF THIS U.S. 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 U.S.
GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE
RESTRICTIONS SET FORTH IN SECTION 307 OF THE INDENTURE.
Section 203. Form of Face of Security.
------------------------
(a) The form of the face of the Securities shall be substantially as
follows:
PIONEER AMERICAS ACQUISITION CORP.
___________________
13 3/8% SENIOR NOTES DUE 2005
No. __________ $___________
PIONEER AMERICAS ACQUISITION CORP., a Delaware corporation (herein
called the "Company", which term includes any successor Person under the
Indenture hereinafter referred to), for value received, hereby promises to pay
to ___________ or registered assigns, the principal sum of __________ United
States
- 36 -
<PAGE>
dollars on April 1, 2005, at the office or agency of the Company referred to
below, and to pay interest thereon from the date of original issuance, or from
the most recent Interest Payment Date to which interest has been paid or duly
provided for, semiannually on April 1 and October 1, in each year, commencing
October 1, 1995 at the rate of 13 3/8% per annum (subject to adjustment as
provided below), in United States dollars, until the principal hereof is paid or
duly provided for.
[In the event that (i) the Exchange Offer Registration Statement is
not filed with the Commission on or prior to the 30th day after the Closing Date
or declared effective on or prior to the 115th day after the Closing Date, (ii)
the Exchange Offer (including the securing of PCAC's Guarantee with Liens on
PCAC's St. Gabriel, Louisiana and Henderson, Nevada plants) is not consummated
on or prior to the 145th day following the Closing Date, (iii) the Shelf
Registration Statement is not filed or declared effective (and PCAC's Guarantee
has not been secured with Liens on PCAC's St. Gabriel, Louisiana and Henderson,
Nevada plants) within the required time periods or (iv) any of the Registration
Statements required by the Registration Rights Agreement is declared effective
but thereafter ceases to be effective (except as specifically permitted therein)
for a period of 15 consecutive days without being succeeded immediately by any
additional Registration Statement filed and declared effective (each such event,
a "Registration Default"), the interest rate borne by the Securities will be
increased, subject to the Registration Rights Agreement, by 25 basis points per
annum for the 90-day period following such Registration Default. Such interest
rate shall increase, subject to the Registration Rights Agreement, by an
additional 25 basis points per annum at the beginning of each subsequent 90-day
period following such Registration Default, up to a maximum aggregate increase
of 150 basis points per annum. Upon (x) the filing or the effectiveness of the
Exchange Offer Registration Statement, (y) the consummation of the Exchange
Offer or (z) the filing or the effectiveness of the Shelf Registration
Statement, as the case may be, the interest rate borne by the Securities shall
be reduced from and including the date on which any of the events specified in
clauses (x), (y) or (z) above occur by the amount of any such increase from the
interest rate set forth above.]/1/
The interest so payable, and punctually paid or duly provided for, on
any Interest Payment Date shall, as provided in such Indenture, be paid to the
Person in whose name this Security (or one of more Predecessor Securities) is
registered at the close of business on the Regular Record Date for such
interest,
__________________
/1/ To be included in each Security prior to expiration of the obligations of
the Company and the Subsidiary Guarantors under the Registration Rights
Agreement.
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<PAGE>
which shall be March 15, or September 15 (whether or not a Business Day), as the
case may be, next preceding such Interest Payment Date. Any such interest not
so punctually paid, or duly provided for, and interest on such defaulted
interest at the interest rate borne by the Securities, to the extent lawful,
shall forthwith cease to be payable to the Holder on such Regular Record Date,
and may be paid to the Person in whose name this Security (or one or more
Predecessor Securities) is registered at the close of business on a Special
Record Date for the payment of such defaulted interest to be fixed by the
Trustee, notice whereof shall be given to Holders of Securities not less than 10
days prior to such Special Record Date, or may be paid at any time in any other
lawful manner not inconsistent with the requirements of any securities exchange
on which the Securities may be listed, and upon such notice as may be required
by such exchange, all as more fully provided in said Indenture.
Payment of the principal of, premium, if any, and interest on this
Security shall be made at the office or agency of the Company maintained for
that purpose, in such coin or currency of the United States of America as at the
time of payment is legal tender for payment of public and private debts;
provided, however, that payment of interest may be made at the option of the
-------- -------
Company by check mailed to the address of the Person entitled thereto as such
address shall appear on the Security Register. Interest shall be computed on
the basis of a 360-day year of twelve 30-day months.
Reference is hereby made to the further provisions of this Security
set forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
This Security is entitled to the benefits of Guarantees by each of the
Subsidiary Guarantors of the punctual payment when due of the Indenture
Obligations made in favor of the Trustee for the benefit of the Holders. Such
Guarantees shall be senior obligations of each Subsidiary Guarantor, and will
rank pari passu with all existing and future Senior Indebtedness of such
Subsidiary Guarantor and senior to all Subordinated Indebtedness of such
Subsidiary Guarantor. Reference is hereby made to Article Thirteen of the
Indenture for a statement of the respective rights, limitations of rights,
duties and obligations under the Guarantees of each of the Subsidiary
Guarantors.
Unless the certificate of authentication hereon has been duly executed
by the Trustee referred to on the reverse hereof or by the authenticating agent
appointed as provided in the Indenture by manual signature, this Security shall
not be entitled to any benefit under the Indenture, or be valid or obligatory
for any purpose.
- 38 -
<PAGE>
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed by the manual or facsimile signature of its authorized officers and its
corporate seal to be affixed or reproduced hereon.
Dated: PIONEER AMERICAS ACQUISITION
CORP.
By
-----------------------
Attest:
[SEAL]
-------------------------
Secretary
Section 204. Form of Reverse of Securities.
------------------------------
(a) The form of the reverse of the Securities shall be substantially
as follows:
This Security is one of a duly authorized issue of Securities of the
Company designated as its 13 3/8% Senior Notes due 2005 (herein called the
"Securities"), limited (except as otherwise provided in the Indenture referred
to below) in aggregate principal amount to $135,000,000, which may be issued
under an indenture (herein called the "Indenture") dated as of April 1, 1995,
among the Company, the Subsidiary Guarantors and IBJ Schroder Bank & Trust
Company, as trustee (herein called the "Trustee," which term includes any
successor trustee under the Indenture), to which Indenture and all indentures
supplemental thereto reference is hereby made for a statement of the respective
rights, limitations of rights, duties, obligations and immunities thereunder of
the Company, the Subsidiary Guarantors, the Trustee and the Holders of the
Securities, and of the terms upon which the Securities and the Guarantees are,
and are to be, authenticated and delivered.
The Indenture contains provisions for defeasance at any time of (a)
the entire Indebtedness on the Securities and (b) certain restrictive covenants
and related Defaults and Events of Default, in each case upon compliance or
noncompliance with certain conditions set forth therein.
The Securities shall be senior unsecured obligations of the Company,
and shall rank pari passu with all existing and future Senior Indebtedness of
the Company and senior to all Subordinated Indebtedness of the Company.
- 39 -
<PAGE>
The Securities shall not be redeemable at the option of the Company
prior to April 1, 2000. On or after that date, the Securities shall be
redeemable at the option of the Company, in whole or in part from time to time,
on not less than 30 nor more than 60 days' prior notice, mailed by first-class
mail to the Holders' registered addresses, in cash, in amounts of $1,000 or an
integral multiple of $1,000 at the following Redemption Prices (expressed as
percentages of the principal amount), if redeemed in the 12-month period
commencing April 1, of the years indicated below:
Year Redemption
---- ----------
2000 106.6875%
2001 105.0156%
2002 103.3438%
2003 101.6719%
2004 and thereafter 100.0000%
in each case together with accrued and unpaid interest, if any, to the
Redemption Date (subject to the right of Holders of record on relevant record
dates to receive interest due on an Interest Payment Date). If less than all of
the Securities are to be redeemed, the Trustee shall select the Securities to be
redeemed pro rata, by lot or by any other method the Trustee shall deem fair and
appropriate.
In addition, at any time on or prior to April 1, 1998, the Company may
redeem, in part, up to $35,000,000 in aggregate principal amount of Securities
at a purchase price of 113% of the principal amount thereof, plus accrued and
unpaid interest, if any, to the Redemption Date, with the net proceeds of (i)
any public offering of Company Common Stock or (ii) any public offering of
common stock of GEV, but only to the extent that GEV contributes such net
proceeds to the Company as a capital contribution; provided that at least
$100,000,000 aggregate principal amount of the Securities must remain
outstanding after such redemption. The Trustee shall select the Securities or
portions thereof to be redeemed pro rata, by lot or by any other method the
Trustee shall deem fair and appropriate.
Upon the occurrence of a Change of Control, each Holder may require
the Company to repurchase all or a portion of such Holder's Securities in an
amount of $1,000 or integral multiples of $1,000, at a purchase price in cash
equal to 101% of the principal amount thereof, together with accrued and unpaid
interest, if any, to the date of repurchase.
Under certain circumstances, in the event the Net Proceeds received by
the Company from one or more Asset Sales, which proceeds are not applied within
365 days subsequent to the consummation of the Asset Sale to repay permanently
any Senior Indebtedness then outstanding or to an investment in the Company
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<PAGE>
or in one or more Restricted Subsidiaries in a Related Business, exceed
$5,000,000 the Company shall be required to apply such proceeds to repurchase
the Securities tendered to the Company for purchase at a price equal to at least
100% of the principal amount thereof, plus accrued interest, if any, to the date
of purchase pursuant to an offer to purchase made by the Company with respect to
the Securities.
In the case of any redemption of Securities, interest installments
whose Stated Maturity is on or prior to the Redemption Date shall be payable to
the Holders of such Securities of record as of the close of business on the
relevant record date referred to on the face hereof. Securities (or portions
thereof) for whose redemption and payment provision is made in accordance with
the Indenture shall cease to bear interest from and after the date of
redemption.
In the event of redemption of this Security in part only, a new
Security or Securities for the unredeemed portion hereof shall be issued in the
name of the Holder hereof upon the cancellation hereof.
If an Event of Default shall occur and be continuing, the principal
amount of all the Securities may be declared due and payable in the manner and
with the effect provided in the Indenture.
The Indenture permits, with certain exceptions (including certain
amendments permitted without the consent of any Holders) as therein provided,
the amendment thereof and the modification of the rights and obligations of the
Company and the Subsidiary Guarantors and the rights of the Holders under the
Indenture and the Guarantees at any time by the Company, the Subsidiary
Guarantors and the Trustee with the consent of the Holders of a majority in
aggregate principal amount of the Securities at the time Outstanding. The
Indenture also contains provisions permitting the Holders of specified
percentages in aggregate principal amount of the Securities at the time
Outstanding, on behalf of the Holders of all the Securities, to waive compliance
by the Company and the Subsidiary Guarantors with certain provisions of the
Indenture and the Guarantees and certain past Defaults under the Indenture and
the Guarantees and their consequences. Any such consent or waiver by or on
behalf of the Holder of this Security shall be conclusive and binding upon such
Holder and upon all future Holders of this Security and of any Security issued
upon the registration of transfer hereof or in exchange herefor or in lieu
hereof whether or not notation of such consent or waiver is made upon this
Security.
No reference herein to the Indenture and no provision of this Security
or of the Indenture shall alter or impair the obligation of the Company, any
Subsidiary Guarantor or any other
- 41 -
<PAGE>
obligor upon the Securities (in the event such other obligor is obligated to
make payments in respect of the Securities), which is absolute and
unconditional, to pay the principal of, premium, if any, and interest on this
Security at the times, place, and rate, and in the coin or currency, herein
prescribed.
The Securities are issuable only in registered form without coupons in
denominations of $1,000 and any integral multiple thereof. As provided in the
Indenture and subject to certain limitations therein set forth, the Securities
are exchangeable for a like aggregate principal amount of Securities of a
different authorized denomination, as requested by the Holder surrendering the
same.
No service charge shall be made for any registration of transfer or
exchange or redemption of Securities, but the Company may require payment of a
sum sufficient to cover any tax or other governmental charge payable in
connection therewith.
Prior to and at the time of due presentment of this Securities for
registration of transfer, the Company, the Trustee and any agent of the Company
or the Trustee may treat the Person in whose name this Security is registered as
the owner hereof for all purposes, whether or not this Security is overdue, and
neither the Company, the Trustee nor any agent shall be affected by notice to
the contrary.
[The Company and the Subsidiary Guarantors have entered into an
Exchange and Registration Rights Agreement dated as of April 20, 1995 (the
"Registration Rights Agreement") with the Initial Purchasers described therein.
Pursuant to the Registration Rights Agreement, the Company and the Subsidiary
Guarantors have agreed, among other things, for the benefit of the Holders that
they shall, at their expense, (i) file with the Commission on or prior to 30
days from the Closing Date an Exchange Offer Registration Statement with the
Commission with respect to a registered offer to exchange this Security for an
Exchange Note, (ii) use their best efforts to cause the Exchange Offer
Registration Statement to be declared effective under the Securities Act on or
prior to 115 days after the Closing Date and (iii) cause the Guarantee of PCAC
to be secured by Liens on PCAC's St. Gabriel, Louisiana and Henderson, Nevada
plants.
Reference is hereby made to the Registration Rights Agreement for a
statement of the respective rights, duties and obligations thereunder of the
Company, the Subsidiary Guarantors and the Holders of the Securities.]/2/
-------------------
/2/ To be included in each Security prior to expiration of the obligations of
the Company and the Subsidiary Guarantors under the Registration Rights
Agreement.
- 42 -
<PAGE>
All terms used in this Security which are defined in the Indenture and
not otherwise defined herein shall have the meanings assigned to them in the
Indenture.
[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 Security and all rights thereunder, hereby irrevocably constituting
and appointing
--------------------------------------------------------------------------------
attorney to transfer said Security on the books of the Company with full power
of substitution in the premises.
In connection with any transfer of this Security occurring prior to
the date which is the earlier of the date of an effective Registration or the
Resale Restriction Termination Date, the undersigned confirms that without
utilizing any general solicitation or general advertising:
[Check One]
---------
[ ] (a) this Security is being transferred in compliance with the exemption
from registration under the Securities Act of 1933, as amended,
provided by Rule 144A thereunder, or
[ ] (b) this Security 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 Security and the Indenture.
If none of the foregoing boxes is checked, the Trustee or other Registrar shall
not be obligated to register this Security in the name of any Person other than
the Holder hereof unless and until the conditions to any such transfer of
registration set forth
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<PAGE>
herein and in Section 307 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.
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing this
Security 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
Company 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 Security purchased by the Company pursuant to
Section 1014 or 1109 of the Indenture, check the Box: [ ].
- 44 -
<PAGE>
If you wish to have a portion of this Security purchased by the
Company pursuant to Section 1014 or 1109 of the Indenture, state the amount (in
authorized denominations):
$__________.
Date:
--------------
Your Signature:
---------------------
(Sign exactly as your name appears on the other side of this Security)
Signature Guarantee:
----------------
Section 205. Form of Trustee's Certificate of Authentication.
-----------------------------------------------
TRUSTEE'S CERTIFICATE OF AUTHENTICATION.
This is one of the Securities referred to in the within-mentioned
Indenture.
IBJ SCHRODER BANK & TRUST COMPANY
As Trustee
By
---------------------------------
Authorized Signatory
Section 206. Form of Guarantee of Each of the Subsidiary Guarantors.
------------------------------------------------------
The form of Guarantee shall be set forth on the Securities
substantially as follows:
GUARANTEES
For value received, each of the undersigned hereby unconditionally
guarantees, jointly and severally, to the Holder of this Security the payment of
principal of, premium, if any, and interest on this Security in the amounts and
at the time when due and interest on the overdue principal and interest, if any,
of this Security, if lawful, and the payment or performance of all other
obligations of the Company under the Indenture or the Securities, to the Holder
of this Security and the Trustee, all in accordance with and subject to the
terms and limitations of this Security and Article Thirteen of the Indenture.
This Guarantee shall not become effective until the Trustee duly
- 45 -
<PAGE>
manually executes the certificate of authentication on this Security.
PIONEER AMERICAS, INC.
Attest By
------------------------- ----------------------------
Name: Name:
Title: Title:
PIONEER CHLOR ALKALI COMPANY
Attest By
------------------------- ----------------------------
Name: Name:
Title: Title:
IMPERIAL WEST CHEMICAL CO.
Attest By
------------------------- ----------------------------
Name: Name:
Title: Title:
ALL-PURE CHEMICAL CO., INC.
Attest By
------------------------- ----------------------------
Name: Name:
Title: Title:
BLACK MOUNTAIN POWER COMPANY
Attest By
------------------------- ----------------------------
Name: Name:
Title: Title:
- 46 -
<PAGE>
ALL-PURE CHEMICAL NORTHWEST, INC.
Attest By
------------------------- ----------------------------
Name: Name:
Title: Title:
PIONEER-CHLOR-ALKALI
INTERNATIONAL, LTD.
Attest By
------------------------- ----------------------------
Name: Name:
Title: Title:
G.O.W. CORPORATION
Attest By
------------------------- ----------------------------
Name: Name:
Title: Title:
- 47 -
<PAGE>
ARTICLE THREE
THE SECURITIES
Section 301. Title and Terms.
---------------
The aggregate principal amount of Securities which may be
authenticated and delivered under this Indenture is limited to $135,000,000 in
principal amount of Securities plus any Exchange Notes which may be issued upon
consummation of an Exchange Offer, except for Securities authenticated and
delivered upon registration of transfer of, or in exchange for, or in lieu of,
other Securities pursuant to Section 303, 304, 305, 306, 307, 308, 906, 1009,
1014 or 1108 hereof.
The Securities shall be known and designated as the "13 3/8% Senior
Notes due 2005" of the Company. The Stated Maturity of the principal amount of
the Securities shall be April 1, 2005, and the Securities shall each bear
interest at the rate of 13 3/8% from the Closing Date or from the most recent
Interest Payment Date to which interest has been paid, as the case may be,
payable on October 1, 1995 and semiannually thereafter on April 1 and October 1,
in each year, until the principal thereof is paid or duly provided for. If a
Registration Default shall occur, the interest rate borne by the Securities
shall be increased by 25 basis points per annum at the beginning of each 90-day
period commencing at the date of any such Registration Default, up to a maximum
aggregate increase of 150 basis points per annum. Upon (x) the filing or the
effectiveness of the Exchange Offer Registration Statement, (y) the consummation
of the Exchange Offer or (z) the filing or the effectiveness of the Shelf
Registration Statement, as the case may be, the interest rate borne by the
Securities shall be reduced from and including the date on which any of the
events specified in clauses (x), (y) or (z) above occur by the amount of any
such increase from the interest rate set forth above.
The principal and interest on the U.S. Global Security shall be
payable to the Depositary or its nominee, as the case may be, as the sole
registered owner and the sole Holder of the U.S. Global Security represented
thereby. The principal of, premium, if any, and interest on the Securities
shall be payable at the office or agency of the Company maintained for such
purpose; provided, however, that at the option of the Company interest may be
-------- -------
paid by check mailed to addresses of the Persons entitled thereto as such
addresses shall appear on the Security Register.
The Securities shall be redeemable as provided in Article Eleven.
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<PAGE>
At the election of the Company, the entire Indebtedness on the
Securities or certain of the Company's obligations and covenants and certain
Events of Default thereunder may be defeased as provided in Article Four.
Section 302. Denominations.
-------------
The Securities 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 Securities shall be executed on behalf of the Company by one of
its Chairman of the Board, its President or one of its Vice Presidents under its
corporate seal reproduced thereon attested by its Secretary or one of its
Assistant Secretaries.
Securities bearing the manual or facsimile signatures of individuals
who were at any time the proper officers of the Company shall bind the Company,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Securities or did not
hold such offices on the date of such Securities.
At any time and from time to time after the execution and delivery of
this Indenture, the Company may deliver Securities executed by the Company to
the Trustee for authentication, together with a Company Order for the
authentication and delivery of such Securities; and the Trustee in accordance
with such Company Order shall authenticate and deliver such Securities as
provided in this Indenture and not otherwise.
Upon a Company Order, the Trustee shall authenticate and deliver an
additional series of notes in an aggregate principal amount not to exceed
$135,000,000 for issuance in exchange for all or a portion of the Initial
Securities previously issued and surrendered for cancellation pursuant to an
exchange offer registered under the Securities Act, in accordance with the
Registration Rights Agreement. The Exchange Notes may have such distinctive
series designation and such changes in the form thereof as are specified in the
Company Order referred to in the preceding sentence, and shall be guaranteed by
the Subsidiary Guarantors on substantially identical terms as the Initial
Securities (except that the Guarantee of PCAC may be secured by Liens on its St.
Gabriel, Louisiana and Henderson, Nevada plants).
Each Security shall be dated the date of its authentication.
- 49 -
<PAGE>
No Security shall be entitled to any benefit under this Indenture or
be valid or obligatory for any purpose unless there appears on such Security 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 Security shall be conclusive evidence, and the only
evidence, that such Security has been duly authenticated and delivered
hereunder.
In case the Company or any Subsidiary Guarantor, pursuant to Article
Eight, shall be consolidated, merged with or into any other Person or shall
sell, assign, convey, transfer or lease substantially all of its properties and
assets to any Person, and the successor Person resulting from such
consolidation, or surviving such merger, or into which the Company or such
Subsidiary Guarantor shall have been merged, or the Person which shall have
received a sale, assignment, conveyance, transfer or lease as aforesaid, shall
have executed an indenture supplemental hereto with the Trustee pursuant to
Article Eight, any of the Securities authenticated or delivered prior to such
consolidation, merger, sale, assignment, conveyance, transfer or lease may, from
time to time, at the request of the successor Person, be exchanged for other
Securities 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 Securities surrendered for such exchange and of like principal
amount; and the Trustee, upon Company Request of the successor Person, shall
authenticate and deliver Securities as specified in such request for the purpose
of such exchange. If Securities shall at any time be authenticated and
delivered in any new name of a successor Person pursuant to this Section in
exchange or substitution for or upon registration of transfer of any Securities,
such successor Person, at the option of the Holders but without expense to them,
shall provide for the exchange of all Securities at the time Outstanding for
Securities authenticated and delivered in such new name.
The Trustee (at the expense of the Company) may appoint an
authenticating agent acceptable to the Company to authenticate Securities on
behalf of the Trustee. Unless limited by the terms of such appointment, an
authenticating agent may authenticate Securities whenever the Trustee may do so.
Each reference in this Indenture to authentication by the Trustee includes
authentication by such agent. An authenticating agent has the same rights as
any Security Registrar or Paying Agent to deal with the Company and its
Affiliates.
Section 304. Temporary Securities.
--------------------
Pending the preparation of definitive Securities, the Company may
execute, and upon Company Order the Trustee shall
- 50 -
<PAGE>
authenticate and deliver, temporary Securities which are printed, lithographed,
typewritten or otherwise produced, in any authorized denomination, substantially
of the tenor of the definitive Securities in lieu of which they are issued and
with such appropriate insertions, omissions, substitutions and other variations
as the officers executing such Securities may determine, as conclusively
evidenced by their execution of such Securities.
After the preparation of definitive Securities, the temporary
Securities shall be exchangeable for definitive Securities upon surrender of the
temporary Securities at the office or agency of the Company designated for such
purpose pursuant to Section 1002 hereof, without charge to the Holder. Upon
surrender for cancellation of any one or more temporary Securities the Company
shall execute and the Trustee shall authenticate and deliver in exchange
therefor a like principal amount of definitive Securities of authorized
denominations. Until so exchanged the temporary Securities shall in all
respects be entitled to the same benefits under this Indenture as definitive
Securities.
Section 305. Registration of Transfer and Exchange.
-------------------------------------
All provisions of this Section 305 shall be subject to Section 307
hereof.
The Company shall cause to be kept at the Corporate Trust Office of
the Trustee, or such other office as the Trustee may designate, a register (the
register maintained in such office and in any other office or agency designated
pursuant to Section 1002 hereof being herein sometimes referred to as the
"Security Register") in which, subject to such reasonable regulations as the
Security Registrar may prescribe, the Company shall provide for the registration
of Securities and of transfers of Securities. The Trustee or an agent thereof
or of the Company shall initially be the "Security Registrar" for the purpose of
registering Securities and transfers of Securities as herein provided.
Upon surrender for registration of transfer of any Security at the
office or agency of the Company designated pursuant to Section 1002 hereof, the
Company shall execute, and the Trustee shall authenticate and deliver, in the
name of the designated transferee or transferees, one or more new Securities of
the same series of any authorized denomination or denominations, of a like
aggregate principal amount.
Any Holder of the U.S. Global Security shall, by acceptance of such
U.S. Global Security, agree that transfers of beneficial interests in such U.S.
Global Security, may be effected only through a book-entry system maintained by
the
- 51 -
<PAGE>
Holder of such U.S. Global Security (or its agent), and that ownership of a
beneficial interest in the Security shall be required to be reflected in a book
entry.
At the option of the Holder, Securities may be exchanged for other
Securities of any authorized denomination or denominations (including an
exchange of Initial Securities for Exchange Notes), of a like aggregate
principal amount, upon surrender of the Securities to be exchanged at such
office or agency. Whenever any Securities are so surrendered for exchange, the
Company shall execute, and the Trustee shall authenticate and deliver, the
Securities of the same series which the Holder making the exchange is entitled
to receive; provided that no exchanges of Initial Securities for Exchange Notes
--------
shall occur until a Registration Statement shall have been declared effective by
the Commission and that any Initial Securities that are exchanged for Exchange
Notes shall be canceled by the Trustee.
All Securities issued upon any registration of transfer or exchange of
Securities shall be the valid obligations of the Company, evidencing the same
Indebtedness, and entitled to the same benefits under this Indenture, as the
Securities surrendered upon such registration of transfer or exchange.
Every Security presented or surrendered for registration of transfer,
or for exchange or redemption shall (if so required by the Company or the
Trustee) be duly endorsed, or be accompanied by a written instrument of transfer
in form satisfactory to the Company and the Security Registrar, duly executed by
the Holder thereof or his attorney duly authorized in writing.
No service charge shall be made to a Holder for any registration of
transfer or exchange or redemption of Securities, but the Company may require
payment of a sum sufficient to pay all documentary, stamp or similar issue or
transfer taxes or other governmental charges that may be imposed in connection
with any registration of transfer or exchange of Securities, other than
exchanges of Initial Securities for Exchange Notes and exchanges pursuant to
Section 303, 304, 305, 306, 307, 308, 906, 1009, 1014 or 1108 hereof not
involving any transfer.
The Company shall not be required (a) to issue, register the transfer
of or exchange any Security during a period beginning at the opening of business
(i) 15 days before the date of selection of Securities for redemption under
Section 1104 hereof and ending at the close of business on the day of such
mailing or (ii) 15 days before an Interest Payment Date and ending on the close
of business on the Interest Payment Date, or (b) to register the transfer of or
exchange any Security so selected for redemption in whole or in part, except the
unredeemed portion of Securities being redeemed in part.
- 52 -
<PAGE>
Section 306. Book-Entry Provisions for U.S. Global Security.
----------------------------------------------
All provisions of this Section 306 shall be subject to Section 307
hereof.
(a) The U.S. Global Security initially shall (i) be registered in the
name of the Depositary for such U.S. Global Security or the nominee of such
Depositary, (ii) be delivered to the Trustee as custodian for such Depositary
and (iii) bear legends as set forth in Section 202 hereof.
Members of, or participants in, the Depositary ("Agent Members") shall
have no rights under this Indenture with respect to any U.S. Global Security
held on their behalf by the Depositary, or the Trustee as its custodian, or
under the U.S. Global Security, and the Depositary may be treated by the
Company, the Trustee and any agent of the Company or the Trustee as the absolute
owner of such U.S. Global Security for all purposes whatsoever. Notwithstanding
the foregoing, nothing herein shall prevent the Company, the Trustee or any
agent of the Company 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 Holder of any
Security.
(b) Transfers of the U.S. Global Security shall be limited to
transfers of such U.S. Global Security in whole, but not in part, to the
Depositary, its successors or their respective nominees. Interests of
beneficial owners in the U.S. Global Security may be transferred in accordance
with the rules and procedures of the Depositary and the provisions of Section
307 hereof. Beneficial owners may obtain Physical Securities in exchange for
their beneficial interests in the U.S. Global Security upon request in
accordance with the Depositary's and the Registrar's procedures. In addition,
Physical Securities shall be transferred to all beneficial owners in exchange
for their beneficial interests in the U.S. Global Security if (i) the Depositary
notifies the Company that it is unwilling or unable to continue as Depositary
for the U.S. Global Security and a successor depositary is not appointed by the
Company within 90 days of such notice or (ii) an Event of Default has occurred
and is continuing and the Security Registrar has received a request from the
Depositary.
(c) In connection with any transfer of a portion of the beneficial
interest in the U.S. Global Security to beneficial owners pursuant to Subsection
(b) of this Section, the Security Registrar shall reflect on its books and
records the date and a decrease in the principal amount of the U.S. Global
Security in an amount equal to the principal amount of the beneficial
- 53 -
<PAGE>
interest in the U.S. Global Security to be transferred, and the Company shall
execute, and the Trustee shall authenticate and deliver, one or more Physical
Securities of like tenor and amount.
(d) In connection with the transfer of the entire U.S. Global
Security to beneficial owners pursuant to Subsection (b) of this Section, the
U.S. Global Security shall be surrendered to the Trustee for cancellation, and
the Company 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 U.S. Global Security, an equal aggregate principal
amount of Physical Securities of authorized denominations.
(e) Any Physical Security delivered in exchange for an interest in
the U.S. Global Security pursuant to Subsection (b) or Subsection (c) of this
Section shall, except as otherwise provided by paragraph (a)(i)(x) and paragraph
(d) of Section 307 hereof, bear the applicable legend regarding transfer
restrictions applicable to the Physical Security set forth in Section 202
hereof.
(f) The registered Holder of the U.S. Global Security 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 Securities.
Section 307. Special Transfer Provisions.
---------------------------
Unless and until an Initial Security is exchanged for an Exchange Note
in connection with an effective Exchange Offer Registration Statement or a Shelf
Registration Statement is declared effective with respect to such Initial
Securities and an Initial Security is sold pursuant to the plan of distribution
thereunder, the following provisions shall apply:
(a) Transfers to Non-QIB Institutional Accredited Investors. The
-------------------------------------------------------
following provisions shall apply with respect to the registration of any
proposed transfer of a Security to any Institutional Accredited Investor
which is not a QIB:
(i) The Security Registrar shall register the transfer of any
Security, whether or not such Security bears the Private Placement
Legend, if (x) the requested transfer is on or after the Resale
Restriction Termination Date or (y) the proposed transferee has
delivered to the Security Registrar a letter containing certain
representations and
- 54 -
<PAGE>
agreements substantially in the form of Exhibit A hereto.
---------
(ii) If the proposed transferor is an Agent Member holding a
beneficial interest in the U.S. Global Security, upon receipt by the
Security Registrar of (x) the documents, if any, required by paragraph
(i) and (y) instructions given in accordance with the Depositary's and
the Security Registrar's procedures, the Security Registrar shall
reflect on its books and records the date and a decrease in the
principal amount of the U.S. Global Security in an amount equal to the
principal amount of the beneficial interest in the U.S. Global
Security to be transferred, and the Company shall execute, and the
Trustee shall authenticate and deliver, one or more Physical
Securities of like tenor and amount.
(b) Transfers to QIBs. The following provisions shall apply with
-----------------
respect to the registration of any proposed transfer of a Security to a
QIB:
(i) If the Security to be transferred consists of Physical
Securities, the Security Registrar shall register the transfer if such
transfer is being made by a proposed transferor who has checked the
box provided for on the form of Security stating, or has otherwise
advised the Company and the Security Registrar in writing, that the
sale has been made in compliance with the provisions of Rule 144A to a
transferee who has signed the certification provided for on the form
of Security stating, or has otherwise advised the Company and the
Security Registrar in writing, that it is purchasing the Security 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 QIB within
the meaning of Rule 144A, 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 Company as it 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 its foregoing
representations in order to claim the exemption from registration
provided by Rule 144A.
(ii) If the proposed transferee is an Agent Member, and the
Security to be transferred consists of Physical Securities, upon
receipt by the Security Registrar of instructions given in accordance
with the Depositary's and the Security Registrar's procedures, the
Security Registrar shall reflect on its books and
- 55 -
<PAGE>
records the date and an increase in the principal amount of the U.S.
Global Security in an amount equal to the principal amount of the
Physical Securities to be transferred, and the Trustee shall cancel
the Physical Security so transferred.
(c) Private Placement Legend. Any Security authenticated and issued
------------------------
hereunder shall not be required to bear the legend set forth in Section 202
hereof, if such Security shall be issued upon:
(i) the transfer or exchange of a Security and contemporaneously
therewith the Company shall have received an Opinion of Counsel, at
its expense, in form and substance reasonably satisfactory to the
Company, to the effect that such Security to be issued upon such
transfer or exchange may be so issued without such legend because (A)
such Security is being exchanged for an Exchange Note, (B) such
Security shall have been registered under the Securities Act, the
registration statement in connection therewith shall have been
declared effective and such Security shall have been disposed of
pursuant to such effective registration statement, or (C) the
circumstances contemplated by paragraph (a)(i)(x) of this Section 307
exist, and the Company shall have delivered to the Trustee and the
Security Registrar a copy of such Opinion of Counsel together with an
Officers' Certificate directing the Trustee and the Security Registrar
to deliver an unlegended Security in connection with such transfer or
exchange; such Officers' Certificate and Opinion of Counsel shall be
delivered by the Company as soon as practicable after its receipt of a
written request by a Holder for such a transfer or exchange; or
(ii) the transfer or exchange of a Security not bearing such
legend.
(d) General.
-------
(i) By its acceptance of any Security bearing the Private
Placement Legend, each Holder of such a Security acknowledges the
restrictions on transfer of such Security set forth in this Indenture
and in the Private Placement Legend and agrees that it shall transfer
such Security only as provided in this Indenture.
(ii) Prior to any transfer or exchange of a legended Security for
another legended Security, the Company shall have received an opinion
of counsel of the Holder (which may include in-house counsel of such
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<PAGE>
Holder experienced in matters of Federal securities law), at its
expense, in form and substance reasonably satisfactory to the Company
to the effect that such transfer does not require registration under
the Securities Act and the Company shall have delivered to the Trustee
and the Security Registrar a copy of such opinion of counsel of the
Holder together with an Officers' Certificate directing the Trustee
and the Security Registrar to transfer or exchange the legended
Security for another legended Security.
The Trustee and the Security Registrar shall forward copies of all
letters, notices and other written communications received pursuant to Section
306 hereof or this Section 307 to the Company for approval prior to any transfer
or exchange.
Notwithstanding anything to the contrary set forth herein, the Trustee
and the Security Registrar shall have no duty to monitor compliance with any
Federal, state or other securities laws.
Section 308. Mutilated, Destroyed, Lost and Stolen Securities.
------------------------------------------------
If (a) any mutilated Security is surrendered to the Trustee, or (b)
the Company and the Trustee receive evidence to their satisfaction of the
destruction, loss or theft of any Security, and there is delivered to the
Company, each Subsidiary Guarantor and the Trustee, such security or indemnity,
in each case, as may be required by them to save each of them harmless, then, in
the absence of notice to the Company, any Subsidiary Guarantor or the Trustee
that such Security has been acquired by a bona fide purchaser, the Company shall
execute and upon its written request the Trustee shall authenticate and deliver,
in exchange for any such mutilated Security or in lieu of any such destroyed,
lost or stolen Security, a replacement Security of like tenor and principal
amount, bearing a number not contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Security has
become or is about to become due and payable, the Company in its discretion may,
instead of issuing a replacement Security, pay such Security.
Upon the issuance of any replacement Securities under this Section,
the Company may require the payment of a sum sufficient to pay all documentary,
stamp or similar issue or transfer taxes or other governmental charges that may
be imposed in relation thereof and any other expenses (including the fees and
expenses of the Trustee) connected therewith.
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<PAGE>
Every replacement Security issued pursuant to this Section in lieu of
any destroyed, lost or stolen Security shall constitute an original additional
contractual obligation of the Company and the Subsidiary Guarantors, whether or
not the destroyed, lost or stolen Security shall be at any time enforceable by
anyone, and shall be entitled to all benefits of this Indenture equally and
proportionately with any and all other Securities 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 Securities.
Section 309. Payment of Interest; Interest Rights Preserved.
----------------------------------------------
Interest on any Security 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 that Security is registered at the close of business on the Regular
Record Date for such interest.
Any interest on any Security which is payable, but is not punctually
paid or duly provided for, on any Interest Payment Date and interest on such
defaulted interest at the then applicable interest rate borne by the Securities,
to the extent lawful (such defaulted interest and interest thereon herein
collectively called "Defaulted Interest") shall forthwith cease to be payable to
the Holder on the Regular Record Date; and such Defaulted Interest may be paid
by the Company, at its election in each case, as provided in Subsection (a) or
(b) below:
(a) the Company may elect to make payment of any Defaulted Interest
to the Persons in whose names the Securities 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 Company shall
notify the Trustee in writing of the amount of Defaulted Interest proposed
to be paid on each Security and the date (not less than 30 days after such
notice) of the proposed payment, and at the same time the Company 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 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
Subsection 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
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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 Company in writing of such Special Record Date. In the
name and at the expense of the Company, the Trustee shall cause notice of
the proposed payment of such Defaulted Interest and the Special Record Date
therefor to be mailed, first-class postage prepaid, to each Holder at his
address as it appears in the Security Register, 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
mailed, such Defaulted Interest shall be paid to the Persons in whose names
the Securities are registered on such Special Record Date and shall no
longer be payable pursuant to the following Subsection (b).
(b) The Company may make payment of any Defaulted Interest in any
other lawful manner not inconsistent with the requirements of any
securities exchange on which the Securities may be listed, and upon such
notice as may be required by such exchange, if, after written notice given
by the Company to the Trustee of the proposed payment pursuant to this
Subsection, such payment shall be deemed practicable by the Trustee.
Subject to the foregoing provisions of this Section, each Security
delivered under this Indenture upon registration of transfer of or in exchange
for or in lieu of any other Security (including any Exchange Security issued in
exchange for an Initial Security) shall carry the rights to interest accrued and
unpaid, and to accrue, which were carried by such other Security.
Section 310. Persons Deemed Owners.
---------------------
The Company, any Subsidiary Guarantor, the Trustee and any agent of
the Company or the Trustee may treat the Person in whose name any Security is
registered as the owner of such Security for the purpose of receiving payment of
principal of, premium, if any, and (subject to Section 309 hereof) interest on
such Security and for all other purposes whatsoever, whether or not such
Security is overdue, and neither the Company, any Subsidiary Guarantor, the
Trustee nor any agent of the Company, any Subsidiary Guarantor or the Trustee
shall be affected by notice to the contrary.
Section 311. Cancellation.
------------
All Securities surrendered for payment, purchase, redemption,
registration of transfer or exchange shall be delivered to the Trustee and, if
not already canceled, shall be promptly canceled by it. The Company and any
Subsidiary Guarantor may at any time deliver to the Trustee for cancellation
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any Securities previously authenticated and delivered hereunder which the
Company or such Subsidiary Guarantor may have acquired in any manner whatsoever,
and all Securities so delivered shall be promptly canceled by the Trustee. No
Securities shall be authenticated in lieu of or in exchange for any Securities
canceled as provided in this Section, except as expressly permitted by this
Indenture. All canceled Securities held by the Trustee shall be destroyed and
certification of their destruction delivered to the Company. The Trustee shall
provide the Company a list of all Securities that have been canceled from time
to time as requested by the Company.
Section 312. Computation of Interest.
-----------------------
Interest on the Securities shall be computed on the basis of a 360-day
year of twelve 30-day months.
Section 313. Deposit of Moneys.
-----------------
Prior to 10:00 a.m., New York City time, on each Interest Payment Date
and at Maturity, the Company shall have deposited with the Trustee or a Paying
Agent in immediately available funds money sufficient to make cash payments, if
any, due on such Interest Payment Date or at Maturity, as the case may be, in a
timely manner which permits the Trustee or such Paying Agent to remit payment to
the Holders on such Interest Payment Date or at Maturity, as the case may be.
Section 314. CUSIP Number.
------------
The Company in issuing the Securities may use a "CUSIP" number(s), and
if so, the Trustee shall use the CUSIP number(s) in notices of redemption or
exchange as a convenience to Holders, provided that any such notice may state
--------
that no representation is made as to the correctness or accuracy of the CUSIP
number(s) printed in the notice or on the Securities and that reliance may be
placed on the other identification numbers printed on the Securities.
ARTICLE FOUR
DEFEASANCE AND COVENANT DEFEASANCE
Section 401. Company's Option to Effect Defeasance or Covenant
-------------------------------------------------
Defeasance.
----------
The Company may, at its option by Board Resolution, at any time, with
respect to the Securities, elect to have either Section 402 or Section 403
hereof be applied to all of the Outstanding Securities (the "Defeased
Securities"), upon
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compliance with the conditions set forth below in this Article Four.
Section 402. Defeasance and Discharge.
------------------------
Upon the Company's exercise under Section 401 hereof of the option
applicable to this Section 402, the Company, each of the Subsidiary Guarantors
and any other obligor upon the Securities, if any, shall be deemed to have been
discharged from its obligations with respect to the Defeased Securities on the
date the conditions set forth below are satisfied (hereinafter, "defeasance").
For this purpose, such defeasance means that the Company shall be deemed to have
paid and discharged the entire Indebtedness represented by the Defeased
Securities, which shall thereafter be deemed to be "Outstanding" only for the
purposes of Section 405 hereof and the other Section of this Indenture referred
to in (a) and (b) below, and to have satisfied all its other obligations under
such Securities and this Indenture insofar as such Securities are concerned (and
the Trustee, at the expense of the Company, and, upon written request, 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 Defeased Securities to receive, solely from the trust fund
described in Section 404 hereof and as more fully set forth in such Section,
payments in respect of the principal of, premium if any, and interest on such
Securities when such payments are due, (b) the Company's obligations with
respect to such Defeased Securities under Sections 304, 305, 308, 1002 and 1018
hereof, (c) the rights, powers, trusts, duties and immunities of the Trustee
hereunder including, without limitation, the Trustee's rights under Section 606
hereof and the Company's obligations in connection therewith, and (d) this
Article Four. Subject to compliance with this Article Four, the Company may
exercise its option under this Section 402 notwithstanding the prior exercise of
its option under Section 403 hereof with respect to the Securities.
Section 403. Covenant Defeasance.
-------------------
Upon the Company's exercise under Section 401 hereof of the option
applicable to this Section 403, the Company and each Subsidiary Guarantor shall
be released from its obligations under any covenant or provision contained or
referred to in Sections 1004, 1005, 1006, 1007, 1008, 1009, 1010, 1011, 1012,
1014, 1015, 1016, 1019 and 1020 hereof with respect to the Defeased Securities
on and after the date the conditions set forth below are satisfied (hereinafter,
"covenant defeasance"), and the Defeased Securities shall thereafter be deemed
to be not "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
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be deemed "Outstanding" for all other purposes hereunder. For this purpose,
such covenant defeasance means that, with respect to the Defeased Securities,
the Company and each Subsidiary Guarantor may omit to comply with and shall have
no liability in respect of any term, condition or limitation set forth in any
such Section or Article, whether directly or indirectly, by reason of any
reference elsewhere herein to any such Section or Article or by reason of any
reference in any such Section or Article 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 (4) hereof but, except as specified
above, the remainder of this Indenture and such Defeased Securities shall be
unaffected thereby.
Section 404. Conditions to Defeasance or Covenant Defeasance.
-----------------------------------------------
The following shall be the conditions to application of either Section
402 or Section 403 hereof to the Defeased Securities:
(1) The Company shall irrevocably have deposited or caused to be
deposited with the Trustee (or another trustee satisfying the requirements
of Section 608 hereof who shall agree to comply with the provisions of this
Article Four 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 Securities, (a)
United States dollars in an amount, or (b) U.S. Government Obligations
which through the scheduled payment of principal and interest in respect
thereof in accordance with their terms shall provide, not later than one
day before the due date of any payment, money in an amount, or (c) a
combination thereof, sufficient, in the opinion of a nationally recognized
firm of independent public accountants or a nationally recognized
investment banking firm 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, premium, if any, and interest on the Defeased Securities on
the Stated Maturity of such principal or installment of principal or
interest (such date being referred to as the "Defeasance Redemption Date"),
if when exercising under Section 401 hereof either its option applicable to
Section 402 hereof or its option applicable to Section 403 hereof, the
Company shall have delivered to the Trustee an irrevocable notice to redeem
all of the Outstanding Securities on the Defeasance Redemption Date);
provided that the Trustee shall have been irrevocably instructed to apply
--------
such United States dollars or the proceeds of such U.S. Government
Obligations to said payments with respect to the Securities.
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(2) In the case of an election under Section 402 hereof, the Company
shall have delivered to the Trustee an Opinion of Independent Counsel in
the United States of America stating that (A) the Company has received from
the Internal Revenue Service a ruling or (B) since the date of this
Indenture, there has been a change in the applicable federal income tax
law, including by means of a Revenue Ruling published by the Internal
Revenue Service, in either case to the effect that, and based thereon such
Opinion of Independent Counsel in the United States of America shall
confirm that, the Holders of the Outstanding Securities 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.
(3) In the case of an election under Section 403 hereof, the Company
shall have delivered to the Trustee an Opinion of Independent Counsel in
the United States of America to the effect that the Holders of the
Outstanding Securities 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.
(4) No Default or Event of Default shall have occurred and be
continuing on the date of such deposit or insofar as Subsections 501(9) or
(10) hereof are concerned, at any time during the period ending on the 91st
day after the date of deposit.
(5) Such defeasance or covenant defeasance shall not result in a
breach or violation of, or constitute a Default under, any material
agreement or instrument (other than this Indenture) to which the Company or
any Subsidiary Guarantor is a party or by which it is bound.
(6) The Company shall have delivered to the Trustee an Opinion of
Independent Counsel to the effect that after the 91st day following the
deposit, the trust funds will not be subject to the effect of any
applicable bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally.
(7) The Company shall have delivered to the Trustee an Officers'
Certificate stating that the deposit was not made by the Company with the
intent of preferring the Holders of the Securities or any Guarantee over
the other creditors of the Company or any Subsidiary Guarantor with the
intent of
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defeating, hindering, delaying or defrauding creditors of the Company, any
Subsidiary Guarantor or others.
(8) The Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Independent Counsel, each stating that all
conditions precedent provided for relating to either the defeasance under
Section 402 hereof or the covenant defeasance under Section 403 hereof (as
the case may be) have been complied with as contemplated by this Section
404.
Opinions of Counsel or Opinions of Independent Counsel required to be delivered
under this Section may have qualifications customary for opinions of the type
required and counsel delivering such opinions may rely on certificates of the
Company or government or other officials customary for opinions of the type
required, including certificates certifying as to matters of fact, including
that various financial covenants have been complied with.
Section 405. Deposited Money and U.S. Government Obligations to Be
-----------------------------------------------------
Held in Trust; Other Miscellaneous Provisions.
---------------------------------------------
Subject to the provisions of the last paragraph of Section 1018
hereof, all United States dollars and U.S. Government Obligations (including the
proceeds thereof) deposited with the Trustee (or other qualifying trustee--
collectively for purposes of this Section 405, the "Trustee") pursuant to
Section 404 hereof in respect of the Defeased Securities shall be held in trust
and applied by the Trustee, in accordance with the provisions of such Securities
and this Indenture, to the payment, either directly or through any Paying Agent
(including the Company acting as its own Paying Agent) as the Trustee may
determine, to the Holders of such Securities of all sums due and to become due
thereon in respect of principal, premium, if any, and interest, but such money
need not be segregated from other funds except to the extent required by law.
The Company 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 404 hereof 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 the Defeased Securities.
Anything in this Article Four to the contrary notwithstanding, the
Trustee shall deliver or pay to the Company from time to time upon Company
Request any United States dollars or U.S. Government Obligations held by it as
provided in Section 404 hereof 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
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the amount thereof which would then be required to be deposited to effect
defeasance or covenant defeasance.
Section 406. Reinstatement.
-------------
If the Trustee or Paying Agent is unable to apply any United States
dollars or U.S. Government Obligations in accordance with Section 402 or 403
hereof, as the case may be, by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise prohibiting such
application, then the Company's and each Subsidiary Guarantor's obligations
under this Indenture and the Securities (including, without limitation, the
provisions of Article Thirteen hereof) shall be revived and reinstated as though
no deposit had occurred pursuant to Section 402 or 403 hereof, as the case may
be, until such time as the Trustee or Paying Agent is permitted to apply all
such United States dollars or U.S. Government Obligations in accordance with
Section 402 or 403 hereof, as the case may be; provided, however, that if the
-------- -------
Company makes any payment to the Trustee or Paying Agent of principal of,
premium, if any, or interest on any Security following the reinstatement of its
obligations, the Trustee or Paying Agent shall promptly pay any such amount to
the Holders of the Securities and the Company shall be subrogated to the rights
of the Holders of such Securities to receive such payment from the money held by
the Trustee or Paying Agent.
Section 407. Repayment of the Company.
------------------------
Any money deposited with the Trustee or any Paying Agent, or then held
by the Company, in trust for the payment of the principal of, premium, if any,
or interest on any Security and remaining unclaimed for two years after such
principal, and premium, if any, or interest has become due and payable shall be
paid to the Company on its written request or (if then held by the Company)
shall be discharged from such trust; and the Holder of such Security shall
thereafter, as an unsecured general creditor, look only to the Company for
payment thereof, and all liability of the Trustee or such Paying Agent with
respect to such trust money, and all liability of the Issuer 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
Company cause to be published once, in the New York Times and The Wall Street
Journal (national edition), notice that such money remains unclaimed and that,
after a date specified therein, which shall not be less than thirty (30) days
from the date of such notification or publication, any unclaimed balance of such
money then remaining shall promptly be repaid to the Company.
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ARTICLE FIVE
REMEDIES
Section 501. Events of Default.
-----------------
An "Event of Default" shall occur if:
(1) there shall be a default in the payment of interest on any
Security when the same becomes due and payable and the Default continues
for a period of thirty (30) days;
(2) there shall be a default in the payment of the principal of, or
premium with respect to, any Security when the same becomes due and
payable, at maturity, upon redemption, in connection with a Change of
Control, an Asset Sale or otherwise;
(3) the Company or any Subsidiary Guarantor fails to observe or
perform any covenant, condition or agreement on the part of the Company or
such Subsidiary Guarantor to be observed or performed pursuant to Section
1006, 1008, 1009, 1010, 1012, 1014, 1019, 1020 or Article Eight hereof;
(4) the Company or any Subsidiary Guarantor fails to observe or
perform any other covenant, condition or agreement in this Indenture or the
Securities and such failure continues for the period and after the notice
specified below;
(5) the Company denies or disaffirms its obligations under this
Indenture or the Securities;
(6) a Subsidiary Guarantor denies or disaffirms its obligations under
its Guarantee, or any Guarantee for any reason ceases to be, or is asserted
in writing by any Subsidiary Guarantor or the Company not to be, in full
force and effect and enforceable in accordance with its terms, except to
the extent contemplated by the Indenture and any such Guarantee;
(7) a default occurs under any Indebtedness of the Company or any of
its Subsidiaries (other than the Securities or the Guarantees), whether
such Indebtedness now exists or is created after the Closing Date if either
(A) such default results from the failure to pay the final scheduled
principal installment in respect of any such Indebtedness on the stated
maturity date thereof (after giving effect to any grace period) or (B) as a
result of such default, the maturity of such Indebtedness has been
accelerated prior to its express maturity and, in each case,
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the principal amount of such Indebtedness, together with the principal
amount of all other Indebtedness with respect to which the principal amount
remains unpaid at its final maturity (after giving effect to any grace
period in respect of such final scheduled principal installment) or the
maturity of which has been so accelerated, aggregates $5,000,000 or more;
(8) a final judgment or final judgments for the payment of money are
entered by a court or courts of competent jurisdiction against the Company
or any of its Restricted Subsidiaries and such judgment or judgments remain
undischarged, unbonded or unstayed for a period of sixty (60) days,
provided that the aggregate of all such judgments (other than any judgment
as to which and only to the extent, a reputable insurance company has
acknowledged coverage of such claim in writing) exceeds $5,000,000;
(9) the Company, any Subsidiary Guarantor or any other Restricted
Subsidiary pursuant to or within the meaning of any Bankruptcy Law:
(a) commences a voluntary case,
(b) consents to the entry of an order for relief against it in
an involuntary case in which it is a debtor,
(c) consents to the appointment of a Custodian of it or for all
or substantially all of its property,
(d) makes a general assignment for the benefit of its creditors,
or
(e) admits in writing its inability to pay debts as the same
become due; or
(10) a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that:
(a) is for relief against the Company, any Subsidiary Guarantor
or any other Restricted Subsidiary in an involuntary case in which it
is a debtor,
(b) appoints a Custodian of the Company, any Subsidiary Guarantor
or any other Restricted Subsidiary or for all or substantially all of
their property,
(c) orders the liquidation of the Company, any Subsidiary
Guarantor or any other Restricted Subsidiary,
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and the order or decree remains unstayed and in effect for sixty (60) days.
The term "Custodian" means any receiver, trustee, assignee, liquidator
or similar official under any Bankruptcy Law.
A Default under clause (4) is not an Event of Default until the
Trustee notifies the Company, or the Holders of at least 25% in principal amount
of the Securities then Outstanding notify the Company and the Trustee, of the
Default and the Company does not cure the Default within sixty (60) days after
receipt of such notice. The notice must specify the Default, demand that it be
remedied and state that the notice is a "Notice of Default."
The failure to make any payment on the Securities when due shall,
after the expiration date of any applicable grace period, constitute an Event of
Default under this Indenture.
Section 502. Acceleration.
------------
If an Event of Default (other than an Event of Default specified in
clauses (9) and (10) of Section 501 hereof) occurs and is continuing, the
Trustee by notice to the Company, or the Holders of at least 25% in principal
amount of the Securities then Outstanding by written notice to the Company and
the Trustee, may declare the unpaid principal of and any accrued interest on all
the Securities to be due and payable. Upon such declaration the principal and
interest shall be due and payable immediately. If an Event of Default specified
in clause (9) or (10) of Section 501 hereof occurs, such an amount 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. The Holders of a majority (or, in
the case of the failure to make a Change of Control Offer pursuant to Section
1014 hereof, two-thirds) in principal amount of Securities then Outstanding by
written notice to the Trustee may rescind an acceleration and its consequences
if the rescission would not conflict with any judgment or decree and if:
(a) the Company has paid or deposited with the Trustee a sum
sufficient to pay
(i) all sums paid or advanced by the Trustee under this
Indenture and the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel,
(ii) all overdue interest on all Securities,
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(iii) the principal of and premium, if any, on any Securities
which have become due otherwise than by such declaration of
acceleration and interest thereon at a rate borne by the Securities,
and
(iv) to the extent that payment of such interest is lawful,
interest upon overdue interest at the rate borne by the Securities;
and
(b) all Events of Default, other than the non-payment of principal of
the Securities which have become due solely by such declaration of
acceleration, have been cured or waived as provided in Section 504 hereof.
No such rescission shall affect any subsequent Default or impair any right
consequent thereon provided in Section 504 hereof.
Section 503. Other Remedies.
--------------
If an Event of Default occurs and is continuing, the Trustee may
pursue any available remedy (under this Indenture or otherwise) to collect the
payment of principal, premium, if any, or interest on the Securities or to
enforce the performance of any provision of the Securities or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any
of the Securities or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Holder in exercising any right or remedy accruing
upon an Event of Default shall not impair the right or remedy or constitute a
waiver of or acquiescence in the Event of Default.
No right or remedy herein conferred upon or reserved to the Trustee or
to the Holders 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 504. Waiver of Past Defaults.
-----------------------
Holders of a majority (or, in the case of the failure by the Company
to make a Change of Control Offer pursuant to Section 1014 hereof, two-thirds)
in aggregate principal amount of the Securities then Outstanding by notice to
the Trustee may waive an existing Default or Event of Default and its
consequences, except a continuing Default or Event of Default in the payment of
the principal of or interest on any Security held by a non-consenting Holder.
Upon any such waiver, such Default shall cease to exist, and any Event of
Default arising therefrom shall
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be deemed to have been cured for every purpose of this Indenture; but no such
waiver shall extend to any subsequent or other Default or impair any right
consequent thereon.
Section 505. Control by Majority.
-------------------
The Holders of a majority in principal amount of the Securities then
Outstanding may 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 it. However, the Trustee may refuse to follow any direction that
conflicts with law or this Indenture, that the Trustee determines may be unduly
prejudicial to the rights of other Holders, or that may involve the Trustee in
personal liability.
Section 506. Limitation on Suits.
-------------------
A Holder may pursue a remedy with respect to this Indenture or the
Securities only if:
(1) the Holder gives to the Trustee written notice of a continuing
Event of Default;
(2) the Holders of at least 25% in principal amount of the Securities
then Outstanding make a written request to the Trustee to pursue the
remedy;
(3) such Holder or Holders offer and, if requested, provide to the
Trustee indemnity satisfactory to the Trustee against any loss, liability
or expense;
(4) the Trustee does not comply with the request within sixty (60)
days after receipt of the request and the offer and, if requested, the
provision of the indemnity; and
(5) during such sixty (60) day period the Holders of a majority in
principal amount of the Securities then Outstanding do not give the Trustee
a direction inconsistent with the request.
A Holder may not use this Indenture to prejudice the rights of another Holder or
to obtain a preference or priority over another Holder.
Section 507. Rights of Holders to Receive Payment.
------------------------------------
Notwithstanding any other provision of this Indenture, but subject to
Article Thirteen the right of any Holder of a Security to receive payment of
principal, premium, if any, and interest on the Security, on or after the
respective due dates expressed in the Security (or, in the case of redemption or
repurchase, on the Redemption Date or repurchase date), or to
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bring suit for the enforcement of any such payment on or after such respective
dates, shall not be impaired or affected without the consent of the Holder,
subject to Article Thirteen.
Section 508. Collection Suit by Trustee.
--------------------------
If an Event of Default specified in Section 501(1) or (2) hereof
occurs and is continuing, the Trustee is authorized to recover judgment in its
own name and as trustee of an express trust against the Company or any
Subsidiary Guarantor for the whole amount of principal, premium, if any, and
interest remaining unpaid on the Securities and interest on overdue principal
and, to the extent lawful, premium and interest and 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, subject to Article Thirteen.
If the Company or any Subsidiary Guarantor, as the case may be, fails
to pay such amounts forthwith upon such demand, the Trustee, in its own name and
as trustee of an express trust, may institute a judicial proceeding for the
collection of the sums so due and unpaid and may prosecute such proceeding to
judgment or final decree, and may enforce the same against the Company or any
Subsidiary Guarantor or any other obligor upon the Securities and collect the
moneys adjudged or decreed to be payable in the manner provided by law out of
the property of the Company or any Subsidiary Guarantor or any other obligor
upon the Securities, 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 under this Indenture or the Guarantees by such appropriate private or
judicial proceedings as the Trustee shall deem most effectual to protect and
enforce such rights, including, seeking recourse against any Subsidiary
Guarantor pursuant to the terms of any Guarantee, 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 therein, or to enforce any other proper
remedy, including, without limitation, seeking recourse against any Subsidiary
Guarantor pursuant to the terms of a Guarantee, or to enforce any other proper
remedy, subject however to Section 505 hereof.
Section 509. Trustee May File Proofs of Claim.
--------------------------------
The Trustee is authorized to file such proofs of claim and 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 the
Holders allowed in any judicial proceedings relative to the Company or any
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Subsidiary Guarantor or any other obligor upon the Securities, their creditors
or their property and shall be entitled and empowered, subject to Article
Thirteen, to collect, receive and distribute any money or other property payable
or deliverable on any such claims and any Custodian 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 to 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 hereof. To the extent that the payment of any such compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel, and
any other amounts due the Trustee under Section 606 hereof out of the estate in
any such proceeding shall be denied for any reason, payment of the same shall be
secured by a Lien on, and shall be paid out of, any and all distributions,
dividends, money, securities and other properties which the Holders of the
Securities may be entitled to receive in such proceeding whether in liquidation
or under any plan of reorganization or arrangement or otherwise. 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 Securities 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 510. Priorities.
----------
If the Trustee collects any money pursuant to this Article, it shall
pay out the money in the following order:
First: to the Trustee, its agents and attorneys for amounts due under
Section 606 hereof, including payment of all compensation, expenses and
liabilities incurred, and all advances made, by the Trustee and the costs
and expenses of collection;
Second: subject to Article Thirteen, to Holders for amounts due and
unpaid on the Securities for principal, premium, if any, and interest
ratably, without preference or priority of any kind, according to the
amounts due and payable on the Securities for principal, premium, if any,
and interest, respectively;
Third: subject to Article Thirteen, without duplication, to Holders
for any other Indenture Obligations owing to the Holders under this
Indenture or the Securities; and
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Fourth: subject to Article Thirteen, to the Company or to such party
as a court of competent jurisdiction shall direct.
The Trustee may fix a record date and payment date for any payment to
Holders.
Section 511. Undertaking for Costs.
---------------------
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as a Trustee, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit, having due regard to
the merits and good faith of the claims or defenses made by the party litigant.
This Section does not apply to a suit by the Trustee, a suit by a Holder
pursuant to Section 507 hereof or a suit by Holders of more than 10% in
principal amount of the Securities then Outstanding or to any suit instituted by
any Holder for the enforcement of the payment of the principal of, premium, if
any, or interest on any Security on or after the respective Stated Maturities
expressed in such Security (or, in the case of redemption or repurchase, on or
after the Redemption Date or repurchase date).
Section 512. Waiver of Stay, Extension or Usury Laws.
----------------------------------------
Each of the Company and any Subsidiary Guarantor covenants (to the
extent that it may lawfully do so) that it shall 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 or any usury or other law wherever enacted, now or at
any time hereafter in force, which would prohibit or forgive the Company or any
Subsidiary Guarantor from paying all or any portion of the principal of,
premium, if any, or interest on the Securities contemplated herein or in the
Securities or which may affect the covenants or the performance of this
Indenture; and each of the Company and any Subsidiary Guarantor (to the extent
that it may lawfully do so) hereby expressly waives all benefit or advantage of
any such law, and covenants that it shall not hinder, delay or impede the
execution of any power herein granted to the Trustee, but shall suffer and
permit the execution of every such power as though no such law had been enacted.
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ARTICLE SIX
THE TRUSTEE
Section 601. Notice of Defaults.
------------------
Within ninety (90) days after the occurrence of any Default, the
Trustee shall transmit by mail to all Holders, as their names and addresses
appear in the Security Register, notice of such Default hereunder known to the
Trustee, unless such Default shall have been cured or waived; provided, however,
-------- -------
that, except in the case of a Default in the payment of the principal of,
premium, if any, or interest on any Security, the Trustee shall be protected in
withholding such notice if and so long as a trust committee of Responsible
Officers of the Trustee in good faith determines that the withholding of such
notice is in the interest of the Holders.
Section 602. Certain Rights of Trustee.
-------------------------
Subject to the provisions of Trust Indenture Act Sections 315(a)
through 315(d):
(a) 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;
(b) any request or direction of the Company mentioned herein shall be
sufficiently evidenced by a Company Request or Company Order and any
resolution of the Board of Directors may be sufficiently evidenced by a
Board Resolution;
(c) the Trustee may consult with counsel and any written 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 in accordance
with such advice or Opinion of Counsel;
(d) 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 pursuant to this Indenture, unless such Holders shall
have offered to the Trustee security or indemnity satisfactory to the
Trustee against the costs, expenses and liabilities which might be incurred
therein or thereby in compliance with such request or direction;
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(e) the Trustee shall not be liable for any action taken or omitted by
it in good faith and believed by it to be authorized or within the
discretion, rights or powers conferred upon it by this Indenture other than
any liabilities arising out of the gross negligence of the Trustee;
(f) 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,
approval, appraisal, bond, debenture, note, coupon, security or other paper
or document unless requested in writing to do so by the Holders of not less
than a majority in aggregate principal amount of the Securities then
Outstanding; provided that, if the payment within a reasonable time to the
--------
Trustee of the costs, expenses or liabilities likely to be incurred by it
in the making of such investigation is, in the opinion of the Trustee, not
reasonably assured to the Trustee by the security afforded to it by the
terms of this Indenture, the Trustee may require reasonable indemnity
against such expenses or liabilities as a condition to proceeding; the
reasonable expenses of every such investigation shall be paid by the
Company or, if paid by the Trustee or any predecessor Trustee, shall be
repaid by the Company upon demand; provided, further, that the Trustee in
-------- -------
its discretion may make such further inquiry or investigation into such
facts or matters as it may deem fit, and, if the Trustee shall determine to
make such further inquiry or investigation, it shall be entitled to examine
the books, records and premises of the Company, personally or by agent or
attorney;
(g) 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; and
(h) no provision of this Indenture shall require the Trustee 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.
Section 603. Trustee Not Responsible for Recitals, Dispositions of
-----------------------------------------------------
Securities or Application of Proceeds Thereof.
---------------------------------------------
The recitals contained herein and in the Securities, except the
Trustee's certificates of authentication, shall be taken as the statements of
the Company, and the Trustee assumes
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no responsibility for their correctness. The Trustee makes no representations
as to the validity or sufficiency of this Indenture or of the Securities, except
that the Trustee represents that it is duly authorized to execute and deliver
this Indenture, authenticate the Securities and perform its obligations
hereunder and that the statements made by it in a Statement of Eligibility on
Form T-1, if any, supplied to the Company are true and accurate subject to the
qualifications set forth therein. The Trustee shall not be accountable for the
use or application by the Company of Securities or the proceeds thereof.
Section 604. Trustee and Agents May Hold Securities; Collections;
----------------------------------------------------
etc.
----
The Trustee, any Paying Agent, Security Registrar or any other agent
of the Company, in its individual or any other capacity, may become the owner or
pledgee of Securities, with the same rights it would have if it were not the
Trustee, Paying Agent, Security Registrar or such other agent and, subject to
Trust Indenture Act Sections 310 and 311, may otherwise deal with the Company
and receive, collect, hold and retain collections from the Company with the same
rights it would have if it were not the Trustee, Paying Agent, Security
Registrar or such other agent.
Section 605. Money Held in Trust.
-------------------
All moneys received by the Trustee shall, until used or applied as
herein provided, be held in trust for the purposes for which they were received,
but need not be segregated from other funds except to the extent required by
mandatory provisions of law. Except for funds or securities deposited with the
Trustee pursuant to Article Four, the Trustee may invest all moneys received by
the Trustee, until used or applied as herein provided, in Cash Equivalents in
accordance with the written directions of the Company. The Trustee shall not be
liable for any losses incurred in connection with any investments made in
accordance with Section 605 hereof, unless the Trustee acted with gross
negligence or in bad faith. With respect to any losses on investments made
under this Section 605, the Company is liable for the full extent of any such
loss.
Section 606. Compensation and Indemnification of Trustee and Its
---------------------------------------------------
Prior Claim.
-----------
The Company covenants and agrees to pay to the Trustee from time to
time, and the Trustee shall be entitled to, reasonable compensation for all
services rendered by it hereunder (which shall not be limited by any provision
of law in regard to the compensation of a trustee of an express trust) and the
Company covenants and agrees to pay or reimburse the Trustee and each
predecessor Trustee upon its request for all reasonable
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expenses, disbursements and advances incurred or made by or on behalf of it in
accordance with any of the provisions of this Indenture (including the
reasonable compensation and the expenses and disbursements of its counsel and of
all agents and other persons not regularly in its employ) except any such
expense, disbursement or advance as may arise from its negligence or bad faith.
The Company also covenants to indemnify the Trustee and each predecessor Trustee
for, and to hold it harmless against, any loss, liability, tax, assessment or
other governmental charge (other than taxes applicable to the Trustee's
compensation hereunder) or expense incurred without gross negligence or bad
faith on such Trustee's part, arising out of or in connection with the
acceptance or administration of this Indenture or the trusts hereunder and such
Trustee's duties hereunder, including enforcement of this Section 606 and also
including any liability which the Trustee may incur as a result of failure to
withhold, pay or report any tax, assessment or other governmental charge, and
the costs and expenses of defending itself against or investigating any claim of
liability in the premises. The obligations of the Company under this Section to
compensate and indemnify the Trustee and each predecessor Trustee and to pay or
reimburse the Trustee and each predecessor Trustee for expenses, disbursements
and advances shall constitute an additional obligation hereunder and shall
survive the satisfaction and discharge of this Indenture, or the resignation or
removal of any Trustee.
To secure the Company's payment obligations in this Section 606, the
Trustee shall have a Lien prior to the Securities on all money or property held
or collected by the Trustee, in its capacity as Trustee, except money or
property held in trust to pay principal of or interest on particular Securities.
When the Trustee incurs expenses or renders services in connection
with an Event of Default specified in Section 501(9) or (10), the expenses and
the compensation for the services shall be preferred over the status of Holders
in any proceeding under any Bankruptcy Law and are intended to constitute
expenses of administration under any Bankruptcy Law.
Section 607. Conflicting Interests.
---------------------
The Trustee shall comply with the provisions of Section 310(b) of the
Trust Indenture Act.
Section 608. Corporate Trustee Required; Eligibility.
---------------------------------------
There shall at all times be a Trustee hereunder which shall be
eligible to act as trustee under Trust Indenture Act Section 310(a)(1) and which
shall have a combined capital and surplus of at least $50,000,000 or which shall
be a wholly owned
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subsidiary of a company that has a combined capital and surplus of at least
$50,000,000, to the extent there is an institution eligible and willing to
serve. If the Trustee does not have an office in The City of New York, the
Trustee may appoint an agent in The City of New York reasonably acceptable to
the Company to conduct any activities which the Trustee may be required under
this Indenture to conduct in The City of New York. If the Trustee does not have
an office in The City of New York or has not appointed an agent in The City of
New York, the Trustee shall be a participant in the Depository Trust Company and
FAST distribution systems. If such corporation published 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,
the Trustee shall resign immediately in the manner and with the effect
hereinafter specified in this Article Six.
Section 609. Resignation and Removal; Appointment of Successor
-------------------------------------------------
Trustee.
-------
(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 under Section 610 hereof.
(b) The Trustee, or any trustee or trustees hereafter appointed, may
at any time resign by giving written notice thereof to the Company. Upon
receiving such notice of resignation, the Company shall promptly appoint a
successor trustee by written instrument executed by authority of the Board of
Directors, a copy of which shall be delivered to the resigning Trustee and a
copy to the successor trustee. If an instrument of acceptance by a successor
trustee shall not have been delivered to the Trustee within thirty (30) days
after the giving of such notice of resignation, the resigning Trustee may, or
any Holder who has been a bona fide Holder of a Security 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. Such
court may thereupon, after such notice, if any, as it may deem proper, appoint a
successor trustee.
(c) The Trustee may be removed at any time by an Act of the Holders
of not less than a majority in aggregate principal amount of the Outstanding
Securities, delivered to the Trustee and to the Company.
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(d) If at any time:
(1) the Trustee shall fail to comply with the provisions of
Trust Indenture Act Section 310(b) after written request therefor by
the Company or by any Holder who has been a bona fide Holder of a
Security for at least six months, or
(2) the Trustee shall cease to be eligible under Section 608
hereof and shall fail to resign after written request therefor by the
Company or by any Holder who has been a bona fide Holder of a Security
for at least six months, or
(3) the Trustee shall become incapable of acting or shall be
adjudged a bankrupt or insolvent, 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 case, (i) the Company by a Board Resolution may remove the Trustee,
or (ii) subject to Section 511 hereof, the Holder of any Security who has been a
bona fide Holder of a Security 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 and the appointment of a successor trustee. Such
court may thereupon, after such notice, if any, as it may deem proper and
prescribe, remove the Trustee and appoint a successor trustee.
(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, the
Company, 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 shall be appointed by Act of the
Holders of a majority in principal amount of the Outstanding Securities
delivered to the Company and the retiring Trustee, the successor trustee so
appointed shall, forthwith upon its acceptance of such appointment, become the
successor trustee and supersede the successor trustee appointed by the Company.
If no successor trustee shall have been so appointed by the Company or the
Holders of the Securities and accepted appointment in the manner hereinafter
provided, the Holder of any Security who has been a bona fide Holder for at
least six months may, subject to Section 511 hereof, on behalf of himself and
all others similarly situated, petition any court of competent jurisdiction for
the appointment of a successor trustee.
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(f) The Company shall give notice of each resignation and each removal
of the Trustee and each appointment of a successor trustee by mailing written
notice of such event by first-class mail, postage prepaid, to the Holders of
Securities as their names and addresses appear in the Security Register. Each
notice shall include the name of the successor trustee and the address of its
Corporate Trust Office or agent hereunder.
Section 610. Acceptance of Appointment by Successor.
--------------------------------------
Every successor trustee appointed hereunder shall execute, acknowledge
and deliver to the Company 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 as if originally named as Trustee hereunder;
but, nevertheless, on the written request of the Company or the successor
trustee, upon payment of its charges then unpaid, such retiring Trustee shall,
pay over to the successor trustee all moneys at the time held by it hereunder
and shall execute and deliver an instrument transferring to such successor
trustee all such rights, powers, duties and obligations. Upon request of any
such successor trustee, the Company shall execute any and all instruments for
more fully and certainly vesting in and confirming to such successor trustee all
such rights and powers. Any Trustee ceasing to act shall, nevertheless, retain
a prior claim upon all property or funds held or collected by such Trustee or
such successor trustee to secure any amounts then due such Trustee pursuant to
the provisions of Section 606 hereof.
No successor trustee with respect to the Securities shall accept
appointment as provided in this Section 610 unless at the time of such
acceptance such successor trustee shall be eligible to act as trustee under the
provisions of Trust Indenture Act Section 310(a) and this Article Six and shall
have a combined capital and surplus of at least $50,000,000 or which shall be a
wholly owned subsidiary of a company that has a combined capital and surplus of
at least $50,000,000 and have a Corporate Trust Office or an agent selected in
accordance with Section 608 hereof.
Upon acceptance of appointment by any successor trustee as provided in
this Section 610, the Company shall give notice thereof to the Holders of the
Securities, by mailing such notice to such Holders at their addresses as they
shall appear on the Security Register. If the acceptance of appointment is
substantially contemporaneous with the resignation, then the notice called for
by the preceding sentence may be combined with the notice called for by Section
609 hereof. If the Company fails to give such notice within ten (10) days after
acceptance of
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appointment by the successor trustee, the successor trustee shall cause such
notice to be given at the expense of the Company.
Section 611. 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 of the corporate trust
business of the Trustee, shall be the successor of the Trustee hereunder,
provided such corporation shall be eligible under Trust Indenture Act Section
310(a) and this Article Six and shall have a combined capital and surplus of at
least $50,000,000 or which shall be a wholly owned subsidiary of a company that
has a combined capital and surplus of at least $50,000,000 and have a Corporate
Trust Office or an agent selected in accordance with Section 608 hereof without
the execution or filing of any paper or any further act on the part of any of
the parties hereto.
In case at the time such successor to the Trustee shall succeed to the
trusts created by this Indenture any of the Securities shall have been
authenticated but not delivered, any such successor to the Trustee may adopt the
certificate of authentication of any predecessor Trustee and deliver such
Securities so authenticated; and, in case at that time any of the Securities
shall not have been authenticated, any successor to the Trustee may authenticate
such Securities either in the name of any predecessor hereunder or in the name
of the successor trustee; and in all such cases such certificate shall have the
full force which it is anywhere in the Securities or in this Indenture provided
that the certificate of the Trustee shall have; provided that the right to adopt
--------
the certificate of authentication of any predecessor Trustee or to authenticate
Securities in the name of any predecessor Trustee shall apply only to its
successor or successors by merger, conversion or consolidation.
Section 612. Preferential Collection of Claims Against Company.
-------------------------------------------------
If and when the Trustee shall be or become a creditor of the Company
(or other obligor under the Securities), the Trustee shall be subject to the
provisions of the Trust Indenture Act regarding the collection of claims against
the Company (or any such other obligor). A Trustee who has resigned or been
removed shall be subject to the Trust Indenture Act Section 311(a) to the extent
indicated therein.
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Section 613. Certain Duties and Responsibilities.
-----------------------------------
(1) Except during the continuance of an Event of Default,
(a) the Trustee undertakes to perform such duties and only such duties
as are specifically set forth in this Indenture, and no implied covenants
or obligations shall be read into this Indenture against the Trustee; and
(b) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to
the Trustee and conforming to the requirements of this Indenture, but in
the case of any such certificates or opinions which by any provision hereof
are specifically required to be furnished to the Trustee, the Trustee shall
be under a duty to examine the same to determine whether or not they
conform to the requirements of this Indenture but shall not be required to
verify the contents thereof.
(2) In case an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture, and use the same degree of care and skill in their exercise, as a
prudent person would exercise or use under the circumstances in the conduct of
such person's own affairs.
ARTICLE SEVEN
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
Section 701. Company to Furnish Trustee Names and Addresses of
-------------------------------------------------
Holders.
-------
The Company shall furnish or cause to be furnished to the Trustee
(a) semiannually, not more than ten (10) days after each Regular
Record Date, a list, in such form as the Trustee may reasonably require, of
the names and addresses of the Holders as of such Regular Record Date; and
(b) at such other times as the Trustee may request in writing, within
thirty (30) days after receipt by the Company of any such request, a list
of similar form and content as of a date not more than fifteen (15) days
prior to the time such list is furnished;
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provided, however, that if and so long as the Trustee shall be the Security
-------- -------
Registrar, no such list need be furnished.
Section 702. Disclosure of Names and Addresses of Holders.
--------------------------------------------
Every Holder of Securities, by receiving and holding the same, agrees
with the Company and the Trustee that neither the Company nor the Trustee nor
any agent of either of them shall be held accountable by reason of the
disclosure of any information as to the names and addresses of the Holders in
accordance with Trust Indenture Act 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
Trust Indenture Act Section 312.
Section 703. Reports by Trustee.
------------------
Within sixty (60) days after May 15 of each year commencing with the
first May 15 after the Closing Date, the Trustee shall transmit by mail to all
Holders, as their names and addresses appear in the Security Register, as
provided in Trust Indenture Act Section 313(c), a brief report dated as of such
May 15 in accordance with and to the extent required by Trust Indenture Act
Section 313(a). The Trustee shall also comply with Trust Indenture Act Section
313(b).
Commencing at the time this Indenture is qualified under the Trust
Indenture Act, a copy of each report at the time of its mailing to Holders shall
be filed with the Commission and each stock exchange on which the Securities are
listed of which the Company has notified the Trustee in writing. The Company
shall notify the Trustee when Securities are listed on any stock exchange.
Section 704. Reports by Company and Subsidiary Guarantors.
--------------------------------------------
(a) Whether or not the Company is subject to Section 13(a) or 15(d)
of the Exchange Act, the Company shall, to the extent permitted under the
Exchange Act, file with the Commission the annual reports, quarterly reports and
other documents which the Company would have been required to file with the
Commission pursuant to such Section 13(a) or 15(d) if the Company were so
subject, such documents to be filed with the Commission on or prior to the
respective dates (the "Required Filing Dates") by which the Company would have
been required so to file such documents if the Company were so subject. The
Company shall also in any event (x) within 15 days of each Required Filing Date
(i) transmit by mail to all Holders of Securities, as their names and addresses
appear in the security register, without cost to such Holders and (ii) file with
the Trustee copies of the annual
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reports, quarterly reports and other documents which the Company would have been
required to file with the Commission pursuant to Section 13(a) or 15(d) of the
Exchange Act if the Company were subject to such Sections and (y) if filing such
documents by the Company with the Commission is not permitted under the Exchange
Act, promptly upon written request and payment of the reasonable cost of
duplication and delivery, supply copies of such documents to any prospective
Holder of Securities at the Company's cost.
(b) For so long as any of the Securities remain outstanding and are
"restricted securities" within the meaning of Rule 144(a)(3) under the
Securities Act, the Company covenants and agrees that it shall, during any
period in which it is not subject to Section 13(a), 13(c) or 15(d) under the
Exchange Act, make available to any Holder of the Securities in connection with
any sale thereof and any prospective purchaser of the Securities from such
Holder, in each case upon request, the information specified in, and meeting the
requirements of, Rule 144A(d)(4) under the Securities Act.
(c) The Trustee has no duty to review any financial or other reports
for purposes of determining compliance with this or any other provisions of this
Indenture.
ARTICLE EIGHT
CONSOLIDATION, MERGER,
CONVEYANCE, TRANSFER OR LEASE
Section 801. When the Company May Merge, Etc.
--------------------------------
(a) The Company shall not consolidate with or merge into, or sell,
assign, convey, lease or transfer all or substantially all of its assets and
those of its Subsidiaries taken as a whole to, any Person, unless
(i) the resulting, surviving or transferee Person expressly assumes
all the obligations of the Company under the Securities and this Indenture;
(ii) such Person shall be organized and existing under the laws of the
United States of America, a state thereof or the District of Columbia;
(iii) at the time of the occurrence of such transaction and after
giving effect to such transaction on a pro forma basis, such Person could
incur $1.00 of additional Indebtedness pursuant to the covenant described
in the initial paragraph under Section 1008 (assuming a market rate of
interest with respect to such additional Indebtedness);
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(iv) at the time of the occurrence of such transaction and after
giving effect to such transaction on a pro forma basis, the Consolidated
Net Worth of such Person shall be equal to or greater than the Consolidated
Net Worth of the Company immediately prior to such transaction;
(v) each Subsidiary Guarantor, to the extent applicable, shall by
supplemental indenture confirm that its Guarantee shall apply to such
Person's obligations under the Securities; and
(vi) immediately before and immediately after giving effect to such
transaction and treating any Indebtedness which becomes an obligation of
the Company or any of its Subsidiaries or of such Person as a result of
such transaction as having been incurred by the Company or such Subsidiary
or such Person, as the case may be, at the time of such transaction, no
Default or Event of Default shall have occurred and be continuing.
The Company shall deliver to the Trustee prior to the consummation of the
proposed transaction an Officers' Certificate to the foregoing effect and an
Opinion of Counsel, covering clauses (i), (ii), (v) and (vi) above, stating that
the proposed transaction and such supplemental indentures comply with this
Indenture and with Section 903 hereof. The Trustee shall be entitled to
conclusively rely upon such Officers' Certificate and Opinion of Counsel which
opinion shall also comply with Section 903 hereof.
(b) No Subsidiary Guarantor shall, and the Company shall not permit a
Subsidiary Guarantor to, in a single transaction or series of related
transactions merge or consolidate with or into any other corporation (other than
the Company or any other Subsidiary Guarantor) or other entity, or sell, assign,
convey, transfer, lease or otherwise dispose of all or substantially all of its
properties and assets to any entity (other than the Company or any other
Subsidiary Guarantor) unless at the time and giving effect thereto:
(i) either (1) such Subsidiary Guarantor shall be the continuing
corporation or (2) the entity (if other than such Subsidiary Guarantor)
formed by such consolidation or into which such Subsidiary Guarantor is
merged or the entity which acquires by sale, assignment, conveyance,
transfer, lease or disposition the properties and assets of such Subsidiary
Guarantor shall be a corporation duly organized and validly existing under
the laws of the United States of America, any state thereof or the District
of Columbia and expressly assumes by a supplemental indenture, executed and
delivered to the Trustee, in a form reasonably satisfactory
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to the Trustee, all the obligations of such Subsidiary Guarantor under the
Securities and the Indenture; and
(ii) immediately before and immediately after giving effect to such
transaction, no Default or Event of Default shall have occurred and be
continuing.
Such Subsidiary Guarantor shall deliver to the Trustee prior to the
consummation of the proposed transaction, in form and substance reasonably
satisfactory to the Trustee, an Officers' Certificate and an Opinion of Counsel,
each stating that such consolidation, merger, sale, assignment, conveyance,
transfer, lease or disposition and such supplemental indenture, if required,
comply with this Indenture. The Trustee shall be entitled to conclusively rely
upon such Officers' Certificate and Opinion of Counsel, which opinion shall also
comply with Section 903 hereof.
The provisions of this Section 801(b) shall not apply to any
transaction (including any Asset Sale made in accordance with Section 1009) with
respect to any Subsidiary Guarantor if the Guarantee of such Subsidiary
Guarantor is released in connection with such transaction in accordance with
Section 1019(b) and shall also not apply to the transfer of assets or property
by Imperial West in connection with the Imperial West Joint Venture.
Section 802. Successor Substituted.
---------------------
Upon any consolidation or merger, or any sale, assignment, conveyance,
transfer or disposition of all or substantially all of the properties and assets
of the Company or any Subsidiary Guarantor in accordance with Section 801
hereof, the successor Person formed by such consolidation or into which the
Company or such Subsidiary Guarantor, as the case may be, is merged or the
successor Person to which such sale, assignment, conveyance, transfer, lease or
disposition is made shall succeed to, and be substituted for, and may exercise
every right and power of, the Company or such Subsidiary Guarantor, as the case
may be, under this Indenture, the Securities and/or such Guarantee, as the case
may be, with the same effect as if such successor had been named as the Company
or such Subsidiary Guarantor, as the case may be, herein, in the Securities
and/or in such Guarantee, as the case may be. When a successor assumes all the
obligations of its predecessor under this Indenture, the Securities or a
Guarantee, as the case may be, the predecessor shall be released from those
obligations; provided that in the case of a transfer by lease, the predecessor
--------
shall not be released from the payment of principal and interest on the
Securities or a Guarantee, as the case may be.
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ARTICLE NINE
SUPPLEMENTAL INDENTURES
Section 901. Supplemental Indentures and Agreements without Consent
------------------------------------------------------
of Holders.
----------
Without the consent of any Holders, the Company and the Subsidiary
Guarantors, when authorized by a Board Resolution, and the Trustee, at any time
and from time to time, may enter into one or more indentures supplemental hereto
or agreements or other instruments with respect to any Guarantee, in form and
substance satisfactory to the Trustee, for any of the following purposes:
(i) to cure any ambiguity, defect or inconsistency;
(ii) to provide for the assumption pursuant to Article Eight of the
Company's or a Subsidiary Guarantor's obligations to the Holders in the
case of a merger, consolidation or sale of assets;
(iii) to provide for uncertificated Securities in addition to or in
place of certificated Securities;
(iv) to make any change that does not adversely affect the rights
hereunder or thereunder of any Holder;
(v) to comply with requirements of the Commission in order to effect
or maintain the qualification of this Indenture under the Trust Indenture
Act;
(vi) to add a Subsidiary Guarantor pursuant to the requirements of
Section 1019 hereof;
(vii) to evidence and provide the acceptance of the appointment of a
successor trustee hereunder;
(viii) to provide collateral for the Securities or the Guarantees,
including, without limitation, to secure PCAC's Guarantee with Liens on
PCAC's St. Gabriel, Louisiana and Henderson, Nevada plants (including real
property, buildings, fixtures and equipment), and in connection therewith,
to modify covenants, to provide additional indemnity to the Trustee, and to
modify other provisions of this Indenture, the Securities or the Guarantees
that relate to such collateral or that will or may be impacted by the
providing of such collateral, and to enter into agreements, documents or
other instruments to effect the foregoing, including, without limitation,
an intercreditor agreement relating to Liens on such collateral on a pari
passu basis in favor of the Trustee for the benefit of the Holders and the
lenders under the Bank Credit Facility;
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(ix) to comply with any requirement of the Commission or applicable
law to effectuate the Exchange Offer; or
(x) to add to the covenants of the Company, any Subsidiary Guarantor
or any other obligor upon the Securities for the benefit of the Holders, or
to surrender any right or power herein conferred upon the Company, any
Subsidiary Guarantor or any other obligor upon the Securities, as
applicable, herein, in the Securities or in any Guarantee.
Section 902. Supplemental Indentures and Agreements with Consent of
------------------------------------------------------
Holders.
-------
With the consent of the Holders of not less than a majority in
aggregate principal amount of the Outstanding Securities, by Act of said Holders
delivered to the Company, each Subsidiary Guarantor, and the Trustee, the
Company, and each Subsidiary Guarantor (if a party thereto) when authorized by a
Board Resolution, and the Trustee may enter into an indenture or indentures
supplemental hereto or agreements or other instruments with respect to any
Guarantee in form and substance satisfactory to the Trustee 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 under this Indenture, the Securities or any Guarantee; provided,
--------
however, that no such supplemental indenture, agreement or instrument shall,
-------
without the consent of the Holder of each Outstanding Security affected thereby:
(i) reduce the principal amount of Securities whose Holders must
consent to an amendment or waiver;
(ii) reduce the rate of, or change the time for payment of, interest,
including default interest, on any Security;
(iii) reduce the principal of or change the fixed maturity of any
Security, or alter the optional redemption provisions, or alter the price
at which the Company shall offer to purchase such Securities pursuant to
Sections 1014 or 1109 hereof;
(iv) make any Security payable in money other than that stated in the
Security;
(v) make any change in Sections 504 or 507 hereof;
(vi) waive a Default or Event of Default in the payment of principal
of, premium, if any, or interest on the Securities, including any such
obligation arising under Sections 1009 and 1109 or Section 1014 hereof
(except a rescission of acceleration of the Securities pursuant to Section
502
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hereof by the Holders of at least a majority (or in the case of the failure
to make a Change of Control Offer, two-thirds) in aggregate principal
amount of the Securities then Outstanding and a waiver of the payment
default that resulted from such acceleration);
(vii) waive a purchase payment required to be made under Section 1009
and 1109 or Section 1014 or a payment under Article Thirteen hereof with
respect to any Security; or
(viii) make any change in the provisions of this Section 902.
Upon the written request of the Company and each Subsidiary Guarantor,
accompanied by a copy of a Board Resolution authorizing the execution of any
such supplemental indenture or Guarantee, and upon the filing with the Trustee
of evidence of the consent of Holders as aforesaid, the Trustee shall, subject
to Section 903 hereof, join with the Company and each Subsidiary Guarantor in
the execution of such supplemental indenture or Guarantee.
It shall not be necessary for any Act of Holders under this Section to
approve the particular form of any proposed supplemental indenture or Guarantee
or agreement or instrument relating to any Guarantee, but it shall be sufficient
if such Act shall approve the substance thereof.
Section 903. Execution of Supplemental Indentures and Agreements.
---------------------------------------------------
In executing, or accepting the additional trusts created by, any
supplemental indenture, agreement or instrument permitted by this Article or the
modifications thereby of the trusts created by this Indenture, the Trustee shall
be entitled to receive, and (subject to Trust Indenture Act Section 315(a)
through 315(d) and Section 602 hereof) shall be fully protected in relying upon,
an Opinion of Counsel and an Officers' Certificate stating that the execution of
such supplemental indenture, agreement or instrument is authorized or permitted
by this Indenture, that no consent is required or that all requisite consents
have been received and that such supplemental indenture constitutes the legal,
valid and binding obligation of the Company, such Subsidiary Guarantor or
successor, as the case may be, enforceable against such entity in accordance
with its terms, subject to customary exceptions. The Trustee may, but shall not
be obligated to, enter into any such supplemental indenture, agreement or
instrument which affects the Trustee's own rights, duties or immunities under
this Indenture, any Guarantee or otherwise.
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Section 904. Revocation Effect of Supplemental Indentures.
--------------------------------------------
Until a supplemental indenture, amendment or waiver becomes effective,
a consent to it by a Holder of a Security is a continuing consent by the Holder
and every subsequent Holder of a Security or portion of a Security that
evidences the same debt as the consenting Holder's Security, even if notation of
consent is not made on any Security.
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 Securities 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 Securities to Supplemental Indentures.
--------------------------------------------------
Securities authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article may bear a notation in form
satisfactory to the Trustee as to any matter provided for in such supplemental
indenture. If the Company shall so determine, new Securities so modified as to
conform to any such supplemental indenture may be prepared and executed by the
Company and each Subsidiary Guarantor and authenticated and delivered by the
Trustee in exchange for Outstanding Securities.
ARTICLE TEN
COVENANTS
Section 1001. Payment of Principal, Premium and Interest.
------------------------------------------
The Company shall duly and punctually pay the principal of, premium,
if any, and interest on the Securities in accordance with the terms of the
Securities and this Indenture.
Section 1002. Maintenance of Office or Agency.
-------------------------------
The Company shall maintain (or cause to be maintained) an office or
agency where Securities may be presented or
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surrendered for payment. The Company also shall maintain (or cause to be
maintained) in The City of New York an office or agency where Securities may be
surrendered for registration or transfer, redemption or exchange and where
notices and demands to or upon the Company in respect of the Securities and this
Indenture may be served. The Company shall give prompt written notice to the
Trustee of the location and any change in the location of any such offices or
agencies. If at any time the Company shall fail to maintain (or cause to be
maintained) any such required offices or agencies or shall fail to furnish the
Trustee with the address thereof, such presentations, surrenders, notices and
demands may be made or served at the office of the agent of the Trustee
described above and the Company hereby appoints such agent as its agent to
receive all such presentations, surrenders, notices and demands.
The Company may from time to time designate one or more other offices
or agencies (in or outside of The City of New York) where the Securities may be
presented or surrendered for any or all such purposes, and may from time to time
rescind such designation. The Company shall give prompt written notice to the
Trustee of any such designation or rescission and any change in the location of
any such office or agency.
Section 1003. Compliance Certificate.
----------------------
(i) The Company shall deliver to the Trustee, within one hundred and
twenty (120) days after the end of each fiscal year, an Officers' Certificate
stating that a review of the activities of the Company and its Subsidiaries
during the preceding fiscal year has been made under the supervision of the
signing Officers with a view to determining whether each has kept, observed,
performed and fulfilled its Indenture Obligations under this Indenture, and
further stating, as to each such Officer signing such certificate, that to the
best of his or her knowledge each has kept, observed, performed and fulfilled
each and every covenant contained in this Indenture and is not in default in the
performance or observance of any of the terms, provisions and conditions hereof
or thereof (or, if a Default or Event of Default shall have occurred, describing
all such Defaults or Events of Default of which he or she may have knowledge and
what action each is taking or proposes to take with respect thereto).
(ii) So long as not contrary to the then current recommendations of
the American Institute of Certified Public Accountants, the year-end financial
statements delivered to the Trustee pursuant to Section 704(a) shall be
accompanied by a written statement of the Company's independent public
accountants (who shall be a firm of established national reputation reasonably
satisfactory to the Trustee) that in making the examination necessary for
certification of such financial
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statements nothing has come to their attention which would lead them to believe
that the Company or any of its Subsidiaries has violated any provisions of
Article Eight or Article Ten hereof or, if any such violation has occurred,
specifying the nature and period of existence thereof, it being understood that
such accountants shall not be liable directly or indirectly to any Person for
any failure to obtain knowledge of any such violation.
(iii) The Company shall, so long as any of the Securities are
outstanding, deliver to the Trustee, forthwith upon any Officer becoming aware
of any Default or Event of Default, an Officers' Certificate specifying such
Default, Event of Default or other event of default and what action the Company
is taking or propose to take with respect thereto.
Section 1004. Taxes.
-----
The Company shall, and shall cause each of its Subsidiaries to, pay
prior to delinquency all material taxes, assessments and governmental levies
except as are being contested in good faith and by appropriate proceedings
diligently conducted and in respect of which appropriate reserves (in the good
faith judgment of management of the Company) are being maintained in accordance
with GAAP.
Section 1005. Limitations on Investments.
--------------------------
The Company shall not, and shall not permit any Restricted
Subsidiaries, directly or indirectly, to make any Investment after the Closing
Date, other than (i) Permitted Investments; and (ii) Restricted Investments
permitted pursuant to Section 1006 hereof.
Section 1006. Limitation on Restricted Payments.
---------------------------------
Subject to the other provisions of this Section 1006, the Company
shall not, nor shall it cause, permit or suffer any Restricted Subsidiary to,
(i) declare or pay any dividends or make any other distributions (including
through mergers, liquidations or other transactions commonly known as leveraged
buyouts) on any class of Equity Interests of the Company or such Restricted
Subsidiary (other than dividends or distributions payable by a wholly-owned
Restricted Subsidiary on account of its Equity Interests held by the Company or
another Restricted Subsidiary or payable in shares of Capital Stock of the
Company other than Redeemable Stock), (ii) make any payment on account of, or
set apart money for a sinking or other analogous fund for, the purchase,
redemption or other retirement of such Equity Interests, (iii) purchase,
defease, redeem or otherwise retire any Subordinated Indebtedness, or (iv) make
any Restricted Investment, either directly or indirectly, whether in cash or
property or in obligations of the Company (all of the foregoing
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being called "Restricted Payments"), unless, (x) in the case of a dividend, such
dividend is payable not more than 60 days after the date of declaration and (y)
after giving effect to such proposed Restricted Payment, all the conditions set
forth in clauses (1) through (4) below are satisfied (A) at the date of
declaration (in the case of any dividend), (B) at the date of such setting apart
(in the case of any such fund) or (C) on the date of such other payment or
distribution (in the case of any other Restricted Payment) (each such date being
referred to as a "Computation Date"):
(1) no Default or Event of Default shall have occurred and be
continuing or would result from the making of such Restricted Payment;
(2) at the Computation Date for such Restricted Payment and after
giving effect to such Restricted Payment on a pro forma basis, the Company
or such Restricted Subsidiary could incur $1.00 of additional Indebtedness
pursuant to the covenant described in the initial paragraph under Section
1008 hereof;
(3) the aggregate amount of Restricted Payments declared, paid or
distributed subsequent to the Closing Date (including the proposed
Restricted Payment) shall not exceed the sum of (i) 50% of the cumulative
Consolidated Net Income of the Company for the period subsequent to January
1, 1995 to and including the last day of the Company's last fiscal quarter
ending prior to the Computation Date (each such period to constitute a
"Computation Period") (or, if such aggregate cumulative Consolidated Net
Income is a loss, minus 100% of such loss), (ii) the aggregate Net Cash
Proceeds of the issuance or sale or the exercise (other than to a
Subsidiary or an employee stock ownership plan or other trust established
by the Company or any of its Subsidiaries for the benefit of their
employees) of the Company's Equity Interests (other than Redeemable Stock)
subsequent to the Closing Date, (iii) the aggregate Net Cash Proceeds of
the issuance or sale (other than to a Subsidiary) of any debt securities of
the Company that have been converted into or exchanged for Equity Interests
(other than Redeemable Stock) of the Company to the extent such debt
securities were originally issued or sold for cash, plus the aggregate Net
Cash Proceeds received by the Company at the time of such conversion or
exchange, in each case subsequent to the Closing Date, and (iv) cash
contributions to the Company's capital subsequent to the Closing Date; and
(4) no declaration or payment of any dividends or distributions of
the type described in clause (i) of the introductory portion of this
paragraph (other than dividends or distributions payable by a wholly-owned
Restricted
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Subsidiary on account of its Equity Interests held by the Company or
another Restricted Subsidiary or payable in shares of Capital Stock of the
Company other than redeemable Stock) and no payment on account of or
setting apart of money for any purchase, redemption or other retirement of
Equity Interests of the type described in clause (ii) of the introductory
portion of this paragraph may be made by the Company or such Restricted
Subsidiary on or prior to April 1, 1997; provided, however, that payments
-------- -------
to GEV in amounts sufficient to enable GEV to pay interest when due on the
Seller Notes shall not be prohibited by this clause (4).
If no Default or Event of Default has occurred and is continuing or
would occur as a result thereof, the prohibitions set forth above are subject to
the following exceptions: (a) Restricted Investments in obligations representing
a portion of the proceeds of any Asset Sale consummated in accordance with
Section 1009 hereof, provided, however, that such Restricted Investments shall
-------- -------
be excluded in the calculation of the amount of Restricted Payments previously
made for purposes of clause (3) of the preceding paragraph; (b) any purchase or
redemption of Equity Interests or Subordinated Indebtedness made by exchange
for, or out of the proceeds of the substantially concurrent sale of, Equity
Interests of the Company (other than Redeemable Stock and other than Equity
Interests issued or sold to a Subsidiary or an employee stock ownership plan),
provided, however, that (x) such purchase or redemption shall be excluded in the
-------- -------
calculation of the amount of Restricted Payments previously made for purposes of
clause (3) of the preceding paragraph and (y) the Net Cash Proceeds from such
sale shall be excluded for purposes of clause 3(ii) of the preceding paragraph
to the extent utilized for purposes of such purchase or redemption; (c) any
purchase or redemption of Subordinated Indebtedness of the Company made by
exchange for, or out of the proceeds of the substantially concurrent sale of,
Subordinated Indebtedness of the Company or any Restricted Subsidiary which is
permitted to be issued pursuant to the provisions of Section 1008 hereof,
provided, however, that such purchase or redemption shall be excluded in the
-------- -------
calculation of the amount of Restricted Payments previously made for purposes of
clause (3) of the preceding paragraph; (d) the purchase of Capital Stock held by
employees of the Company or any Subsidiary pursuant to any employee stock
ownership plan thereof upon the termination, retirement or death of any such
employee in accordance with the provisions of any such plan in an amount not
greater than $500,000 in any calendar year, provided, however, that any such
-------- -------
purchase shall be excluded in the calculation of the amount of Restricted
Payments previously made for purposes of clause (3) of the preceding paragraph;
(e) payments to GEV pursuant to any tax sharing arrangement so long as payments
thereunder do not exceed the amount of the Company and its consolidated
subsidiaries' share of Federal and state income taxes actually paid or to be
paid by GEV, provided,
--------
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<PAGE>
however, that such payments shall be excluded in the calculation of the amount
-------
of Restricted Payments previously made for purposes of clause (3) of the
preceding paragraph; (f) payments to GEV to perform accounting, legal, corporate
reporting and administrative functions in the ordinary course of business in an
amount not greater than $500,000 in any calendar year, or to pay required fees
in connection with the Acquisition and related transactions, including the
registration under applicable laws and regulations of its debt or equity
securities issued in connection therewith, provided, however, that such payments
-------- -------
shall be excluded in the calculation of the amount of Restricted Payments
previously made for purposes of clause (3) of the preceding paragraph; and (g)
Investments described in clause (vii) of the definition of Permitted
Investments, provided, however, that such Investments shall be included in the
-------- -------
calculation of the amount of Restricted Payments previously made for purposes of
clause (3) of the preceding paragraph.
For purposes of this Section 1006, (a) the amount of any Restricted
Payment declared, paid or distributed in property of the Company or any
Restricted Subsidiary shall be deemed to be the net book value of any such
property that is intangible property and the Fair Market Value (as determined by
and set forth in a resolution of the Board of Directors) of any such property
that is tangible property at the Computation Date, in each case, after deducting
related reserves for depreciation, depletion and amortization; (b) the amount of
any Restricted Payment declared, paid or distributed in obligations of the
Company or any Restricted Subsidiary shall be deemed to be the principal amount
of such obligations as of the date of the adoption of a resolution by the board
of directors of the Company or such Restricted Subsidiary authorizing such
Restricted Payment; and (c) a distribution to holders of the Company's Equity
Interests of (i) shares of Capital Stock or other Equity Interests of any
Restricted Subsidiary of the Company or (ii) other assets of the Company,
without, in either case, the receipt of equivalent consideration therefor shall
be regarded as the equivalent of a cash dividend equal to the excess of the Fair
Market Value of the Equity Interests or other assets being so distributed at the
time of such distribution over the consideration, if any, received therefor.
Section 1007. Limitations on Payment Restrictions Affecting
---------------------------------------------
Restricted Subsidiaries.
-----------------------
The Company shall not, and shall not permit any Restricted Subsidiary
to, directly or indirectly, create or otherwise cause or suffer to exist or
become effective any consensual encumbrance or restriction of any kind on the
ability of any Restricted Subsidiary to (i) pay dividends or make any other
distribution to the Company or its Restricted Subsidiaries on its Equity
Interests, (ii) pay any Indebtedness owed to the
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Company or any other Restricted Subsidiary, (iii) make loans or advances to the
Company or any other Restricted Subsidiary or (iv) transfer any of its property
or assets to the Company or any other Restricted Subsidiary, except (A)
consensual encumbrances or restrictions contained in or created pursuant to the
Bank Credit Facility and other Existing Indebtedness listed on Schedule 2
hereto, (B) consensual encumbrances or restrictions in the Securities and the
Indenture, (C) any restriction, with respect to a Restricted Subsidiary of the
Company that is not a Subsidiary of the Company on the Closing Date, in
existence at the time such entity becomes a Restricted Subsidiary of the
Company; provided that such encumbrance or restriction is not created in
anticipation of or in connection with such entity becoming a Subsidiary of the
Company and is not applicable to any Person or the properties or assets of any
Person other than a Person that becomes a Subsidiary, (D) any encumbrances or
restrictions pursuant to an agreement effecting a refinancing of Indebtedness
referred to in clauses (A) or (C) of this Section 1007 or contained in any
amendment to any agreement creating such Indebtedness, provided that the
encumbrances and restrictions contained in any such refinancing or amendment are
not materially more restrictive taken as a whole (as determined in good faith by
the chief financial officer of the Company) than those provided for in such
Indebtedness being refinanced or amended, (E) encumbrances or restrictions
contained in any other Indebtedness permitted to be incurred subsequent to the
Closing Date pursuant to the provisions of Section 1008 hereof, provided that
any such encumbrances or restrictions are not materially more restrictive taken
as a whole (as determined in good faith by the chief financial officer of the
Company) than the most restrictive of those provided for in the Indebtedness
referred to in clauses (A) or (C) of this Section 1007, (F) any such encumbrance
or restriction consisting of customary nonassignment provisions in leases
governing leasehold interests to the extent such provisions restrict the
transfer of the lease, (G) any restriction with respect to a Restricted
Subsidiary imposed pursuant to an agreement entered into for the sale or
disposition of all or substantially all of the Capital Stock or assets of such
Restricted Subsidiary in compliance with the Indenture pending the closing of
such sale or disposition; or (H) any encumbrance or restriction due to
applicable law.
Section 1008. Limitations on Indebtedness.
---------------------------
The Company shall not, and shall not permit its Restricted
Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee
or otherwise become liable with respect to or become responsible for the payment
of, contingently or otherwise ("incur"), any Indebtedness; provided, however,
-------- -------
that the Company, or a Restricted Subsidiary of the Company, may incur
Indebtedness if at the time of such incurrence and after giving pro forma effect
thereto, the Company's Consolidated Cash Flow
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Coverage Ratio for the most recently ended four full fiscal quarters for which
internal financial statements are available immediately preceding the date on
which such Indebtedness is incurred, calculated on a pro forma basis as if such
Indebtedness was incurred on the first day of such four full fiscal quarter
period, would be at least 2.75 to 1.0.
Notwithstanding the foregoing limitations, the limitations of this
Section 1008 shall not apply to the incurrence of Permitted Indebtedness.
Section 1009. Asset Sales.
-----------
(a) The Company shall not, and shall not permit any Restricted
Subsidiary to, make any Asset Sale (other than to the Company or other
Restricted Subsidiary) unless (i) the Company or such Restricted Subsidiary
receives consideration at the time of such Asset Sale at least equal to the Fair
Market Value of the assets sold or otherwise disposed of, and at least 80% of
the consideration received by the Company or such Restricted Subsidiary from
such Asset Sale is in the form of cash; provided however, that the amount of any
cash equivalent or note or other obligation received by the Company or such
Restricted Subsidiary from the transferee in any such transaction that is
converted within 90 days by the Company or such Restricted Subsidiary into cash
shall be deemed upon such conversion to be cash for purposes of this provision;
and (ii) the Net Proceeds received by the Company or such Restricted Subsidiary
from such Asset Sale are applied in accordance with the following paragraphs.
The provisions of this Section 1009 shall not apply to the transfer of assets or
property by Imperial West in connection with the Imperial West Joint Venture.
(b) (i) If all or a portion of the Net Proceeds of any Asset Sale are
not required to be applied to repay permanently any Senior Indebtedness of the
Company then outstanding as required by the terms thereof, or the Company
determines not to apply such Net Proceeds to the permanent prepayment of any
Senior Indebtedness outstanding or if no such Senior Indebtedness is then
outstanding, then the Company may within 365 days of the Asset Sale, invest the
Net Proceeds in the Company, or in one or more Restricted Subsidiaries in a
Related Business. The amount of such Net Proceeds neither used to permanently
repay or prepay Senior Indebtedness nor used or invested as set forth in this
paragraph constitutes "Excess Proceeds."
(ii) When the aggregate amount of Excess Proceeds from one or more
Asset Sales equals $5,000,000 or more, the Company shall apply 100% of such
Excess Proceeds within 365 days subsequent to the consummation of the Asset
Sale which resulted in the Excess Proceeds equalling $5,000,000 or more to
the purchase of Securities tendered to the Company for
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purchase at a price (the "Asset Sale Purchase Price") equal to 100% of the
principal amount thereof, plus accrued interest, if any, to the date of
purchase pursuant to an offer to purchase made by the Company (an "Asset
Sale Offer") with respect to the Securities. Any Asset Sale Offer may
include a pro rata offer under similar circumstances to purchase other
Senior Indebtedness requiring a similar offer.
(c) Until such time as the Net Proceeds from any Asset Sale are
applied in accordance with this covenant, such Net Proceeds shall be segregated
from the other assets of the Company and its Subsidiaries and invested in cash
or Eligible Investments, except that the Company or any Restricted Subsidiary
may use any Net Proceeds pending the utilization thereof in the manner (and
within the time period) described above, to repay revolving loans (under the
Bank Credit Facility or otherwise) without a permanent reduction of the
commitment thereunder.
(d) Any Asset Sale Offer shall be made substantially in accordance
with the procedures described under Section 1109 hereof. The Company shall
cause a notice of any Asset Sale Offer to be mailed to the Trustee and the
Holders at their registered addresses not less than 30 days nor more than 45
days before the purchase date. Such notice to the Trustee shall set forth the
calculations used in determining the amount of Excess Proceeds to be applied to
the purchase of Securities. Upon receiving notice of an Asset Sale Offer,
Holders may elect to tender their Securities in whole or in part in integral
multiples of $1,000 in exchange for cash. To the extent that Holders properly
tender Securities in an amount exceeding the Asset Sale Offer, Securities of
tendering Holders shall be repurchased on a pro rata basis (based on amounts
tendered).
(e) In the event the Company is required to make an Asset Sale Offer
at a time when the Company is prohibited from making such Offer, the Company
shall, on or prior to the date that the Company is required to make an Asset
Sale Offer, (i) seek the consent of its lenders to repurchase Securities
pursuant to such Asset Sale Offer or (ii) refinance the Indebtedness that
prohibits such Asset Sale Offer; provided, however, that the failure to make or
-------- -------
consummate the Asset Sale Offer as provided herein shall constitute an Event of
Default.
(f) The Company shall comply, to the extent applicable, with the
requirements of Rule 14e-1 under the Exchange Act, any other tender offer rules
under the Exchange Act and other securities laws or regulations in connection
with any offer to repurchase and the repurchase of the Securities as described
above.
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(g) The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, create or permit to exist or become effective any consensual
restriction (other than restrictions not more restrictive taken as a whole (as
determined in good faith by the chief financial officer of the Company) than
those in effect under Existing Indebtedness, and Indebtedness under the Bank
Credit Facility) that would materially impair the ability of the Company to
comply with the provisions of this Section 1009.
Section 1010. Limitation on Sale and Leaseback Transactions.
---------------------------------------------
The Company shall not, and shall not permit any Restricted Subsidiary
to, enter into any Sale and Leaseback Transaction unless (i) at the time of the
occurrence of such transaction and after giving effect to such transaction and
(x) in the case of a Sale and Leaseback Transaction which is a Capitalized Lease
Obligation, giving effect to the Indebtedness in respect thereof, and (y) in the
case of any other Sale and Leaseback Transaction, giving effect to the
Attributable Indebtedness in respect thereof, the Company or such Restricted
Subsidiary could incur $1.00 of additional Indebtedness pursuant to the initial
paragraph under Section 1008 hereof, (ii) at the time of the occurrence of such
transaction, the Company or such Restricted Subsidiary could incur Indebtedness
secured by a Lien on property in a principal amount equal to or exceeding the
Attributable Indebtedness in respect of such Sale and Leaseback Transaction
pursuant to Section 1012 hereof, and (iii) the transfer of assets in such Sale
and Leaseback Transaction is permitted by, and the Company applies the proceeds
of such transaction in compliance with, Section 1009 hereof.
Section 1011. Limitation on Transactions With Affiliates.
------------------------------------------
(a) The Company and its Restricted Subsidiaries shall not, directly
or indirectly, enter into any transaction or series of related transactions with
or for the benefit of any of their respective Affiliates other than with the
Company or any Restricted Subsidiaries, except on an arm's-length basis and if
(x)(i) in the case of any such transaction in which the aggregate rental value,
remuneration or other consideration (including the value of a loan), together
with the aggregate rental value, remuneration or other consideration (including
the value of a loan) of all such other transactions consummated in the year
during which such transaction is proposed to be consummated, exceeds $500,000,
the Company delivers Board Resolutions to the Trustee evidencing that the Board
of Directors and the Independent Directors that are disinterested each have (by
a majority vote) determined in good faith that the aggregate rental value,
remuneration or other consideration (including the value
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of any loan) inuring to the benefit of such Affiliate from any such transaction
is not greater than that which would be charged to or extended by the Company or
its Subsidiaries, as the case may be, on an arm's-length basis for similar
properties, assets, rights, goods or services by or to a Person not affiliated
with the Company or its Subsidiaries, as the case may be, and (ii) in the case
of any such transaction in which the aggregate rental value, remuneration or
other consideration (including the value of any loan), together with the
aggregate rental value, remuneration or other consideration (including the value
of any loan) of all such other transactions consummated in the year during which
such transactions are proposed to be consummated, exceeds $5,000,000, the
Company delivers to the Trustee Board Resolutions as described in clause
(a)(x)(i) of this Section 1011 and an opinion of a nationally recognized
investment banking firm, unaffiliated with the Company and the Affiliate which
is party to such transaction, to the effect that the aggregate rental price,
remuneration or other consideration (including the value of a loan) inuring to
the benefit of such Affiliate from any such transaction is not greater than that
which would be charged to or extended by the Company or its Subsidiaries, as the
case may be, on an arm's-length basis for similar properties, assets, rights,
goods or services by or to a Person not affiliated with the Company or its
Subsidiaries, as the case may be, and (y) all such transactions referred to in
clauses (a)(x)(i) and (a)(x)(ii) of this Section 1011 are entered into in good
faith. Any transaction required to be approved by Independent Directors
pursuant to the preceding paragraph must be approved by at least one such
Independent Director.
(b) The provisions of the preceding paragraph do not prohibit (i) any
Restricted Payment permitted to be paid pursuant to the provisions of Section
1006 hereof, (ii) any issuance of securities, or other payments, awards or
grants in cash, securities or otherwise pursuant to, or the funding of,
employment arrangements, stock options and stock ownership plans approved by the
Board of Directors, (iii) loans or advances to employees in the ordinary course
of business consistent with past practices, not to exceed $500,000 aggregate
principal amount outstanding at any time, (iv) the payment of fees and
compensation paid to, and indemnity provided on behalf of, officers, directors,
employees or consultants of the Company or any of its Subsidiaries, as
determined by the board of directors of the Company or any of its Subsidiaries
in good faith, (v) the payment of fees of approximately $1,600,000 and related
expenses to Interlaken Capital, Inc. for its financial advisory services to the
Company with respect to the Acquisition, the offering of the Securities and the
other financings entered into in connection therewith, and (vi) Existing
Affiliate Agreements, including amendments thereto entered into after the
Closing Date provided that the terms of any such amendment either (A) are not,
in the aggregate, less favorable to the Company than the terms of
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such agreement prior to such amendment, or (B) if such terms are, in the
aggregate, less favorable to the Company, such amendment satisfies the
requirements of the preceding paragraph.
Section 1012. Limitation on Liens.
-------------------
The Company shall not, and shall not permit any Restricted Subsidiary
to, create, incur, assume or suffer to exist any Lien upon any of their
respective assets or properties now owned or acquired after the Closing Date, or
any income or profits therefrom, unless the Securities are directly secured
equally and ratably (or prior to in the case of Liens with respect to
Indebtedness subordinated to the Securities or the Guarantees, as the case may
be), excluding, however, from the operation of the foregoing any of the
following:
(a) Liens existing as of the Closing Date or pursuant to an agreement
in existence on the Closing Date, including the Bank Credit Facility;
(b) Permitted Liens;
(c) Liens on assets or properties of the Company, or on assets or
properties of Restricted Subsidiaries of the Company, to secure the payment
of all or a part of the purchase price of assets or property acquired or
constructed in the ordinary course of business after the Closing Date;
provided, however, that (i) the aggregate principal amount of Indebtedness
-------- -------
secured by such Liens shall not exceed the original cost or purchase price
of the assets or property so acquired or constructed, (ii) the Indebtedness
secured by such Liens shall be otherwise permitted to be incurred hereunder
and (iii) such Liens shall not encumber any other assets or property of the
Company or any of its Restricted Subsidiaries and the Indebtedness secured
by the Lien shall not be created more than 90 days after the later of the
acquisition, completion of construction, repair, improvement, addition or
commencement of full operation of the property subject to the Lien;
(d) Liens on the assets or property acquired by the Company or any
Restricted Subsidiary after the Closing Date; provided, however, that (i)
-------- -------
such Liens existed on the date such asset or property was acquired and were
not incurred as a result of or in anticipation of such acquisition and (ii)
such Liens shall not extend to or cover any property or assets of the
Company or any of its Restricted Subsidiaries other than the property or
assets so acquired;
(e) Liens securing Indebtedness which is incurred to refinance
Indebtedness which has been secured by a Lien permitted under the Indenture
and which shall be permitted
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to be refinanced under the Indenture; provided, however, that such Liens
-------- -------
shall not extend to or cover any property or assets of the Company or any
of its Restricted Subsidiaries not securing the Indebtedness so refinanced;
(f) Liens on assets or property of the Company or any Restricted
Subsidiary that shall be subject to a Sale and Leaseback Transaction,
provided, that the aggregate principal amount of Attributable Indebtedness
--------
in respect of all Sale and Leaseback Transactions then outstanding shall
not at the time such a Lien is incurred exceed $5,000,000;
(g) Liens on property or shares of Capital Stock of a Person at the
time such Person becomes a Restricted Subsidiary; provided, however, that
-------- -------
such Liens were not created, incurred or assumed in contemplation of the
acquisition thereof by the Company or a Subsidiary; provided further, that
such Liens shall not extend to any other property owned by the Company or a
Restricted Subsidiary;
(h) Liens securing Indebtedness of a Restricted Subsidiary owing to
the Company or a wholly-owned Restricted Subsidiary;
(i) Liens on inventory or accounts receivable of any Restricted
Subsidiary securing the obligations under clause (e) of the definition of
"Permitted Indebtedness" in Section 101 hereof; and
(j) Liens on PCAC's St. Gabriel, Louisiana and Henderson, Nevada
plants to secure the Guarantee of PCAC and the guarantee of PCAC with
respect to the Bank Credit Facility if the Exchange Notes are issued or the
Securities are registered pursuant to any resale registration statement as
provided in the Registration Rights Agreement.
Section 1013. Corporate Existence.
-------------------
Subject to Article Eight, the Company shall do or cause to be done all
things necessary to preserve and keep in full force and effect (i) its corporate
existence and the corporate existence of each of its Subsidiaries, in accordance
with their respective organizational documents (as the same may be amended from
time to time) and (ii) its (and its Subsidiaries) rights (charter and
statutory), licenses and franchises; provided, however, that the Company shall
-------- -------
not be required to preserve any such right, license or franchise, or the
corporate existence of any Subsidiary, if the Board of Directors shall determine
that the preservation thereof is no longer desirable in the conduct of the
business of the Company and its Subsidiaries taken as a whole and that the loss
thereof is not adverse in any material respect to the Holders.
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Section 1014. Change of Control.
-----------------
(a) In the event of a Change of Control (the date of such occurrence
being the "Change of Control Date"), the Company shall notify the Holders in
writing of such occurrence and shall make an irrevocable offer (the "Change of
Control Offer") to purchase on a Business Day (the "Change of Control Payment
Date") not later than 60 days following the Change of Control Date, all
Securities then outstanding at a purchase price (the "Change of Control Purchase
Price") equal to 101% of the principal amount thereof plus accrued and unpaid
interest, if any, to the Change of Control Payment Date.
(b) Notice of a Change of Control Offer shall be mailed by the
Company to the Holders at their registered addresses not less than 30 days nor
more than 45 days before the Change of Control Payment Date. The Change of
Control Offer shall remain open for at least 20 Business Days and until 5:00
p.m., New York City time, on the Business Day next preceding the Change of
Control Payment Date. Substantially simultaneously with mailing of the notice,
the Company shall cause a copy of such notice to be published in a newspaper of
general circulation in the Borough of Manhattan, The City of New York.
(c) The notice, which governs the terms of the Change of Control
Offer, shall state:
(i) that the Change of Control Offer is being made pursuant to this
Section 1014 and that all Securities (or portions thereof) tendered will be
accepted for payment;
(ii) the Change of Control Purchase Price and the Change of Control
Payment Date;
(iii) that any Securities not surrendered or accepted for payment shall
continue to accrue interest;
(iv) that, unless the Company defaults in the payment of the Change of
Control Purchase Price, any Securities accepted for payment pursuant to the
Change of Control Offer shall cease to accrue interest after the Change of
Control Payment Date;
(v) that any Holder electing to have a Security purchased (in whole
or in part) pursuant to a Change of Control Offer shall be required to
surrender the Security, with the form entitled "Option of Holder to Elect
Purchase" on the reverse of the Security completed, to the Paying Agent at
the address specified in the notice (or otherwise make effective delivery
of the Security pursuant to book-entry procedures and the related rules of
the applicable
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Depositary) at least five Business Days before the Change of Control
Payment Date;
(vi) that any Holder shall be entitled to withdraw its election if the
Paying Agent receives, not later than three (3) Business Days prior to the
Change of Control Payment Date, a telegram, telex, facsimile transmission
or letter setting forth the name of the Holder, the principal amount of the
Security the Holder delivered for purchase, the certificate number of the
Security and a statement that such Holder is withdrawing his or her
election to have such Security purchased;
(vii) that Holders whose Securities are purchased only in part shall be
issued Securities representing the unpurchased portion of the Securities
surrendered, which unpurchased portion must be equal to $1,000 principal
amount or an integral multiple thereof;
(viii) the instructions that Holders must follow in order to tender
their Securities; and
(ix) the circumstances and relevant facts regarding such Change of
Control (including but not limited to information with respect to pro forma
financial information after giving effect to such Change of Control, and
information regarding the Persons acquiring control).
(d) On the Change of Control Payment Date, the Company shall:
(i) accept for payment the Securities, or portions thereof,
surrendered and properly tendered and not withdrawn, pursuant to the Change
of Control Offer;
(ii) deposit with the Paying Agent money sufficient to pay the Change
of Control Purchase Price of all the Securities, or portions thereof, so
accepted; and
(iii) deliver to the Trustee the Securities so accepted together with
an Officers' Certificate stating that such Securities have been accepted
for payment by the Company.
The Paying Agent shall promptly mail or deliver to Holders of Securities so
accepted payment in an amount equal to the Change of Control Purchase Price and
the Trustee shall promptly authenticate and mail to such Holders a new Security
equal in principal amount to the unpurchased portion of the Security
surrendered.
(e) Subject to applicable escheat laws, as provided in the
Securities, the Trustee and the Paying Agent shall upon the
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Company's written request return to the Company any cash that remains unclaimed,
together with interest or dividends, if any, thereon, held by them for the
payment of the Change of Control Purchase Price; provided, however, that (x) to
-------- -------
the extent that the aggregate amount of cash deposited by the Company pursuant
to clause (ii) of paragraph (d) above exceeds the aggregate Change of Control
Purchase Price of the Securities or portions thereof to be purchased, then the
Trustee shall hold such excess for the Company and (y) unless otherwise directed
by the Company in writing, promptly after the Business Day following the Change
of Control Payment Date the Trustee shall return any such excess to the Company
together with interest, if any, thereon.
(f) The Company shall comply, to the extent applicable, with the
requirements of Rule 14e-1 under the Exchange Act, any other tender offer rules
under the Exchange Act and other securities laws or regulations in connection
with the offer to repurchase and the repurchase of the Securities as described
above.
(g) In the event a Change of Control occurs at a time when the
Company is prohibited from purchasing Securities, the Company shall, within
thirty (30) days following a Change of Control (i) seek the consent of its
lenders to the purchase of the Securities or (ii) refinance the Indebtedness
that prohibits such purchase; provided, however, that the failure to make or
-------- -------
consummate the Change of Control Offer shall constitute an Event of Default.
(h) The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, create or permit to exist or become effective any restriction
(other than restrictions not more restrictive taken as a whole (as determined in
good faith by the chief financial officer of the Company) than those in effect
under Existing Indebtedness and Indebtedness under the Bank Credit Facility)
that would materially impair the ability of the Company to make a Change of
Control Offer to purchase the Securities or, if such Change of Control Offer is
made, to pay for the Securities tendered for purchase.
Section 1015. Maintenance of Properties.
-------------------------
The Company shall, and shall cause its Restricted Subsidiaries to,
maintain their respective properties and assets in normal working order and
condition as on the Closing Date (reasonable wear and tear excepted) and make
all repairs, renewals, replacements, additions, betterments and improvements
thereto, as shall be reasonably necessary for the proper conduct of the business
of the Company and its Restricted Subsidiaries taken as a whole, provided that
--------
nothing herein shall prevent the Company or any of its Restricted Subsidiaries
from discontinuing any maintenance of any such properties if such discontinuance
is
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desirable in the conduct of the business of the Company and its Restricted
Subsidiaries taken as a whole.
Section 1016. Maintenance of Insurance.
------------------------
The Company shall, and shall cause its Restricted Subsidiaries to
maintain liability, casualty and other insurance (subject to customary
deductibles and retentions) with responsible insurance companies in such amounts
and against such risks as is customarily carried by responsible companies
engaged in similar businesses and owning similar assets in the general areas in
which the Company and its Restricted Subsidiaries operate (which may include
self-insurance in comparable form to that maintained by such responsible
companies).
Section 1017. [Intentionally omitted].
Section 1018. Money for Security Payments to Be Held in Trust.
-----------------------------------------------
If the Company shall at any time act as its own Paying Agent, it
shall, on or before each due date of the principal of, premium, if any, or
interest on any of the Securities, segregate and hold in trust for the benefit
of the Holders entitled thereto a sum sufficient to pay the principal, 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 shall promptly notify
the Trustee of its action or failure so to act.
If the Company is not acting as Paying Agent, the Company shall,
before 10:00 a.m. New York City time on each due date of the principal of,
premium, if any, or interest on any Securities, deposit with a Paying Agent a
sum in same day funds sufficient to pay the principal, 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 Company shall promptly notify the Trustee of such
action or any failure so to act.
If the Company is not acting as Paying Agent, the Company shall 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 shall:
(a) hold all sums held by it for the payment of the principal of,
premium, if any, or interest on Securities 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;
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(b) give the Trustee notice of any Default by the Company or any
Subsidiary Guarantor (or any other obligor upon the Securities) in the
making of any payment of principal, premium, if any, or interest;
(c) 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; and
(d) acknowledge, accept and agree to comply in all aspects with the
provisions of this Indenture relating to the duties, rights and
disabilities of such Paying Agent.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Company Order direct any Paying Agent to pay, to the Trustee all sums held in
trust by the Company or such Paying Agent, such sums to be held by the Trustee
upon the same trusts as those upon which such sums were held by the Company 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 money.
Any money deposited with the Trustee or any Paying Agent, or then held
by the Company, in trust for the payment of the principal of, premium, if any,
or interest on any Security and remaining unclaimed for two years after such
principal and premium, if any, or interest has become due and payable shall
promptly be paid to the Company on Company Request, or (if then held by the
Company) shall be discharged from such trust; and the Holder of such Security
shall thereafter, as an unsecured general creditor, look only to the Company for
payment thereof, and all liability of the Trustee or such Paying Agent with
respect to such trust money, and all liability of the Company 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 Company cause to be published once, in the New York Times and The
Wall Street Journal (national edition), notice that such money remains unclaimed
and that, after a date specified therein, which shall not be less than thirty
(30) days from the date of such notification or publication, any unclaimed
balance of such money then remaining shall promptly be repaid to the Company.
Section 1019. Subsidiary Guarantees.
---------------------
(a) If (i) any Subsidiary of the Company becomes a Restricted
Subsidiary after the Closing Date, (ii) the Company or any Subsidiary of the
Company that is a Subsidiary Guarantor transfers or causes to be transferred, in
one transaction or a series of related transactions, property or assets
(including,
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without limitation, businesses, divisions, real property, assets or equipment)
which in the aggregate have a value equal to or greater than 15% of the
Company's and its Subsidiaries' total assets determined on a consolidated basis
as of the time of transfer to any Subsidiary or Subsidiaries of the Company that
is not a Subsidiary Guarantor or are not Subsidiary Guarantors, or (iii) any
Subsidiary of the Company which has a value equal to or greater than 5% of the
Company's and its Subsidiaries' total assets determined on a consolidated basis
as of the time of determination directly or indirectly guarantees or otherwise
becomes obligated with respect to any Senior Indebtedness of the Company, the
Company shall cause such Subsidiary or Subsidiaries to execute and deliver to
the Trustee a supplemental indenture pursuant to which such Subsidiary or
Subsidiaries shall unconditionally guarantee, in accordance with Article
Thirteen hereof, all of the Company's obligations under the Indenture and the
Securities on the same terms as the other Subsidiary Guarantors, which Guarantee
shall rank pari passu with any Senior Indebtedness of such Subsidiary. The
provisions of this Section 1019 shall not apply to the transfer of assets or
property by Imperial West in connection with the Imperial West Joint Venture.
(b) Each guarantee created pursuant to the provisions described in
the foregoing paragraph is referred to as a "Guarantee" and the issuer of each
such Guarantee is referred to as a "Subsidiary Guarantor." Notwithstanding the
foregoing, any Guarantee by a Subsidiary of the Securities 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 an Affiliate of the
Company, of all of the Company's Equity Interest in (or if such Subsidiary is
owned by a Restricted Subsidiary, of all of such Restricted Subsidiary's Equity
Interest in), or all or substantially all the assets of, such Subsidiary, which
is in compliance with this Indenture.
Section 1020. Limitation on Ownership of Restricted Subsidiary Stock.
-------------------------------------------------------
The Company shall not permit any Person (other than the Company or one
or more wholly-owned Restricted Subsidiaries) to own any Capital Stock of any
Restricted Subsidiary; provided, however, that this Section 1020 does not
-------- -------
prohibit (x) the issuance and sale of all, but not less than all, of the issued
and outstanding Capital Stock of any Restricted Subsidiary owned by the Company
or any of its Subsidiaries in compliance with the other provisions of this
Indenture or (y) the ownership by directors of director's qualifying shares or
the ownership by foreign nationals of Capital Stock of any Restricted
Subsidiary, to the extent mandated by applicable law.
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Section 1021. Limitation on Applicability of Certain Covenants.
-------------------------------------------------
Notwithstanding anything to the contrary herein, the covenants set
forth in Sections 1005, 1006, 1007, 1008, 1009, 1011, and 1012 hereof shall not
apply to transactions effected pursuant to and in accordance with the Contingent
Payment Agreement and amounts related to such transactions shall not be required
to be included in any calculation required by any such covenant. Such
transactions include (i) any payment made by the Company or a Restricted
Subsidiary, (ii) any assets or property transferred by the Company or a
Restricted Subsidiary, (iii) the application of any proceeds received by the
Company or any Restricted Subsidiary in connection with any transfer of assets
or property made by such Person, (iv) any escrow or segregation of moneys to be
paid by the Company or a Restricted Subsidiary, (v) any Investment of such
escrowed or segregated moneys by the Company or a Restricted Subsidiary or any
other Investment under the Contingent Payment Agreement, (vi) any obligation of
the Company or a Restricted Subsidiary to make any such payments or to effect
any such escrow or segregation of moneys, (vii) any Indebtedness incurred by the
Company or a Restricted Subsidiary that is non-recourse to the assets of the
Company, such Restricted Subsidiary or any other Restricted Subsidiary, other
than the borrower's interest in Basic Investments, Inc., Victory Valley Land
Company, L.P., the Excess Land and/or any other assets or funds held under the
Contingent Payment Agreement, and as to which neither the Company nor any
Restricted Subsidiary (other than the borrower) provides credit support or is
directly or indirectly liable, or (viii) any Lien incurred by the Company or any
Restricted Subsidiary in connection with Indebtedness described in clause (vii)
above that does not extend to assets of the Company or any Restricted Subsidiary
other than such Person's interest in Basic Investments, Inc., Victory Valley
Land Company, L.P., the Excess Land and/or any other assets or funds held under
the Contingent Payment Agreement.
ARTICLE ELEVEN
REDEMPTION OF SECURITIES
Section 1101. Rights of Redemption.
--------------------
The Securities shall not be redeemable at the option of the Company
prior to April 1, 2000. On or after that date, the Securities shall be
redeemable at the option of the Company, in whole or in part from time to time,
on not less than thirty (30) nor more than sixty (60) days' prior notice, mailed
by first-class mail to the Holders' registered addresses, in cash, at the
following redemption prices (expressed as percentages of the principal amount),
if redeemed in the 12-month period commencing
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April 1 in the year indicated below, in each case plus accrued and unpaid
interest to the date fixed for redemption:
Year Redemption
---- ----------
2000 106.6875%
2001 105.0156%
2002 103.3438%
2003 101.6719%
2004 and thereafter 100.0000%
Notwithstanding the foregoing, at any time prior to April 1, 1998, the
Company may redeem, in part, up to $35,000,000 in aggregate principal amount of
Securities at a purchase price of 113% of the principal amount thereof, plus
accrued and unpaid interest, if any, to the date fixed for redemption, with the
net proceeds of (i) any public offering of Common Stock of the Company or (ii)
any public offering of Common Stock of GEV, but only to the extent that GEV
contributes such net proceeds to the Company as a capital contribution; provided
that at least $100,000,000 aggregate principal amount of the Securities must
remain outstanding after such redemption. In order to effect the foregoing
redemption, the Company shall be required to send the redemption notice not
later than sixty (60) days after the receipt of the proceeds of such public
offering.
Securities may be redeemed or repurchased as set forth in Sections
1009, 1014 and 1109 hereof. Any redemption pursuant to this Section 1101 shall
be made pursuant to the provisions of Sections 1102 through 1108 hereof.
Section 1102. Applicability of Article.
------------------------
Redemption of Securities at the election of the Company or otherwise,
as permitted or required by any provision of this Indenture, shall be made in
accordance with such provision and this Article.
Section 1103. Election to Redeem; Notice to Trustee.
-------------------------------------
The election of the Company to redeem any Securities pursuant to
Section 1101 hereof shall be evidenced by a Company Order and an Officers'
Certificate. In case of any redemption at the election of the Company, the
Company shall, not less than forty-five (45) nor more than sixty (60) days prior
to the Redemption Date fixed by the Company (unless a shorter notice period
shall be satisfactory to the Trustee), notify the Trustee in writing of such
Redemption Date, the Redemption Price and of the principal amount of Securities
to be redeemed.
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Section 1104. Selection by Trustee of Securities to Be Redeemed.
-------------------------------------------------
If less than all the Securities are to be redeemed, the particular
Securities or portions hereof to be redeemed shall be selected not more than
thirty (30) days prior to the Redemption Date by the Trustee, from the
Outstanding Securities not previously called for redemption, pro rata, by lot or
such other method as the Trustee shall deem fair and appropriate, and the
amounts to be redeemed may be equal to $1,000 or any integral multiple thereof.
The Trustee shall promptly notify the Company and the Security
Registrar in writing of the Securities selected for redemption and, in the case
of any Securities 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 Securities shall relate, in
the case of any Security redeemed or to be redeemed only in part, to the portion
of the principal amount of such Security which has been or is to be redeemed.
Section 1105. Notice of Redemption.
--------------------
Notice of redemption shall be given by first-class mail, postage
prepaid, mailed not less than thirty (30) nor more than sixty (60) days prior to
the Redemption Date, to each Holder of Securities to be redeemed, at his address
appearing in the Security Register.
All notices of redemption shall state:
(a) the Redemption Date;
(b) the Redemption Price;
(c) if less than all Outstanding Securities are to be redeemed, the
identification of the particular Securities to be redeemed;
(d) in the case of a Security to be redeemed in part, the principal
amount of such Security to be redeemed and that after the Redemption Date
upon surrender of such Security, new Security or Securities in the
aggregate principal amount equal to the unredeemed portion thereof will be
issued;
(e) that Securities called for redemption must be surrendered to the
Paying Agent to collect the Redemption Price;
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(f) that on the Redemption Date the Redemption Price will become due
and payable upon each such Security or portion thereof, and that (unless
the Company shall default in payment of the Redemption Price) interest
thereon shall cease to accrue on and after said date;
(g) the place or places where such Securities are to be surrendered
for payment of the Redemption Price;
(h) the paragraph of the Securities and/or Section of this Indenture
pursuant to which the Securities called for redemption are being redeemed;
and
(i) the CUSIP number, if any, relating to such Securities.
Notice of redemption of Securities to be redeemed at the election of
the Company shall be given by the Company or, at the Company's written request,
by the Trustee in the name and at the expense of the Company.
The notice if mailed in the manner herein provided shall be
conclusively presumed to have been given, whether or not the Holder receives
such notice. In any case, failure to mail such notice, or any defect in any
notice so mailed, to any particular Holder of any Security designated for
redemption as a whole or in part shall not affect the validity of the
proceedings for the redemption of any other Security.
Section 1106. Deposit of Redemption Price.
---------------------------
On or prior to 10:00 a.m. New York City time on any Redemption Date,
the Company shall deposit with the Trustee or with a Paying Agent (or if the
Company is acting as its own Paying Agent, segregate and hold in trust as
provided in Section 1018 hereof) an amount of money in same day funds sufficient
to pay the Redemption Price of and (except if the Redemption Date shall be an
Interest Payment Date) accrued interest on, all the Securities or portions
thereof which are to be redeemed on that date. When the Redemption Date falls
on an Interest Payment Date, payments of interest due on such date are to be
paid as provided hereunder as if no such redemption were occurring.
Section 1107. Securities Payable on Redemption Date.
-------------------------------------
Notice of redemption having been given as aforesaid, the Securities so
to be redeemed shall, on the Redemption Date, become due and payable at the
Redemption Price therein specified and from and after such date (unless the
Company shall default in the payment of the Redemption Price and accrued
interest) such Securities shall cease to bear interest. Upon surrender of any
such Security for redemption in accordance with said notice, such
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Security shall be paid by the Company at the Redemption Price together with
accrued interest 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 Securities, or one or more Predecessor
Securities, registered as such on the relevant Regular Record Dates according to
the terms and the provisions of Section 309 hereof.
If any Security 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 such
Security.
Section 1108. Securities Redeemed or Purchased in Part.
----------------------------------------
Any Security which is to be redeemed or purchased only in part shall
be surrendered to the Paying Agent at the office or agency maintained for such
purpose pursuant to Section 1002 hereof (with, if the Company, the Security
Registrar or the Trustee so requires, due endorsement by, or a written
instrument of transfer in form satisfactory to the Company, the Security
Registrar or the Trustee duly executed by, the Holder thereof or such Holder's
attorney duly authorized in writing), and the Company shall execute, and the
Trustee shall authenticate and deliver to the Holder of such Security without
service charge, a new Security or Securities, 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 Security so surrendered that
is not redeemed or purchased.
Section 1109. Asset Sale Offers.
-----------------
In the event that the Company shall commence an Asset Sale Offer
pursuant to Section 1009 hereof, it shall follow the procedures specified below.
The Asset Sale Offer shall remain open for twenty (20) Business Days
after the date on which such Asset Sale Offer is commenced (the "Commencement
Date") except to the extent required to be extended pursuant to applicable law
(as so extended, the "Asset Sale Offer Period"). No later than one Business Day
after the termination of the Asset Sale Offer Period (the "Asset Sale Purchase
Date"), the Company shall purchase the principal amount (the "Asset Sale Offer
Amount") of Securities required pursuant to Section 1009 hereof to be purchased
in such Asset Sale Offer or, if less than the Asset Sale Offer Amount has been
tendered, all Securities tendered in response to the Asset Sale Offer.
If the Asset Sale Purchase Date is on or after a Regular Record Date
and on or before the related Interest Payment Date, any accrued interest shall
be paid to the Person in whose
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name a Security is registered at the close of business on such Regular Record
Date, and no additional interest shall be payable to Holders who tender
Securities pursuant to the Asset Sale Offer.
On the Commencement Date of any Asset Sale Offer, the Company shall
send or cause to be sent, by first class mail, a notice to each of the Holders,
with a copy to the Trustee. Such notice, which shall govern the terms of the
Asset Sale Offer, shall contain all instructions and materials necessary to
enable the Holders to tender Securities pursuant to the Asset Sale Offer and
shall state:
(1) that the Asset Sale Offer is being made pursuant to Section 1009
hereof and this Section 1109 and the length of time the Asset Sale Offer
shall remain open;
(2) the Asset Sale Offer Amount, the Asset Sale Purchase Price and
the Asset Sale Purchase Date;
(3) that any Security not tendered or accepted for payment shall
continue to accrue interest in accordance with this Indenture;
(4) that, unless the Company defaults in the payment of the Asset
Sale Purchase Price, all Securities accepted for payment pursuant to the
Asset Sale Offer shall cease to accrue interest after the Asset Sale
Purchase Date;
(5) that Holders electing to have Securities purchased pursuant to
any Asset Sale Offer shall be required to surrender the Security, with the
form entitled "Option of Holder to Elect Purchase" on the reverse of the
Security completed, to the Company, a depositary, if appointed by the
Company, or a Paying Agent at the address specified in the notice prior to
the close of business on the Business Day preceding the Asset Sale Purchase
Date;
(6) that Holders shall be entitled to withdraw their election if the
Company, Depositary or Paying Agent, as the case may be, receives not later
than the close of business on the Business Day preceding the termination of
the Asset Sale Offer Period, a telegram, telex, facsimile transmission or
letter setting forth the name of the Holder, the principal amount of the
Security the Holder delivered for purchase, the certificate number on the
Security and a statement that such Holder is withdrawing his election to
have the Security purchased;
(7) that, if the aggregate principal amount of Securities surrendered
by Holders exceeds the Asset Sale Offer Amount, the Company shall select
the Securities to be
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purchased on a pro rata basis (with such adjustments as may be deemed
appropriate by the Company so that only Securities in denominations of
$1,000, or integral multiples thereof, shall be purchased); and
(8) that Holders whose Securities are purchased only in part shall be
issued new Securities equal in principal amount to the unpurchased portion
of the Securities surrendered, which unpurchased portion must be equal to
$1,000 principal amount or an integral multiples thereof.
On or before 10:00 a.m. New York City time on each Asset Sale Purchase
Date, the Company shall irrevocably deposit with the Trustee or Paying Agent in
immediately available funds the aggregate Asset Sale Purchase Price with respect
to a principal amount of Securities equal to the Asset Sale Offer Amount,
together with accrued interest thereon, to be held for payment in accordance
with the terms of this Section 1109. On the Asset Sale Purchase Date, the
Company shall, to the extent lawful, (i) accept for payment, on a pro rata basis
to the extent necessary, an aggregate principal amount equal to the Asset Sale
Offer Amount of Securities tendered pursuant to the Asset Sale Offer, or if less
than the Asset Sale Offer Amount has been tendered, all Securities or portions
thereof tendered, (ii) deliver, or cause the Paying Agent or depositary, as the
case may be, to deliver to the Trustee Securities so accepted and (iii) deliver
to the Trustee an Officers' Certificate stating that such Securities or portions
thereof were accepted for payment by the Company in accordance with the terms of
this Section 1109. The Company, a depositary or Paying Agent, as the case may
be, shall promptly (but in any case not later than two (2) Business Days after
the Asset Sale Purchase Date) mail or deliver to each tendering Holder an amount
equal to the Asset Sale Purchase Price with respect to the Securities tendered
by such Holder and accepted by the Company for purchase, and the Company shall
promptly issue a new Security, and the Trustee shall authenticate and mail or
deliver such new Security, to such Holder, equal in principal amount to any
unpurchased portion of such Holder's Securities surrendered. Any Security not
accepted in the Asset Sale Offer shall be promptly mailed or delivered by the
Company to the Holder thereof. The Company shall publicly announce in a
newspaper of general circulation the results of the Asset Sale Offer on the
Asset Sale Purchase Date.
The Asset Sale Offer shall be made by the Company in compliance with
all applicable laws, including, without limitation, the requirements of Rule
14e-1 under the Exchange Act, any other tender offer rules under the Exchange
Act and all other applicable federal and state securities laws.
Subject to applicable escheat laws, as provided in the Securities, the
Trustee and the Paying Agent shall return to the
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Company any cash that remains unclaimed, together with interest, if any,
thereon, held by them for the payment of the Asset Sale Purchase Price;
provided, however, that (x) to the extent that the aggregate amount of an Asset
-------- -------
Sale Offer exceeds the aggregate Asset Sale Purchase Price of the Securities or
portions thereof to be purchased, the Trustee shall hold such excess for the
Company and (y) unless otherwise directed by the Company in writing, promptly
after the Business Day following the Asset Sale Purchase Date the Trustee shall
return any such excess to the Company together with interest or dividends, if
any, thereon.
Other than as specifically provided in this Section 1109, each
purchase pursuant to this Section 1109 shall be made pursuant to the provisions
of Sections 1101 through 1108 hereof.
ARTICLE TWELVE
SATISFACTION AND DISCHARGE
Section 1201. Satisfaction and Discharge of Indenture.
---------------------------------------
This Indenture shall cease to be of further effect (except as to
surviving rights of registration of transfer or exchange of Securities herein
expressly provided for) and the Trustee, on demand of and at the expense of the
Company, shall execute proper instruments acknowledging satisfaction and
discharge of this Indenture, when
(a) either
(1) all the Securities theretofore authenticated and delivered
(other than (i) Securities which have been destroyed, lost or stolen
and which have been replaced or paid as provided in Section 308 hereof
or (ii) all Securities for whose payment United States dollars have
theretofore been deposited in trust or segregated and held in trust by
the Company and thereafter repaid to the Company or discharged from
such trust, as provided in Section 1018 hereof) have been delivered to
the Trustee for cancellation; or
(2) all such Securities not theretofore delivered to the Trustee
for cancellation (x) have become due and payable, (y) shall become due
and payable at their 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, and at the expense, of the Company, and the Company or
any Subsidiary Guarantor, in the case of (2)(x), (y) or (z) above, has
irrevocably deposited or caused to be
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deposited with the Trustee as trust funds in trust for the purpose an
amount in United States dollars sufficient to pay and discharge the
entire Indebtedness on the Securities not theretofore delivered to the
Trustee for cancellation, for the principal of, premium, if any, and
accrued interest at such Stated Maturity or Redemption Date;
(b) the Company or any Subsidiary Guarantor has paid or caused to be
paid all other sums payable hereunder by the Company or any Subsidiary
Guarantor; and
(c) the Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel stating that (i) all conditions precedent herein
provided for relating to the satisfaction and discharge of this Indenture
have been complied with and (ii) such satisfaction and discharge shall not
result in a breach or violation of or constitute a default under, this
Indenture or any other material agreement or instrument to which the
Company or any Subsidiary Guarantor is a party or by which the Company or
any Subsidiary Guarantor is bound.
Opinions of Counsel required to be delivered under this Section may
have qualifications customary for opinions of the type required and counsel
delivering such Opinions of Counsel may rely on certificates of the Company or
government or other officials customary for opinions of the type required,
including certificates certifying as to matters of fact, including that various
financial covenants have been complied with.
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company to the Trustee under Section 606 hereof and, if
United States dollars shall have been deposited with the Trustee pursuant to
subclause (2) of Subsection (a) of this Section, the obligations of the Trustee
under Section 1202 and the last paragraph of Section 1018 hereof shall survive.
Section 1202. Application of Trust Money.
--------------------------
Subject to the provisions of the last paragraph of Section 1018
hereof, all United States dollars deposited with the Trustee pursuant to Section
1201 hereof shall be held in trust and applied by it, in accordance with the
provisions of the Securities and this Indenture, to the payment, either directly
or through any Paying Agent (including the Company acting as its own Paying
Agent) as the Trustee may determine, to the Persons entitled thereto, of the
principal of, premium, if any, and interest on the Securities for whose payment
such United States dollars have been deposited with the Trustee.
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ARTICLE THIRTEEN
GUARANTEE
Section 1301. Subsidiary Guarantors' Guarantee.
--------------------------------
For value received, each of the Subsidiary Guarantors, in accordance
with this Article Thirteen, hereby absolutely, unconditionally and irrevocably
guarantees, jointly and severally, to the Trustee and the Holders, as if the
Subsidiary Guarantors were the principal debtor, the punctual payment and
performance when due of all Indenture Obligations (which for purposes of this
Guarantee shall also be deemed to include all commissions, fees, charges, costs
and other expenses (including reasonable legal fees and disbursements of one
counsel) arising out of or incurred by the Trustee or the Holders in connection
with the enforcement of this Guarantee).
Section 1302. Continuing Guarantee; No Right of Set-Off; Independent
------------------------------------------------------
Obligation.
----------
(a) This Guarantee shall be a continuing guarantee of the payment and
performance for all Indenture Obligations and shall remain in full force and
effect until the payment in full of all of the Indenture Obligations and shall
apply to and secure any ultimate balance due or remaining unpaid to the Trustee
or the Holders; and this Guarantee shall not be considered as wholly or
partially satisfied by the payment or liquidation at any time or from time to
time of any sum of money for the time being due or remaining unpaid to the
Trustee or the Holders. Each Subsidiary Guarantor, jointly and severally,
covenants and agrees to comply with all obligations, covenants, agreements and
provisions applicable to it in this Indenture including those set forth in
Article Eight. Without limiting the generality of the foregoing, each of the
Subsidiary Guarantors' liability shall extend to all amounts which constitute
part of the Indenture Obligations and would be owed by the Company under this
Indenture and the Securities but for the fact that they are unenforceable,
reduced, limited, impaired, suspended or not allowable due to the existence of a
bankruptcy, reorganization or similar proceeding involving the Company.
(b) Each Subsidiary Guarantor, jointly and severally, hereby
guarantees that the Indenture Obligations shall be paid to the Trustee without
set-off or counterclaim or other reduction whatsoever (whether for taxes,
withholding or otherwise) in lawful currency of the United States of America.
(c) Each Subsidiary Guarantor, jointly and severally, guarantees that
the Indenture Obligations shall be paid strictly in accordance with their terms
regardless of any law, regulation
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or order now or hereafter in effect in any jurisdiction affecting any of such
terms or the rights of the Holders of the Securities.
(d) Each Subsidiary Guarantor's liability to pay or perform or cause
the performance of the Indenture Obligations under this Guarantee shall arise
forthwith after demand for payment or performance by the Trustee has been given
to the Subsidiary Guarantors in the manner prescribed in Section 106 hereof.
(e) Except as provided herein, the provisions of this Article Thirteen
cover all agreements between the parties hereto relative to this Guarantee and
none of the parties shall be bound by any representation, warranty or promise
made by any Person relative thereto which is not embodied herein; and it is
specifically acknowledged and agreed that this Guarantee has been delivered by
each Subsidiary Guarantor free of any conditions whatsoever and that no
representations, warranties or promises have been made to any Subsidiary
Guarantor affecting its liabilities hereunder, and that the Trustee shall not be
bound by any representations, warranties or promises now or at any time
hereafter made by the Company to any Subsidiary Guarantor.
Section 1303. Guarantee Absolute.
------------------
The obligations of the Subsidiary Guarantors hereunder are independent
of the obligations of the Company under the Securities and this Indenture and a
separate action or actions may be brought and prosecuted against any Subsidiary
Guarantor whether or not an action or proceeding is brought against the Company
and whether or not the Company is joined in any such action or proceeding. The
liability of the Subsidiary Guarantors hereunder is irrevocable, absolute and
unconditional and (to the extent permitted by law) the liability and obligations
of the Subsidiary Guarantors hereunder shall not be released, discharged,
mitigated, waived, impaired or affected in whole or in part by:
(a) any defect or lack of validity or enforceability in respect of
any Indebtedness or other obligation of the Company or any other Person
under this Indenture or the Securities, or any agreement or instrument
relating to any of the foregoing;
(b) any grants of time, renewals, extensions, indulgences, releases,
discharges or modifications which the Trustee or the Holders may extend to,
or make with, the Company, any Subsidiary Guarantor or any other Person, or
any change in the time, manner or place of payment of, or in any other term
of, all or any of the Indenture Obligations, or any other amendment or
waiver of, or any consent to or
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departure from, this Indenture or the Securities, including any increase or
decrease in the Indenture Obligations;
(c) the taking of security from the Company, any Subsidiary Guarantor
or any other Person, and the release, discharge or alteration of, or other
dealing with, such security;
(d) the occurrence of any change in the laws, rules, regulations or
ordinances of any jurisdiction by any present or future action of any
governmental authority or court amending, varying, reducing or otherwise
affecting, or purporting to amend, vary, reduce or otherwise affect, any of
the Indenture Obligations and the obligations of any Subsidiary Guarantor
hereunder;
(e) the abstention from taking security from the Company, any
Subsidiary Guarantor or any other Person or from perfecting, continuing to
keep perfected or taking advantage of any security;
(f) any loss, diminution of value or lack of enforceability of any
security received from the Company, any Subsidiary Guarantor or any other
Person, and including any other guarantees received by the Trustee;
(g) any other dealings with the Company, any Subsidiary Guarantor or
any other Person, or with any security;
(h) the Trustee's or the Holder's acceptance of compositions from the
Company or any Subsidiary Guarantor;
(i) the application by the Holders or the Trustee of all monies at
any time and from time to time received from the Company, any Subsidiary
Guarantor or any other Person on account of any indebtedness and
liabilities owing by the Company or any Subsidiary Guarantor to the Trustee
or the Holders, in such manner as the Trustee or the Holders deems best and
the changing of such application in whole or in part and at any time or
from time to time, or any manner of application of collateral, or proceeds
thereof, to all or any of the Indenture Obligations;
(j) the release or discharge of the Company or any Subsidiary
Guarantor of the Securities or of any Person liable directly as surety or
otherwise by operation of law or otherwise for the Securities, other than
an express release in writing given by the Trustee, on behalf of the
Holders, of the liability and obligations of any Subsidiary Guarantor
hereunder;
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(k) any change in the name, business, capital structure or governing
instrument of the Company or any Subsidiary Guarantor or any refinancing or
restructuring of any of the Indenture Obligations;
(l) the sale of the Company's or any Subsidiary Guarantor's business
or any part thereof;
(m) subject to Section 1314 hereof, any merger or consolidation,
arrangement or reorganization of the Company, any Subsidiary Guarantor, any
Person resulting from the merger or consolidation of the Company or any
Subsidiary Guarantor with any other Person or any other successor to such
Person or merged or consolidated Person or any other change in the
corporate existence, structure or ownership of the Company or any
Subsidiary Guarantor;
(n) the insolvency, bankruptcy, liquidation, winding-up, dissolution,
receivership or distribution of the assets of the Company or its assets or
any resulting discharge of any obligations of the Company (whether
voluntary or involuntary) or of any Subsidiary Guarantor or the loss of
corporate existence;
(o) subject to Section 1314 hereof, any arrangement or plan of
reorganization affecting the Company or any Subsidiary Guarantor;
(p) any other circumstance (including any statute of limitations)
that might otherwise constitute a defense available to, or discharge of,
the Company or any Subsidiary Guarantor; or
(q) any modification, compromise, settlement or release by the
Trustee, or by operation of law or otherwise, of the Indenture Obligations
or the liability of the Company or any other obligor under the Securities,
in whole or in part, and any refusal of payment by the Trustee, in whole or
in part, from any other obligor or other guarantor in connection with any
of the Indenture Obligations, whether or not with notice to, or further
assent by, or any reservation of rights against, each of the Subsidiary
Guarantors.
Section 1304. Right to Demand Full Performance.
--------------------------------
In the event of any demand for payment or performance by the Trustee
from any Subsidiary Guarantor hereunder, the Trustee or the Holders shall have
the right to demand its full claim and to receive all payments in respect
thereof until the Indenture Obligations have been paid in full, and the
Subsidiary Guarantors shall continue to be jointly and severally liable
hereunder for any balance which may be owing to the Trustee or
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the Holders by the Company under this Indenture and the Securities. The
retention by the Trustee or the Holders of any security, prior to the
realization by the Trustee or the Holders of its rights to such security upon
foreclosure thereon, shall not, as between the Trustee and any Subsidiary
Guarantor, be considered as a purchase of such security, or as payment,
satisfaction or reduction of the Indenture Obligations due to the Trustee or the
Holders by the Company or any part thereof.
Section 1305. Waivers.
-------
(a) Each Subsidiary Guarantor hereby expressly waives (to the extent
permitted by law) notice of the acceptance of this Guarantee and notice of the
existence, renewal, extension or the non-performance, non-payment, or non-
observance on the part of the Company of any of the terms, covenants, conditions
and provisions of this Indenture or the Securities or any other notice
whatsoever to or upon the Company or such Subsidiary Guarantor with respect to
the Indenture Obligations. Each Subsidiary Guarantor hereby acknowledges
communication to it of the terms of this Indenture and the Securities and all of
the provisions therein contained and consents to and approves the same. Each
Subsidiary Guarantor hereby expressly waives (to the extent permitted by law)
diligence, presentment, protest and demand for payment.
(b) Without prejudice to any of the rights or recourses which the
Trustee or the Holders may have against the Company, each Subsidiary Guarantor
hereby expressly waives (to the extent permitted by law) any right to require
the Trustee or the Holders to:
(i) initiate or exhaust any rights, remedies or recourse against the
Company, any Subsidiary Guarantor or any other Person;
(ii) value, realize upon, or dispose of any security of the Company or
any other Person held by the Trustee or the Holders; or
(iii) initiate or exhaust any other remedy which the Trustee or the
Holders may have in law or equity;
before requiring or becoming entitled to demand payment from such Subsidiary
Guarantor under this Guarantee.
Section 1306. The Subsidiary Guarantors Remain Obligated in Event the
-------------------------------------------------------
Company Is No Longer Obligated to Discharge Indenture Obligations.
-----------------------------------------------------------------
It is the express intention of the Trustee and the Subsidiary
Guarantors that if for any reason the Company has no
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legal existence, is or becomes under no legal obligation to discharge the
Indenture Obligations owing to the Trustee or the Holders by the Company or if
any of the Indenture Obligations owing by the Company to the Trustee or the
Holders become irrecoverable from the Company by operation of law or for any
reason whatsoever, this Guarantee and the covenants, agreements and obligations
of the Subsidiary Guarantors contained in this Article Thirteen shall
nevertheless be binding upon the Subsidiary Guarantors, as principal debtor,
until such time as all such Indenture Obligations have been paid in full to the
Trustee and all Indenture Obligations owing to the Trustee or the Holders by the
Company have been discharged, or such earlier time as Section 402 hereof shall
apply to the Securities and the Subsidiary Guarantors shall be responsible for
the payment thereof to the Trustee or the Holders upon demand.
Section 1307. Fraudulent Conveyance; Subrogation.
----------------------------------
(a) Any term or provision of this Guarantee to the contrary
notwithstanding, the aggregate amount of the Indenture Obligations guaranteed
hereunder shall be reduced to the extent necessary to prevent this Guarantee
from violating or becoming voidable under applicable law relating to fraudulent
conveyance or fraudulent transfer or similar laws affecting the rights of
creditors generally.
(b) Each Subsidiary Guarantor hereby waives until repayment in full of
the Indenture Obligations and except as provided in Section 1309, all rights of
subrogation or contribution, whether arising by contract or operation of law
(including, without limitation, any such right arising under federal bankruptcy
law) or otherwise by reason of any payment by it pursuant to the provisions of
this Article Thirteen.
Section 1308. Guarantee Is in Addition to Other Security.
------------------------------------------
This Guarantee shall be in addition to and not in substitution for any
other guarantees or other security which the Trustee may now or hereafter hold
in respect of the Indenture Obligations owing to the Trustee or the Holders by
the Company and (except as may be required by law) the Trustee shall be under no
obligation to marshal in favor of each of the Subsidiary Guarantors any other
guarantees or other security or any moneys or other assets which the Trustee may
be entitled to receive or upon which the Trustee or the Holders may have a
claim.
Section 1309. Contribution.
------------
In order to provide for just and equitable contribution among the
Subsidiary Guarantors, the Subsidiary Guarantors agree, inter se, that in the
----- --
event any payment or distribution is made
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by any Subsidiary Guarantor (a "Funding Subsidiary Guarantor") under its
Guarantee, such Funding Subsidiary Guarantor shall be entitled to a contribution
from all other Subsidiary Guarantors in a pro rata amount based on the "Adjusted
--- ----
Net Assets" (as defined below) of each Subsidiary Guarantor (including the
Funding Subsidiary Guarantor) for all payments, damages and expenses incurred by
that Funding Subsidiary Guarantor in discharging the Company's obligations with
respect to the Securities or any other Subsidiary Guarantor's obligation with
respect to its Guarantee. "Adjusted Net Assets" means, with respect to any
Subsidiary Guarantor, at any date, the lesser of the amount by which (x) the
fair value of the property of such Subsidiary Guarantor exceeds the total amount
of liabilities, including, without limitation, contingent liabilities (after
giving effect to all other fixed and contingent liabilities incurred or assumed
on such date), but excluding liabilities under the Guarantee, of such Subsidiary
Guarantor at such date and (y) the present fair salable value of assets of such
Subsidiary Guarantor at such date exceeds the amount that shall be required to
pay the probable liability of such Subsidiary Guarantor on its debts (after
giving effect to all other fixed and contingent liabilities incurred or assumed
on such date), excluding debt in respect of its Guarantee, as they become
absolute and matured.
Section 1310. No Bar to Further Actions.
-------------------------
Except as provided by law, no action or proceeding brought or
instituted under Article Thirteen and this Guarantee and no recovery or judgment
in pursuance thereof shall be a bar or defense to any further action or
proceeding which may be brought under Article Thirteen and this Guarantee by
reason of any further default or defaults under Article Thirteen and this
Guarantee or in the payment of any of the Indenture Obligations owing by the
Company.
Section 1311. Failure to Exercise Rights Shall Not Operate as a
-------------------------------------------------
Waiver.
------
No failure to exercise and no delay in exercising, on the part of the
Trustee or the Holders, any right, power, privilege or remedy under this Article
Thirteen and this Guarantee shall operate as a waiver thereof, nor shall any
single or partial exercise of any rights, power, privilege or remedy preclude
any other or further exercise thereof, or the exercise of any other rights,
powers, privileges or remedies. The rights and remedies herein provided for are
cumulative and not exclusive of any rights or remedies provided in law or
equity.
- 124 -
<PAGE>
Section 1312. Trustee's Duties; Notice to Trustee.
-----------------------------------
(a) Any provision in this Article Thirteen or elsewhere in this
Indenture allowing the Trustee to request any information or to take any action
authorized by, or on behalf of any Subsidiary Guarantor, shall be subject to
Section 602(d) and shall be permissive and shall not be obligatory on the
Trustee except as the Holders may direct in accordance with the provisions of
this Indenture or where the failure of the Trustee to request any such
information or to take any such action arises from the Trustee's gross
negligence, bad faith or willful misconduct.
(b) The Trustee shall not be required to inquire into the existence,
powers or capacities of the Company, any Subsidiary Guarantor or the officers,
directors or agents acting or purporting to act on their respective behalf.
Section 1313. Successors and Assigns.
----------------------
All terms, agreements and conditions of this Article Thirteen shall
extend to and be binding upon each Subsidiary Guarantor and its successors and
permitted assigns and shall enure to the benefit of and may be enforced by the
Trustee and its successors and assigns; provided, however, that the Subsidiary
-------- -------
Guarantors may not assign any of their rights or obligations hereunder other
than in accordance with Article Eight.
Section 1314. Release of Guarantee.
--------------------
Concurrently with the payment in full of all of the Indenture
Obligations, the Subsidiary Guarantors shall be released from and relieved of
their obligations under this Article Thirteen. Upon the delivery by the Company
to the Trustee of an Officers' Certificate and, if requested by the Trustee, an
Opinion of Counsel to the effect that the transaction giving rise to the release
of this Guarantee was made by the Company in accordance with the provisions of
this Indenture and the Securities, the Trustee shall execute any documents
reasonably required in order to evidence the release of the Subsidiary
Guarantors from their obligations under this Guarantee. If any of the Indenture
Obligations are revived and reinstated after the termination of this Guarantee,
then all of the obligations of the Subsidiary Guarantors under this Guarantee
shall be revived and reinstated as if this Guarantee had not been terminated
until such time as the Indenture Obligations are paid in full, and each
Subsidiary Guarantor shall enter into an amendment to this Guarantee, reasonably
satisfactory to the Trustee, evidencing such revival and reinstatement.
- 125 -
<PAGE>
This Guarantee shall terminate with respect to each Subsidiary
Guarantor and shall be automatically and unconditionally released and discharged
as provided in Section 1019(b) hereof.
Section 1315. Execution of Guarantee.
----------------------
To evidence the Guarantee, each Subsidiary Guarantor hereby agrees to
execute the guarantee substantially in the form set forth in Section 205 hereof,
to be endorsed on each Security authenticated and delivered by the Trustee and
that this Indenture shall be executed on behalf of each Subsidiary Guarantor by
its Chairman of the Board, its President, or one of its Vice Presidents, under
its corporate seal reproduced thereon attested by its Secretary or one of its
Assistant Secretaries. The signature of any of these officers on the Securities
may be manual or facsimile.
If an officer whose signature is on this Indenture no longer holds
that office at the time the Trustee authenticates a Security on which a
Guarantee is endorsed, such Guarantee shall be valid nevertheless.
Section 1316. Payment Permitted by Each of the Subsidiary Guarantors
------------------------------------------------------
if No Default.
-------------
Nothing contained in this Article, elsewhere in this Indenture or in
any of the Securities shall affect the obligation of any Subsidiary Guarantor to
make, or prevent any Subsidiary Guarantor from making at any time, payments
pursuant to the Securities.
Section 1317. Notice to Trustee by Each of the Subsidiary Guarantors.
------------------------------------------------------
Each Subsidiary Guarantor shall give prompt written notice to the Trustee of any
fact known to such Subsidiary Guarantor which would prohibit the making of any
payment to or by the Trustee in respect of the Guarantee. Notwithstanding the
provisions of this Article or any provision of this Indenture, the Trustee shall
not be charged with knowledge of the existence of any facts which would prohibit
the making of any payment to or by the Trustee in respect of the Securities,
unless and until the Trustee shall have received written notice thereof from any
Subsidiary Guarantor or any trustee, fiduciary or agent therefor; and, prior to
the receipt of any such written notice, the Trustee shall be entitled in all
respects to assume that no such facts exist; provided, however, that if the
-------- -------
Trustee shall not have received the notice provided for in this Section at least
three (3) Business Days prior to the date upon which by the terms hereof any
money may become payable for any purpose (including, without limitation, the
payment of the principal of, premium, if any, or interest on any Security or any
other Indenture Obligations), then, anything herein contained
- 126 -
<PAGE>
to the contrary notwithstanding, the Trustee shall have full power and authority
to receive such money and to apply the same to the purpose for which such money
was received and shall not be affected by any notice to the contrary which may
be received by it after such date; nor shall the Trustee be charged with
knowledge of the curing of any such default or the elimination of the act or
condition preventing any such payment unless and until the Trustee shall have
received an Officers' Certificate to such effect.
Section 1318. Article Applicable to Paying Agents.
-----------------------------------
In case at any time any Paying Agent other than the Trustee shall have
been appointed by the Company and be then acting under this Indenture, the term
"Trustee" as used in this Article shall in such case (unless the context
otherwise requires) be construed as extending to and including such Paying Agent
within its meaning as fully for all intents and purposes as if such Paying Agent
were named in this Article in addition to or in place of the Trustee; provided,
--------
however, that this Section 1318 shall not apply to the Company or any Affiliate
-------
of the Company if it or such Affiliate acts as Paying Agent.
Section 1319. No Suspension of Remedies.
-------------------------
Nothing contained in this Article shall limit the right of the Trustee
or the Holders of Securities to take any action to accelerate the maturity of
the Securities pursuant to the provisions described under Article Five and as
set forth in this Indenture or to pursue any rights or remedies hereunder or
under applicable law.
- 127 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed, all as of the day and year first above written.
PIONEER AMERICAS ACQUISITION
CORP.
Attest /s/ William L. Mahone By /s/ Joshua A. Polan
------------------------- ----------------------------
Name:William L. Mahone Name:Joshua A. Polan
Title:Secretary Title:Vice President
PIONEER AMERICAS, INC.
Attest /s/ Kent R. Stephenson By /s/ George T. Henning, Jr.
------------------------- ----------------------------
Name:Kent R. Stephenson Name: George T. Henning, Jr.
Title:Secretary Title: Vice President
PIONEER CHLOR ALKALI COMPANY
Attest /s/ Kent R. Stephenson By /s/ George T. Henning, Jr.
------------------------- ----------------------------
Name:Kent R. Stephenson Name:George T. Henning, Jr.
Title:Secretary Title:Vice President
IMPERIAL WEST CHEMICAL CO.
Attest /s/ Kent R. Stephenson By /s/ George T. Henning, Jr.
------------------------ ------------------------------
Name:Kent R. Stephenson Name:George T. Henning, Jr.
Title:Secretary Title:Vice President
ALL-PURE CHEMICAL CO., INC.
Attest /s/ Kent R. Stephenson By /s/ George T. Henning, Jr.
------------------------- -------------------------------
Name:Kent R. Stephenson Name:George T. Henning, Jr.
Title:Secretary Title:Vice President
BLACK MOUNTAIN POWER COMPANY
Attest /s/ Kent R. Stephenson By /s/ George T. Henning, Jr.
-------------------------- -------------------------------
Name:Kent R. Stephenson Name:George T. Henning, Jr.
Title:Secretary Title:Vice President
<PAGE>
ALL-PURE CHEMICAL NORTHWEST, INC.
Attest /s/ Kent R. Stephenson By /s/ George T. Henning
-------------------------- -----------------------------
Name: Kent R. Stephenson Name: George T. Henning, Jr.
Title: Secretary Title: Vice President
PIONEER-CHLOR-ALKALI
INTERNATIONAL, LTD.
Attest /s/ Kent R. Stephenson By /s/ George T. Henning
-------------------------- -----------------------------
Name: Kent R. Stephenson Name: George T. Henning, Jr.
Title: Secretary Title: Vice President
G.O.W. CORPORATION
Attest /s/ Kent R. Stephenson By /s/ George T. Henning
-------------------------- -----------------------------
Name: Kent R. Stephenson Name: George T. Henning, Jr.
Title: Secretary Title: Vice President
IBJ SCHRODER BANK & TRUST
COMPANY
Attest /s/ Thomas McCutcheon By /s/ Barbara McCluskey
-------------------------- -----------------------------
Name: Thomas McCutcheon Name: Barbara McCluskey
Title: Assistant Secretary Title: Assistant Vice President
<PAGE>
SCHEDULE 1
----------
Existing Affiliate Agreement
AMENDED AND RESTATED STEAM PURCHASE AND SALE AGREEMENT, between PCAC and Saguaro
Power Company, dated 6/29/92.
AMENDED AND RESTATED SITE SERVICES AGREEMENT, between PCAC and Saguaro Power
Company, dated 6/23/92.
ASSIGNMENT OF WATER RIGHTS AND RIGHTS FOR WATER SERVICE, between PCAC and
Saguaro Power Company, dated 11/22/92.
SIDE LETTER AGREEMENT REGARDING WASTEWATER, between PCAC and Saguaro Power
Company, dated 2/20/91.
GROUND LEASE, between PCAC and Saguaro Power Company, dated 11/03/89.
FIRST AMENDMENT TO GROUND LEASE, between PCAC and Saguaro Power Company, dated
6/01/92.
EASEMENT AGREEMENT, between PCAC and Saguaro Power Company, dated 2/18/91.
PIONEER DEVELOPMENT AGREEMENT, between PCAC and Basic Management, Inc. ("BMI"),
dated 11/05/90.
COMMON ELECTRIC FACILITIES AGREEMENT, between PCAC and BMI, dated 9/10/93.
POWER FACILITY EASEMENT AGREEMENT, between PCAC and BMI, dated 8/24/94.
JACK FACILITY EASEMENT AGREEMENT, between PCAC and BMI, dated 8/24/94.
BASIC WATER COMPANY WATER CONTRACT, between PCAC and BMI, dated 12/01/88.
VICTORY VALLEY DEVELOPMENT MANAGERS AGREEMENT, between PCAC and BMI, dated
12/07/93.
VICTORY VALLEY DEVELOPMENT MANAGERS AGREEMENT, between PCAC and BMI, dated
12/07/93.
VICTORY VALLEY PARTNERSHIP AGREEMENT, between Basic Land Company, Kerr McGee
Chemical Corp., Titanium Metals Corp., Chemstar Lime Company, and PCAC, dated
9/30/92.
VICTORY VALLEY COST SHARING AGREEMENT, between AMPAC Development Company, BMI,
Bonanza Materials Inc., PEPCON, PCAC, and Gibson Ranch Limited Liability
Company, dated 12/12/94.
VICTORY VALLEY WATER SUPPLY AGREEMENT, between Basic Land Company, Kerr McGee
Chemical Corp., Titanium Metals Corp., Chemstar Lime Company, and PCAC, dated
9/30/92.
<PAGE>
SCHEDULE 2
----------
Existing Indebtedness
All-Pure Chemical Co.
$6,971,665 as of February 28, 1995 representing deposits from customers pending
the return of various sizes of chlorine tanks, cylinders and other product
returnable containers.
<PAGE>
EXHIBIT A
---------
TRANSFEREE LETTER OF REPRESENTATION
Pioneer Americas Acquisition Corp.
c/o IBJ Schroder Bank & Trust Company
Attn: Corporate Trust & Agency
Administration
One State Street
New York, NY 10004
Dear Sirs:
In connection with our proposed purchase of $________ aggregate
principal amount of 13 3/8% Senior Notes due 2005 (the "Senior Notes") of
------------
Pioneer Americas Acquisition Corp., a Delaware corporation (the "Company"), we
-------
confirm that:
1. We understand that the Senior Notes and the Guarantees thereon
(together, the "Securities") have not been registered under the Securities
----------
Act of 1933, as amended (the "Securities Act") or under the securities laws
--------------
of any state and, unless so registered, may not be sold except as permitted
in the following sentence. We agree on our own behalf and on behalf of any
investor account for which we are purchasing Securities to offer, sell or
otherwise transfer such Securities prior to the date which is three years
after the later of the date of original issue and the last date on which
the Company or any affiliate of the Company was the owner of such
Securities (or any predecessor thereto) (the "Resale Restriction
------------------
Termination Date") only (a) to the Company, (b) pursuant to a registration
----------------
statement which has been declared effective under the Securities Act, (c)
so long as the Securities are eligible for resale pursuant to Rule 144A
under the Securities Act, to a person we reasonably believe is a qualified
institutional buyer under Rule 144A (a "QIB") that purchases for its own
---
account or for the account of a QIB and 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 of America
within the meaning of Regulation S under the Securities Act, (e) to an
institutional "accredited investor" within the meaning of subparagraph
(a)(1), (2), (3) or (7) of Rule 501 under the Securities Act that is
purchasing for his own account or for the account of such an institutional
"accredited investor," in each case in a minimum principal amount of Senior
Notes of $250,000, for investment purposes and not with a view to, or for
offer or sale in connection with, any distribution thereof in violation of
the Securities Act or (f) pursuant
<PAGE>
A-2
to any other available exemption from the registration requirements of the
Securities Act, subject in each of the foregoing cases to any requirement
of law that the disposition of our property or the property of such
investor account or accounts be at all times within our or their control
and to compliance with any applicable state securities laws. The foregoing
restrictions on resale shall not apply subsequent to the Resale Restriction
Termination Date. If any resale or other transfer of the Securities is
proposed to be made pursuant to clause (e) above prior to the Resale
Restriction Termination Date, the transferor shall deliver a letter from
the transferee substantially in the form of this letter to the Trustee,
which shall provide, among other things, that the transferee is an
institutional "accredited investor" within the meaning of subparagraph
(a)(1), (2), (3) or (7) of Rule 501 under the Securities Act and that it is
acquiring such Securities for investment purposes and not for distribution
in violation of the Securities Act. We acknowledge on our own behalf and
on behalf of any investor account for which we are purchasing Securities
that the Company and the Trustee reserve the right prior to any offer, sale
or other transfer prior to the Resale Restriction Termination Date of the
Securities pursuant to clauses (d), (e) or (f) above to require the
delivery of an opinion of counsel, certifications and/or other information
satisfactory to the Company and the Trustee.
2. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act)
purchasing for our own account or for the account of such an institutional
"accredited investor," and we are acquiring the Securities for investment
purposes and not with a view to, or for offer or sale in connection with,
any distribution in violation of the Securities Act and we have such
knowledge and experience in financial and business matters as to be capable
of evaluating the merits and risks of our investment in the Securities, and
we and any accounts for which we are acting are each able to bear the
economic risk of our or its investments.
3. We are acquiring at least $250,000 principal amount of the Senior
Notes and we are acquiring the Securities purchased by us for our own
account or for one or more accounts as to each of which we exercise sole
investment discretion.
4. You are entitled to rely upon this letter and you are irrevocably
authorized to produce this letter or a copy
<PAGE>
A-3
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:_____________________
Date:___________________
Upon transfer the Senior Notes should be registered in the name of the
new beneficial owner as follows:
Name: ______________________
Address:_____________________
Taxpayer ID Number:__________
<PAGE>
LOAN AND SECURITY AGREEMENT
THIS AGREEMENT ("Agreement") is made as of this 12th day of April,
1995 by and among BANK OF AMERICA ILLINOIS (in its individual capacity, "BAI"),
an Illinois corporation having its principal office at 231 South LaSalle Street,
Chicago, Illinois 60697, as Agent and a Lender hereunder, the other Lenders from
time to time party hereto, and PIONEER AMERICAS, INC. ("Borrower"), a Delaware
corporation having its principal office at 4200 NationsBank Center, 700
Louisiana Street, Houston, Texas 77002.
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Borrower may, from time to time, request loans or other
financial accommodations from Lenders, and the parties wish to provide for the
terms and conditions upon which such loans or other financial accommodations
shall be made;
NOW, THEREFORE, in consideration of any loan or advance or grant of
credit (including any loan or advance or grant of credit by renewal or
extension) hereafter made to Borrower by, or on behalf of, Lenders, and for
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties agree as follows:
1. DEFINITIONS AND OTHER TERMS.
1.1 Definitions. In addition to terms defined elsewhere in this
-----------
Agreement or any Supplement, Schedule or Exhibit hereto, when used herein, the
following terms shall have the following meanings (such meanings shall be
equally applicable to the singular and plural forms of the terms used, as the
context requires):
"Account Debtor" means any Person who is or who may become obligated
to Borrower or any Designated Subsidiary under, with respect to, or on account
of an Account Receivable, Contract Right or other Collateral.
"Account Receivable" means any account of Borrower or any Designated
Subsidiary and any other right of Borrower or any Designated Subsidiary to
payment for goods sold or leased or for services rendered, whether or not
evidenced by an instrument or chattel paper and whether or not yet earned by
performance.
"Acquisition" means, collectively, (a) the purchase by GEV and New
Pioneer of one hundred percent (100%) of the common stock of Borrower from
Sellers and (b) the transactions contemplated in connection therewith, including
without limitation (i) the issuance by GEV of the Seller Notes in exchange for
One Hundred Forty-Five Thousand Five Hundred Thirty-Six (145,536) shares of the
common stock of Borrower, (ii) the redemption by Borrower of one hundred percent
(100%) of its
<PAGE>
preferred stock, (iii) the repayment in full of all Indebtedness for borrowed
money of Borrower existing immediately prior to the Closing Date and (iv) the
execution of the Contingent Payment Agreement, in each case occurring on or
before the Closing Date.
"Agent" means BAI in its capacity as agent for Lenders hereunder and
under the Related Agreements, or any successor agent pursuant to Section 10.
----------
"Agreement" means this Loan and Security Agreement, as the same may be
amended, modified or supplemented from time to time.
"Application" means an application by Borrower, in a form and
containing terms and provisions acceptable to Agent and Issuing Bank, for the
issuance by Issuing Bank of a Letter of Credit.
"Assignee Deposit Account" has the meaning ascribed to such term in
Section 3.2(d).
--------------
"Assignment and Acceptance Agreement" means an agreement in the form
of Exhibit D pursuant to which a Lender assigns all or a portion of its rights,
---------
and delegates all or such portion of its obligations, under this Agreement and
the Related Agreements, to another Person.
"Attorneys' Fees" has the meaning ascribed to such term in Section
-------
12.3.
----
"BAI" has the meaning ascribed to such term in the Preamble.
"Banking Day" means any day other than a Saturday, Sunday or legal
holiday on which banks are authorized or required to be closed for the conduct
of commercial banking business in Chicago, Illinois; provided, with respect to
LIBOR Rate Loans, Banking Days shall not include a day on which dealings in U.S.
Dollars may not be carried on by BAI in the London interbank LIBOR market.
"Borrower" has the meaning ascribed to such term in the Preamble.
"Borrower Collateral" has the meaning ascribed to such term in Section
-------
3.1.
---
"Borrowing Base" has the meaning ascribed to such term in Supplement
----------
A.
--
"Borrowing Base Certificate" means a certificate in the form of
Exhibit A attached hereto, executed and certified as accurate by an officer of
---------
Borrower designated in writing from
<PAGE>
time to time by Borrower to Agent pursuant to resolutions of the Board of
Directors of Borrower.
"Capitalized Lease" means any lease which is or should be capitalized
on the balance sheet of the lessee in accordance with GAAP.
"Closing Date" means the first date on which Loans are made, or
Letters of Credit are issued, under this Agreement.
"Code" means the Internal Revenue Code of 1986, as amended, and any
successor statute of similar import, together with the regulations thereunder,
in each case as in effect from time to time.
"Collateral" means, collectively, (a) Borrower Collateral and (b) the
Obligor Collateral.
"Contingent Payment Agreement" shall mean that certain Contingent
Payment Agreement dated on or about the date hereof among GEV, New Pioneer and
Sellers.
"Contract Right" means any right of Borrower or any Designated
Subsidiary to payment under a contract for the sale or lease of goods or the
rendering of services, which right is not yet earned by performance.
"Credit" means the facility established under this Agreement pursuant
to which Lenders will make Revolving Loans (the "Revolving Credit") to Borrower,
and/or cause Issuing Bank to issue Letters of Credit for the account of
Borrower.
"Default Rate" means, with respect to a Loan, the rate of interest
which is applicable to such Loan after the occurrence of an Event of Default, as
determined pursuant to Supplement A.
------------
"Demand Deposit Account" has the meaning ascribed to such term in
Section 2.3.
-----------
"Depository Accounts" has the meaning ascribed to such term in Section
-------
3.2(d).
------
"Designated Subsidiary" means any Subsidiary of Borrower so designated
by Borrower from time to time, with Agent's written consent, which shall not be
unreasonably withheld. The Designated Subsidiaries existing on the Closing Date
are designated as such on Schedule 4.10.
-------------
"Disproportionate Advance" has the meaning ascribed to such term in
Section 2.1.1(a).
----------------
-3-
<PAGE>
"Eligible Account Receivable" means an Account Receivable owing to
Borrower or a Designated Subsidiary which meets the following requirements:
(a) it is genuine and in all respects what it purports to be;
(b) it arises from either (i) the performance of services by
Borrower or such Designated Subsidiary, which services have been fully
performed and, if applicable, acknowledged and/or accepted by the Account
Debtor with respect thereto or (ii) the sale or lease of goods by Borrower
or such Designated Subsidiary; and if it arises from the sale or lease of
goods, (A) such goods comply with such Account Debtor's specifications (if
any) and have been shipped to, or delivered to and accepted by, such
Account Debtor and neither Borrower nor such Designated Subsidiary has
knowledge that the Account Debtor has failed to accept delivery of all or a
portion of such goods, and (B) Borrower or such Designated Subsidiary has
possession of shipping and delivery receipts evidencing such shipment,
delivery and acceptance;
(c) it (i) is evidenced by an invoice rendered to the Account
Debtor with respect thereto which (A) is dated not earlier than the date of
shipment or performance and (B) has payment terms which are not
unacceptable to Agent in its reasonable discretion and (ii) meets the
additional Eligible Account Receivable requirements set forth in Supplement
----------
A;
-
(d) it is not subject to any assignment, claim or Lien, other than
(i) a Lien in favor of Agent, for the benefit of itself and Lenders, and
(ii) a Lien consented to by Agent in writing;
(e) it is a valid, legally enforceable and unconditional obligation
of the Account Debtor with respect thereto, and is not subject to setoff,
counterclaim, credit or allowance (except any credit or allowance which has
been deducted in computing the net amount of the applicable invoice as
shown in the original schedule or Borrowing Base Certificate furnished to
Agent identifying or including such Account Receivable) or adjustment by
the Account Debtor with respect thereto, or to any claim by such Account
Debtor denying liability thereunder in whole or in part, and such Account
Debtor has not refused to accept
-4-
<PAGE>
any of the goods or services which are the subject of such Account
Receivable or offered or attempted to return any of such goods;
(f) there are no proceedings or actions which to the knowledge of
Borrower are then threatened or pending against the Account Debtor with
respect thereto or to which such Account Debtor is a party which are
reasonably likely to materially impair its ability to pay any Account
Receivable in full when due;
(g) it does not arise out of a contract which, by its terms,
forbids, restricts or makes void or unenforceable the assignment by
Borrower or such Designated Subsidiary to Agent, for the benefit of itself
and Lenders, of the Account Receivable arising with respect thereto;
(h) the Account Debtor with respect thereto is not Borrower, a
Subsidiary, Related Party (other than Saguaro Power Company L.P.) or
Obligor, or a director, officer, employee or agent of Borrower, a
Subsidiary, Related Party or Obligor;
(i) the Account Debtor with respect thereto is a resident or
citizen of, and is located within, the United States of America (a
"Domestic Account");
(j) it is not a Domestic Account (a "Foreign Account"), but only to
the extent that the aggregate amount of all Foreign Accounts does not
exceed $3,000,000 (the "Foreign Account Limit");
(k) it is not an Account Receivable arising from a "sale on
approval," "sale or return" or "consignment," or subject to any other
repurchase or return agreement;
(l) it is not an Account Receivable with respect to which
possession and/or control of the goods sold giving rise thereto is held,
maintained or retained by Borrower or such Designated Subsidiary or any
Subsidiary, Related Party or other Obligor (or by any agent or custodian of
Borrower or such Designated Subsidiary, any Subsidiary, Related Party or
Obligor) for the account of or subject to further and/or future direction
from the Account Debtor thereof;
(m) it is not an Account Receivable which in any way fails to meet
or violates any warranty,
-5-
<PAGE>
representation or covenant contained in this Agreement or any Related
Agreement relating directly or indirectly to Accounts Receivable;
(n) it arises in the ordinary course of Borrower's or such
Designated Subsidiary's business;
(o) if the Account Debtor is the United States of America or any
state or local governmental entity, or any department, agency or
instrumentality thereof, Borrower or such Designated Subsidiary has
assigned its rights to payment of such Account Receivable to Agent, for the
benefit of itself and Lenders, pursuant to the Assignment of Claims Act of
1940, as amended, or pursuant to any similar state or local law, regulation
or requirement, but only to the extent that the aggregate amount of such
government Accounts exceeds $10,000,000 or the amount of any individual
government Accounts exceeds $2,000,000;
(p) if Agent in its reasonable business judgment has established a
credit limit for an Account Debtor, the aggregate dollar amount of Accounts
Receivable due from such Account Debtor, including such Account Receivable,
does not exceed such credit limit; provided, however, that Agent may not
reduce any credit limit with respect to any Account Debtor except upon 45
days' prior notice to Borrower;
(q) if the Account Receivable is evidenced by chattel paper or an
instrument, (i) Agent shall have specifically agreed in writing to include
such Account Receivable as an Eligible Account Receivable, (ii) only
payments then due and payable under such chattel paper or instrument shall
be included as an Eligible Account Receivable and (iii) the originals of
such chattel paper or instruments have been endorsed and/or assigned and
delivered to Agent, for the benefit of itself and Lenders, in a manner
satisfactory to Agent;
(r) it is an Account Receivable with respect to which Agent, for
itself and Lenders, has a valid, first priority and fully perfected Lien,
other than Foreign Accounts with an aggregate value less than or equal to
the Foreign Account Limit; and
(s) it is an Account Receivable that Agent in its reasonable
business judgment deems to be acceptable.
-6-
<PAGE>
Agent further reserves the right in its reasonable business judgment, from time
to time hereafter, to designate upon ten (10) Banking Days' prior notice to
Borrower as ineligible specific Accounts Receivable that meet the aforementioned
criteria for Eligible Accounts Receivable, including without limitation if Agent
in its reasonable business judgment determines that the prospect of payment or
performance of the Account Debtor with respect to such Account Receivable is or
will be materially impaired for any reason whatsoever. An Account Receivable
which is at any time an Eligible Account Receivable, but which subsequently
fails to meet any of the foregoing requirements, shall forthwith cease to be an
Eligible Account Receivable.
"Eligible Inventory" means Inventory of Borrower or any Designated
Subsidiary, which meets the following requirements:
(a) it is owned by Borrower or a Designated Subsidiary and is not
subject to any prior assignment, claim or Lien, other than (i) a Lien in
favor of Agent, for the benefit of itself and Lenders, and (ii) Liens
consented to by Agent in writing;
(b) if it is a hard good held for sale or lease or furnishing under
contracts of service, it is (except as Agent may otherwise consent in
writing) new and unused;
(c) except as Agent may otherwise consent, it is in the possession
and control of Borrower, a Designated Subsidiary or their respective
agents;
(d) if it is in the possession or control of a bailee,
warehouseman, processor or other Person other than Borrower or a Designated
Subsidiary, Agent is in possession of such agreements, instruments and
documents as Agent may require (each in form and content acceptable to
Agent and duly executed, as appropriate, by the bailee, warehouseman,
processor or other Person in possession or control of such Inventory, as
applicable), including but not limited to warehouse receipts in Agent's
name, for the benefit of itself and Lenders, covering such Inventory;
(e) it is not Inventory which is dedicated to, identifiable with,
or is otherwise specifically to be used in the manufacture of, goods which
are to be sold or leased to the United States of America or any department,
agency or instrumentality thereof and in respect of which Inventory
Borrower or a Designated Subsidiary shall have received any progress or
other
-7-
<PAGE>
advance payment which is or may be against any Account Receivable
generated upon the sale or lease of any such goods;
(f) it is not Inventory produced in violation of the Fair Labor
Standards Act and subject to the "hot goods" provisions contained in Title
29 U.S.C. (S)215 or any successor statute or section;
(g) it is not (i) packaging or shipping materials, (ii) goods used
in connection with maintenance or repair of Borrower's or a Designated
Subsidiary's business, properties or assets, (iii) work-in-process or (iv)
general supplies;
(h) it is not Inventory which in any way fails to meet or violates
any warranty, representation or covenant contained in this Agreement or any
Related Agreement relating directly or indirectly to Inventory;
(i) Agent has not determined in its reasonable business judgment
and after ten (10) Banking Days' prior notice to Borrower that it is
unacceptable due to age, type, category, quality and/or quantity;
(j) it is Inventory with respect to which Agent, for itself and
Lenders, has a valid, first priority and fully perfected Lien; and
(k) it is not Inventory the use of which by Borrower or a
Designated Subsidiary or the manufacture or sale thereof by Borrower or a
Designated Subsidiary, is subject to any licensing, patent, royalty,
trademark, tradename or copyright agreement of any other Person, other than
Inventory subject to the two certain DSA Anode Lease Agreements dated
January 1, 1987 between Electrode Corporation and Stauffer Chemical
Company.
Notwithstanding anything to the contrary contained herein, up to $1,000,000 of
Inventory located at leased locations of Borrower and the Designated
Subsidiaries shall at all times deemed to be Eligible Inventory hereunder,
despite the fact that the lessors of the applicable leased locations have not
executed and delivered to Agent Landlord's Waivers in form and substance
reasonably satisfactory to Agent, so long as such Inventory would be classified
as Eligible Inventory except for the failure to deliver such Landlord's Waivers.
-8-
<PAGE>
Agent further reserves the right in its reasonable business judgment, from time
to time hereafter, to designate upon ten (10) Banking Days' prior notice to
Borrower as ineligible specific items of Inventory that meet the aforementioned
criteria for Eligible Inventory. Inventory which is at any time Eligible
Inventory but which subsequently fails to meet any of the foregoing requirements
shall forthwith cease to be Eligible Inventory.
"Environmental Laws" means the Resource Conservation and Recovery Act,
the Comprehensive Environmental Response, Compensation and Liability Act, any
so-called "Superfund" or "Superlien" law, the Toxic Substances Control Act, and
any other federal, state or local statute, law, ordinance, code, rule,
regulation, order or decree or other requirement regulating, relating to, or
imposing liability or standards of conduct (including but not limited to permit
requirements, and emission or effluent restrictions) with respect to protection
or conservation of the environment concerning any Hazardous Materials or any
hazardous, toxic or dangerous waste, substance or constituent, or any pollutant
or contaminant or other substance, whether solid, liquid or gas, as now or at
any time hereafter in effect.
"Environmental Lien" means a Lien in favor of any governmental entity
for (a) any liability under any Environmental Law or (b) damages arising from or
costs incurred by such governmental entity in response to a Release of any
Hazardous Material or the spillage, disposal or release into the environment of
any other hazardous, toxic or dangerous waste, substance or constituent, or
other substance.
"Equipment" means all equipment of Borrower or any Designated
Subsidiary of every description, including without limitation fixtures,
furniture, vehicles and trade fixtures, together with any and all accessions,
parts and equipment attached thereto or used in connection therewith, and any
substitutions therefor and replacements thereof.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and any successor statute of similar import, together with the
regulations thereunder, in each case as in effect from time to time. References
to sections of ERISA shall be construed to also refer to any successor sections.
"ERISA Affiliate" means any corporation, partnership, or other trade
or business (whether or not incorporated) that is, along with Borrower, a member
of a controlled group of corporations or a controlled group of trades or
businesses, as described in Sections 414(b) and 414(c), respectively, of the
-9-
<PAGE>
Code or Section 4001 of ERISA, or a member of the same affiliated service group
within the meaning of Section 414(m) of the Code.
"Eurocurrency Reserve Requirement" means, with respect to any LIBOR
Rate Loan for any Interest Rate Period, a percentage equal to the daily average
during such Interest Rate Period of the percentages in effect on each day of
such Interest Rate Period, as prescribed by the Federal Reserve Board, for
determining the aggregate maximum reserve requirements (including all basic,
supplemental, marginal and other reserves) applicable to "Eurocurrency
liabilities" pursuant to Regulation D or any other then applicable regulation of
the Federal Reserve Board which prescribes reserve requirements applicable to
"Eurocurrency liabilities," as presently defined in Regulation D. Without
limiting the effect of the foregoing, the Eurocurrency Reserve Requirement shall
reflect any other reserves required to be maintained by BAI against (i) any
category of liabilities that includes deposits by reference to which the LIBOR
Rate is to be determined, or (ii) any category of extensions of credit or other
assets that includes LIBOR Rate Loans. For purposes of this Agreement, any
LIBOR Rate Loan hereunder shall be deemed to be "Eurocurrency liabilities," as
defined in Regulation D, and, as such, shall be deemed to be subject to such
reserve requirements without the benefit of, or credit for, proration,
exceptions or offsets which may be available to BAI from time to time under
Regulation D.
"Event of Default" has the meaning ascribed to such term in Section
-------
6.1.
---
"Exchange Notes" shall have the meaning ascribed to such term in the
Senior Note Indenture, as it exists on the Closing Date.
"Federal Funds Rate" means, for any period, a fluctuating interest
rate per annum equal, for each day during such period, to the weighted average
of the rates on overnight federal funds transactions with members of the Federal
Reserve System arranged by federal funds brokers, as published for such day (or,
if such day is not a Banking Day, for the next preceding Banking Day) by the
Federal Reserve Bank of New York, or, if such rate is not so published for any
day that is a Banking Day, the average of the quotations for such day on such
transactions received by Agent from three federal funds brokers of recognized
standing selected by it.
"Federal Reserve Board" means the Board of Governors of the Federal
Reserve System or any successor thereto.
-10-
<PAGE>
"Fiscal Year" means any period of twelve (12) consecutive calendar
months ending on December 31. References to a Fiscal Year with a number
corresponding to any calendar year (e.g. "Fiscal Year 1995") refer to the Fiscal
Year ending on the thirty-first (31st) day of December occurring during such
calendar year.
"GAAP" means generally accepted accounting principles as in effect
from time to time (except as otherwise provided in Section 1.4), as applied in
-----------
the preparation of the audited financial statements referred to in Section 4.6.
-----------
"General Intangibles" means (i) all general intangibles now owned or
hereafter acquired by Borrower or any Designated Subsidiary, including without
limitation all right, title and interest of Borrower or such Designated
Subsidiary in and to: (a) all tax refunds and tax refund claims; (b) registered
and unregistered patents, service marks, copyrights, applications for any of the
foregoing and (c) all trade secrets and other confidential information relating
to the business of Borrower or such Designated Subsidiary, in each case to the
extent that any of the foregoing arises out of or relates to Accounts or
Inventory.
"GEV" means GEV Corporation, a Delaware corporation.
"Hazardous Materials" means any toxic substance, hazardous substance,
hazardous material, hazardous chemical or hazardous waste defined or qualifying
as such in (or for the purposes of) any Environmental Law, or any pollutant or
contaminant, and shall include, but not be limited to, petroleum, including
crude oil, any radioactive material, including but not limited to any source,
special nuclear or by-product material as defined at 42 U.S.C. Section 2011 et
--
seq., as amended or hereafter amended, polychlorinated biphenyls and asbestos in
---
any form or condition.
"Indebtedness" of any Person means, without duplication, (a) the
principal portion of any obligation of such Person for borrowed money, including
without limitation (i) any obligation of such Person evidenced by bonds,
debentures, notes or other similar debt instruments and (ii) any obligation for
borrowed money which is non-recourse to the credit of such Person but which is
secured by a Lien on any asset of such Person, (b) the principal component of
any obligation of such Person on account of deposits or advances, (c) any
obligation of such Person for the deferred purchase price of any property or
services, except Trade Accounts Payable, (d) any obligation of such Person as
lessee under a Capitalized Lease, (e) any net obligation of such Person with
respect to interest rate swaps,
-11-
<PAGE>
interest rate caps, interest rate collars or other interest hedging agreements,
(f) any net obligation of such Person in respect of foreign exchange contracts,
(g) any obligation of such Person with respect to Letters of Credit,
acceptances, guarantees or similar obligations of another Person issued for the
account of such Person and (h) any Indebtedness of another Person secured by a
Lien on any asset of such first Person, whether or not such Indebtedness is
assumed by such first Person. For all purposes of this Agreement, the
Indebtedness of any Person shall include the Indebtedness of any partnership or
joint venture in which such Person is a general partner or joint venturer and
such Indebtedness is recourse to some or all of the assets of such Person.
"Interest Coverage Sale Threshold" means with respect to any sale,
transfer, conveyance, lease or other disposition of assets otherwise permitted
under Section 5.11, that the Interest Coverage Ratio after such transaction,
------------
calculated in the manner set forth in Section 5.1 of Supplement A, but using the
----------- ------------
financial results most recently reported by Borrower to Agent, adjusted to
reflect the pro forma effect of such transaction, is at least 1.0:1.0.
"Interest Rate Period" means with respect to any portion of the
Revolving Loans, the period commencing on the date on which the LIBOR Rate is
deemed applicable to such portion of the Revolving Loans, and ending on the
numerically corresponding day one (1), two (2) or three (3) months thereafter,
as selected by Borrower pursuant to Section 3.1.1(c) of Supplement A; provided,
--------------------------------
however, that:
(a) any Interest Rate Period which would otherwise end on a day
which is not a Banking Day shall end on the next succeeding Banking Day
unless such next succeeding Banking Day falls in another calendar month, in
which case such Interest Rate Period shall end on the next preceding
Banking Day;
(b) any Interest Rate Period which begins on the last Banking 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 Rate
Period) shall end on the last Banking Day of the calendar month at the end
of such Interest Rate Period; and
(c) no Interest Rate Period shall extend beyond the Termination
Date.
-12-
<PAGE>
"Inventory" means any and all of Borrower's and each Designated
Subsidiary's goods (including without limitation goods in transit) wheresoever
located, which are held for sale, furnished under any contract of service, or
held as raw materials, work in process, or supplies or materials used or
consumed in Borrower's or such Designated Subsidiary's business, or which are
held for use in connection with the manufacture, packing, shipping, advertising,
selling or finishing of such goods, and any and all goods the sale or other
disposition of which has given rise to an Account Receivable, Contract Right or
any other property described in Section 3.1(a), which are returned to and/or
--------------
repossessed and/or stopped in transit by, or at any time hereafter are in the
possession or under the control of, Borrower, any Designated Subsidiary, Agent
or any Lender or any agent or bailee of any of them, and all documents of title
or other documents representing the same.
"Inventory Percentage" has the meaning ascribed to such term in
Supplement A.
------------
"Inventory Sublimit" has the meaning ascribed to such term in
Supplement A.
------------
"Investment" of any Person means any investment, made in cash or by
delivery of any kind of property or asset, in any other Person, whether by
acquisition of shares of stock or similar interest, Indebtedness or other
obligation or security, or by loan, advance or capital contribution, or
otherwise.
"Issuing Bank" means BAI or any other Lender selected by Agent with
Borrower's consent (which will not be unreasonably withheld) to issue Letters of
Credit under this Agreement.
"L/C Draft" means a draft drawn on Issuing Bank pursuant to a Letter
of Credit.
"Lenders" means, collectively, BAI and any other Person that becomes a
Lender under this Agreement and each of their respective successors and assigns
as provided in this Agreement; and "Lender" means any one of Lenders.
"Letter of Credit" means a standby letter of credit issued by the
Issuing Bank on the Application of Borrower.
"Letter of Credit Obligations" means at any time an amount equal to
the sum of (a) the aggregate outstanding face amount of all Letters of Credit
plus (b) the aggregate outstanding face amount of all accepted but unpaid L/C
Drafts.
-13-
<PAGE>
"Liabilities" means all of the liabilities, obligations (including
obligations of performance) and indebtedness of Borrower to Agent or any Lender
of any kind or nature, however created, arising or evidenced, whether direct or
indirect, absolute or contingent, now or hereafter existing or due or to become
due, and arising under, or in connection with, this Agreement, any Note, any
Related Agreement, any Letter of Credit or any Application therefor, including
without limitation all interest, charges, expenses, Attorneys' Fees and other
sums chargeable to Borrower by Agent or any Lender hereunder or thereunder.
"Liabilities" shall also include any and all amendments, extensions, renewals,
refundings or refinancings of any of the foregoing.
"LIBOR Base Rate" means, with respect to each Interest Rate Period for
a LIBOR Rate Loan, the sum of two and three-quarters percent (2.75%) plus the
----
rate per annum at which U.S. Dollar deposits in immediately available funds are
offered to the Eurodollar Office of BAI two (2) Banking Days prior to the
beginning of such Interest Rate Period by major banks in the interbank
eurodollar market as at or about the relevant local time of such Eurodollar
Office, for delivery on the first day of such Interest Rate Period, for the
number of days comprised therein and in an amount equal to the amount of the
LIBOR Rate Loan to be outstanding during such Interest Rate Period. As used
herein, "relevant local time" as to any LIBOR Office means 11:00 a.m., London
time, when such Office is located in Europe or the Middle East, and 10:00 a.m.,
Chicago time, when such LIBOR Office is located in North America or the
Caribbean.
"LIBOR Office" means with respect to any Lender the Office or offices
of such Lender which shall be making or maintaining the LIBOR Rate Loans of such
Lender hereunder or such other office or offices through which such Lender
determines its LIBOR Base. A LIBOR Office of any Lender may be, at the option
of such Lender, either a domestic or foreign office.
"LIBOR Rate" means, with respect to each Interest Rate Period for a
LIBOR Rate Loan, a rate per annum (rounded upward, if necessary, to the nearest
one hundredth of one percent (1/100th of 1%)) determined pursuant to the
following formula:
LIBOR Rate = LIBOR Base Rate
----------------------------------
1-Eurocurrency Reserve Requirement
"LIBOR Rate Loan" means any portion of the Revolving Loan which bears
interest at a rate determined with reference to the LIBOR Rate.
-14-
<PAGE>
"Lien" means any security interest, mortgage, pledge, hypothecation,
judgment lien or similar legal process, title retention lien, or other lien or
encumbrance, including without limitation the interest of a vendor under any
conditional sale or other title retention agreement and the interest of a lessor
under any Capitalized Lease.
"Loan" means (a) any Revolving Loan made pursuant to Section 2.1.1 and
-------------
(b) any other loan or advance made to Borrower by Agent or any Lender under or
pursuant to this Agreement.
"Loan Account" has the meaning ascribed to such term in Section 2.3.
-----------
"Margin Stock" has the meaning ascribed to such term in Regulation U
of the Federal Reserve Board or any regulation substituted therefor, as in
effect from time to time.
"Material Adverse Change" means (a) a material adverse change in the
condition (financial or otherwise), operations, performance, prospects,
properties or affairs, of Borrower or in the ability of Borrower to perform its
obligations under any material agreement to which Borrower is a party, (b) a
material adverse change in the condition (financial or otherwise), operations,
performance, prospects, properties or affairs of Borrower and the Designated
Subsidiaries taken as a whole or in the ability of Borrower and the Designated
Subsidiaries taken as a whole to perform their obligations under any material
agreements to which they are parties, (c) a material adverse change in the
condition (financial or otherwise), operations, performance, prospects,
properties or affairs of New Pioneer, Borrower and the Designated Subsidiaries
taken as a whole or in the ability of New Pioneer, Borrower and the Designated
Subsidiaries taken as a whole to perform their obligations under any material
agreements to which they are parties, or (d) an impairment of Agent's interest,
for the benefit of itself and Lenders, in any material portion of the Collateral
or the material diminution in value of the Collateral.
"Material Adverse Effect" means (a) a material adverse effect upon the
condition (financial or otherwise), operations, performance, prospects,
properties or affairs, of Borrower or upon the ability of Borrower to perform
its obligations under any material agreement to which Borrower is a party, (b) a
material adverse effect upon the condition (financial or otherwise), operations,
performance, prospects, properties or affairs of Borrower and the Designated
Subsidiaries taken as a whole or upon the ability of Borrower and the Designated
Subsidiaries taken as a whole to perform their obligations under any material
agreements to which they are parties, (c) a material adverse
-15-
<PAGE>
effect upon the condition (financial or otherwise), operations, performance,
prospects, properties or affairs of New Pioneer, Borrower and the Designated
Subsidiaries taken as a whole or upon the ability of New Pioneer, Borrower and
the Designated Subsidiaries taken as a whole to perform their obligations under
any material agreements to which they are parties, or (d) an impairment of
Agent's interest, for the benefit of itself and Lenders, in any material portion
of the Collateral or the material diminution in value of the Collateral.
"Maximum Loan Amount" means, with respect to any Lender, the maximum
amount of Loans which such Lender has agreed, pursuant to the terms and
conditions of this Agreement, to make available to Borrower, as set forth on the
signature page hereto or in an Assignment and Acceptance Agreement executed by
such Lender.
"Multiemployer Plan" means a "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA that is maintained for employees of Borrower or any
ERISA Affiliate.
"New Pioneer" means Pioneer Americas Acquisition Corp., a Delaware
corporation, or its successor.
"Note" means any promissory note of Borrower evidencing any loan or
advance made by any Lender to Borrower pursuant to this Agreement, as the same
may be amended, modified or supplemented from time to time.
"Obligor" means Borrower and each other Person (including without
limitation each Designated Subsidiary) who is or shall become primarily or
secondarily liable on any of the Liabilities, or who grants to Agent, for the
benefit of itself and Lenders, a Lien on any property of such Person as security
for any of the Liabilities.
"Obligor Collateral" means any real or personal property of any
Obligor on which a Lien has been granted to Agent, for the benefit of itself and
Lenders, in order to secure the Liabilities and/or such Obligor's guaranty of
the Liabilities.
"Occupational Safety and Health Law" means the Occupational Safety and
Health Act of 1970 and any other federal, state or local statute, law,
ordinance, code, rule, regulation, order or decree regulating, relating to or
imposing liability or standards of conduct concerning employee health and/or
safety.
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<PAGE>
"Offering Memorandum" shall mean that certain Offering Memorandum
relating to the issuance of the Senior Notes dated April 13, 1995.
"Over Advance" has the meaning ascribed to such term in Section 2.8.
-----------
"Overdraft Loan" has the meaning ascribed to such term in Section 2.7.
-----------
"Participant" means any Person, now or at any time or times hereafter,
participating with any Lender, pursuant to the provisions of Section 12.9, in
------------
the Loans made or Letters of Credit issued, pursuant to this Agreement or any
Related Agreement.
"Payment Liabilities" means all Liabilities other than contingent
obligations of Borrower with respect to which neither Agent nor any Lender has
asserted a claim against Borrower or against which Borrower has provided
reserves or Collateral satisfactory to Agent or such Lender; provided, that
Payment Liabilities shall include the Letter of Credit Obligations.
"PBGC" means the Pension Benefit Guaranty Corporation and any entity
succeeding to any or all of its functions under ERISA.
"PCAC" means Pioneer Chlor Alkali Company, Inc., a Subsidiary of
Borrower.
"Pension Plan" means a "pension plan," as such term is defined in
Section 3(2) of ERISA, that is subject to the provisions of Title IV of ERISA
(other than a Multiemployer Plan) and to which Borrower or any ERISA Affiliate
may have any liability, including any liability by reason of being deemed to be
a contributing sponsor under Section 4069 of ERISA.
"Permitted Intercompany Indebtedness" shall mean Indebtedness of a
Designated Subsidiary to Borrower or to New Pioneer as permitted pursuant to
Section 5.19.
------------
"Person" means any individual, sole proprietorship, partnership, joint
venture, trust, unincorporated organization, association, corporation,
institution, entity, or government (whether national, federal, state, county,
city, municipal or otherwise, including without limitation any instrumentality,
division, agency, body or department thereof).
"Pre-Settlement Determination Date" has the meaning ascribed to such
term in Section 2.15.
------------
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<PAGE>
"Pro Rata Share" means, with respect to any Lender, a fraction
(expressed as a percentage in nine (9) decimal places), the numerator of which
shall be the Maximum Loan Amount of such Lender and the denominator of which
shall be the aggregate amount of the Maximum Loan Amounts of all Lenders.
"Reference Rate" means, at any time, the rate of interest then most
recently announced by BAI at Chicago, Illinois as its reference rate. Each
change in the interest rate on any Loan shall take effect on the effective date
of the change in the Reference Rate.
"Register" has the meaning ascribed to such term in Section 12.9(d).
---------------
"Related Agreement" means any agreement, instrument or document
(including without limitation notes, guarantees, chattel mortgages, pledges,
powers of attorney, consents, assignments, contracts, notices, security
agreements, leases, financing statements, subordination agreements,
intercreditor agreements, trust account agreements and all other written matter)
heretofore, now, or hereafter delivered to Agent or any Lender with respect to
or in connection with or pursuant to this Agreement or any of the Liabilities,
and executed by or on behalf of Borrower, any Designated Subsidiary or any other
Obligor, as each of the same may be amended, modified or supplemented from time
to time and shall specifically include any Notes. The Related Agreements shall
specifically exclude the Transaction Documents.
"Related Party" means, with respect to any Person, any other Person
(a) that directly or indirectly through one or more intermediaries controls, or
is controlled by, or is under common control with, such first Person or a
subsidiary of such first Person, (b) that beneficially owns or holds ten percent
(10%) or more of the equity interest of such first Person or a subsidiary of
such first Person or (c) ten percent (10%) or more of the equity interest of
which is beneficially owned or held by such first Person or a subsidiary of such
first Person. The term "control" means the possession, directly or indirectly,
of the power to direct or cause the direction of the management and policies of
a Person, whether through the ownership of voting securities, by contract or
otherwise.
"Release" means any actual or threatened spilling, leaking, pumping,
pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping
or disposing of Hazardous Materials into the environment.
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<PAGE>
"Reportable Event" has the meaning given to such term in ERISA.
"Requisite Lenders" means Lenders having, in the aggregate, Pro Rata
Shares of at least fifty-one percent (51%).
"Restricted Subsidiary" has the meaning given to such term in the
Senior Note Indenture, as it exists on the Closing Date.
"Revolving Credit" has the meaning ascribed to such term in the
definition of "Credit."
"Revolving Credit Amount" has the meaning ascribed to such term in
Supplement A.
------------
"Revolving Loan" has the meaning ascribed to such term in Section
-------
2.1.1.
-----
"Revolving Loan Availability" means the lesser of (a) the Revolving
Credit Amount minus the Letter of Credit Obligations and (b) the Borrowing Base
minus the Letter of Credit Obligations.
"Seller Notes" means, collectively, the subordinated promissory notes
issued by GEV to the Sellers in the original aggregate principal amount of
$10,000,000, as adjusted.
"Sellers" means the "Sellers" as defined in the Stock Purchase
Agreement.
"Senior Loan Documents" means, collectively, the agreements,
instruments and documents evidencing and governing the Senior Notes, including
the Senior Note Indenture and that certain Registration Rights Agreement, as
each of the same may be amended, modified or supplemented from time to time in
compliance with Section 5.26 hereof.
------------
"Senior Loans" means, collectively, all indebtedness of New Pioneer
represented by the Senior Notes.
"Senior Note Indenture" means the Indenture dated as of April 1, 1995
among New Pioneer, Borrower, the Designated Subsidiaries, certain other
Subsidiaries of Borrower and IBJ Schroder Bank & Trust Company as Trustee (the
"Trustee"). Upon the issuance of one or more of the Exchange Notes and its or
their exchange for all or a portion of the Senior Notes, the indenture governing
the Exchange Notes shall be the "Senior Note Indenture" for purposes hereof.
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<PAGE>
"Senior Notes" means, collectively, New Pioneer's 13 3/8% Senior Notes
due 2005 in the aggregate principal amount due upon maturity of not more than
$140,000,000. Upon the issuance of one or more Exchange Notes and its or their
exchange for all or a portion of the Senior Notes, such Exchange Note or Notes
shall be deemed Senior Notes for purposes hereof.
"Settlement Date" has the meaning ascribed to such term in Section
-------
2.15.
----
"Stock Purchase Agreement" means that certain Stock Purchase
Agreement, dated as of March 24, 1995, by and among New Pioneer and GEV, as
purchasers, and Richard C. Kellogg, Jr., Frans G.J. Speets, D.A. Huckabay, and
all common shareholders, warrant holders and option holders of Borrower, as
sellers.
"Subordinated Debt" means, collectively, that portion of any
liabilities, obligations or Indebtedness of Borrower or any Designated
Subsidiary which is subordinated as to right and time of payment of principal
and interest thereon, to all of the Liabilities.
"Subordinated Debt Documents" means, collectively, the agreements,
instruments and documents evidencing or otherwise pertaining to any Subordinated
Debt, as each of the same may be amended, modified or supplemented from time to
time in compliance with Section 5.26.
------------
"Subsidiary" means any Person of which or in which Borrower and its
other Subsidiaries own directly or indirectly more than fifty percent (50%) of
(a) the combined voting power of all classes of stock having general voting
power under ordinary circumstances to elect a majority of the board of directors
of such Person, if it is a corporation, (b) the capital interest or profits
interest of such Person, if it is a partnership, joint venture or similar entity
or (c) the beneficial interest of such Person, if it is a trust, association or
other unincorporated organization.
"Supplemental Documentation" has the meaning ascribed to such term in
Section 3.4.
-----------
"Taxes" with respect to any Person means taxes, assessments or other
governmental charges or levies imposed upon such Person, its income or any of
its properties, franchises or assets.
"Termination Date" means April 20, 1998.
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"Trade Accounts Payable" of any Person means trade accounts payable of
such Person with a maturity of not greater than two hundred seventy (270) days
incurred in the ordinary course of such Person's business.
"Transaction Documents" means, collectively, the agreements,
instruments and documents evidencing and governing the Transactions, as each of
the same may be amended, modified or supplemented from time to time in
compliance with Section 5.26 hereof.
------------
"Transactions" has the meaning ascribed to such term in Section 8.1.2.
-------------
"UCC" means the Uniform Commercial Code as in effect in the State of
Illinois, and any successor statute, together with any regulations thereunder,
in each case as in effect from time to time. References to sections of the UCC
shall be construed to also refer to any successor sections.
"Unmatured Event of Default" means any event or condition which, with
the lapse of time or giving of notice to Borrower or both, would constitute an
Event of Default.
"ZENECA Indemnity" means the indemnity in favor of Borrower by ZENECA
Delaware Holdings, Inc. and ZENECA, Inc. (as successors to ICI Delaware
Holdings, Inc. and ICI Americas, Inc., respectively) in respect of certain
environmental matters, issued in connection with the purchase by Borrower in
October, 1988 of PCAC.
1.2 Other Definitional Provisions. Unless otherwise defined or the
-----------------------------
context otherwise requires, all financial and accounting terms used herein or in
any certificate or other document made or delivered pursuant hereto shall be
defined in accordance with GAAP. Unless otherwise defined therein, all terms
defined in this Agreement shall have the defined meanings when used in any
Related Agreement or Supplemental Documentation. Terms used in this Agreement
which are defined in any Supplement or Exhibit hereto shall, unless the context
---------- -------
otherwise indicates, have the meanings given them in such Supplement or Exhibit.
---------- -------
Other terms used in this Agreement shall, unless the context indicates
otherwise, have the meanings provided for by the UCC to the extent the same are
used or defined therein.
1.3 Interpretation of Agreement. A Section, an Exhibit or a Schedule
--------------------------- ------- ------- --------
is, unless otherwise stated, a reference to a section hereof, an exhibit hereto
or a schedule hereto, as the case may be. Section captions used in this
Agreement are for
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convenience only and shall not affect the construction of this Agreement. The
words "hereof," "herein," "hereto" and "hereunder" and words of similar import
when used in this Agreement refer to this Agreement as a whole and not to any
particular provision of this Agreement. Reference to "this Agreement" shall
include the provisions of Supplement A.
------------
1.4 Compliance with Financial Restrictions. Compliance with each of
--------------------------------------
the financial ratios and restrictions contained in Section 5 or Supplement A
--------- ------------
shall, except as otherwise provided herein, be determined in accordance with
GAAP consistently followed.
2. LOANS; LETTERS OF CREDIT; OTHER MATTERS.
2.1 Loans.
-----
2.1.1 Revolving Loans.
---------------
(a) Subject to the terms and conditions of this Agreement and the
Related Agreements, and in reliance upon the warranties and representations of
Borrower set forth herein and the warranties and representations of Borrower and
each other Obligor set forth in the Related Agreements, each Lender, severally
and not jointly, agrees to make its Pro Rata Share of such loans or advances
(individually each a "Revolving Loan" and collectively the "Revolving Loans")
from time to time before the Termination Date to Borrower as Borrower may from
time to time request; provided, that Agent may, but shall not be obligated to,
make such Revolving Loans to Borrower on behalf of Lenders as a
"Disproportionate Advance" (as defined below); provided further, that, except as
provided in Section 2.8, the aggregate outstanding principal amount of the
-----------
Revolving Loans made by or on behalf of Lenders shall not at any time exceed the
Revolving Loan Availability. Revolving Loans made by or on behalf of Lenders
may be repaid and, subject to the terms and conditions hereof, reborrowed to but
not including the Termination Date unless the Credit extended under this
Agreement is otherwise terminated as provided in this Agreement. No Lender
shall be obligated at any time to make available to Borrower its Pro Rata Share
of any requested Revolving Loan if such amount, plus its Pro Rata Share of all
Revolving Loans then outstanding, would exceed such Lender's Maximum Loan Amount
at such time. No Lender shall be obligated to make available its Pro Rata Share
of any Revolving Loans during the occurrence of any Event of Default or
Unmatured Event of Default; provided that notwithstanding the foregoing or
anything contained herein to the contrary, regardless of whether an
Event of Default or an Unmatured Event of Default exists, each Lender shall, at
the request of Agent, continue to be obligated to make its Pro Rata Share of the
Revolving Loans available to
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Borrower for a period of up to five (5) Banking Days, but in any event, no
Lender shall be obligated at any time to make available to Borrower its Pro Rata
Share of any such requested Revolving Loan if such amount, plus its Pro Rata
Share of all Revolving Loans then outstanding, would exceed such Lender's
Maximum Loan Amount at such time. Neither Agent nor any Lender shall be
responsible for any failure by any other Lender to perform its obligations to
make advances hereunder, and the failure of any Lender to make its Pro Rata
Share of any advance hereunder shall not relieve any other Lender of its
obligation, if any, to make its Pro Rata Share of Loans hereunder, nor require
such other Lender to make more than its Pro Rata Share of any Loans hereunder.
If Borrower makes a request for a Revolving Loan as provided herein, or if Agent
desires to make a Revolving Loan pursuant to any other provision of this
Agreement or any Related Agreement that permits Agent to advance Revolving Loans
to Borrower, Agent, at its option and in its sole and absolute discretion, shall
do either of the following:
(i) Advance the amount of the proposed Revolving Loan to Borrower
disproportionately (a "Disproportionate Advance") out of Agent's own funds
on behalf of Lenders, and request settlement in accordance with Section
-------
2.15, such that upon such settlement, each Lender's share of the
----
outstanding Revolving Loans (including, without limitation, the amount of
any Disproportionate Advance) equals its Pro Rata Share and such
Disproportionate Advance shall be deemed to be repaid; or
(ii) Notify each Lender and Borrower by telecopy or other similar
form of teletransmission of the proposed advance on the same day Agent is
notified by Borrower of Borrower's request for an advance hereunder or the
same day Agent desires to make a Revolving Loan for the benefit of Borrower
(to the extent permitted hereunder or under any Related Agreement). Each
Lender shall remit, to the Demand Deposit Account, on or prior to twelve
o'clock noon, Chicago time, on the business day immediately succeeding the
date of such notification, immediately available funds in an amount equal
to such Lender's Pro Rata Share of such proposed advance.
If and to the extent that a Lender does not settle with Agent as required under
clause (i), Borrower agrees to repay to Agent forthwith on demand such amount
----------
required to be paid by such Lender to Agent, together with interest thereon, for
each day from the date such amount is made available to Borrower until the date
such amount is repaid to Agent, at the interest rate
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applicable at such time for such Revolving Loans; provided, that Borrower's
obligation to repay such advance to Agent shall not relieve each Lender of its
liability to Agent or Borrower for failure to settle as provided in clause (i).
----------
(b) In the event the aggregate outstanding principal balance of the
Revolving Loans exceeds the Revolving Loan Availability, Borrower shall, unless
Agent permits such Over Advance as provided in Section 2.8 or Requisite Lenders
-----------
shall otherwise consent, without notice or demand of any kind, immediately make
such repayments of the Revolving Loans or take such other actions as shall be
necessary to eliminate such excess.
(c) All Revolving Loans hereunder shall be paid by Borrower on the
Termination Date, unless payable sooner pursuant to the provisions of this
Agreement, but may, at Borrower's election, be repaid in whole or in part at any
time prior to such date without premium or penalty (other than as expressly
provided in Section 3.4 of Supplement A with respect to LIBOR Rate Loans repaid
----------- ------------
prior to the end of the applicable Interest Rate Period).
2.1.2 Prepayment of all Liabilities; Reduction of Revolving Credit
------------------------------------------------------------
Amount. Borrower may prepay all of the Liabilities in full at any time, without
------
premium or penalty (other than as expressly provided in Section 3.4 of
-----------
Supplement A with respect to LIBOR Rate Loans repaid prior to the end of the
------------
applicable Interest Rate Period), by prepaying the outstanding principal balance
of the Revolving Loans, together with (a) all accrued and unpaid interest on the
Liabilities, (b) all other outstanding Liabilities and (c) cash in the amount
of, or adequate (in Agent's determination) cash collateral for, the Letter of
Credit Obligations. Borrower may not permanently reduce the Revolving Credit
Amount except (i) in connection with the prepayment in full of all of the
Liabilities or (ii) if, after giving effect to such reduction, the Revolving
Credit Amount equals or exceeds the amount of the Loans plus the Letter of
Credit Obligations then outstanding.
2.1.3 Maximum Outstanding Liabilities. Notwithstanding any other
-------------------------------
provision of this Agreement, the aggregate outstanding principal balance of the
Loans plus Letter of Credit Obligations shall not exceed the Revolving Credit
Amount; provided, however, that the foregoing shall not limit the right of Agent
-------- -------
to advance Revolving Loans to Borrower pursuant to any other provision of this
Agreement or any Related Agreement that permits Agent to advance Revolving Loans
to Borrower. Any Revolving Loan advanced by Agent to Borrower under any of the
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<PAGE>
foregoing provisions shall be deemed to be a Revolving Loan made by Agent on
behalf of Lenders.
2.2 Letters of Credit.
-----------------
(a) In addition to Loans made pursuant to Section 2.1, Agent will,
-----------
upon receipt of duly executed Applications and such other documents, instruments
and/or agreements as Agent may require, request, on Borrower's behalf, that
Issuing Bank issue Letters of Credit on such terms as are satisfactory to Agent
and Issuing Bank, provided, however that no Letter of Credit will be issued if,
-------- -------
before or after taking such Letter of Credit into account, (i) the Letter of
Credit Obligations exceed $6,000,000 or (ii) the Letter of Credit Obligations
exceeds the lesser of (A) the Revolving Credit Amount minus the outstanding
principal balance of the Revolving Loans and (B) the Borrowing Base minus the
outstanding principal balance of the Revolving Loans. If such excess shall at
any time exist, Borrower shall, unless Requisite Lenders shall otherwise
consent, promptly make such payments as are necessary to eliminate such excess
or shall promptly post cash collateral in the amount of such excess. No Letter
of Credit shall have an expiry date after the Termination Date.
(b) Borrower agrees to pay to Issuing Bank, on demand, Issuing Bank's
standard issuance, negotiation and administrative operating fees and charges in
effect from time to time for issuing and administering any Letters of Credit and
if not so paid, each Lender shall, without regard to any other provision of this
Agreement or any other Related Agreement, any defense that Borrower may have to
its obligation to pay Issuing Bank in connection with such fees and charges or
any defense that any Lender may have in connection with the participation
described in Section 2.2(e) in connection with any Letter of Credit or L/C
--------------
Draft, pay Issuing Bank for such Lender's Pro Rata Share of such fees and
charges, and any payments so made by Lenders to Issuing Bank shall be deemed to
be Revolving Loans. Each Lender (other than a Lender that is Issuing Bank)
acknowledges and agrees that it shall not be entitled to any of the fees and
charges of Issuing Bank. Borrower further agrees to pay Agent, for the benefit
of itself and Lenders, a commission equal to one and one-half percent (1.5%) per
annum (calculated on the basis of a year consisting of three hundred sixty (360)
days and paid for actual days elapsed) of the daily average of the undrawn
amount of each Letter of Credit and on each L/C Draft accepted (but not yet
paid) in connection therewith. Such Letter of Credit commissions shall be paid
in arrears on the last day of each month thereafter. Agent may provide for the
payment of any fees, charges or commissions due hereunder by advancing the
amount thereof to Borrower as a Revolving Loan. At all times
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<PAGE>
that any Default Rate is being charged under this Agreement, the Letter of
Credit commission shall be equal to the otherwise applicable commission plus two
percent (2%) per annum.
(c) Subject to the remaining sentences of this clause (c), Borrower
----------
agrees to reimburse Issuing Bank, on demand, for each payment made by Issuing
Bank under or pursuant to any Letter of Credit or L/C Draft and if not so
reimbursed, each Lender shall, without regard to any other provision of this
Agreement or any other Related Agreement, any defense that Borrower may have to
its obligation to reimburse Issuing Bank in connection with such payment or any
defense that any Lender may have in connection with the participation described
in Section 2.2(e) in connection with any Letter of Credit or L/C Draft,
--------------
reimburse Issuing Bank for such Lender's Pro Rata Share of such payment, and any
payments so made by Lenders to Issuing Bank shall be deemed to be Revolving
Loans. Agent and Lenders agree that so long as there is sufficient Revolving
Loan Availability and provided that no Event of Default is then in existence or
would be caused thereby, Agent will provide for the payment of any reimbursement
obligations and any interest accrued thereon by advancing the amount thereof to
Borrower as a Revolving Loan as soon as reasonably practicable. Prior to such
advance, the amount of such reimbursement obligations shall bear interest at the
then applicable Reference Rate. Agent shall have the option, pursuant to Section
-------
2.8, to so provide for such payments even if there is not sufficient Revolving
---
Loan Availability or if an Event of Default is then in existence or would be
caused thereby and such amounts will bear interest at the rate set forth in
Section 2.8. In the event a Letter of Credit or L/C Draft is not reimbursed
-----------
from a Revolving Loan as provided herein, Borrower agrees to pay Agent, for the
benefit of itself and Lenders, on demand, interest at the Default Rate on any
amounts paid by Issuing Bank in respect of a Letter of Credit or an L/C Draft
until the reimbursement of Issuing Bank by Borrower of such payment.
(d) Notwithstanding anything to the contrary herein or in any
Application, upon the occurrence of an Event of Default, an amount equal to the
aggregate amount of the outstanding Letter of Credit Obligations shall, at
Agent's option and without demand upon or further notice to Borrower, be deemed
(as between Lenders and Borrower) to have been paid or disbursed by Agent under
the Letters of Credit and accepted L/C Drafts (notwithstanding that such amounts
may not in fact have been so paid or disbursed), and a Revolving Loan to
Borrower in the amount of such Letter of Credit Obligations to have been made
and accepted, which Loan shall be immediately due and payable. In lieu of the
foregoing, at the election of Agent at any time after an Event of Default,
Borrower shall, upon Agent's demand, deliver
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<PAGE>
to Agent cash collateral equal to the aggregate Letter of Credit Obligations.
Any such cash collateral and/or any amounts received by Agent in payment of the
Loan made pursuant to this paragraph (d) shall be held by Agent, for the benefit
-------------
of itself and Lenders, in the Assignee Deposit Account or a separate account
appropriately designated as a cash collateral account in relation to this
Agreement and the Letters of Credit and shall be retained by Agent, for the
benefit of itself and Lenders, as collateral security in respect of, first, the
Liabilities under or in connection with the Letters of Credit and L/C Drafts and
then, all other Liabilities. Such amounts shall not be used by Agent to pay any
amounts drawn or paid under or pursuant to any Letter of Credit or L/C Draft,
but may be applied to reimburse Issuing Bank for drawings or payments under or
pursuant to Letters of Credit or L/C Drafts which Issuing Bank has paid, or if
no such reimbursement is required, to payment of such other Liabilities as Agent
shall determine. Any amounts remaining in any cash collateral account
established pursuant to this paragraph (d) following payment in full of all
-------------
Liabilities shall be returned to Borrower.
(e) Immediately upon the issuance of a Letter of Credit in accordance
with this Agreement, each Lender shall be deemed to have irrevocably and
unconditionally purchased and received from Issuing Bank, without recourse or
warranty, an undivided interest and participation therein to the extent of such
Lender's Pro Rata Share (including without limitation, all obligations of
Borrower with respect thereto). Borrower hereby indemnifies each of Agent and
each Lender against any and all liability and expense it may incur in connection
with any Letter of Credit or L/C Draft and agrees to reimburse each of Agent and
each Lender for any payment made by Agent or any Lender to Issuing Bank, except
for any liability incurred or payment made as a result of Agent's or such
Lender's gross negligence or willful misconduct.
2.3 Loan Account; Demand Deposit Account. Agent shall establish or
------------------------------------
cause to be established on its books in Borrower's name one or more accounts
(each a "Loan Account") to evidence Loans made to Borrower. Agent or Lenders,
as appropriate, will credit or cause to be credited to a commercial account
("Demand Deposit Account") maintained by Borrower at BAI's 231 South LaSalle
Street, Chicago, Illinois office the amount of any sums advanced as Loans
hereunder, which shall be disbursed at Borrower's direction. Any amounts
advanced as Loans hereunder which are credited to Borrower's Demand Deposit
Account, together with any other amounts advanced to Borrower as a Loan pursuant
to this Agreement, will be debited to the applicable Loan Account and result in
an increase in the
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principal balance outstanding in such Loan Account in the amount thereof.
2.4 Interest and Fees.
-----------------
2.4.1 Interest. The unpaid principal amount of each Revolving Loan
--------
hereunder shall bear interest until maturity at the rate or rates applicable to
Revolving Loans indicated in Supplement A hereto. If any Revolving Loan or
------------
portion thereof is not paid when due, whether by acceleration or otherwise, the
entire unpaid principal amount of the Revolving Loans shall bear interest
thereafter until such amount is paid in full at the Default Rate applicable to
Revolving Loans indicated in Supplement A hereto. Until maturity, interest on
------------
the Revolving Loans shall be paid by Borrower on the date(s) indicated in
Supplement A, and at such maturity. After maturity, whether by acceleration or
------------
otherwise, accrued interest shall be payable on demand.
2.4.2 Nonuse Fee. Borrower agrees to pay to Agent, for the benefit
----------
of itself and Lenders, a fee equal to one-half of one percent (0.5%) per annum
on the daily average amount by which the Revolving Credit Amount exceeds the
outstanding principal balance of the Revolving Loans plus the Letter of Credit
Obligations; provided, however, that the amount of such fee payable in a given
--------
month shall be reduced by an amount equal to (i) one-half of one percent (0.5%)
per annum, times (ii) the amount of the daily average decrease in the Borrowing
Base during the preceding month resulting from all reductions in the Inventory
Percentage since the Closing Date, as described in Supplement A. The fee
------------
provided for in this Section 2.4.2 shall be payable monthly in arrears on the
-------------
last day of each month commencing April 30, 1995, and on the date the Revolving
Credit terminates for the period then ended.
2.4.3 Method of Calculating Interest and Fees. Interest on the
---------------------------------------
unpaid principal amount of each Loan shall accrue from and including the date
such Loan is made to, but not including, the date such Loan is paid. Interest
and any fees shall be calculated on the basis of a year consisting of three
hundred sixty (360) days and paid for actual days elapsed.
2.4.4 Payment of Interest and Fees. Agent may provide for the
----------------------------
payment of any unpaid accrued interest and any fees by charging the Demand
Deposit Account or any bank account maintained by Borrower with Agent or by
advancing the amount thereof to Borrower as a Revolving Loan.
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<PAGE>
2.5 Requests for Loans; Borrowing Base Certificates; Other
------------------------------------------------------
Information.
-----------
(a) Loans shall be requested in writing or by telephone, except for
Overdraft Loans and Revolving Loans made pursuant to the provisions of Section
-------
2.2(b), 2.2(c), 2.2(d), 2.4.4, 2.10(c), 3.2(c), 5.5, 5.6, 7.4, 12.3, or 12.4 or
------ ------ ------ ----- ------- ------ --- --- --- ---- ----
any other provision of this Agreement or any Related Agreement that permits
Agent to advance Revolving Loans to Borrower.
(b) In the event that Borrower shall at any time, or from time to
time, (i) make a request for a Loan hereunder or (ii) be deemed to have
requested an Overdraft Loan, Borrower agrees to forthwith provide Agent and
Lenders with such information, at such frequency and in such format, as is
reasonably required by Agent, such information to be current as of the time of
such request.
(c) Borrower further agrees to provide to Agent and Lenders a current
Borrowing Base Certificate on the 15th day of each month for the preceding month
and at such other times as Agent may request. Such Borrowing Base Certificate
shall be in substantially the same form as that attached hereto as Exhibit A,
---------
executed and certified as accurate by such officers or employees of Borrower as
Borrower designates from time to time in writing to Agent pursuant to duly
adopted resolutions of Borrower's Board of Directors authorizing such action.
(d) Borrower may request, telephonically or by written authorization,
the disbursement of Revolving Loans by Agent or Lenders, as appropriate.
Borrower shall provide Agent with documentation satisfactory to Agent indicating
the names of those employees of Borrower authorized by Borrower to sign
Borrowing Base Certificates and/or to make telephonic requests for Loans and
Letters of Credit, and/or to authorize disbursement of the proceeds
of Loans by wire transfer or otherwise, and Agent and Lenders shall be entitled
to rely upon such documentation until notified in writing by Borrower of any
change(s) in the names of the employees so authorized. Agent and Lenders shall
be entitled to act on the instructions of anyone identifying himself as one of
the persons authorized to request Loans and Letters of Credit, or disbursements
of Loan proceeds by telephone and Borrower shall be bound thereby in the same
manner as if the person were actually so authorized. Borrower agrees to
indemnify and hold each of Agent and each Lender harmless from any and all
claims, damages, liabilities, losses, costs and expenses (including Attorneys'
Fees) which may arise or be created by the acceptance of instructions for making
or paying Loans in writing or by telephone. Each such request must be received
by Agent no
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later than 11:00 a.m. (Chicago time) on the date on which such Revolving Loan is
requested to be made.
2.6 Statements. All Loans and payments hereunder shall be recorded
----------
on Agent's books, which shall be rebuttably presumptive evidence of the amount
of such Loans outstanding at any time hereunder. Agent will account monthly as
to all Loans and payments hereunder and, absent demonstrable error, each monthly
accounting will be fully binding on Borrower unless, within thirty (30) days of
Borrower's receipt thereof, Borrower shall provide Agent with a specific listing
of exceptions. Notwithstanding any term or condition of this Agreement to the
contrary, however, the failure of Agent to record the date and amount of any
Loan hereunder shall not limit or otherwise affect the obligation of Borrower to
repay any such Loan.
2.7 Overdraft Loans. Agent, in its sole and absolute discretion, and
---------------
subject to the terms hereof, may make a Revolving Loan to Borrower in an amount
equal to the amount of any overdraft which may from time to time exist with
respect to the Demand Deposit Account or any bank account which Borrower may now
or hereafter have with Agent. The existence of any such overdraft shall be
deemed to be a request by Borrower for such Loan. Borrower acknowledges that
Agent is under no duty or obligation to make any Loan to Borrower to cover any
overdraft. Borrower further agrees that if the making of a Loan to cover any
Overdraft would result in an Over Advance, such overdraft shall constitute a
separate Loan under this Agreement (an "Overdraft Loan"), which shall bear, from
the date on which the overdraft occurred until paid, interest in an amount equal
to the greater of one hundred thirty percent (130%) of the highest rate of
interest then actually being charged for Revolving Loans (other than Overdraft
Loans) made hereunder, and $50 per day. If Agent, in its sole and absolute
discretion, decides not to make a Loan to cover part or all of any overdraft,
Agent may return any check(s) which created such overdraft.
2.8 Over Advances. If the aggregate outstanding Revolving Loans and
-------------
Letter of Credit Obligations exceed Revolving Loan Availability (such excess
Liabilities are herein referred to as "Over Advances"), Agent, in its sole and
absolute discretion, may, for a period of five (5) Banking Days, to the extent
such Over Advance arises as a result of a reduction in the Borrowing Base,
permit such Over Advance to exist without the consent of any Lender (but subject
to Section 2.1.1(a)) and continue to make Revolving Loans on behalf of Lenders,
----------------
and after the expiration of such five (5) Banking Day period, no such event or
occurrence shall cause or constitute a waiver by any Lender of its right to
refuse to make any further Revolving Loans at any time that an Over Advance
exists or would result therefrom; provided, that
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Agent may not (i) make Revolving Loans on behalf of Lenders under this Section
-------
2.8 to the extent such Revolving Loans would cause a Lender's Pro Rata Share of
---
the Revolving Loans to exceed such Lender's Maximum Loan Amount or (ii) make
Revolving Loans on behalf of Lenders under this Section 2.8 to the extent such
-----------
Revolving Loans would cause the then outstanding Revolving Loans and Letter of
Credit Obligations to exceed the sum of $1,000,000 and the amount of the
outstanding Revolving Loans and Letter of Credit Obligations as of the date
Agent became aware of the Over Advance. During any period in which an Over
Advance exists, the amount of Over Advances shall bear interest at a rate equal
to one hundred thirty percent (130%) of the highest rate of interest then
actually being charged for Revolving Loans made hereunder.
2.9 All Loans One Obligation. The Revolving Loans and all other
------------------------
Loans under this Agreement shall constitute one Loan, and all Indebtedness and
other Liabilities of Borrower under this Agreement and any of the Related
Agreements shall constitute one general obligation secured by Agent's Lien, for
the benefit of itself and Lenders, on all of the Collateral and by all other
Liens heretofore, now, or at any time or times hereafter granted by Borrower or
any other Obligor to Agent, for the benefit of itself and Lenders. Borrower
agrees that all of the rights of Agent and Lenders set forth in this Agreement
shall apply to any modification of or supplement to this Agreement, any
Supplements or Exhibits hereto, and the Related Agreements, unless otherwise
agreed in writing.
2.10 Making of Payments; Application of Collections; Charging of
-----------------------------------------------------------
Accounts.
--------
(a) All payments hereunder (including payment of Letter of Credit
Obligations and payments with respect to any Notes) shall be made without set-
off or counterclaim and shall be made to Agent in immediately available funds
(except for payments to be made to Issuing Bank as provided in Section 2.2 and
-----------
except as Agent may otherwise consent) prior to 12:30 p.m., Chicago time, on the
date due at BAI's office at 231 South LaSalle Street, Chicago, Illinois 60697,
or at such other place as may be designated by Agent to Borrower in writing.
Any payments received after such time shall be deemed received on the next
Banking Day. Whenever any payment to be made hereunder or under any Note shall
be stated to be due on a date other than a Banking Day, such payment may be made
on the next succeeding Banking Day, and such extension of time shall be included
in the calculation of interest and any fees.
(b) (i) Borrower authorizes Agent, and Agent will, subject to the
provisions of this paragraph (b), apply the whole or any part of any amounts
-------------
received by Agent (whether
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<PAGE>
deposited in the Assignee Deposit Account or otherwise received by Agent) from
the collection of items of payment and proceeds of any Collateral (including
without limitation proceeds of insurance), against the principal and/or interest
of any Loans made hereunder and/or any other Liabilities, whether or not then
due, in such order of application as Agent may determine; provided, however,
-------- -------
that prior to the occurrence of an Event of Default, any such amounts received
by Agent shall, at Borrower's option, (y) be transferred to Borrower's Demand
Deposit Account or other operating account in accordance with written
instructions provided by Borrower, or (z) be applied in the manner, if any,
specifically set forth in this Agreement with respect to such payment and if no
such manner is specifically set out, then as follows: first, to payment of
-----
amounts then due with respect to fees (including Attorneys' Fees), charges and
expenses for which Borrower is liable pursuant to this Agreement and the Related
Agreements; second, to payment of amounts then due with respect to interest on
------
the Loans; third, to payment of the principal of the Loans.
-----
(ii) Notwithstanding anything to the contrary herein, (i) all cash,
checks, instruments and other items of payment, solely for purposes of
determining the occurrence of an Event of Default, shall be deemed received upon
actual receipt by Agent, unless the same is subsequently dishonored for any
reason whatsoever, (ii) for purposes of determining whether, under Sections 2.1
------------
and 2.2, there is availability for Loans or Letters of Credit, all cash, checks,
---
instruments and other items of payment shall be applied against the Liabilities
when received by Agent and (iii) solely for purposes of interest calculation
hereunder, all cash, checks, instruments and other items of payment shall be
deemed to have been applied against the Liabilities on the first Banking Day
after receipt by Agent of collected funds with respect thereto; further
provided, that any amounts earned on such funds during the period after receipt
thereof by Agent and prior to application thereof against the Liabilities as
provided herein, shall be retained by Agent for Agent's own account.
Notwithstanding the foregoing, no checks, drafts or other instruments received
by Agent shall constitute final payment with respect to any Liabilities unless
and until such item of payment has actually been collected.
(c) Borrower hereby authorizes Agent, and Agent may, in its sole and
absolute discretion, charge to Borrower at any time when due all or any portion
of any of the Liabilities consisting of principal or interest and, after three
Banking Days' prior notice, any other Liabilities including but not limited to
any Attorneys' Fees and other costs and expenses of Agent and Lenders for which
Borrower is liable pursuant to the terms of this Agreement or any
Related Agreement, or for which
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any other Obligor is liable pursuant to the terms of any Related Agreement, by
charging Borrower's Demand Deposit Account or any bank account of Borrower with
Agent or by advancing the amount thereof to Borrower as a Revolving Loan;
provided, however that the provisions of this Section 2.10(c) shall not affect
-------- ------- ---------------
Borrower's obligation to pay when due all amounts payable by Borrower under this
Agreement, any Note or any Related Agreement, whether or not there are
sufficient funds therefor in the Demand Deposit Account or any such other bank
account of Borrower.
2.11 Agent's Election Not to Enforce. Notwithstanding any term or
-------------------------------
condition of this Agreement to the contrary, Agent, in the sole and absolute
discretion of Requisite Lenders, at any time and from time to time, may suspend
or refrain from enforcing any or all of the restrictions imposed in this Section
-------
2, but no such suspension or failure to enforce shall impair any right or power
-
of Agent or any Lender under this Agreement, including without limitation any
right of each Lender to refrain from making a Loan or Issuing Bank to refrain
from issuing a Letter of Credit if all conditions precedent to such Lender's
obligation to make such Loan or Issuing Bank's obligation to issue such Letter
of Credit have not been satisfied.
2.12 Reaffirmation. Each Loan or Letter of Credit, or designation or
-------------
continuation of a LIBOR Rate Loan, in each case requested by Borrower pursuant
to this Agreement, shall constitute an automatic certification by Borrower to
Agent and Lenders that (a) all of the representations and warranties of Borrower
in this Agreement and each of the Related Agreements are true and correct on the
date of such request to the same extent as if made on such date, except for such
changes as are specifically permitted hereunder (or under such Related
Agreement) and except for those representations and warranties made solely as of
the date hereof or the Closing Date and (b) immediately before and after making
the requested Loan or issuing the requested Letter of Credit, no Event of
Default or Unmatured Event of Default, then exists or would result therefrom.
2.13 Setoff. In addition to and not in limitation of all other
------
rights and remedies (including other rights of offset or banker's lien) that
Agent and Lenders may have under applicable law, each of Agent and each Lender
shall, upon the occurrence of any Event of Default described in Section 6.1, or
-----------
any Unmatured Event of Default described in Section 6.1(e), have the right to
--------------
appropriate and apply to the payment of the Liabilities (whether or not then
due), in such order of application as Agent may elect, any and all balances,
credits, deposits (general or special, time or demand, provisional or final),
accounts or moneys of Borrower then or thereafter with
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Agent or any Lender. Agent and each Lender shall promptly advise Borrower of any
such setoff and application but failure to do so shall not affect the validity
of such setoff and application.
2.14 Closing Fee. Borrower agrees to pay to BAI, for its own
-----------
account, in connection with the closing of this Agreement, a closing fee of
$300,000, which amount shall be deemed fully earned and shall be payable in full
on the Closing Date. With Agent's consent, the amount of the closing fee may be
advanced to Borrower as a Revolving Loan.
2.15 Settlements, Distributions and Apportionment of Payments. On a
--------------------------------------------------------
weekly basis (or more frequently if required by Agent) (a "Settlement Date"),
Agent shall provide each Lender with a statement of the outstanding balance of
the Liabilities as of the end of the Banking Day preceding the Settlement Date
(the "Pre-Settlement Determination Date") and the current balance of the
Revolving Loans funded by each Lender (whether made directly by such Lender to
Borrower or constituting a settlement by such Lender of a previous
Disproportionate Advance made by Agent on behalf of such Lender to Borrower).
If such statement discloses that such Lender's current balance of the Revolving
Loans as of the Pre-Settlement Determination Date exceeds such Lender's Pro Rata
Share of the Revolving Loans outstanding as of the Pre-Settlement Determination
Date, then Agent shall, one (1) Banking Day after the Settlement Date, transfer
to such Lender, by wire transfer, the net amount due to such Lender in
accordance with such Lender's instructions, and if such statement discloses that
such Lender's current balance of the Revolving Loans as of the Pre-Settlement
Determination Date is less than such Lender's Pro Rata Share of the Revolving
Loans outstanding as of the Pre-Settlement Determination Date, then such Lender
shall, one (1) Banking Day after the Settlement Date, transfer to Agent, by wire
transfer the net amount due to Agent in accordance with Agent's instructions.
In addition, payments actually received by Agent with respect to the following
items shall be distributed by Agent to Lenders as follows:
(a) Within one (1) Banking Day of receipt thereof by Agent,
payments to be applied to interest on the Loans shall be paid to each
Lender in proportion to its Pro Rata Share, subject to any adjustments for
any Disproportionate Advances so that Agent shall receive interest on the
Disproportionate Advances and each Lender shall only receive interest on
the amount of funds actually advanced by such Lender; and
(b) Within one (1) Banking Day of receipt thereof by Agent,
payments to be applied to the unused line fee set forth in Section 2.4.2
-------------
and the Letter of
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<PAGE>
Credit commission set forth in Section 2.2(b), shall each
--------------
be paid to each Lender in proportion to its Pro Rata Share.
Notwithstanding the foregoing, if a Lender has failed to remit its Pro Rata
Share of any Loans required to be made pursuant to Section 2.1.1 or has failed
-------------
to make a settlement payment to Agent pursuant to this Section 2.15, no payment
------------
shall be made to such Lender by Agent at any time such Lender's share of the
outstanding Loans is less than such Lender's Pro Rata Share. If Agent or any
Lender fails to pay the other any payment due under this Agreement on its due
date, the party to whom such payment is due shall be entitled to recover
interest from the party obligated to make such payment at a rate per annum equal
to the overnight Federal Funds Rate.
3. COLLATERAL.
3.1 Grant of Security Interest. As security for the payment of all
--------------------------
Loans now or hereafter made by, or on behalf of, Lenders to Borrower hereunder
or under any Note, and as security for the payment or other satisfaction of all
other Liabilities (including without limitation all reimbursement obligations
under any Letters of Credit), Borrower hereby grants to Agent, for the benefit
of itself and Lenders, a security interest in and to the following property of
Borrower, whether now owned or existing, or hereafter acquired or coming into
existence, wherever now or hereafter located (all such property is hereinafter
referred to collectively as the "Borrower Collateral"):
(a) Accounts Receivable (whether or not Eligible Accounts);
Contract Rights; any and all security deposits and other security held by
or granted to Borrower to secure payments from any and all persons who are
or may become obligated to Borrower under, with respect to, or on account
of any Account Receivable or Contract Right; and all chattel paper and
instruments evidencing, arising out of or relating to any obligations to
Borrower for goods sold or leased or services rendered, or otherwise
arising out of or relating to any property described in this Section 3.1;
-----------
(b) Inventory (whether or not Eligible Inventory);
(c) General Intangibles;
(d) Any and all balances, credits, deposits (general or special,
time or demand, provisional or
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<PAGE>
final), accounts or monies of or in the name of Borrower now or hereafter
with Agent, any Lender or any Participant and any and all property of every
kind or description of or in the name of Borrower now or hereafter, for any
reason or purpose whatsoever, in the possession or control of, or in
transit to, or standing to Borrower's credit on the books of, Agent, any
agent or bailee for Agent, any Lender, or any Participant;
(e) To the extent related to the property described in clauses (a)
-----------
through (d) above, all books, correspondence, credit files, records,
---
invoices and other papers and documents, including without limitation, to
the extent so related, all tapes, cards, computer runs, computer programs
and other papers and documents in the possession or control of Borrower or
any computer bureau from time to time acting for Borrower, and, to the
extent so related, all rights in, to and under all policies of insurance,
including claims of rights to payments thereunder and proceeds therefrom,
including business interruption insurance and any credit insurance; and
(f) All products and proceeds (including but not limited to any
Accounts Receivable or other proceeds arising from the sale or other
disposition of any property described above, any returns of Inventory sold
by Borrower, and the proceeds of any insurance covering any of the property
described above) of any of the foregoing.
3.2 Accounts Receivable.
-------------------
(a) If requested by Agent, Borrower shall notify Agent immediately of
all material disputes and claims by any Account Debtor and, if reasonably
requested by Agent after the occurrence and during the continuance of an Event
of Default, settle or adjust them, or cause them to be settled or adjusted, at
no expense to Agent or Lenders. If Agent directs after the occurrence and
during the continuance of an Event of Default, no discount or credit allowance
shall be granted thereafter by Borrower or any Designated Subsidiary to any
Account Debtor, other than discounts and trade allowances offered in the
ordinary course of Borrower's or a Designated Subsidiary's business. All
Account Debtor payments and all net amounts received by Agent in settlements,
adjustment or liquidation of any Account Receivable may be applied by Agent to
the Liabilities or credited to the Demand Deposit Account (subject to
collection) with Agent, as more fully described in Section 2.10. If requested
------------
by Agent, Borrower will, and will cause each Designated Subsidiary to, make
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<PAGE>
proper entries in its books and records, disclosing the assignment of Accounts
Receivable to Agent, for the benefit of itself and Lenders.
(b) Borrower warrants and covenants that: (i) all of the Accounts
Receivable are and will continue to be bona fide existing obligations created by
the sale of goods, the rendering of services, or the furnishing of other good
and sufficient consideration to Account Debtors in the regular course of
business; (ii) all shipping or delivery receipts and other documents furnished
or to be furnished to Agent in connection therewith are and will be genuine; and
(iii) none of the Accounts Receivable identified or included on any schedule,
Borrowing Base Certificate or report as Eligible Accounts Receivable fail at the
time so identified or included to satisfy any of the requirements for
eligibility set forth in the definition of Eligible Accounts Receivable.
(c) Agent is authorized and empowered (which authorization and power,
being coupled with an interest, is irrevocable until the last to occur of
termination of this Agreement and payment and performance in full of all of the
Payment Liabilities under this Agreement) at any time in its sole and absolute
discretion:
(i) To request, in the name of Agent, in Borrower's or a Designated
Subsidiary's name or the name of a third party, confirmation from any
Account Debtor or party obligated under or with respect to any Collateral
of the amount shown by the Accounts Receivable or other Collateral to be
payable, or any other matter stated therein;
(ii) To endorse in Borrower's or a Designated Subsidiary's name and
to collect any chattel paper, checks, notes, drafts, instruments or other
items of payment tendered to or received by Agent in payment of any Account
Receivable or other obligation owing to Borrower or such Designated
Subsidiary;
(iii) After the occurrence and during the continuance of an Event of
Default, to notify, either in Agent's name or Borrower's or a Designated
Subsidiary's name, and/or to require Borrower or such Designated Subsidiary
to notify, any Account Debtor or other Person obligated under or in respect
of any Collateral, of the fact of Agent's Lien thereon, for the benefit of
itself and Lenders, and of the collateral assignment
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<PAGE>
thereof to Agent, for the benefit of itself and Lenders;
(iv) After the occurrence and during the continuance of an Event of
Default, to direct, either in Borrower's or a Designated Subsidiary's name
or Agent's name, and/or to require Borrower or such Designated Subsidiary
to direct, any Account Debtor or other Person obligated under or in respect
of any Collateral to make payment directly to Agent of any amounts due or
to become due thereunder or with respect thereto; and
(v) After the occurrence and during the continuance of an Event of
Default, to demand, collect, surrender, release or exchange all or any part
of any Collateral or any amounts due thereunder or with respect thereto, or
compromise or extend or renew for any period (whether or not longer than
the initial period) any and all sums which are now or may hereafter become
due or owing upon or with respect to any of the Collateral, or enforce, by
suit or otherwise, payment or performance of any of the Collateral either
in Agent's own name or in the name of Borrower or a Designated Subsidiary.
Under no circumstances shall Agent be under any duty to act in regard to any of
the foregoing matters. The costs relating to any of the foregoing matters,
including Attorneys' Fees and out-of-pocket expenses, and the cost of any
Depository Account, Assignee Deposit Account, or other bank account or accounts
which may be required hereunder, shall be borne solely by Borrower whether the
same are incurred by Agent or Borrower, and Agent may after three Banking Days'
prior to notice to Borrower advance same to Borrower as a Revolving Loan.
(d) Borrower will notify its Account Debtors to make all payments in
respect of Borrower's Accounts Receivable directly to one or more lockbox
accounts evidenced by agreements in form and substance satisfactory to Agent.
All deposits to such lockbox accounts, and all of the checks, drafts, cash and
other remittances received by Borrower in payment or as proceeds of, or on
account of, any of the Accounts Receivable or other Collateral, shall be
deposited in special bank accounts (the "Depository Accounts") at such banks or
financial institutions as Agent shall consent. Said proceeds shall be deposited
in precisely the form received except for Borrower's endorsement where necessary
to permit collection of items, which endorsement Borrower agrees to make.
Pending such deposit, Borrower agrees not to commingle any such checks, drafts,
cash and other
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<PAGE>
remittances received by it with any of its funds or property, but will hold them
separate and apart therefrom and upon an express trust for Agent, for the
benefit of itself and Lenders, until deposit thereof is made in the Depository
Accounts. All funds in the Depository Accounts at the end of each Banking Day
will be wire transferred or transferred by other means acceptable to Agent to a
special bank account (the "Assignee Deposit Account") at BAI, over which Agent
alone has power of withdrawal. Borrower acknowledges that the maintenance of the
Assignee Deposit Account is solely for the convenience of Agent in facilitating
its own operations, and Borrower does not and shall not have any right, title or
interest in the Assignee Deposit Account or in the amounts at any time appearing
to the credit thereof, except to the extent that such amounts are transferred to
Borrower's Demand Deposit Account or operating account in accordance with
Section 2.10(b)(i). Borrower agrees not to maintain any depository accounts
------------------
other than Depository Accounts, the Demand Deposit Account and the Assignee
Deposit Account established pursuant to this Section 3.2(d). Upon the full and
--------------
final liquidation of all Payment Liabilities, Agent will pay over to Borrower
any excess amounts received by Agent as payment or proceeds of Collateral,
whether received by Agent as a deposit in the Assignee Deposit Account,
contained in a lockbox account or any Depository Account or received by Agent as
a direct payment on any of the sums due hereunder. Borrower will cause each of
its Designated Subsidiaries to establish accounts comparable to those set forth
above for the collection of the proceeds of their Accounts Receivable, and
Borrower shall cause each Designated Subsidiary to take all other actions to
implement the collection mechanism set forth in this Section 3.2(d).
--------------
(e) Borrower appoints Agent, or any Person whom Agent may from time to
time designate, as Borrower's attorney and agent-in-fact with power: (i) after
the occurrence and during the continuance of an Event of Default to notify the
post office authorities to change the address for delivery of Borrower's mail
to an address designated by Agent; (ii) to receive, open and dispose of all mail
addressed to Borrower, but received by Agent; (iii) to send requests for
verification of Accounts Receivable or other Collateral to Account Debtors; (iv)
to open an Assignee Deposit Account, Depository Accounts, lockbox accounts or
other accounts under Agent's sole control for the collection of Accounts
Receivable or other Collateral, if not required contemporaneously with the
execution hereof; and (v) to do all other things which Agent is permitted to do
under this Agreement or any Related Agreement or which are necessary to carry
out this Agreement and the Related Agreements. Neither Agent nor any of its
directors, officers, employees or agents will be liable for any acts of
commission or omission nor for any error in judgment or mistake of fact or law,
unless the same shall have resulted
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<PAGE>
from gross negligence or willful misconduct. The foregoing appointment and
power, being coupled with an interest, is irrevocable until all Payment
Liabilities under this Agreement are paid and performed in full and this
Agreement is terminated. Borrower expressly waives presentment, demand, notice
of dishonor and protest of all instruments and any other notice to which it
might otherwise be entitled.
(f) If any Account Receivable or Contract Right, in either case in
excess of $2,000,000, and designated by Borrower as an Eligible Account, arises
out of a contract with the United States or any state or local governmental
entity, or any department, agency, or instrumentality of any thereof, Borrower
will, and will cause each Designated Subsidiary to, immediately notify Agent in
writing and execute any instruments and take any steps reasonably required by
Agent in order that all monies due and to become due under such contract shall
be assigned to Agent, for the benefit of itself and Lenders, and notice thereof
given to the applicable government under the Federal Assignment of Claims Act of
1940, as amended, or other applicable laws or regulations; provided, that with
respect to such Accounts Receivable and Contract Rights in existence on the
Closing Date or within 90 days thereafter, such steps need not be completed
until 90 days after the Closing Date. The failure of Borrower or a Designated
Subsidiary to comply with this clause (f) shall not by itself constitute an
----------
Event of Default; rather, such failure will cause the applicable Account
Receivable or Contract Right to be deemed not to be an Eligible Account under
this Agreement.
(g) If any Account Receivable or Contract Right is evidenced by
chattel paper or promissory notes, trade acceptances, or other instruments for
the payment of money, Borrower will, unless Agent shall otherwise agree, deliver
the originals of same to Agent, appropriately endorsed to Agent's order and,
regardless of the form of such endorsement, Borrower hereby expressly waives
presentment, demand, notice of dishonor, protest and notice of protest and all
other notices with respect thereto.
3.3 Inventory.
---------
(a) Borrower warrants and covenants that: (i) all of the Inventory
is, and at all times shall be, owned by Borrower or a Designated Subsidiary free
of all claims and Liens (except as set forth in Section 5.15); and (ii) neither
------------
Borrower nor any Designated Subsidiary will make any further assignment of any
thereof or create or permit to exist any further Lien thereon, unless approved
in writing by Requisite Lenders, nor
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<PAGE>
permit any of Agent's rights therein to be affected by any attachment, levy,
garnishment or other judicial process.
(b) Neither Agent nor any Lender shall be liable or responsible in any
way for the safekeeping of any Inventory delivered to it, to any bailee
appointed by or for it, to any warehouseman, or under any other circumstances,
other than for losses caused by its gross negligence or willful misconduct.
Neither Agent nor any Lender shall be responsible for collection of any proceeds
or for losses in collected proceeds held by Borrower or any Designated
Subsidiary in trust for Agent. Any and all risk of loss for any or all of the
foregoing shall be upon Borrower and the Designated Subsidiaries.
(c) Any material change in the value, or condition of any Inventory,
and any errors discovered in any monthly inventory certificate under Section
-------
5.1.3 or any other inventory schedule delivered to Agent and Lenders, shall be
-----
reported to Agent promptly. Borrower represents and warrants that, as to each
schedule of Inventory delivered to Agent or any Lender:
(i) The descriptions, origins, sizes, qualities, quantities,
weights, and markings of all goods stated thereon, or on any attachment
thereto, are true and correct in all respects;
(ii) None of the goods are defective, of second quality, used, or
goods returned after shipment, except where described as such; and
(iii) All Inventory not included on such schedule has been
previously scheduled.
3.4 Supplemental Documentation. At Agent's request, Borrower shall
--------------------------
execute and deliver, or cause to be executed and delivered, to Agent, at any
time or times hereafter, such agreements, documents, financing statements,
warehouse receipts, bills of lading, notices of assignment of Accounts
Receivable, schedules of Accounts Receivable assigned, and other written matter
necessary or reasonably requested by Agent to perfect and maintain perfected
Agent's Lien on the Collateral, for the benefit of itself and Lenders (all the
above hereinafter referred to as "Supplemental Documentation"), in form and
substance acceptable to Agent, and pay all taxes, fees and other costs and
expenses associated with any recording or filing of the Supplemental
Documentation. Borrower hereby irrevocably makes, constitutes and appoints Agent
(and all Persons designated by Agent for that purpose) as Borrower's true and
lawful attorney (and agent-in-fact) (which appointment and power, being coupled
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with an interest, is irrevocable until the last to occur of termination of this
Agreement and payment and performance in full of all of the Payment Liabilities
under this Agreement) to sign the name of Borrower on any of the Supplemental
Documentation and to deliver any of the Supplemental Documentation to such
Persons as Agent in its sole and absolute discretion, may elect. Borrower agrees
that a carbon, photographic, photostatic, or other reproduction of this
Agreement or of a financing statement is sufficient as a financing statement.
3.5 Collateral for the Benefit of Agent and Lenders. All Liens
-----------------------------------------------
granted to Agent hereunder and under the Related Agreements and all Collateral
delivered to Agent hereunder and under the Related Agreements shall be deemed to
have been granted and delivered to Agent, for the benefit of itself and Lenders,
to secure the Liabilities.
3.6 Certain Intellectual Property. Borrower hereby grants Agent, for
-----------------------------
the benefit of Lenders, a world-wide irrevocable license or other right to use,
without charge, Borrower's labels, rights of use of any name, tradenames,
trademarks and advertising matter, or any assets and property of a similar
nature (collectively, the "Intangible Rights"), as they pertain to the
Collateral, in advertising for sale and selling any Collateral and Borrower's
rights under all applicable licenses and license agreements related to the
foregoing shall inure to Agent's benefit. Such license shall remain in full
force and effect until all of the Liabilities have been repaid in full. Any
transfer of or Lien on the Intangible Rights granted by Borrower to any other
Person shall be subject in all respects to Agent's rights granted hereunder.
4. REPRESENTATIONS AND WARRANTIES.
To induce Agent and Lenders to make Loans to, and issue Letters of
Credit for the account of, Borrower under this Agreement, Borrower makes the
following representations and warranties to Agent and Lenders, all of which
shall be true and correct as of the date the initial Loan is made or the initial
Letter of Credit is issued and shall survive the execution of this Agreement and
the making of the initial Loan and the issuance of the initial Letter of Credit:
4.1 Organization. Borrower, New Pioneer and each Designated
------------
Subsidiary is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its respective incorporation.
Borrower, New Pioneer and each Designated Subsidiary is in good standing and is
duly qualified to do business in each jurisdiction where, because of the nature
of its activities or properties, such qualification is required,
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except for those states in which its failure to qualify to do business would not
be reasonably likely to have a Material Adverse Effect. Except as set forth on
Schedule 4.1 (with respect to Borrower) or Schedule 4.10 (with respect to each
------------ -------------
Designated Subsidiary), on the date hereof, Borrower and each Designated
Subsidiary conducts business in its own name exclusively. Schedule 4.1 sets
------------
forth a complete and accurate list, as of the date of this Agreement, of (a) the
state of formation of Borrower, (b) each state in which Borrower is qualified to
do business and (c) all of Borrower's tradenames, trade styles or doing business
forms.
4.2 Authorization. Borrower is duly authorized to execute and
-------------
deliver this Agreement, any Notes, and any Related Agreements or Supplemental
Documentation contemplated by this Agreement, and is and will continue to be
duly authorized to borrow monies hereunder and to perform its obligations under
this Agreement, any Notes and any such Related Agreements and Supplemental
Documentation. Each Designated Subsidiary is duly authorized to execute and
deliver any Related Agreements or Supplemental Documentation contemplated to be
delivered by such Designated Subsidiary, and is and will continue to be duly
authorized to perform its obligations thereunder. The execution, delivery and
performance by (a) Borrower of this Agreement, any Notes, and any Related
Agreements or Supplemental Documentation contemplated by this Agreement, and the
borrowings hereunder and (b) each Designated Subsidiary of any Related
Agreements or Supplemental Documentation to which it is a party, do not and will
not require any consent or approval of any governmental agency or authority.
4.3 No Conflicts. The execution, delivery and performance by (a)
------------
Borrower of this Agreement, any Notes, and any Related Agreements or
Supplemental Documentation contemplated by this Agreement and (b) each
Designated Subsidiary of any Related Agreements or Supplemental Documentation to
which it is a party, do not and will not conflict with (i) any provision of law,
(ii) the Certificate or Articles of Incorporation, as applicable, or by-laws, of
Borrower or such Designated Subsidiary, (iii) any agreement binding upon
Borrower or such Designated Subsidiary which conflict is reasonably likely to
have a Material Adverse Effect or (iv) any court or administrative order or
decree applicable to Borrower or such Designated Subsidiary which conflict is
reasonably likely to have a Material Adverse Effect, and do not and will not
require, or result in, the creation or imposition of any Lien on any asset of
Borrower or any Designated Subsidiary, except as provided herein.
4.4 Validity and Binding Effect. This Agreement, any Notes, and any
---------------------------
Related Agreements or Supplemental
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<PAGE>
Documentation contemplated by this Agreement, when duly executed and delivered,
will be legal, valid and binding obligations of Borrower and each Designated
Subsidiary party thereto, as applicable, enforceable against Borrower and each
such Designated Subsidiary in accordance with their respective terms.
4.5 No Default. Neither Borrower nor New Pioneer nor any Designated
----------
Subsidiary is in default under any agreement or instrument to which Borrower,
New Pioneer or such Designated Subsidiary is a party or by which any of their
respective properties or assets is bound or affected, which default is
reasonably likely to have a Material Adverse Effect. No Event of Default or
Unmatured Event of Default has occurred and is continuing.
4.6 Financial Statements. Borrower's consolidated audited financial
--------------------
statements as of (a) December 31, 1994 and Borrower's consolidated and
consolidating unaudited financial statements as of February 28, 1995, copies of
which have been furnished to Agent, have been prepared in conformity with GAAP
applied on a basis consistent with that of the preceding Fiscal Year and period
and present fairly the financial condition of Borrower and the Subsidiaries as
of such dates and the results of their operations for the periods then ended,
subject (in the case of the interim financial statement) to year-end audit
adjustments. Since December 31, 1994, there has been no Material Adverse Change
with respect to Borrower and the Designated Subsidiaries. New Pioneer's audited
balance sheet as of March 6, 1995 has been prepared in conformity with GAAP and
presents fairly the financial condition of New Pioneer as of such date. Since
March 6, 1995, there has been no Material Adverse Change with respect to
Borrower, New Pioneer and the Designated Subsidiaries. New Pioneer's
consolidated and consolidating unaudited pro forma balance sheets as of the
Closing Date reflect pro forma changes in New Pioneer's financial condition
since March 6, 1995, including the pro forma effects of the Transactions and the
application of proceeds in respect thereof, and have been prepared in conformity
with GAAP and present fairly the financial condition of New Pioneer, Borrower
and the Subsidiaries as of such date.
4.7 Insurance. Schedule 4.7 hereto is a complete and accurate
--------- ------------
summary of the property and casualty insurance program carried by Borrower and
the Designated Subsidiaries on the date hereof. Schedule 4.7 includes the
------------
insurer's(s') name(s), policy number(s), expiration date(s), amount(s) of
coverage, type(s) of coverage, the annual premium(s), deductibles and self-
insured retention and describes any retrospective rating plan, fronting
arrangement or any other self-insurance or risk assumption agreed to by Borrower
or any Designated Subsidiary or imposed upon Borrower or any Designated
Subsidiary by any such
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<PAGE>
insurer. This summary also includes any self-insurance program that is in
effect.
4.8 Litigation; Contingent Liabilities.
----------------------------------
(a) As of the date hereof, except for those referred to in Schedule
--------
4.8, there are no claims, litigation, arbitration proceedings or governmental
---
proceedings pending or threatened against or affecting New Pioneer, Borrower,
any Designated Subsidiary or any Related Party, the results of which are
reasonably likely to have a Material Adverse Effect.
(b) As of the date hereof, other than any liability incident to the
claims, litigation or proceedings disclosed in Schedule 4.8 or Schedule 4.19, or
------------ -------------
provided for or disclosed in the financial statements referred to in Section 4.6
-----------
neither Borrower nor New Pioneer nor any of the Designated Subsidiaries has any
contingent liabilities which are reasonably likely to have a Material Adverse
Effect.
4.9 Liens. None of the Collateral or other property, revenues or
-----
assets of New Pioneer, Borrower or any Designated Subsidiary is subject to any
Lien (including but not limited to Liens pursuant to Capitalized Leases under
which New Pioneer, Borrower or any Designated Subsidiary is a lessee) except:
(a) Liens in favor of Agent, for the benefit of itself and Lenders; (b) Liens
for current Taxes not delinquent or Taxes being contested in good faith and by
appropriate proceedings and as to which such reserves or other appropriate
provisions as may be required by GAAP are being maintained; (c) carriers',
warehousemen's, mechanics', materialmen's and other like statutory Liens arising
in the ordinary course of business securing obligations which are not overdue or
which are being contested in good faith and by appropriate proceedings and as to
which such reserves or other appropriate provisions as may be required by GAAP
are being maintained; (d) Liens listed on Schedule 4.9 and Liens permitted by
------------
Section 5.15; and (e) Liens consented to in writing by Requisite Lenders.
------------
4.10 Subsidiaries. As of the date hereof, all of Borrower's
------------
Subsidiaries are listed on Schedule 4.10. Schedule 4.10 sets forth, for each
------------- -------------
such Subsidiary, a complete and accurate statement of (a) Borrower's percentage
ownership of each of the Subsidiaries, (b) the state or other jurisdiction of
formation or incorporation of each Subsidiary, (c) each state in which each
Subsidiary is qualified to do business and (d) all of each Subsidiary's trade
names, trade styles or doing business forms. Except as otherwise noted on
Schedule 4.10, all of the Subsidiaries listed on Schedule 4.10 are Restricted
------------- -------------
Subsidiaries and are Designated Subsidiaries.
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<PAGE>
4.11 Partnerships; Joint Ventures. As of the date hereof, neither
----------------------------
Borrower nor New Pioneer nor any of the Designated Subsidiaries is a partner or
joint venturer in any partnership or joint venture other than the partnerships
and joint ventures listed on Schedule 4.11. Schedule 4.11 sets forth, for each
------------- -------------
such partnership or joint venture, a complete and accurate statement of (a) New
Pioneer's, Borrower's and each Designated Subsidiary's percentage ownership of
each such partnership or joint venture, (b) the state or other jurisdiction of
formation or incorporation, as appropriate, of each such partnership or joint
venture, (c) each state in which each such partnership or joint venture is
qualified to do business and (d) all of each such partnership's or joint
venture's trade names, trade styles or doing business forms on the date of this
Agreement.
4.12 Business and Collateral Locations.
---------------------------------
(a) On the date hereof, the office where Borrower and keeps its books
and records concerning its Accounts Receivable and other Collateral, and
Borrower's chief place of business and chief executive office, is located at the
address of Borrower set forth on the signature pages of this Agreement.
Schedule 4.12 accurately identifies the office where New Pioneer and each
-------------
Designated Subsidiary keeps its books and records concerning its Accounts
Receivable and other Collateral. Schedule 4.12 contains a complete and accurate
-------------
list, as of the date of this Agreement, of all of New Pioneer's, Borrower's and
each Designated Subsidiary's places of business other than that referred to in
the first two sentences of this paragraph (a).
-------------
(b) Schedule 4.12 contains a complete and accurate list, as of the
-------------
date of this Agreement, of the locations of all Inventory and other tangible
Collateral and if any Inventory or other Collateral is not in the possession or
control of Borrower, a Designated Subsidiary or the owner of such Collateral,
the name and mailing address of each bailee, processor, warehouseman or other
Person in possession or control thereof.
4.13 Senior Notes. The Senior Notes have been issued on or prior to
------------
the Closing Date in accordance with and pursuant to the terms of the Offering
Memorandum and in compliance with all laws, including without limitation Rule
144A of the Securities Act of 1933, as amended and all other applicable federal
and state securities laws. The Initial Purchasers (as defined in the Offering
Memorandum) have purchased on or prior to the Closing Date all of the Senior
Notes in accordance with the terms of the Offering Memorandum. The issuance of
the Senior Notes and the execution of the Senior Loan
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<PAGE>
Documents has been duly authorized by all necessary corporate action on the part
of New Pioneer, Borrower and each Designated Subsidiary party thereto and will
not require any consent or approval of any governmental agency or authority that
has not been obtained prior to the date hereof. The issuance of the Senior Notes
and the execution of the Senior Loan Documents does not conflict with (i) any
provision of law, (ii) the Certificate or Articles of Incorporation or by-laws
of New Pioneer, Borrower or any Designated Subsidiary party thereto, (iii) any
agreement binding upon New Pioneer, Borrower or any Designated Subsidiary party
thereto which conflict is reasonably likely to have a Material Adverse Effect,
or (iv) any court or administrative order or decree applicable to New Pioneer,
Borrower or any Designated Subsidiary party thereto which conflict is reasonably
likely to have a Material Adverse Effect, and do not and will not require, or
result in, the creation or imposition of any Lien on any asset of New Pioneer,
Borrower or any Designated Subsidiary. The Senior Loan Documents are legal,
valid and binding obligations of New Pioneer, Borrower and each Designated
Subsidiary party thereto, enforceable against New Pioneer, Borrower and each
Designated Subsidiary party thereto in accordance with their
respective terms. All representations and warranties of New Pioneer, Borrower or
any Designated Subsidiary contained in the Senior Loan Documents are true and
correct in all material respects as of the date hereof.
4.14 Other Transactions.
------------------
(a) Each of the Transactions other than the issuance of the Senior
Notes has been consummated in accordance with and pursuant to the terms of the
applicable Transaction Documents, and in compliance with all applicable laws
except where noncompliance therewith is not reasonably likely to have a Material
Adverse Effect. The execution of all such Transaction Documents has been duly
authorized by all necessary corporate action on the part of Borrower, the
Designated Subsidiaries, New Pioneer and GEV, as applicable, and will not
require any consent or approval of any governmental agency or authority that has
not been obtained prior to the date hereof. The execution of all such
Transaction Documents does not conflict with (i) any provision of law, (ii) the
Certificate or Articles of Incorporation or by-laws of New Pioneer, GEV,
Borrower or any Designated Subsidiary party thereto, (iii) any agreement binding
upon New Pioneer, GEV, Borrower or any Designated Subsidiary party thereto which
conflict is reasonably likely to have a Material Adverse Effect or (iv) any
court or administrative order or decree applicable to New Pioneer, GEV, Borrower
or any Designated Subsidiary party thereto which conflict is reasonably likely
to have a Material Adverse Effect.
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<PAGE>
(b) After consummation of the Transactions, the capitalization of New
Pioneer, Borrower and each Designated Subsidiary shall be as set forth on
Schedule 4.14.
-------------
4.15 Eligibility of Collateral. Each Account Receivable or item of
-------------------------
Inventory which Borrower shall, expressly or by implication (by inclusion on a
Borrowing Base Certificate or otherwise), request Agent to classify as an
Eligible Account Receivable or as Eligible Inventory, respectively, will, as of
the time when such request is made, conform in all respects to the requirements
of such classification set forth in the respective definitions of "Eligible
Account Receivable" and "Eligible Inventory" set forth herein.
4.16 Patents, Trademarks, etc. New Pioneer, Borrower and each of the
------------------------
Designated Subsidiaries possesses adequate licenses, patents, patent
applications, copyrights, trademarks, trademark applications, trade styles, and
tradenames to continue to conduct its respective business as heretofore
conducted by it, and all such licenses, patents, patent applications,
copyrights, trademarks, trademark applications, trade styles, and tradenames
existing on the date hereof of Borrower or any Designated Subsidiary are listed
on Schedule 4.16.
-------------
4.17 Solvency. Each of (i) New Pioneer, Borrower and each Designated
--------
Subsidiary and (ii) New Pioneer, Borrower and the Designated Subsidiaries, taken
as a whole, now have capital sufficient to carry on their businesses and
transactions and all businesses and transactions in which any of them is about
to engage, and are able to pay their debts as they mature. Each of (i) New
Pioneer, Borrower and each Designated Subsidiary, and (ii) New Pioneer, Borrower
and the Designated Subsidiaries, taken as a whole, are now solvent and now own
property having a value, both at fair valuation and at present fair salable
value, greater than the amount required to pay its debts.
4.18 Contracts; Labor Matters. Except as disclosed on Schedule 4.18:
------------------------ -------------
(a) neither Borrower nor New Pioneer nor any Designated Subsidiary is a party to
any contract or agreement, or is subject to any charge, corporate restriction,
judgment, decree or order, which is reasonably likely to have a Material Adverse
Effect; (b) as of the date hereof, no labor contract to which New Pioneer,
Borrower or any Designated Subsidiary is a party or is otherwise subject is
scheduled to expire prior to the Termination Date; (c) neither New Pioneer nor
Borrower nor any Designated Subsidiary has, within the two (2)-year period
preceding the date of this Agreement, taken any action which would have
constituted or resulted in a "plant closing" or "mass layoff" within the meaning
of the Federal
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<PAGE>
Worker Adjustment and Retraining Notification Act of 1988 or any similar
applicable federal, state or local law, and Borrower has no reasonable
expectation that any such action is or will be required at any time prior to the
initial Termination Date and (d) on the date of this Agreement (i) neither New
Pioneer nor Borrower nor any Designated Subsidiary is a party to any labor
dispute and (ii) there are no strikes or walkouts relating to any labor
contracts to which New Pioneer or Borrower or any Designated Subsidiary is a
party or is otherwise subject.
4.19 Pension and Welfare Plans. Each Pension Plan complies, and has
-------------------------
been administered in compliance, in all material respects, with all applicable
statutes and governmental rules and regulations; no Reportable Event has
occurred and is continuing with respect to any Pension Plan; neither Borrower
nor any ERISA Affiliate has withdrawn from any Multiemployer Plan in a "complete
withdrawal" or a "partial withdrawal" as defined in Section 4203 or 4205 of
ERISA, respectively, with respect to which Borrower or any ERISA Affiliate has
any unsatisfied liability; no steps have been instituted to terminate any
Pension Plan; no contribution failure has occurred with respect to any Pension
Plan sufficient to give rise to a Lien under Section 302(f) of ERISA; no
condition exists or event or transaction has occurred in connection with any
Pension Plan or Multiemployer Plan that is reasonably likely to have a Material
Adverse Effect; and neither Borrower nor any ERISA Affiliate is a "contributing
sponsor" as defined in Section 4001(a)(13) of ERISA of a "single-employer plan"
as defined in Section 4001(a)(15) of ERISA that has two or more contributing
sponsors at least two of whom are not under common control. Except as listed
in Schedule 4.19, neither Borrower nor any ERISA Affiliate, to the extent there
-------------
is joint and several liability with Borrower to pay such benefits, has any
liability to pay any welfare benefits under any employee welfare benefit plan
within the meaning of Section 3(l) of ERISA to former employees thereof or to
current employees with respect to claims incurred after the termination of their
employment other than as required by Section 4980B of the Code or Part 6 of
Subtitle B of Title 1 of ERISA.
4.20 Regulations G and U. None of Borrower, any Designated
-------------------
Subsidiary or New Pioneer is engaged in the business of purchasing or selling
Margin Stock or extending credit to others for the purpose of purchasing or
carrying Margin Stock, and no part of the proceeds of the Senior Loans or any
borrowing hereunder will be used to purchase or carry any Margin Stock or for
any other purpose which would violate any of the margin regulations of the
Federal Reserve Board.
4.21 Compliance. Except as described on Schedule 4.21 or Schedule
---------- ------------- --------
4.25, each of New Pioneer, Borrower and each
----
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<PAGE>
Designated Subsidiary is in compliance with all statutes and governmental rules
and regulations applicable to it, the noncompliance with which is reasonably
likely to have a Material Adverse Effect.
4.22 Taxes. Each of New Pioneer, Borrower and each Designated
-----
Subsidiary has filed all material tax returns which are required to have been
filed and has paid, or made adequate provisions for the payment of, all of its
Taxes which are due and payable, except such Taxes, if any, as are being
contested in good faith and by appropriate proceedings and as to which such
reserves or other appropriate provisions as may be required by GAAP have been
maintained. The federal income tax liability of Borrower and each Designated
Subsidiary has been audited by the Internal Revenue Service and has been finally
determined and satisfied (or the time for audit has expired) for all tax years
up to and including the tax year ended December 31, 1991. Except as described
on Schedule 4.22, as updated from time to time, Borrower is not aware of any
-------------
proposed assessment against New Pioneer, Borrower or any of the Designated
Subsidiaries for additional Taxes (or any basis for any such assessment).
4.23 Investment Company Act Representation. None of New Pioneer,
-------------------------------------
Borrower or any Designated Subsidiary is an "investment company" or a company
"controlled" by an "investment company" within the meaning of the Investment
Company Act of 1940, as amended.
4.24 Public Utility Holding Company Act Representation. None of New
-------------------------------------------------
Pioneer, Borrower or any Designated Subsidiary is a "holding company" or a
"subsidiary company" of a "holding company" or an "affiliate" of a "holding
company" within the meaning of the Public Utility Holding Company Act of 1935,
as amended.
4.25 Environmental and Safety and Health Matters. Except as
-------------------------------------------
disclosed on Schedule 4.25, New Pioneer, Borrower and each of the Designated
-------------
Subsidiaries and/or each property, operations and facility that New Pioneer,
Borrower or any Designated Subsidiary may own, operate or control (a) complies
in all respects with (i) all applicable Environmental Laws the failure with
which to comply is reasonably likely to have a Material Adverse Effect and (ii)
all applicable Occupational Safety and Health Laws the failure with which to
comply is reasonably likely to have a Material Adverse Effect; (b) is not
subject to any judicial or administrative proceeding alleging the violation of
any Environmental Law or Occupational Safety and
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<PAGE>
Health Law which is reasonably likely to have a Material Adverse Effect; (c) has
not received any notice (i) that it may be in violation of any Environmental Law
or Occupational Safety and Health Law which is reasonably likely to have a
Material Adverse Effect, (ii) threatening the commencement of any proceeding
relating to allegedly unlawful, unsafe or unhealthy conditions, which is
reasonably likely to have a Material Adverse Effect, or (iii) alleging that it
is or may be responsible for any response, cleanup, or corrective action,
including but not limited to any remedial investigation/feasibility studies,
under any Environmental Law or Occupational Safety and Health Law, which, is
reasonably likely to have a Material Adverse Effect; (d) to the knowledge of
Borrower is not the subject of federal or state investigation evaluating whether
any investigation, remedial action or other response is needed to respond to (i)
a Release or threatened Release into the environment of any Hazardous Material
or the spillage, disposal or release or threatened release into the environment
of any other hazardous, toxic or dangerous waste, substance or constituent, or
other substance which, is reasonably likely to have a Material Adverse Effect or
(ii) any allegedly unsafe or unhealthful condition, which, is reasonably likely
to have a Material Adverse Effect; (e) has not filed any notice under or
relating to any Environmental Law or Occupational Safety and Health Law
indicating or reporting (i) any past or present Release into the environment of,
or treatment, storage or disposal of, any Hazardous Material or spillage,
disposal or release into the environment of any other hazardous, toxic or
dangerous waste, substance or constituent, or other substance or (ii) any
potentially unsafe or unhealthful condition, in either case, which is reasonably
likely to have a Material Adverse Effect, and to Borrower's knowledge, there
exists no basis for such notice irrespective of whether such notice was actually
filed; and (f) has no contingent liability in connection with any actual Release
into the environment of, or otherwise with respect to, any Hazardous Material or
spillage, disposal or release into the environment of any other hazardous, toxic
or dangerous waste, substance or constituent, or other substance, whether on any
premises owned or occupied by New Pioneer, Borrower or any Designated Subsidiary
or on any other premises, which is reasonably likely to have a Material Adverse
Effect. Except as disclosed on Schedule 4.25, there are no Hazardous Materials
-------------
on, in or under any property or facilities owned, operated or controlled by New
Pioneer, Borrower or any Designated Subsidiary the presence of which is
reasonably likely to have a Material Adverse Effect, including but not limited
to such Hazardous Materials that may be contained in underground storage tanks,
but excepting such Hazardous Materials used in accordance with all applicable
laws and such Hazardous Materials used in the same manner as an ordinary
consumer (e.g., gasoline in tanks of motor vehicles, small amounts of cosmetic
cleaners, etc.). Except as described in the Offering Memorandum with respect to
the termination of its term on the fourth anniversary of the Closing Date, to
the best of Borrower's knowledge, the ZENECA Indemnity
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<PAGE>
shall remain in full force and effect in accordance with its terms following
consummation of the Transactions.
4.26 Related Agreements and Transaction Documents. As of the date
--------------------------------------------
hereof, all representations and warranties of Borrower and each Designated
Subsidiary contained in any Related Agreements and all representations and
warranties of GEV, New Pioneer, Borrower and each Designated Subsidiary
contained in any Transaction Document (whether such representations and
warranties were made to Agent or any Lender or to another Person), are true and
correct as if made on the date hereof (except for those representations and
warranties which are expressly made as of another specified date) and Borrower
hereby adopts and affirms all such representations and warranties which Borrower
agrees shall be incorporated by reference herein and made a part hereof.
4.27 Capitalized Lease Obligations. As of the date hereof, the
-----------------------------
Indebtedness of New Pioneer, Borrower and each Designated Subsidiary under
Capitalized Leases is as set forth on Schedule 4.27.
-------------
5. BORROWER COVENANTS.
From the date of this Agreement and thereafter until the Credit is
terminated and all Payment Liabilities of Borrower hereunder are paid in full,
Borrower agrees that unless Agent, at the written direction of Requisite
Lenders, shall otherwise consent in writing, it will:
5.1 Financial Statements and Other Reports. Furnish to Agent and
--------------------------------------
each Lender, in form satisfactory to Agent:
5.1.1 Financial Reports:
-----------------
(a) Annual Audited Financial Statements. Within ninety (90) days
-----------------------------------
after each Fiscal Year, a copy of the annual audited financial statements of New
Pioneer, Borrower and the Subsidiaries prepared on a consolidated and
consolidating basis and in conformity with GAAP and certified by an independent
certified public accountant who shall be satisfactory to Agent, together with
(i) a certificate from such accountant, (x) containing a computation of, and
showing compliance with, each of the financial ratios and restrictions contained
in this Section 5 or in Supplement A, and (y) to the effect that, in making the
--------- ------------
examination necessary for the signing of such annual audit report, such
accountant has not become aware of any Event of Default or Unmatured Event of
Default that has occurred and is continuing and that relates to financial or
other accounting matters or the financial ratios and restrictions contained in
this Section 5 or in Supplement A, or, if such accountant has
--------- ------------
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<PAGE>
become aware of any such event, describing it and (ii) if prepared in connection
with the annual audit report, the annual operating statements of New Pioneer,
Borrower and the Subsidiaries prepared on a consolidating basis and in
conformity with GAAP applied in a manner consistent with the audit report
referred to in preceding clauses (a)(i), signed by Borrower's chief financial
--------------
officer.
(b) Monthly Financial Statement. Within thirty (30) days after the
---------------------------
end of each month of each Fiscal Year of Borrower except (i) forty-five (45)
days after the end of each month closing a fiscal quarter and (ii) ninety (90)
days after the end of each month closing a Fiscal Year, a copy of the unaudited
financial statement of New Pioneer, Borrower and the Subsidiaries prepared on a
consolidated and consolidating basis and in conformity with GAAP applied in a
manner consistent with the audit report referred to in preceding clause (a)(i),
-------------
signed by Borrower's chief financial officer and consisting of at least a
balance sheet as at the close of such month and an income statement and cash
flow statement for such month and for the period from the beginning of such
Fiscal Year to the close of such month, compared, in each case, to the actual
results for the same period during the prior Fiscal Year and to Borrower's
budget (delivered pursuant to Section 5.1.1(c), for the current Fiscal Year).
----------------
(c) Annual Budgets. Within thirty (30) days after the end of each
--------------
Fiscal Year of Borrower, a copy of an annual budget of New Pioneer for the
current Fiscal Year, prepared on a consolidated and consolidating basis and in
conformity with GAAP applied in a manner consistent with the prior Fiscal Year's
budget, signed by Borrower's chief financial officer and consisting of at least
a balance sheet, an income statement and a cash flow statement, each calculated
on a quarter by quarter basis.
(d) Officer's Certificate. Together with the financial statements
---------------------
furnished by Borrower under the preceding clauses (a), and (b), a certificate
----------- ---
of Borrower's chief financial officer in the form of Exhibit C, dated the date
---------
of such annual audit report or such monthly financial statement, as the case may
be, containing a statement that no Event of Default or Unmatured Event of
Default has occurred and is continuing, or, if there is any such event,
describing it and the steps, if any, being taken to cure it, and containing a
computation of, and showing compliance with, each of the financial ratios and
restrictions contained in this Section 5 or in Supplement A.
--------- ------------
5.1.2 Agings. Within twenty (20) days after the end of each month,
------
an aging of all Accounts Receivable of
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<PAGE>
Borrower and the Designated Subsidiaries as of the end of such month, in form
substantially as attached hereto as Exhibit E.
5.1.3 Inventory Certification. Within twenty (20) days after the end
-----------------------
of each month, an Inventory certification report as of the end of the month for
all Inventory locations of Borrower and the Designated Subsidiaries as of the
end of such month, in form substantially as attached hereto as Exhibit B.
5.1.4 Other Reports and Information:
-----------------------------
(a) SEC and Other Reports. Copies of each filing and report made
---------------------
by GEV, New Pioneer, Borrower or any Designated Subsidiary with or to any
securities exchange or the Securities and Exchange Commission, including without
limitation any registration statement and all amendments thereto filed with
respect to the Exchange Notes, or as required pursuant to the Senior Loan
Documents, promptly upon the filing or making thereof;
(b) Intercompany Loans. Within twenty (20) days after the end of each
------------------
month, a list of all outstanding balances of the Permitted Intercompany
Indebtedness of each Designated Subsidiary owing to Borrower as of the end of
such month, together with a list of all debits and credits with respect thereto,
in form and content acceptable to Agent; and
(c) Other Reports. Any information required to be provided pursuant
-------------
to other provisions of this Agreement, and such other reports or information
from time to time reasonably requested by Agent on behalf of itself or any
Lender.
5.2 Notices. Notify Agent in writing of any of the following
-------
promptly upon learning of the occurrence thereof (or, in the case of clauses (e)
-----------
and (f) (other than clause (e)(iii)) of this Section 5.2, at least thirty (30)
--- -----------
days prior to the occurrence thereof to the extent applicable to New Pioneer,
Borrower, any Designated Subsidiary or any other Obligor), describing the same
and, if applicable, the steps being taken by the Person(s) affected with respect
thereto:
(a) Default. The occurrence of (i) an Event of Default or
-------
Unmatured Event of Default and (ii) to the extent not included in clause
------
(i) of this Section 5.2(a), the default by GEV, New Pioneer, Borrower, any
--- --------------
other Obligor or any Designated Subsidiary under any material note,
indenture, loan agreement, mortgage, lease, deed or other material similar
agreement to which GEV, New Pioneer, Borrower, any other Obligor or any
Designated Subsidiary, as appropriate, is a party
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<PAGE>
or by which it is bound (including without limitation any Senior Loan
Documents, the Seller Notes or any Subordinated Debt Document);
(b) Intentionally Omitted.
(c) Judgment. The entry of any judgment or decree against New
--------
Pioneer, Borrower, any other Obligor or any Designated Subsidiary, if the
amount of such judgment exceeds $500,000;
(d) Pension Plans and Welfare Plans. The occurrence of a
-------------------------------
Reportable Event with respect to any Pension Plan; the filing of a notice
of intent to terminate a Pension Plan by Borrower, any ERISA Affiliate, or
any other Obligor; the institution of proceedings to terminate a Pension
Plan by the PBGC or any other Person; the withdrawal in a "complete
withdrawal" or a "partial withdrawal" as defined in Sections 4203 and 4205,
respectively, of ERISA by Borrower, any ERISA Affiliate or any other
Obligor from any Multiemployer Plan, which complete or partial withdrawal
results in a liability to such Multiemployer Plan in excess of $1,000,000;
the failure of Borrower, any other Obligor or any ERISA Affiliate to make a
required contribution to any Pension Plan, including but not limited to any
failure to pay an amount sufficient to give rise to a Lien under Section
302(f) of ERISA; the taking of any action with respect to a Pension Plan
which could result in the requirement that Borrower, any other Obligor or
any ERISA Affiliate furnish a bond or other security to the PBGC or such
Pension Plan; the occurrence of any other event with respect to any Pension
Plan which could result in the incurrence by Borrower, any other Obligor or
any ERISA Affiliate of any material liability, fine or penalty; or the
establishment of a new plan subject to ERISA or an amendment to any
existing plan which will result in a material increase in contributions or
benefits under such plan or the incurrence of any material increase in the
liability of Borrower, any other Obligor (or an ERISA Affiliate to the
extent there is joint and several liability with Borrower or any other
Obligor) or any Designated Subsidiary, with respect to any "employee
welfare benefit plan" as defined in Section 3(l) of ERISA which covers
former employees thereof or current employees and their beneficiaries with
respect to claims incurred after the termination of their employment;
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<PAGE>
(e) Business and Collateral Information. Any change or proposed
-----------------------------------
change in any of the information set forth on Schedule 4.12, including but
-------------
not limited to (i) any change in the location of any Inventory, (ii) the
identity of any new bailee, processor, warehouseman or other Person in
possession or control of any Inventory or other Collateral, (iii) any
change in the name or address of the lessor or owner of any real property
leased to Borrower, any Designated Subsidiary or any other Obligor, (iv)
any proposed change in the location of New Pioneer's, Borrower's or any
Designated Subsidiary's chief executive office or chief place of business,
(v) any proposed opening, closing or other change in the list of offices
and other places of business of New Pioneer, Borrower or any Designated
Subsidiary and (vi) any opening, closing or other change in the offices and
other places of business of each other Obligor;
(f) Change of Name or Status. Any change in the name or address of
------------------------
New Pioneer, Borrower, any Designated Subsidiary, or any other Obligor;
(g) Insurance Information. Any material change in the information
---------------------
set forth in Schedule 4.7;
------------
(h) Environmental and Safety and Health Matters. The occurrence of
-------------------------------------------
any event, or the acquisition of any information which, if it had occurred
or was true on or before the Closing Date, would have been required to have
been disclosed and included on Schedule 4.25, including but not limited to
-------------
existence of any Environmental Lien and receipt of any notice from any
federal, state or local government or agency alleging violation of any
Environmental Law or any Occupational Safety and Health Law which violation
is reasonably likely to have a Material Adverse Effect;
(i) Material Adverse Change or Effect. The occurrence of a
---------------------------------
Material Adverse Change or the occurrence of any event that is reasonably
likely to have a Material Adverse Effect;
(j) Default by Others. Any material default by any Account Debtor
-----------------
or other Person obligated to New Pioneer, Borrower, any other Obligor, or
any Designated Subsidiary, under any contract, chattel paper, note or other
evidence of amounts payable or due or to become due to New Pioneer,
Borrower, such Obligor or Designated Subsidiary if the amount payable under
such
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contract, chattel paper, note or other evidence of amounts payable or due
or to become due is reasonably likely to have a Material Adverse Effect;
(k) Change in Management or Line(s) of Business. Any substantial
-------------------------------------------
change in the senior management of New Pioneer, Borrower or any Designated
Subsidiary, or any change in New Pioneer's, Borrower's or any Designated
Subsidiary's line(s) of business;
(l) Transaction Documents. The existence or assertion of any claim
---------------------
or possible claim in excess of $100,000 or that is reasonably likely to
have a Material Adverse Effect by or against New Pioneer, Borrower, any
Designated Subsidiary or any Obligor under any Transaction Document.
(m) Other Indebtedness Notices. Copies of any material amendments,
--------------------------
waivers or consents, notices of breach or default, notices relating to the
exercise or nonexercise of any remedy available to any Person, notices of
indemnity or other claims, written materials relating to any dispute,
written materials relating to the exercise of any rights derived from or
arising in connection with any Indebtedness and other written
communications of a material nature, including any communications by GEV,
New Pioneer, Borrower or any Designated Subsidiary in connection with the
Senior Loans or the Seller Notes other than any such notice or other
written materials already sent to Agent pursuant to any other Section of
this Agreement; and
(n) Patents, Etc. Any change to the list of patents, trademarks,
------------
copyrights and other information set forth in Schedule 4.16;
-------------
(o) Litigation. An update of any changes to Schedule 4.8,
---------- ------------
disclosing all newly instituted claims, litigation, arbitration proceedings
or governmental proceedings against or affecting New Pioneer, Borrower or
any Designated Subsidiary or any Collateral which involves an amount in
controversy in excess of $500,000 or which requests injunctive or other
equitable relief, and which discloses any significant events or occurrences
in any of the matters set forth on Schedule 4.8 or any updates previously
------------
provided thereto;
(p) Certain Changes. Any change in the information set forth in
---------------
Schedule 4.1, Schedule 4.10 or
------------ -------------
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Schedule 4.11 concerning New Pioneer, Borrower, any Designated Subsidiary
-------------
or any partnership or joint venture of any of the foregoing; and
(q) Other Notices. Notice of the occurrence of such other event as
-------------
Agent may reasonably from time to time specify, and any notices required to
be provided pursuant to any Related Agreement or the other provisions of
this Agreement.
5.3 Existence. Except as permitted under Section 5.11, maintain and
--------- ------------
preserve, and cause New Pioneer and each Designated Subsidiary to maintain and
preserve, its respective existence as a corporation or other form of business
organization, as the case may be, and all rights, privileges, licenses, patents,
patent rights, copyrights, trademarks, trade names, trade styles, franchises and
other authority to the extent material and necessary for the conduct of its
respective business in the ordinary course as conducted from time to time.
5.4 Nature of Business. Engage in, and cause New Pioneer and each
------------------
Designated Subsidiary to engage in, substantially the same fields of business as
it is engaged in on the date hereof or reasonably incidental thereto.
5.5 Books, Records and Access. Maintain, and cause New Pioneer and
-------------------------
each Designated Subsidiary to maintain, complete and accurate books and records
(including but not limited to records relating to Accounts Receivable,
Inventory, and other Collateral and property), in which full and correct entries
in conformity with GAAP shall be made of all dealings and transactions in
relation to its respective business and activities. Cause the books and records
of New Pioneer, Borrower and each Designated Subsidiary as at the end of any
calendar month to be posted and closed not more than thirty (30) days after the
last business day of such month except (i) forty-five (45) days after the end of
each month closing a fiscal quarter and (ii) ninety (90) days after the end of
each month closing a fiscal year. Permit, and cause New Pioneer and each
Designated Subsidiary to permit, access by Agent and its agents and employees to
the books and records of New Pioneer, Borrower and such Designated Subsidiary at
New Pioneer's, Borrower's or such Designated Subsidiary's place or places of
business at intervals to be determined by Agent upon reasonable prior notice and
during normal business hours and without hindrance or delay, and permit and
cause New Pioneer and each Designated Subsidiary to permit Agent and its agents
and employees to inspect the books and records and location of New Pioneer or
such Designated Subsidiary, as applicable, and to inspect, audit, check and make
copies and/or extracts from the books, records, computer data and
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records, computer programs, journals, orders, receipts, correspondence and other
data relating to Inventory, Accounts Receivable, and, any other Collateral and
property, or relating to any other transactions between the parties hereto;
provided, that Borrower shall permit each Lender and its respective agents and
employees to accompany Agent on each such visit; and provided further, that
after the occurrence of an Event of Default, Agent and Lenders may have access
to such premises at such times as they desire, without having given prior
notice. Any and all such inspections, appraisals and/or audits by Agent and its
agents and employees relating to New Pioneer's, Borrower's or any Designated
Subsidiary's books and records and locations shall be at Borrower's expense, no
matter when the same shall occur; provided, that prior to the occurrence of an
Event of Default, Borrower shall be responsible for no more than $12,000 of such
costs in any 12 month period. Agent may advance such costs for which Borrower is
responsible to Borrower as a Revolving Loan.
5.6 Insurance. Maintain, and cause each Designated Subsidiary to
---------
maintain, insurance to such extent and against such hazards and liabilities as
is commonly maintained by companies similarly situated. Keep the Collateral
properly housed and insured for its full insurable value (subject to customary
deductibles) against loss or damage by fire, theft, explosion, sprinklers and
such other risks as are customarily insured against by persons engaged in
business similar to that of Borrower or such Designated Subsidiary, as
applicable, with such companies, in such amounts and under policies in such form
as shall be reasonably satisfactory to Agent. Certificates of such policies of
insurance in form and substance satisfactory to Agent have been delivered to
Agent prior to the date hereof together with evidence of payment of all premiums
therefor then due. Borrower hereby directs all insurers under Borrower's
policies of insurance to pay all proceeds payable thereunder after the
occurrence and during the continuance of an Event of Default in respect of the
Collateral directly to Agent, as its interest may appear. Borrower appoints
Agent and any Person whom Agent may from time to time designate (and all
officers, employees or agents designated by Agent or such Person) after the
occurrence and during the continuance of an Event of Default as Borrower's true
and lawful attorney and agent in fact with power to make, settle and adjust
claims under such policies of insurance, endorse the name of Borrower on any
check, draft, instrument or other item of payment for the proceeds of such
policies of insurance which are payable to Agent or any Lender hereunder and
make all determinations and decisions with respect to such policies of
insurance. The foregoing appointment and power, being coupled with an interest,
is irrevocable until all Payment Liabilities under this Agreement are paid and
performed in full and this Agreement is terminated. In the event Borrower or
any
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Designated Subsidiary at any time or times hereafter shall fail to obtain or
maintain any of the policies of insurance required herein or to pay any premium
in whole or in part relating thereto when due, then Agent, without waiving or
releasing any obligation of or default by Borrower hereunder, may at any time or
times thereafter (but shall be under no obligation to do so) obtain and maintain
such policies of insurance and pay such premiums and take any other action with
respect thereto which Agent deems advisable. All sums so disbursed by Agent,
including reasonable Attorneys' Fees, court costs, expenses and other charges
relating thereto, shall be payable on demand by Borrower to Agent, and Agent
may, in its sole and absolute discretion, after three (3) Banking Days' prior
notice to Borrower advance such sums to Borrower as a Revolving Loan. Borrower
shall cause each Designated Subsidiary to grant to Agent rights identical to
those granted by Borrower to Agent in respect of its insurance.
5.7 Repair. Maintain, preserve and keep, and cause New Pioneer and
------
each Designated Subsidiary to maintain, preserve and keep, its Equipment and
other properties in good operating condition and repair, ordinary wear and tear
excepted, and from time to time make, and cause each Designated Subsidiary to
make, all necessary and proper repairs, renewals, replacements, additions,
betterments and improvements thereto so that at all times the efficiency thereof
shall be fully preserved and maintained.
5.8 Taxes. Pay, and cause New Pioneer and each Designated Subsidiary
-----
to pay, when due, all of its Taxes, unless and only to the extent that Borrower,
New Pioneer or such Designated Subsidiary is contesting such Taxes in good faith
and by appropriate proceedings and Borrower, New Pioneer or such Designated
Subsidiary has set aside on its books such reserves or other appropriate
provisions therefor as may be required by GAAP; not file a consolidated tax
return together with any other Person, unless consented to in writing by Agent,
except that New Pioneer, Borrower and the Designated Subsidiaries may file
consolidated returns with GEV pursuant to that certain Tax Sharing Agreement
dated on or about the Closing Date; and not change its Fiscal Year or tax year
without Agent's prior written consent.
5.9 Compliance. Comply, and cause New Pioneer and each Designated
----------
Subsidiary to comply, with all statutes and governmental rules and regulations
applicable to it, except where the failure to so comply would not be reasonably
likely to have a Material Adverse Effect.
5.10 Pension Plans. Not permit, and not permit New Pioneer or any
-------------
Designated Subsidiary to permit, any condition
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to exist in connection with any Pension Plan that would constitute grounds for
the PBGC to institute proceedings to have such Pension Plan terminated or a
trustee appointed to administer such Pension Plan; not fail, and not permit New
Pioneer or any Designated Subsidiary to fail, to make a required contribution to
any Pension Plan if such failure is sufficient to give rise to a Lien under
Section 302(f) of ERISA; and not engage in, or permit to exist or occur, or
permit New Pioneer or any of the Designated Subsidiaries to engage in, or permit
to exist or occur, any other condition, event or transaction with respect to any
Pension Plan that is reasonably likely to result in a Material Adverse Effect.
5.11 Merger, Purchase and Sale. Not, and not permit New Pioneer or
-------------------------
any Designated Subsidiary to: (a) be a party to any merger, liquidation or
consolidation, except, in the case of Borrower and the Designated Subsidiaries,
with or into Borrower or another Designated Subsidiary; (b) except for sales of
Inventory in the normal course of its business and as permitted otherwise in
this Agreement, sell, transfer, convey, lease or otherwise dispose of its
assets, including without limitation any Accounts Receivable, Contract Rights,
notes receivable or chattel paper; provided, however, that (i) if no Event of
--------
Default has occurred and is continuing or would be caused thereby, (ii) to the
extent permitted by the terms of the Senior Note Indenture as it exists on the
Closing Date and, (iii) after such transaction, the Interest Coverage Sale
Threshold has been met, any or all of the assets of or capital stock in any
Designated Subsidiary may be sold, transferred, conveyed, leased or otherwise
disposed of, on such terms as Borrower or such Designated Subsidiary determines
to be commercially reasonable, including without limitation the transfer by
Imperial West Chemical Co. of assets or property in connection with the Imperial
West Joint Venture (as defined in the Senior Note Indenture as it exists on the
Closing Date), in each case as long as the cash proceeds (net of taxes, expenses
of sale and repayment of any Indebtedness secured thereby) of any of the
foregoing transactions are applied to repay the Liabilities, repay Indebtedness
in respect of the Senior Notes or purchase replacement assets, all as provided
in the Senior Note Indenture as it exists on the Closing Date and, if the assets
sold, transferred, conveyed, leased or otherwise disposed of include Eligible
Accounts or Eligible Inventory, Liabilities in an amount equal to the Borrowing
Base generated by such assets are immediately repaid in full out of the proceeds
of such transaction (or in the case of the transfer of Eligible Accounts and/or
Eligible Inventory to the Imperial West Joint Venture, if any, out of other
available cash); (c) purchase or otherwise acquire all or substantially all of
the assets of any Person, except, if no Event of Default has occurred and is
continuing or would be caused thereby, (i) the purchase of the assets of or
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capital stock in any Designated Subsidiary by Borrower or another Designated
Subsidiary and (ii) any purchase or acquisition by New Pioneer, Borrower or any
Designated Subsidiary, so long as such purchase or acquisition does not create
Indebtedness or Liens not otherwise permitted by this Agreement and so long as
such purchase or acquisition is permitted by the terms of the Senior Note
Indenture as it exists on the Closing Date; or (d) become a party to or
participate in any joint venture, partnership or similar business organization,
other than the Imperial West Joint Venture.
5.12 Restricted Payments. Not, and not permit New Pioneer or any
-------------------
Designated Subsidiary to, (a) purchase or redeem any shares of its stock or any
options or warrants therefor, other than the purchase of capital stock held by
employees of New Pioneer, Borrower or any Designated Subsidiary pursuant to any
employee stock ownership plan thereof upon the termination, retirement or death
of any employee in accordance with the provisions of any such plan in an amount
not greater than $500,000 in any calendar year; (b) except as provided below in
this Section 5.12, declare or pay any dividends on any of its stock (other than
------------
dividends payable in non-redeemable capital stock) or make any distribution to
stockholders as such or set aside any funds for any such purpose (collectively,
"Upstream Payments"); (c) make any prepayment, purchase, defeasance or
redemption of any Senior Loans (including without limitation any mandatory
prepayment required by the terms of the Senior Note Indenture upon a change of
control or an asset sale, or any optional prepayment, redemption or defeasance
allowed by the terms of the Senior Note Indenture as it exists on the Closing
Date) at any time that an Event of Default is in existence or to the extent an
Event of Default would be caused thereby; or (d) except as permitted in any
applicable subordination or intercreditor agreements, or any subordination terms
contained within the applicable Subordinated Debt Documents, pay any
Subordinated Debt, except by exchange for, or out of the proceeds of the
substantially concurrent sale of, Nonredeemable Capital Stock (as defined in the
Senior Note Indenture as it exists on the Closing Date) of New Pioneer.
Notwithstanding the foregoing, (x) (i) each Designated Subsidiary may make
Upstream Payments to Borrower at any time, (ii) Borrower may make Upstream
Payments to New Pioneer at any time that no Event of Default exists or would be
created by such Upstream Payment, and (iii) New Pioneer may make Upstream
Payments to GEV to the extent permitted under the terms of the Senior Note
Indenture as it exists on the Closing Date; and (y) payments by New Pioneer,
Borrower or any Designated Subsidiary may be made at any time pursuant to the
Contingent Payment Agreement as it exists on the Closing Date to the extent
permitted in the Senior Note Indenture as it exists on the Closing Date.
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5.13 Stock. Except as permitted under Section 5.11, not permit any
----- ------------
Designated Subsidiary to purchase or otherwise acquire any shares of the stock
of New Pioneer or Borrower, and not take any action, or permit New Pioneer or
any Designated Subsidiary to take any action, which will result in a decrease in
New Pioneer's ownership interest in Borrower or Borrower's or ownership interest
in any Designated Subsidiary.
5.14 Indebtedness. Not, and not permit New Pioneer or any Designated
------------
Subsidiary to, incur or permit to exist any Indebtedness (including but not
limited to Indebtedness as lessee under Capitalized Leases), except: (a)
Indebtedness under the terms of this Agreement; (b) Indebtedness of New
Pioneer, Borrower and the Designated Subsidiaries in respect of the Senior Notes
in an aggregate principal amount of not more than $140,000,000; (c) Indebtedness
of New Pioneer, Borrower and the Designated Subsidiaries in respect of the
Exchange Notes, which Exchange Notes and the indenture relating thereto shall be
substantially identical to the Senior Notes and the Senior Note Indenture,
respectively; (d) other Indebtedness outstanding on the date hereof and listed
on Schedule 5.14; (e) Indebtedness as lessee under Capitalized Leases plus
-------------
Indebtedness secured by Liens securing the payment of all or part of the
purchase price of assets acquired after the Closing Date, which Indebtedness
does not exceed $7,000,000 in the aggregate for New Pioneer, Borrower and the
Designated Subsidiaries on a consolidated basis at any time, and any refinancing
of any of the foregoing; (f) Permitted Intercompany Indebtedness and
Indebtedness of Borrower to the Designated Subsidiaries; (g) Indebtedness under
Hedging Obligations (as defined in the Senior Note Indenture as it exists on the
Closing Date), to the extent permitted in the Senior Note Indenture as it exists
on the Closing Date hereof; (h) Indebtedness in respect of performance,
completion, guarantee, surety and similar bonds, banker's acceptances or letters
of credit provided by New Pioneer, Borrower or any Designated Subsidiary in the
ordinary course of business; (i) Indebtedness permitted pursuant to the first
paragraph of Section 1008 of the Senior Note Indenture as it exists on the
Closing Date; (j) in addition to any other Indebtedness permitted hereunder, up
to $5,000,000 aggregate principal amount of Indebtedness at any one time
outstanding; and (k) other Indebtedness approved in writing by Requisite
Lenders.
5.15 Liens. Not, and not permit New Pioneer any Designated
-----
Subsidiary to, create or permit to exist any Lien with respect to any property,
revenue or assets now owned or hereafter acquired, except: (a) Liens in favor of
Agent, for the benefit of itself and Lenders; (b) Liens securing Permitted
Intercompany Indebtedness; (c) without duplication, Liens referred to in Section
-------
4.9; (d) Liens permitted under clause (b) of the
---
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<PAGE>
definition of "Permitted Liens" in the Senior Note Indenture as it exists on the
Closing Date in an amount of up to $5,000,000 at any one time outstanding; (e)
other than in connection with Indebtedness, Liens arising in the ordinary course
of business (i) to secure payments of workers' compensation, unemployment
insurance, pension or other social security or retirement benefits, or to secure
the performance of bids, tenders, leases, progress payments, contracts (other
than for the payment of money) or to secure public or statutory obligations of
New Pioneer, Borrower or any Designated Subsidiary, or to secure surety or
appeal bonds to which New Pioneer, Borrower or any Designated Subsidiary is a
party and (ii) for rights of financial institutions to setoff and chargeback
arising by operation of law; (f) Liens permitted under clauses (d) and (e) of
the definition of "Permitted Liens" in the Senior Note Indenture as it exists on
the Closing Date; (g) Liens permitted under clause (f) of the definition of
"Permitted Liens" or clauses (c), (d), and (e) of Section 1012 of the Senior
Note Indenture as it exists on the Closing Date; provided, however, that with
-------- -------
respect to Borrower and the Designated Subsidiaries, such Lien shall be
permitted only to the extent it secures Indebtedness permitted under Section
-------
5.14(e); (h) Liens permitted under clauses (f) and (g) of Section 1012 of the
-------
Senior Note Indenture as it exists on the Closing Date; (i) Liens on the real
property, buildings, fixtures and equipment at St. Gabriel, Louisiana and
Henderson, Nevada (the "Exchange Collateral"), securing the Exchange Notes (or
the Senior Notes upon registration pursuant to any resale registration
statement) and the Liabilities on a pari passu basis, provided that (i) the
agreements granting such Liens are in form and substance acceptable to Agent in
its reasonable discretion and (ii) Agent has received from the Trustee an
intercreditor agreement governing the relationship between the Trustee and the
holders of the Exchange Notes, on the one hand, and Agent and Lenders on the
other, with respect to the Exchange Collateral, in form and substance acceptable
to Agent in its reasonable discretion; and (j) Liens consented to in writing by
Requisite Lenders.
5.16 Guaranties. Not, and not permit New Pioneer or any Designated
----------
Subsidiary to, become or be a guarantor or surety of, or otherwise become or be
responsible in any manner (whether by agreement to purchase any obligations,
stock, assets, goods or services, or to supply or advance any funds, assets,
goods or services, or otherwise) with respect to, any undertaking of any other
Person, except for (a) the endorsement, in the ordinary course of collection, of
instruments payable to it or its order; (b) any guaranty of the Liabilities in
favor of Agent, for the benefit of itself and Lenders; (c) any guaranty of the
Senior Notes or the Exchange Notes and (d) any guaranty of any Indebtedness
permitted under this Agreement.
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5.17 Investments. Except as provided in Section 5.19 or Section
----------- ------------ -------
5.11, not, and not permit New Pioneer or any Designated Subsidiary to, make or
----
permit to exist any Investment in any Person, except for: (a) advances to
employees of Borrower or any of the Designated Subsidiaries for travel or other
ordinary business expenses provided that the aggregate amount outstanding at any
one time shall not exceed $500,000 in the aggregate for all employees; (b)
Eligible Investments (as defined in the Senior Note Indenture as it exists on
the Closing Date); (c) Investments consisting of Indebtedness permitted under
Section 5.14 (f); (d) Investments (other than loans) by Borrower in any
----------------
Designated Subsidiary or by any Designated Subsidiary in another Designated
Subsidiary or Investments by New Pioneer in Borrower or any Designated
Subsidiary; (e) extensions of credit in the nature of Accounts Receivable or
notes receivable arising from the sale of goods and services in the ordinary
course of business; (f) shares of stock, obligations or other securities
received in settlement of claims arising in the ordinary course of business; (g)
other Investments outstanding on the date hereof and listed on Schedule 5.17 and
-------------
any reclassification or conversion thereof into an alternate form of Investment
in the same or a successor entity; (h) Investments consisting of bank accounts
permitted under this Agreement; and (i) other Investments consented to by
Requisite Lenders in writing.
5.18 Designated Subsidiaries. Except as permitted in Section 5.11 or
----------------------- ------------
Section 5.17, not, and not permit any Designated Subsidiary to, acquire any
------------
stock or similar interest in any Person and not create, establish or acquire any
Subsidiaries; not change the status of a Subsidiary to or from a Designated
Subsidiary.
5.19 Loans to Designated Subsidiaries. Not make or extend any loan
--------------------------------
or advance to any Designated Subsidiary not designated as such on the Closing
Date, without prior written notice of such loan or advance to Agent, and not
permit any Designated Subsidiary to make or extend any loan or advance to
another Designated Subsidiary. Upon Agent's request, prior to any such loan or
advance from Borrower to a Designated Subsidiary not designated as such on the
Closing Date, such Designated Subsidiary shall execute and deliver agreements in
the same form as those delivered to Agent on the Closing Date by the currently
existing Designated Subsidiaries in order to evidence such loans and advances
and to grant Borrower a first priority perfected Lien on such Designated
Subsidiary's property of the types described in Section 3.1 as collateral
-----------
therefor. Borrower shall assign the proceeds of such loans, all of the foregoing
agreements, documents and instruments and its Lien related thereto to Agent, in
each case in a manner, and pursuant to agreements, satisfactory to Agent.
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5.20 Change in Accounts Receivable. After the occurrence and during
-----------------------------
the continuance of an Event of Default, not permit or agree to, or permit any
Designated Subsidiary to permit or agree to, any extension, compromise or
settlement or make any change or modification of any kind or nature with respect
to any Account Receivable, including any of the terms relating thereto.
5.21 Environmental Issues. Provide such information that is or
--------------------
becomes available (unless subject to confidentiality restrictions in existence
on the Closing Date) to New Pioneer, Borrower or any Designated Subsidiary which
Agent may reasonably request from time to time pertaining to the environmental
aspects of New Pioneer, Borrower and the Designated Subsidiaries and any
property owned, operated or controlled by New Pioneer, Borrower or any
Designated Subsidiary. Nothing in this Section 5.21, and no actions taken by
------------
Agent or any Lender pursuant thereto, shall give, or be construed as
controlling, or giving to Agent or any Lender the right or obligation to direct
or control, the conduct or action or inaction of New Pioneer, Borrower or any
Designated Subsidiary with respect to any environmental matters, including but
not limited to those pertaining to compliance with any Environmental Laws.
Borrower shall also maintain, and cause New Pioneer and each Designated
Subsidiary to maintain, in full force and effect all third-party indemnities in
favor of Borrower, New Pioneer or any Designated Subsidiary with respect to any
of the foregoing.
5.22 Related Agreements. After the date hereof, not enter into, or
------------------
permit New Pioneer or any Designated Subsidiary to enter into, any agreement
containing any provision which would be violated or breached by the performance
by New Pioneer, Borrower or such Designated Subsidiary of its obligations
hereunder or under any Related Agreement or any instrument or document delivered
or to be delivered by New Pioneer, Borrower or such Designated Subsidiary in
connection herewith.
5.23 Unconditional Purchase Options. Except in the ordinary course
------------------------------
of business, not enter into or be a party to, or permit New Pioneer or any
Designated Subsidiary to enter into or be a party to any contract for the
purchase of materials, supplies or other property or services, if such contract
requires that payment be made by it regardless of whether or not delivery is
ever made of such materials, supplies or other property or services.
5.24 Use of Proceeds. Not use or permit, and not permit New Pioneer
---------------
or any Designated Subsidiary to use or permit, any proceeds of the Senior Loans,
the Loans or Letters of Credit to be used, either directly or indirectly, for
the purpose,
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whether immediate, incidental or ultimate, of "purchasing or carrying" any
Margin Stock, and furnish to Agent upon request, a statement in conformity with
the requirements of Federal Reserve Form U-l referred to in Regulation U of the
Board of Governors of the Federal Reserve System.
5.25 Transactions with Related Parties. Except as set forth on
---------------------------------
Schedule 5.25, not, and not permit New Pioneer or any Designated Subsidiary to,
-------------
(a) pay any management, consulting or similar fees to any Related Party, whether
for services rendered to New Pioneer, Borrower or any Designated Subsidiary, or
otherwise, or (b) enter into or be a party to any other transaction or
arrangement, including without limitation the purchase, sale, lease or exchange
of property or the rendering of any service, with any Related Party, except in
the ordinary course of and pursuant to the reasonable requirements of New
Pioneer's, Borrower's or such Designated Subsidiary's business and upon fair and
reasonable terms no less favorable to New Pioneer, Borrower or such Designated
Subsidiary than would obtain in a comparable arm's-length transaction with a
Person not a Related Party and unless such transaction or arrangement is
permitted by the terms of the Senior Note Indenture, as it exists on the Closing
Date.
5.26 Amendment of Documents. Not, and not permit GEV, New Pioneer or
----------------------
any Designated Subsidiary to, amend, modify or alter, or permit to be amended,
modified or altered, (a) any Senior Loan Document (except for an amendment
relating to the granting of the Liens permitted by Section 5.15(i), (b) any
---------------
other Transaction Document, or (c) any agreement, instrument or document
evidencing any of the Indebtedness listed on Schedule 5.14 if the effect of such
-------------
amendment or modification is to (i) increase the interest rate or fees payable
thereunder, if applicable, (ii) shorten the maturity of Indebtedness thereunder,
if applicable, (iii) alter the timing or amount of any payment terms thereunder,
if applicable, (iv) increase the aggregate amount of Indebtedness thereunder, if
applicable, or is to materially adversely affect the interest of Agent or
Lenders. Agent and Lenders hereby agree that their consent to any of the
foregoing will not be unreasonably withheld or delayed.
5.27 Designated Subsidiary. Cause each Designated Subsidiary to
---------------------
execute and deliver to Agent, in form and substance satisfactory to Agent in its
sole discretion, the following (i) a guaranty in favor of Agent, for the benefit
of itself and Lenders, pursuant to which such Designated Subsidiary has
unconditionally guarantied the Liabilities; and (ii) a security agreement with
Agent, for the benefit of itself and Lenders, pursuant to which such Subsidiary
has granted to Agent, for the benefit of itself and Lenders, a Lien on its
assets of the types
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described in Section 3.1, as collateral for the guaranty described in clause (i)
----------- ---------
above.
5.28 Limitation on Applicability of Covenants. Notwithstanding the
----------------------------------------
covenants contained in this Agreement, Borrower, New Pioneer and any Designated
Subsidiary may engage in any transactions contemplated by and effected in
accordance with the terms of the Contingent Payment Agreement as it exists on
the Closing Date. The consummation of any such transaction shall not constitute
a breach of the otherwise applicable covenants, contained in this Agreement.
6. DEFAULT.
6.1 Event of Default. Each of the following shall constitute an
----------------
Event of Default under this Agreement:
(a) Non-Payment. Default in the payment of the principal of or
-----------
interest on the Liabilities when due or declared due or the payment of any of
the other Liabilities other than principal or interest within five (5) Banking
Days' of the date due or declared due.
(b) Non-Payment of Other Indebtedness. Default in the payment when
---------------------------------
due, whether by acceleration or otherwise (subject to any applicable grace
period), of any Indebtedness of, or guaranteed by, New Pioneer, Borrower, any
other Obligor or any Designated Subsidiary with a principal balance in excess of
$5,000,000 (other than any Indebtedness under this Agreement and any Notes),
including without limitation the Senior Loans.
(c) Acceleration of Other Indebtedness. Any event or condition shall
----------------------------------
occur which results in the acceleration of the maturity of any Indebtedness of,
or guaranteed by, Borrower, New Pioneer, any other Obligor or any Designated
Subsidiary with a principal balance in excess of $5,000,000 (other than the
Indebtedness under this Agreement and any Notes), including without limitation
the Senior Loans, or enables the holder or holders of such other Indebtedness or
any trustee or agent for such holders to accelerate the maturity of such other
Indebtedness.
(d) Other Obligations. Default in the performance or observance
-----------------
(subject to any applicable grace period or waiver of such default) of (i) any
obligation or agreement of Borrower, New Pioneer, any other Obligor or any
Designated Subsidiary to or with Agent or any Lender (other than any obligation
or agreement of Borrower hereunder and under any Notes) or (ii) any obligation
or agreement of Borrower, New Pioneer, any other Obligor or any Designated
Subsidiary to or
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with any other Person (other than (x) any such obligation or agreement
constituting or related to Indebtedness, or (y) Trade Accounts Payable), in any
case if the existence of any such default is not being contested by Borrower,
New Pioneer, such other Obligor or such Designated Subsidiary, as the case may
be, in good faith and by appropriate proceedings and Borrower, New Pioneer, such
other Obligor or such Designated Subsidiary, as applicable, shall have set aside
on its books such reserves or other appropriate provisions therefor as may be
required by GAAP and such obligation is for an amount in excess of $5,000,000.
(e) Bankruptcy. Borrower, New Pioneer, any other Obligor or any
----------
Designated Subsidiary applies for, consents to, or acquiesces in the appointment
of a trustee, receiver or other custodian for Borrower, New Pioneer, such other
Obligor or such Designated Subsidiary, or for a substantial part of the property
of Borrower, New Pioneer, such other Obligor or such Designated Subsidiary, or
makes a general assignment for the benefit of creditors; or, in the absence of
such application, consent or acquiescence, a trustee, receiver or other
custodian is appointed for Borrower, New Pioneer, any other Obligor or any
Designated Subsidiary, or for a substantial part of the property of Borrower,
New Pioneer any other Obligor or any Designated Subsidiary and is not discharged
or dismissed within sixty (60) days; or any bankruptcy, reorganization, debt
arrangement or other proceeding under any bankruptcy or insolvency law, or any
dissolution or liquidation proceeding, is instituted by or against Borrower, New
Pioneer, any other Obligor or any Designated Subsidiary; or any warrant of
attachment or similar legal process is issued against any substantial part of
the property of Borrower, New Pioneer, any other Obligor or any Designated
Subsidiary.
(f) Insolvency. Borrower, New Pioneer, any other Obligor or any
----------
Designated Subsidiary becomes insolvent, or generally fails to pay, or admits in
writing its inability to pay, its debts as they mature.
(g) ERISA Liabilities. Any of the following events shall have
-----------------
occurred, if such event is reasonably likely to have a Material Adverse Effect:
(i) the existence of a Reportable Event, (ii) the withdrawal of Borrower or any
ERISA Affiliate from a Pension Plan during a plan year in which it was a
"substantial employer" as defined in Section 4001(a)(2) of ERISA, (iii) the
occurrence of an obligation to provide affected parties with a written notice of
intent to terminate a Pension Plan in a distress termination under Section 4041
of ERISA, (iv) the institution by PBGC of proceedings to terminate any Pension
Plan, (v) any event or condition that would require the appointment of a trustee
to administer a Pension Plan, (vi) the
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withdrawal of Borrower or any ERISAAffiliate from a Multiemployer Plan, and
(vii) any event that would give rise to a Lien under Section 302(f) of ERISA.
(h) Non-Compliance With This Agreement. Default in the performance of
----------------------------------
any of Borrower's agreements set forth in Section 3.2, 3.3, 5.5, 5.6, 5.11
----------- --- --- --- ----
through 5.28 or in Section 5 of Supplement A hereto (and not constituting an
---- --------- ------------
Event of Default under any of the other subsections of this Section 6.1); or
-----------
default in the performance of any of Borrower's agreements set forth in Section
-------
5.1.1, 5.1.2, 5.1.3, 5.1.4 or 5.2 (and not constituting an Event of Default
----- ----- ----- ----- ---
under any of the other subsections of this Section 6.1), and continuance of such
-----------
default for five (5) days after the occurrence thereof; or default in the
performance of any of Borrower's other agreements herein set forth (and not
constituting an Event of Default under any of the other subsections of this
Section 6.1), and continuance of such default for thirty (30) days after the
-----------
occurrence thereof.
(i) Non-Compliance With Related Agreements. Default in the
--------------------------------------
performance by Borrower, New Pioneer, any other Obligor or any Designated
Subsidiary of any of its agreements set forth in any Related Agreement (and not
constituting an Event of Default under any of the other subsections of this
Section 6.1), and continuance of such default after notice from Agent and the
-----------
expiration of the grace or cure period (if any) set forth therein.
(j) Representations and Warranties. Any representation or warranty
------------------------------
made by Borrower or any other Obligor herein (including without limitation any
representation or warranty contained in Section 3.2 or 3.3) or in any Related
----------- ---
Agreement is untrue or misleading in any material respect when made or deemed
made; or any schedule, statement, report, notice, certificate or other writing
furnished by New Pioneer, Borrower, any Designated Subsidiary or any other
Obligor to Agent or any Lender is untrue or misleading in any material respect
on the date as of which the facts set forth therein are stated or certified; or
any certification made or deemed made by New Pioneer, Borrower, any Designated
Subsidiary or any other Obligor to Agent or any Lender is untrue or misleading
in any material respect on or as of the date made or deemed made.
(k) Litigation. There shall be entered against any one of Borrower,
----------
New Pioneer any other Obligor or any Designated Subsidiary one or more judgments
or decrees in excess of $5,000,000 in the aggregate at any one time outstanding,
excluding those judgments or decrees (i) that shall have been outstanding less
than thirty (30) calendar days from the entry thereof, (ii) for and to the
extent which Borrower, New Pioneer,
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such Obligor or such Designated Subsidiary,as applicable, is insured and with
respect to which the insurer has assumed responsibility in writing or for and to
the extent which Borrower, New Pioneer such Obligor or such Designated
Subsidiary, as applicable, is otherwise indemnified if the terms of such
indemnification are satisfactory to Agent or (iii) which have been stayed
pending appeal and with respect to which Borrower, New Pioneer, such Obligor or
such Designated Subsidiary has posted any required bond or letter of credit.
(l) Termination of Obligations. If any Obligor shall terminate any of
--------------------------
its obligations to Agent or any Lender in respect of the Liabilities.
(m) Validity. If the validity or enforceability of this Agreement or
--------
any Related Agreement shall be challenged by Borrower, New Pioneer, any
Designated Subsidiary or any other Obligor, or if this Agreement or any Related
Agreement shall fail to remain in full force and effect.
(n) Change of Control. If (i) any Person and its Related Parties
-----------------
(other than William R. Berkley and his Related Parties and Interlaken Capital,
Inc. and its Related Parties (collectively, the "Investor Parties")) among them
have record and beneficial ownership of more than 25% of the outstanding voting
power of New Pioneer or GEV on a fully diluted basis, in any case at any time
that the Investor Parties among them have record and beneficial ownership of
less than 30% of the outstanding voting power of New Pioneer or GEV on a fully
diluted basis; or (ii) if any Change of Control (as defined in the Senior Note
Indenture as it exists on the Closing Date) occurs or (iii) if New Pioneer
ceases to retain record and beneficial ownership of 100% of the issued and
outstanding stock of Borrower.
6.2 Effect of Event of Default; Remedies.
------------------------------------
(a) In the event that one or more Events of Default described in
Section 6.1(e) shall occur, then each Lender's commitment and the Credit
--------------
extended under this Agreement shall terminate and all Liabilities hereunder and
under any Notes shall be immediately due and payable without demand, notice or
declaration of any kind whatsoever.
(b) In the event an Event of Default other than one described in
Section 6.1(e) shall occur, at the option of Agent or Requisite Lenders, each
--------------
Lender's commitment shall terminate and all Liabilities hereunder and under any
Notes shall immediately be due and payable without demand or notice of any kind
whatsoever, whereupon the Credit extended under this Agreement shall terminate.
Agent shall promptly advise Borrower
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of any such declaration, but failure to do so shall not impair the effect of
such declaration.
(c) In the event of the occurrence of any Event of Default, Agent may
exercise any one or more or all of the following remedies, all of which are
cumulative and non-exclusive:
(i) Any remedy contained in this Agreement or in any of the Related
Agreements or any Supplemental Documentation;
(ii) Any rights and remedies available to Agent or any Lender under
the UCC, and any other applicable law;
(iii) To the extent permitted by applicable law, Agent may,
without notice, demand or legal process of any kind, take possession of any
or all of the Collateral (in addition to Collateral which it may already
have in its possession), wherever it may be found, and for that purpose may
pursue the same wherever it may be found, and may enter into any premises
where any of the Collateral may be or is supposed to be, and search for,
take possession of, remove, keep and store any of the Collateral until the
same shall be sold or otherwise disposed of, and Agent shall have the right
to store the same in any of Borrower's premises without cost to Agent;
(iv) At Agent's request, Borrower will, at Borrower's expense,
assemble the Collateral and make it available to Agent at a place or places
to be designated by Agent which is reasonably convenient to Agent and
Borrower; and
(v) Agent at its option, and pursuant to notification given to
Borrower as provided for below, may sell any Collateral actually or
constructively in its possession at public or private sale and apply the
proceeds thereof as provided below.
7. ADDITIONAL PROVISIONS REGARDING COLLATERAL AND AGENT'S RIGHTS.
7.1 Notice of Disposition of Collateral. Any notification of
-----------------------------------
intended disposition of any of the Collateral required by law shall be deemed
reasonably and properly given if given at least ten (10) calendar days before
such disposition.
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7.2 Application of Proceeds of Collateral. Any proceeds of any
-------------------------------------
disposition by Agent of any of the Collateral may be applied by Agent to the
payment of expenses in connection with the taking possession of, storing,
preparing for sale, and disposition of Collateral, including Attorneys' Fees and
legal expenses, and any balance of such proceeds may be applied by Agent toward
the payment of such of the Liabilities, and in such order of application, as
Agent may from time to time elect.
7.3 Care of Collateral. Agent shall be deemed to have exercised
------------------
reasonable care in the custody and preservation of any Collateral in its
possession if it takes such action for that purpose as Borrower requests in
writing, but failure of Agent to comply with such request shall not, of itself,
be deemed a failure to exercise reasonable care, and no failure of Agent to
preserve or protect any rights with respect to such Collateral against prior
parties, or to do any act with respect to the preservation of such Collateral
not so requested by Borrower, shall be deemed a failure to exercise reasonable
care in the custody or preservation of such Collateral.
7.4 Performance of Borrower's Obligations. Agent shall have
-------------------------------------
the right, but shall not be obligated, to discharge any claims or Liens against,
and any Taxes at any time levied or placed upon any or all Collateral, including
without limitation those arising under statute or in favor of landlords, taxing
authorities, government, public and/or private warehousemen, common and/or
private carriers, processors, finishers, draymen, coopers, dryers, mechanics,
artisans, laborers, attorneys, courts, or others. Agent may also pay for
maintenance and preservation of Collateral. Agent may, but is not obligated to,
perform or fulfill any of Borrower's responsibilities under this Agreement which
Borrower has failed to perform or fulfill. Agent may after three (3) Banking
Days' notice to Borrower advance to Borrower as a Revolving Loan any payment
made or expense incurred under this Section 7.4.
-----------
7.5 Agent's Rights. None of the following shall affect the
--------------
obligations of Borrower or any Designated Subsidiary to Agent or any Lender
under this Agreement or Agent's right with respect to the remaining Collateral
(any or all of which actions may be taken by Agent at any time, whether before
or after an Event of Default, at its sole and absolute discretion and without
notice to Borrower):
(a) acceptance or retention by Agent or any Lender of other
property or interests in property as security for the Liabilities, or
acceptance or retention of any Obligor(s), in addition to Borrower, with
respect to any of the Liabilities;
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(b) release of its Lien on, or surrender or release of, or the
substitution or exchange of or for, all or any part of the Collateral or
any other property securing any of the Liabilities (including but not
limited to any property of any Obligor other than Borrower), or any
extension or renewal for one or more periods (whether or not longer than
the original period), or release, compromise, alteration or exchange, of
any obligations of any guarantor or other Obligor with respect to any
Collateral or any such property;
(c) extension or renewal for one or more periods (whether or not
longer than the original period), or release, compromise, alteration or
exchange of any of the Liabilities, or release or compromise of any
obligation of any Obligor with respect to any of the liabilities; or
(d) failure by Agent or any Lender to resort to other security or
pursue any Person liable for any of the Liabilities before resorting to the
Collateral.
8. CONDITIONS PRECEDENT; DELIVERY OF DOCUMENTS AND OTHER MATTERS.
8.1 Conditions Precedent to Initial Loans and Letters of Credit. The
-----------------------------------------------------------
obligation of each Lender that is a party to this Agreement on the date hereof
to make the initial Loans and for Issuing Bank to issue the initial Letters of
Credit is subject to satisfaction of the following conditions precedent (in
addition to those provided in Section 8.2):
-----------
8.1.1 Liens. The Liens on the Collateral granted under this
-----
Agreement and the Related Agreements and all other Liens granted to Agent, for
the benefit of itself and Lenders, to secure the Liabilities, shall be senior,
perfected Liens, except as otherwise agreed by Agent and Lenders, and all
financing statements and other documents relating to Collateral shall have been
filed or recorded, as appropriate. Agent shall have received such consents and
waivers with respect to the Collateral as Agent shall request, in form and
substance satisfactory to Agent.
8.1.2 Transactions. (i) New Pioneer shall have issued the Senior
------------
Notes, the gross proceeds of such Senior Notes, in an amount not less than
$135,000,000, shall have been received by New Pioneer and the proceeds thereof
shall have been used by New Pioneer in substantially the manner described in
"The
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<PAGE>
Acquisition and Use of Proceeds" section of the Offering Memorandum, (ii)
the Acquisition shall have been consummated in accordance with all applicable
laws, (iii) the merger of GPS Pool Supply with and into All-Pure Chemical Co.
shall have been consummated in compliance with all applicable laws, (iv) certain
of the Sellers and certain other individuals shall have purchased common stock
of GEV for not less than $6,000,000 in cash, which amount shall have been
contributed by GEV to New Pioneer as equity, (v) Interlaken Capital, Inc. shall
have purchased common stock of GEV for not less than $15,000,000 in cash, which
amount shall have been contributed to New Pioneer as equity, (vi) GEV shall
contribute to New Pioneer as equity the shares of the common stock of Borrower
received by GEV in exchange for the issuance of the Seller Notes, and (vii) GEV
and New Pioneer shall have entered into the Tax Sharing Agreement (as defined in
the Senior Note Indenture), all as described in the Offering Memorandum and all
on terms, and all pursuant to Transaction Documents in form and substance
satisfactory to each Lender (the transactions referred to in clauses (i), (ii),
----------- ----
(iii), (iv), (v), (vi) and (vii) are hereinafter referred to as the
----- ---- --- ---- -----
"Transactions").
8.1.3 Solvency. Each Lender shall be satisfied that, after giving
--------
effect to the Transactions, and the initial Loans and Letters of Credit, New
Pioneer, Borrower, each Designated Subsidiary and each other Obligor shall have
assets (excluding goodwill and other intangible assets not capable of valuation)
having a value, both at fair salable value and at fair valuation, greater than
the amount of such Person's liabilities (including trade debt and Indebtedness
to Agent and Lenders). Each Lender shall be satisfied that all of the assets
supporting the Loans and Letters of Credit under this Agreement shall be
sufficient in value to provide New Pioneer, Borrower and each Designated
Subsidiary with sufficient cash flow and working capital to enable it to
thereafter profitably operate its business and to meet its obligations as they
become due. Each Lender shall be satisfied that New Pioneer, Borrower and each
Designated Subsidiary has adequate capital for the business in which it is about
to engage. In connection with the foregoing, each Lender shall have received
such written appraisals, balance sheets, solvency certificates or other
materials as Agent shall reasonably request, including without limitation the
solvency opinion and related reports of Valuation Research Corporation.
8.1.4 Effect of Law. No law or regulation affecting Agent's or any
-------------
Lender's entering into the secured financing transaction contemplated by this
Agreement shall impose upon Agent or such Lender any material obligation, fee,
liability, loss, penalty, cost, expense or damage.
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8.1.5 Exhibits; Schedules. All Exhibits and Schedules to this
-------------------
Agreement shall have been completed and submitted to each Lender, shall be in
form and substance satisfactory to such Lender and shall contain no facts or
information which such Lender, in its sole judgment, determines to be
unacceptable.
8.1.6 Licenses, Permits and Consents. All licenses, permits,
------------------------------
consents, judicial and regulatory approvals and corporate action necessary to
consummate the Transactions and the making of the initial Loans and the issuance
of the initial Letters of Credit shall have been obtained on terms acceptable to
each Lender.
8.1.7 Fees. If not funded with the proceeds of the initial Loans,
----
Agent shall have received the closing fee referred to in Section 2.14 and any
------------
other fees due and payable by Borrower or any other Person on the funding of the
initial Loans and the issuance of the initial Letters of Credit.
8.1.8 Title to Assets. Borrower and the Designated Subsidiaries
---------------
shall have good, indefeasible and merchantable title to the Collateral, free and
clear of all Liens, except as otherwise permitted in Section 5.15 hereof.
------------
8.1.9 Material Adverse Change; Litigation. No Material Adverse
-----------------------------------
Change, as determined by each Lender, shall have occurred from March 14, 1995
through the Closing Date and the issuance of the initial Letters of Credit and
no Material Adverse Change, as determined by such Lender, shall have occurred in
the facts and information disclosed to such Lender or otherwise relied upon by
such Lender in making its decision to enter into this Agreement, and no Lender
shall have become newly aware of any material adverse facts or information, as
reasonably determined by such Lender, with respect to GEV, New Pioneer, Borrower
or any Designated Subsidiary or the business, operations or prospects thereof.
In addition, there shall not have been instituted or threatened any litigation
or proceedings in any court or administrative forum affecting or threatening to
affect the consummation of the Transactions or which would have a Material
Adverse Effect, in each case as determined by each Lender.
8.1.10 Documents. In addition to this Agreement, each Lender shall
---------
have received the agreements, documents and instruments listed in Section VIII
of the Closing Checklist attached hereto as Exhibit F, each duly executed where
appropriate and dated as of the Closing Date (or such other date as shall be
satisfactory to Agent), in form, and containing terms and provisions, acceptable
to such Lender.
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8.1.11 Default. No Event of Default or Unmatured Event of Default
-------
shall have occurred and be continuing or would be caused thereby.
8.1.12 Other Conditions. The conditions contained in paragraphs
----------------
14(a)-(i) of that certain Commitment Letter dated March 14, 1995 shall have been
satisfied in a manner satisfactory to Agent.
8.2 Continuing Conditions Precedent to all Loans; Certification. The
-----------------------------------------------------------
obligation of each Lender to make the initial Loans and each subsequent Loan and
to establish any LIBOR Rate Loans, and for Issuing Bank to issue the initial
Letters of Credit and each subsequent Letter of Credit, is subject to
satisfaction of the following conditions precedent in addition to those provided
in Section 8.1:
-----------
(a) No Change in Condition. No change in the condition or
----------------------
operations, financial or otherwise, of New Pioneer, Borrower, any
Designated Subsidiary or any other Obligor, shall have occurred which
change, in the reasonable credit judgment of Requisite Lenders, is
reasonably likely to have a Material Adverse Effect;
(b) Default. Before and after giving effect to such Loan and/or
-------
Letter of Credit, no Event of Default or Unmatured Event of Default shall
have occurred and be continuing; and
(c) Representations and Warranties. Before and after giving effect
------------------------------
to such Loan and/or Letter of Credit, the representations and warranties in
Section 4 shall be true and correct as though made on the date of such Loan
---------
and/or Letter of Credit, except for those representations and warranties
which are expressly made as of the date hereof.
Each request for a Loan or a Letter of Credit hereunder made or deemed to have
been made by Borrower shall be deemed to be a certificate of Borrower as to the
matters set out in the foregoing provisions of this Section 8.2.
-----------
9. INDEMNITY.
9.1 Environmental and Safety and Health Indemnity. Borrower hereby
---------------------------------------------
indemnifies Agent and each Lender and agrees to hold Agent and each Lender
harmless from and against any and all losses, liabilities, damages, injuries,
costs, expenses and claims of any and every kind whatsoever (including without
limitation court costs and Attorneys' Fees) which at any
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time or from time to time may be paid, incurred or suffered by, or asserted
against, Agent or any Lender for, with respect to, or as a direct or indirect
result of the violation by New Pioneer, Borrower or any of the Designated
Subsidiaries of any Environmental Law or Occupational Safety and Health Law, or
with respect to, or as a direct or indirect result of (a) the presence on or
under, or the Release from, properties utilized by New Pioneer, Borrower and/or
any Designated Subsidiary in the conduct of its business into or upon any land,
the atmosphere, or any watercourse, body of water or wetland, of any Hazardous
Material or the escape, seepage, leakage, spillage, disposal, discharge,
emission or release of any other hazardous or toxic waste, substance or
constituent, or other substance (including without limitation any losses,
liabilities, damages, injuries, costs, expenses or claims asserted or arising
under any Environmental Law) or (b) the existence of any unsafe or unhealthful
condition on or at any premises utilized by New Pioneer, Borrower and/or any
Designated Subsidiary in the conduct of its business except, with respect to any
of the foregoing, to the extent arising out of the gross negligence or willful
misconduct of Agent or any Lender. The provisions of and undertakings and
indemnification set out in this Section 9.1 shall survive satisfaction and
-----------
payment of the Liabilities and termination of this Agreement.
9.2 General Indemnity. In addition to the payment of expenses
-----------------
pursuant to Section 12.3, whether or not the transactions contemplated hereby
------------
shall be consummated, Borrower agrees to indemnify, pay and hold Agent and each
Lender, and the officers, directors, employees, agents, and affiliates of each
of Agent and each Lender (collectively, the "Indemnitees") harmless from and
against any and all other liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, claims, costs, expenses and disbursements of any kind
or nature whatsoever (including without limitation the reasonable fees and
disbursements of counsel for any of such Indemnitees in connection with any
investigative, administrative or judicial proceeding commenced or threatened,
whether or not any of such Indemnitees shall be designated a party thereto) that
may be imposed on, incurred by, or asserted against any Indemnitee, in any
manner relating to or arising out of this Agreement or any Related Agreement,
the statements contained in any commitment letter delivered by Agent or any
Lender, Agent's or any Lender's agreement to make the Loans or to issue Letters
of Credit hereunder, the use or intended use of any Letters of Credit, or the
use or intended use of the proceeds of any of the Loans hereunder (the
"indemnified liabilities"); provided that Borrower shall have no obligation to
--------
an Indemnitee hereunder with respect to indemnified liabilities arising from the
gross negligence or willful misconduct of such Indemnitee. To the extent that
the undertaking to indemnify, pay and hold harmless set forth in the
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preceding sentence may be unenforceable because it violates any law or public
policy, Borrower shall contribute the maximum portion that it is permitted to
pay under applicable law to the payment and satisfaction of all indemnified
liabilities incurred by the Indemnitees or any of them. The provisions of the
undertakings and indemnification set out in this Section 9.2 shall survive
-----------
satisfaction and payment of the Liabilities and termination of this
Agreement.
9.3 Capital Adequacy. If Agent or any Lender shall reasonably
----------------
determine that the application or adoption of any law, rule, regulation,
directive, interpretation, treaty or guideline regarding capital adequacy, or
any change therein or in the interpretation or administration thereof, whether
or not having the force or law (including without limitation application of
changes to Regulation H and Regulation Y of the Federal Reserve Board issued by
the Federal Reserve Board on January 19, 1989 and regulations of the Comptroller
of the Currency, Department of the Treasury, 12 CFR Part 3, Appendix A, issued
by the Comptroller of the Currency on January 27, 1989) increases the amount of
capital required or expected to be maintained by Agent or such Lender or any
Person controlling Agent or such Lender in excess of any such increases
affecting Agent or such Lender as of the date hereof, and such increase is based
upon the existence of Agent's or such Lender's obligations hereunder and other
commitments of this type, then from time to time, within ten (10) days after
demand from Agent or such Lender, Borrower shall pay to Agent or such Lender, as
applicable, such amount or amounts as will compensate Agent or such Lender or
such controlling Person, as the case may be, for such increased capital
requirement. The determination of any amount to be paid by Borrower under this
Section 9.3 shall take into consideration the policies of Agent or such Lender
-----------
or any Person controlling Agent or such Lender with respect to capital adequacy
and shall be based upon any reasonable averaging, attribution and allocation
methods. A certificate of Agent or such Lender, as applicable, setting forth
the amount or amounts as shall be necessary to compensate Agent or such Lender
as specified in this Section 9.3 shall be delivered to Borrower and shall be
-----------
conclusive in the absence of manifest error. Any demand to be given by a Lender
under this Section 9.3 shall be effective only if given within 120 days after
-----------
such Lender became aware or should have become aware of the events giving rise
to such notice.
10. AGENT.
10.1 Appointment of Agent. Each Lender hereby irrevocably appoints
--------------------
and authorizes BAI to act as its Agent under this Agreement and the Related
Agreements. Each Lender hereby irrevocably appoints and authorizes Agent to
take such action on
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such Lender's behalf under the provisions of this Agreement and the Related
Agreements and to exercise such powers and perform such duties under this
Agreement and the Related Agreements as are specifically delegated to Agent by
the terms hereof and thereof, together with such other powers as are reasonably
incidental hereto and thereto. Agent may perform any of its duties hereunder or
under the Related Agreements by or through its agents or employees. The
provisions of this Section 10 are solely for the benefit of Agent and Lenders,
----------
and neither Borrower nor any Obligor shall have any rights as a third party
beneficiary of any of the provisions hereof other than Section 10.9. In
------------
performing its functions and duties under this Agreement and the Related
Agreements, Agent shall act solely as agent of Lenders and does not assume and
shall not be deemed to have assumed any obligation toward or relationship of
agency or trust with or for Borrower or any Obligor.
10.2 Nature of Duties of Agent. Agent shall have no duties,
-------------------------
obligations or responsibilities except those expressly set forth in this
Agreement and the Related Agreements. Neither Agent nor any of its officers,
directors, employees or agents shall be liable for any action taken or omitted
by it as such hereunder or under the Related Agreements or in connection
herewith or therewith, unless caused by its or their gross negligence or willful
misconduct. The duties of Agent shall be mechanical and administrative in
nature; Agent shall not have by reason of this Agreement or the Related
Agreements a fiduciary relationship in respect of any Lender; and nothing in
this Agreement or the Related Agreements, expressed or implied, is intended to
or shall be so construed as to impose upon Agent any obligations in respect of
this Agreement or the Related Agreements except as expressly set forth herein or
therein. No duty to act, or refrain from acting, and no other obligation
whatsoever, shall be implied on the basis of or imputed in respect of any right,
power or authority granted to Agent or shall become effective in the event of
any temporary or partial exercise of such rights, power or authority.
10.3 Agent in its Capacity as Lender. With respect to its obligation
-------------------------------
to lend under this Agreement and the Related Agreements, the Loans made by it
and its participation in Letters of Credit, Agent shall have the same rights and
powers under this Agreement and the Related Agreements as any Lender and may
exercise the same as though it were not Agent, and the terms "Lender" or
"Lenders" shall, unless the context otherwise indicates, include Agent in its
capacity as a Lender hereunder. Agent, any Lender and their respective
affiliates may accept deposits from, lend money to, and generally engage in any
kind of banking or trust business with Borrower, or Related Parties of Borrower,
as if it were not Agent or as if it or they were not a
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Lender hereunder and without any duty to account therefor to the other parties
to this Agreement; provided, that the obligations of Borrower under such
transactions shall not be deemed to be Liabilities or secured by any Collateral
without the prior written agreement of the Requisite Lenders; provided, further
that Lenders acknowledge and agree that the obligations of Borrower to BAI or
any other Lender as Issuing Bank and with respect to any lockbox or bank account
maintained by or for the benefit of Borrower, including the Demand Deposit
Account, the Depository Accounts, and the Assignee Deposit Account, shall be
deemed to be Liabilities secured by the Collateral.
10.4 Independent Credit Analysis. Each Lender agrees that it has,
---------------------------
independently and without reliance upon Agent, any other Lender, or the
directors, officers, agents, attorneys or employees of Agent or of any other
Lender, and instead in reliance upon information supplied to it by or on behalf
of GEV, New Pioneer, Borrower and/or each Designated Subsidiary, made its own
independent credit analysis and decision to enter into this Agreement and the
Related Agreements to which it is a party, and that it shall independently and
without reliance upon Agent, any other Lender, or the directors, officers,
agents, attorneys or employees of Agent or of any other Lender, continue to make
its own independent credit analysis and decisions in acting or not acting under
this Agreement and the Related Agreements. Except as otherwise expressly
provided herein, Agent shall not have any duty or responsibility, either
initially or on a continuing basis, to provide any Lender with any credit or
other information concerning the affairs, financial condition, litigation,
liabilities, or business of GEV, New Pioneer, Borrower, any Designated
Subsidiary or any other Obligor which may at any time come into the possession
of Agent (or any of its affiliates). In the event such information is furnished
to any Lender by Agent, Agent shall have no duty to confirm or verify its
accuracy or completeness and shall have no liability whatsoever with respect
thereto.
10.5 General Immunity. Neither Agent nor any of its directors,
----------------
officers, agents, attorneys or employees shall be liable to any Lender for any
action taken or omitted to be taken by it or them under this Agreement or the
Related Agreements or in connection herewith or therewith except for its or
their own willful misconduct or gross negligence. Without limiting the
generality of the foregoing, Agent: (i) shall not be responsible to Lenders for
any recitals, statements, warranties or representations under this Agreement or
the Related Agreements or any agreement or document relative hereto or thereto
or for the financial or other condition of any Obligor, (ii) shall not be
responsible for the authenticity, accuracy, completeness, value, validity,
effectiveness, due execution, legality, genuineness,
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enforceability, collectibility or sufficiency of this Agreement or the Related
Agreements or any other agreements or any assignments, certificates, requests,
financial statements, projections, notices, schedules or opinions of counsel
executed and delivered pursuant hereto or thereto, (iii) shall not be bound to
ascertain or inquire as to the performance or observance of any of the terms,
covenants or conditions of this Agreement or the Related Agreements on the part
of Obligors or of any of the terms of any such agreement by any party hereto or
thereto and shall have no duty to inspect the property (including the books and
records) of any Obligor, (iv) shall have no obligation whatsoever to Lenders or
to any other Person to assure that the Collateral exists or is owned by Borrower
or another Obligor or is cared for, protected or insured or that the Liens
granted to Agent herein or in Related Agreements or pursuant hereto or thereto
have been properly or sufficiently or lawfully created, perfected, protected,
enforced, realized upon or are entitled to any particular priority, and (v)
shall incur no liability under or in respect of this Agreement or the Related
Agreements or any other document by acting upon any notice, consent, certificate
or other instrument or writing (which may be by telegram, cable, telex,
telecopier or similar form of facsimile transmission) believed by Agent to be
genuine and signed or sent by the proper party. Agent may consult with legal
counsel (including counsel for Borrower), independent public accountants and
other experts selected by Agent and shall not be liable for any action taken or
omitted to be taken in good faith in accordance with the advice of such counsel,
accountants or experts.
10.6 Action by Agent.
---------------
(a) Actual Knowledge. Agent may assume that no Event of Default has
----------------
occurred and is continuing, unless Agent has actual knowledge of the Event of
Default, has received notice from Borrower or Borrower's independent certified
public accountants stating the nature of the Event of Default, or has received
notice from a Lender stating the nature of the Event of Default and that such
Lender considers the Event of Default to have occurred and to be continuing.
(b) Discretion to Act. Agent shall have the right to request
-----------------
instructions from Requisite Lenders by notice to each Lender. If Agent shall
request instructions from Requisite Lenders with respect to any act or action
(including the failure to act) in connection with this Agreement or any Related
Agreement, Agent shall be entitled to refrain from such act or taking such
action unless and until Agent shall have received instructions from Requisite
Lenders, and Agent shall not incur liability to any Person by reason of so
refraining. Without limiting the foregoing, no Lender shall have any right of
action
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whatsoever against Agent as a result of Agent acting or refraining from
acting hereunder or under any Related Agreement in accordance with the
instructions of Requisite Lenders. Agent may give any notice required under
Section 6 hereof without the consent of any of Lenders unless otherwise directed
---------
by Requisite Lenders in writing and will, at the direction of Requisite Lenders,
give any such notice required under Section 6. Except for any obligation
---------
expressly set forth in this Agreement or the Related Agreements, Agent may, but
shall not be required to, exercise its discretion to act or not act, except that
Agent shall be required to act or not act upon the instructions of Requisite
Lenders (unless all of Lenders are required to provide such instructions as
provided in Section 12.6) and those instructions shall be binding upon Agent and
------------
all Lenders; provided that Agent shall not be required to act or not act if to
--------
do so would expose Agent to liability or would be contrary to this Agreement or
any Related Agreements or to applicable law.
10.7 Right to Indemnity. Agent shall be fully justified in failing
------------------
or refusing to take any action under this Agreement or the Related Agreements or
in relation hereto or thereto unless it shall first be indemnified (upon
requesting such indemnification) to its satisfaction by Lenders against any and
all liability and expense which it may incur by reason of taking or continuing
to take any such action. Lenders further agree to indemnify Agent ratably in
accordance with their Pro Rata Shares for any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind and nature whatsoever which may be imposed on,
incurred by or asserted against Agent in any way relating to or arising out of
this Agreement or the other Related Agreements or the transactions contemplated
hereby or thereby, or the enforcement of any of the terms hereof or thereof or
of any other documents; provided no such liability, obligation, loss, damage,
penalty, action, judgment, suit, cost, expense or disbursement results from
Agent's gross negligence or willful misconduct. Each Lender agrees to reimburse
Agent in the amount of its Pro Rata Share of any out-of-pocket expenses for
which Agent is entitled to receive, but has not received, reimbursement pursuant
to this Agreement. The agreements in this Section 10.7 shall survive the payment
------------
and fulfillment of the Liabilities and termination of this Agreement.
10.8 Rights and Remedies to be Exercised by Agent Only. In the event
-------------------------------------------------
any remedy may be exercised with respect to this Agreement or the Related
Agreements or the Collateral, Agent shall pursue remedies designated by
Requisite Lenders subject to the proviso set forth in Section 10.6(b). Each
---------------
Lender agrees that no Lender shall have any right individually (a) to realize
upon the security created by this Agreement or the Related
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Agreements, (b) enforce any provision of this Agreement or the Related
Agreements, or (c) make demand under this Agreement or the Related Agreements;
provided, that any Lender that is an Issuing Bank may make demand upon Borrower
as the Issuing Bank pursuant to Sections 2.2(b) and 2.2(c) and BAI may make
-------------- ------
demand upon Borrower pursuant to Section 12.4.
------------
10.9 Agent's Resignation. Agent may resign at any time after giving
-------------------
at least thirty (30) days' prior written notice of its intention to do so to
each Lender and to Borrower. Upon satisfaction of the foregoing condition,
Requisite Lenders shall have the right to appoint a successor Agent (such
appointment to be subject to the consent of Borrower (which consent of Borrower
shall not be unreasonably withheld or delayed); provided, that Borrower's
consent shall not be required if a Lender is appointed Agent). If no successor
Agent shall have been so appointed and shall have accepted such appointment
within twenty (20) days after Agent's giving of such notice of resignation, then
the resigning Agent may appoint a successor Agent. After any resigning Agent's
resignation hereunder as Agent, it shall be discharged from its duties and
obligations under this Agreement but the provisions of this Section 10 shall
----------
continue to bind Agent and inure to Agent's benefit as to any actions taken or
omitted to be taken by it while it was Agent hereunder. Upon appointment of a
successor Agent, the term "Agent" shall for all purposes of this Agreement
thereafter mean such successor.
10.10 Disbursement of Proceeds of Loans and Other Advances. Agent
----------------------------------------------------
may (and is hereby irrevocably authorized by Lenders), but shall have no duty to
make such other disbursements and advances as Revolving Loans on behalf of
Lenders, including without limitation the making of advances for the
expenditures described in Section 7.4 of this Agreement, which Agent, in its
-----------
sole discretion, deems necessary or desirable to preserve or protect the
Collateral, or any portion thereof. Agent's use of its own checks upon its funds
or Agent's transfer of its own funds, by wire or otherwise, to an account of
Borrower or any other Obligor shall be deemed to be disbursements made by each
Lender under this Agreement and pursuant to the Related Agreements.
10.11 Release of Collateral. Each Lender hereby irrevocably
---------------------
authorizes Agent, at its option and in its discretion, to release any and all
guaranties of the Liabilities and any Lien granted to or held by Agent upon any
Collateral (i) upon termination of Lenders' obligations to make Loans and
payment and satisfaction of all Loans, Letter of Credit reimbursement
obligations and all other Payment Liabilities and which Agent has been notified
in writing are then due and payable; (ii) constituting Collateral being sold or
disposed of
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if Borrower certifies to Agent that the sale or disposition is made
in compliance with the terms of this Agreement (and, absent any actual knowledge
of Agent to the contrary, Agent may rely conclusively on any such certificate,
without further inquiry); (iii) constituting property in which Borrower or any
other Obligor owned no interest at the time the Lien was granted and at all
times thereafter; or (iv) if approved, authorized or ratified in writing by
Agent at the direction of all Lenders. Upon request by Agent at any time, each
Lender will confirm in writing Agent's authority to release particular types or
items of Collateral pursuant to this Section 10.11.
-------------
10.12 Agreement to Cooperate. Each Lender agrees to cooperate to the
----------------------
end that the terms and provisions of this Agreement may be promptly and fully
carried out. Lenders also agree, from time to time, at the request of Agent, to
execute and deliver any and all other agreements, documents or instruments and
to take such other actions, all as may be reasonably necessary or desirable to
effectuate the terms, provisions and intent of this Agreement and the Related
Agreements.
10.13 Sharing of Collateral. If any Lender shall obtain any payment
---------------------
(whether voluntary, involuntary, through exercise of any right of set off, or
otherwise) on account of the Liabilities in excess of the amount to which it is
entitled pursuant to this Agreement, such Lender shall forthwith purchase from
the other Lenders such participations in such other Lenders' claims against
Borrower as shall be necessary to cause such purchasing Lender to share the
excess payment with the other Lenders in accordance with the provisions of this
Agreement; provided, that if all or any portion of such excess payment is
thereafter recovered from such purchasing Lender, such purchase from such other
Lender shall be rescinded and such other Lenders shall repay to the purchasing
Lender the purchase price to the extent of their portion of such recovery
together with an amount equal to the share (according to the proportion of (i)
the amount of such other Lenders' required repayment, to (ii) the total amount
so recovered from the purchasing Lender) of any interest or other amount paid or
payable by purchasing Lender in respect of the total amount recovered.
10.14 Lenders to Act as Agents. If any Collateral or proceeds
------------------------
thereof at any time comes into the possession or under the control of any
Lender, such Lender shall hold such Collateral or proceeds thereof as agent for
the joint benefit of Lenders, and will, upon receipt therefor, deliver such
Collateral or proceeds thereof to Agent.
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11. ADDITIONAL PROVISIONS.
Additional provisions are set forth in Supplement A.
------------
12. GENERAL.
12.1 Borrower Waiver. Except as otherwise provided for in this
---------------
Agreement, Borrower waives (a) presentment, demand and protest and notice of
presentment, protest, default, non-payment, maturity, release, compromise,
settlement, one or more extensions or renewals of any or all commercial paper,
accounts, contract rights, documents, instruments, chattel paper and guaranties
at any time held by Agent or any Lender on which Borrower may in any way be
liable and hereby ratifies and confirms whatever Agent or any Lender may do in
this regard; (b) all rights to notice and a hearing prior to Agent's or any
Lender's taking possession or control of, or Agent's or any Lender's replevy,
attachment or levy on or of, the Collateral or any bond or security which might
be required by any court prior to allowing Agent or any Lender to exercise any
of Agent's or any Lender's remedies; and (c) the benefit of all valuation,
appraisement and exemption laws. Borrower acknowledges that it has been advised
by counsel of its choice with respect to this Agreement and the transactions
evidenced by this Agreement.
12.2 Power of Attorney. Borrower appoints Agent, or any Person whom
-----------------
Agent may from time to time designate, as Borrower's attorney and agent-in-fact
with power (which appointment and power, being coupled with an interest, is
irrevocable until all Payment Liabilities under this Agreement are paid and
performed in full and this Agreement is terminated), without notice to Borrower,
to:
(a) At such time or times hereafter as Agent or said agent, in its
sole and absolute discretion, may determine in Borrower's or Agent's name
(i) endorse Borrower's name on any checks, notes, drafts or any other items
of payment relating to and/or proceeds of the Collateral which come into
the possession of Agent or under Agent's control and apply such payment or
proceeds to the Liabilities; (ii) endorse Borrower's name on any
chattel paper, document, instrument, invoice, freight bill, bill of lading
or similar document or agreement in Agent's possession relating to Accounts
Receivable, Inventory or any other Collateral; (iii) use the information
recorded on or contained in any data processing equipment and computer
hardware and software to which Borrower has access relating to Accounts
Receivable, Inventory and/or other Collateral; (iv) use Borrower's
stationery and sign the name of
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Borrower to verification of Accounts Receivable and notices thereof to
Account Debtors; and (v) if not done by Borrower, do all acts and things
determined by Agent to be necessary, to fulfill Borrower's obligations
under this Agreement; and
(b) At such time or times after the occurrence and during the
continuance of an Event of Default, as Agent or said agent, in its sole and
absolute discretion, may determine, in Borrower's or Agent's name: (i)
demand payment of the Accounts Receivable; (ii) enforce payment of the
Accounts Receivable, by legal proceedings or otherwise; (iii) exercise all
of Borrower's rights and remedies with respect to the collection of the
Accounts Receivable and other Collateral; (iv) settle, adjust, compromise,
extend or renew the Accounts Receivable; (v) settle, adjust or compromise
any legal proceedings brought to collect the Accounts Receivable; (vi) if
permitted by applicable law, sell or assign the Accounts Receivable and/or
other Collateral upon such terms for such amounts and at such time or times
as Agent may deem advisable; (vii) discharge and release the Accounts
Receivable and/or other Collateral; (viii) prepare, file and sign
Borrower's name on any proof of claim in bankruptcy or similar document
against any Account Debtor; (ix) prepare, file and sign Borrower's name on
any notice of lien, assignment or satisfaction of lien or similar document
in connection with the Accounts Receivable and/or other Collateral; and (x)
do all acts and things necessary, in Agent's sole and absolute discretion,
to obtain repayment of the Liabilities and to fulfill Borrower's other
obligations under this Agreement.
12.3 Expenses; Attorneys' Fees. Borrower agrees, whether or not any
-------------------------
Loan is made or Letter of Credit is issued hereunder, to pay upon demand all
Attorneys' Fees and all other reasonable expenses incurred by Agent at any time,
including fees, costs and expenses incurred in connection with Collateral field
audits or other due diligence investigations by Agent (subject to the limits
contained in Section 5.5). For purposes of this Agreement, "Attorneys' Fees"
-----------
means the reasonable value of the services (and costs, charges and expenses
related thereto) of the attorneys (and all paralegals and any outside
consultants employed by such attorneys) employed by Agent or, to the extent
specifically referred to below, any Lender (including but not limited to
attorneys and paralegals who are employees of Agent or any Lender) from time to
time (a) in connection with the negotiation, preparation, execution, delivery,
administration and, in
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the case of Agent or any Lender, enforcement of this Agreement, any Related
Agreement, any Supplemental Documentation and all other documents or instruments
provided for herein or in any thereof or delivered or to be delivered hereunder
or under any thereof or in connection herewith or with any thereof, (b) to
prepare documentation related to the Loans made and other Liabilities incurred
hereunder, (c) to prepare any amendment to or waiver under this Agreement or any
Related Agreement and any documents or instruments related thereto, (d) to
represent Agent or any Lender in any litigation, contest, dispute, suit or
proceeding or to commence, defend or intervene in any litigation, contest,
dispute, suit or proceeding or to file a petition, complaint, answer, motion or
other pleading, or to take any other action in or with respect to, any
litigation, contest, dispute, suit or proceeding (whether instituted by Agent or
any Lender, Borrower or any other Person and whether in bankruptcy or otherwise)
in any way or respect relating to the Collateral, this Agreement or any Related
Agreement (other than any litigation, contest, dispute, suit or proceedings
involving a dispute between Agent and any Lender or between any Lender and any
other Lender), or Borrower's or any other Obligor's or any Designated
Subsidiary's affairs, (e) to protect, collect, lease, sell, take possession of,
or liquidate any of the Collateral, (f) to perfect or attempt to enforce any
security interest in any of the Collateral or to give any advice with respect to
such enforcement and (g) to enforce any of Agent's or any Lender's rights to
collect any of the Liabilities. Agent may after three (3) Banking Days' notice
to Borrower advance all such amounts to Borrower as a Revolving Loan. Borrower
also agrees (y) to indemnify and hold Agent and each Lender harmless from any
loss or expense which may arise or be created by the acceptance of telephonic or
other instructions for making Loans or issuing Letters of Credit and (z) to pay,
and save Agent and each Lender harmless from all liability for, any stamp or
other taxes which may be payable with respect to the execution or delivery of
this Agreement, or any Related Agreement or Supplemental Documentation, or the
issuance of any Note or of any other instruments or documents provided for
herein or to be delivered hereunder or in connection herewith. In addition to
the foregoing, "Attorneys' Fees" shall include Agent's fees and expenses of the
types described in the preceding sentence incurred in connection with the
syndication, participation and assignment of this Agreement, any Related
Agreement and any Supplemental Documentation. Borrower's foregoing obligations
shall survive any termination of this Agreement.
12.4 BAI's Fees and Charges. To the extent not already covered by
----------------------
Section 12.3, Borrower agrees to pay BAI on demand by BAI the customary fees and
------------
charges of BAI for maintenance of accounts with BAI or for providing other
services
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to Borrower and if not so paid, each Lender shall, without regard to
any other provision of this Agreement or any other Related Agreement or any
defense that Borrower may have to its obligation to pay BAI in connection with
such fees and charges, pay BAI for such Lender's Pro Rata Share of such fees and
charges, and any payments so made by Lenders to BAI shall be deemed to be
Revolving Loans. Each Lender (other than BAI) acknowledges and agrees that it
shall not be entitled to any of the fees and charges of BAI as provided in the
immediately preceding sentence. Agent may, in its sole and absolute discretion,
provide for such payment by advancing the amount thereof to Borrower as a
Revolving Loan after three (3) Banking Days' notice to Borrower.
12.5 Lawful Interest. In no contingency or event whatsoever shall
---------------
the interest rate charged pursuant to the terms of this Agreement exceed the
highest rate permissible under any law which a court of competent jurisdiction
shall, in a final determination, deem applicable hereto. In the event that such
a court determines that any Lender has received interest hereunder in excess of
the highest applicable rate, such Lender shall promptly refund its Pro Rata
Share of such excess interest to Borrower.
12.6 No Waiver by Agent or any Lender; Amendments. No failure or
--------------------------------------------
delay on the part of Agent or any Lender in the exercise of any power or right,
and no course of dealing between Borrower and Agent or any Lender shall operate
as a waiver of such power or right, nor shall any single or partial exercise of
any power or right preclude other or further exercise thereof or the exercise of
any other power or right. The remedies provided for herein are cumulative and
not exclusive of any remedies which may be available to Agent or any Lender at
law or in equity. No notice to or demand on Borrower not required hereunder
shall in any event entitle Borrower to any other or further notice or demand in
similar or other circumstances or constitute a waiver of the right of Agent or
any Lender to any other or further action in any circumstances without notice or
demand. No amendment, modification or waiver of, or consent with respect to,
any provision of this Agreement or any Related Agreement shall in any event be
effective unless the same shall be in writing and signed and delivered by
Requisite Lenders. Notwithstanding the foregoing, any amendment, modification,
termination, waiver or consent with respect to any of the following provisions
of this Agreement shall be effective only by a written agreement, signed by each
Lender affected thereby: (a) increase in the amount of the Maximum Loan Amount
of such Lender, (b) reduction of the principal of, rate or amount of interest on
the Revolving Loans or any fees or charges (including, without limitation, any
Letter of Credit fees or charges) payable to such Lender (other than by the
payment or prepayment thereof), (c) postponement of the date
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fixed for any payment of principal of, or interest on, the Loans or any fees or
charges) (including, without limitation, any Letter of Credit fees or charges)
or other amounts payable to such Lender, (d) change in the aggregate Pro Rata
Share of Lenders which shall be required for Lenders or any of them to take
action hereunder or amend the definition of "Requisite Lenders," or (e)
-----------------
amendment of this Section 12.6. Agent may, but shall have no obligation to,
------------
with the written concurrence of any Lender, execute amendments, modifications,
waivers or consents on behalf of that Lender. Any waiver of any provision of
this Agreement, and any consent to any departure by Borrower from the terms of
any provision of this Agreement, shall be effective only in the specific
instance and for the specific purpose for which given.
12.7 Termination of Revolving Credit. Borrower may terminate the
-------------------------------
Revolving Credit at any time upon notice to Agent and payment in full of the
outstanding principal balance of the Loans and all other Payment Liabilities
under this Agreement and the Related Agreements, as provided in Section 2.1.2.
-------------
All of Agent's and each Lender's rights and remedies, the Liens of Agent on the
Collateral, for the benefit of itself and Lenders, and all of Borrower's duties
and obligations under this Agreement shall survive termination of the Credit
extended to Borrower hereunder until all of the Payment Liabilities hereunder
have been finally paid and performed in full. The termination or cancellation
of the Credit shall not affect or impair the liabilities and obligations of
Borrower or any one or more of the Obligors to Agent and Lenders or Agent's and
each Lender's rights with respect to any Loans and advances made and other
Liabilities incurred prior to such termination or with respect to the
Collateral.
12.8 Notices. Except as otherwise expressly provided herein, any
-------
notice hereunder to Borrower, Agent or any Lender shall be in writing (including
facsimile communication) and shall be given to Borrower, Agent or such Lender at
its address or facsimile number set forth on the signature pages hereof or at
such other address or facsimile number as Borrower, Agent or such Lender may, by
written notice, designate as its address or facsimile number for purposes of
notices hereunder. All such notices shall be deemed to be given when
transmitted by facsimile, delivered by courier, personally delivered or, in the
case of notice by mail, three (3) Banking Days following deposit in the United
States mails, properly addressed as herein provided, with proper postage
prepaid; provided, however, that notice to Agent of Borrower's intent to
terminate the Credit shall not be effective until actually received by Agent.
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12.9 Assignments and Participations; Information.
-------------------------------------------
(a) This Agreement may not be assigned by Borrower without the prior
written consent of Agent and Lenders. Whenever in this Agreement reference is
made to any of the parties hereto, such reference shall be deemed to include,
wherever applicable, a reference to the successors and permitted assigns of
Borrower and the successors and assigns of Agent and each Lender.
(b) Borrower and each Lender hereby agree that on or after the date
hereof, BAI may, in its discretion, without Borrower's or any other Lender's
consent, sell one or more assignments of portions of its interest in the Credit.
Each sale described in the preceding sentence shall be to a creditworthy
financial institution satisfactory to BAI, in its discretion, and on such terms
and conditions as BAI may determine. No other Lender may sell any portion of its
interest in the Credit without the consent of Borrower and Agent, which consent
will not be unreasonably withheld.
(c) Each assignment of an interest hereunder shall be subject to the
following conditions: (i) each assignment shall be of a constant, and not a
varying, ratable percentage of all of the assigning Lender's rights and
obligations under this Agreement, and the Maximum Loan Amount assigned shall be
in a minimum amount of $5,000,000 and after giving effect to such assignment no
Lender's Maximum Loan Amount shall be less than $5,000,000 (unless such Lender
sells all of its interest in the Credit), and (ii) the parties to each such
assignment shall execute and deliver to Agent, for its acceptance and recording
in the Register, an Assignment and Acceptance Agreement, with a copy to
Borrower. Upon such execution, delivery, acceptance and recording in the
Register, from and after the effective date specified in each Assignment and
Acceptance Agreement and agreed to by Agent, (x) the assignee thereunder shall,
in addition to any rights and obligations hereunder held by it immediately prior
to such effective date, if any, have the rights and obligations hereunder that
have been assigned to it pursuant to such Assignment and Acceptance Agreement
and shall, to the fullest extent permitted by law, have the same rights and
benefits hereunder as if it were an original Lender hereunder and (y) the
assigning Lender shall, to the extent that rights and obligations hereunder have
been assigned by it pursuant to such Assignment and Acceptance Agreement,
relinquish its rights and be released from its obligations under this Agreement
(and, in the case of an Assignment and Acceptance Agreement covering all or the
remaining portion of such assigning Lender's rights and obligations under this
Agreement, the assigning Lender shall cease to be a party hereto).
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<PAGE>
(d) Agent shall maintain a copy of each Assignment and Acceptance
Agreement delivered to and accepted by it and a register (the "Register") for
the recordation of the names and addresses of Lenders and the Maximum Loan
Amount and principal amount of the Loans owing to each Lender from time to time.
The entries in the Register shall be conclusive and binding for all purposes,
absent manifest error, and Borrower, Agent and Lenders may treat each Person
whose name is recorded in the Register as a Lender hereunder for all purposes of
this Agreement. The Register shall be available for inspection by 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 Agreement
executed by the assigning Lender and the assignee and a processing and
recordation fee of $2,500 (payable by the assigning Lender or the assignee, as
shall be agreed between them), Agent shall, if such Assignment and Acceptance
Agreement has been completed and is in compliance with this Agreement and in
substantially the form of Exhibit D and Agent has consented to the assignment
---------
evidenced thereby, (i) accept such Assignment and Acceptance Agreement, (ii)
record the information contained therein in the Register and (iii) give prompt
notice thereof to Borrower.
(f) Each Lender may sell participations to one or more other financial
institutions in or to all or a portion of its rights and obligations under and
in respect of any and all facilities under this Agreement; provided, however,
-------- -------
that (i) such Lender's obligations under this Agreement shall remain unchanged,
(ii) such Lender shall remain solely responsible to the other parties hereto for
the performance of such obligations, (iii) Borrower, Agent and the other Lenders
shall continue to deal solely and directly with such Lender in connection with
such Lender's rights and obligations under this Agreement and (iv) such
participant's rights to agree or to restrict such Lender's ability to agree to
the modification, waiver or release of any of the terms of this Agreement or the
Related Agreements or to the release of any Collateral covered by this Agreement
or the Related Agreements, to consent to any action or failure to act by any
party to this Agreement or any of the Related Agreements, or to exercise or
refrain from exercising any powers or rights which any Lender may have under or
in respect of this Agreement or the Related Agreements or any Collateral, shall
be limited to the right to consent to (A) an increase in the Maximum Loan Amount
of the Lender from whom such participant purchased a participation, (B)
reduction of the principal of, or rate or amount of interest on the Loans
subject to such participation (other than by the payment or prepayment thereof)
or (C) postponement of any date
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<PAGE>
fixed for any payment of principal of, or interest on, the Loans subject to such
participation.
(g) Any Lender may, in connection with any assignment or participation
or proposed assignment or participation pursuant to this Section 12.9, disclose
------------
to the assignee or participant or proposed assignee or participant, any
information relating to GEV, New Pioneer, Borrower or its Subsidiaries furnished
to such Lender by or on behalf of Borrower; provided that, prior to any such
--------
disclosure, such assignee or participant, or proposed assignee or participant,
shall agree to preserve the confidentiality of any confidential information
described therein and such Lender shall notify Borrower of the assignee or
participant, or proposed assignee or participant.
(h) Anything in this Agreement to the contrary notwithstanding, in the
case of any participation, all amounts payable by Borrower under this Agreement
or the Related Agreements shall be calculated and made in the manner and to the
parties required hereby as if no such participation had been sold.
(i) Agent agrees to promptly notify Borrower of each sale of a
participation or permitted assignment hereunder. Borrower agrees to use its
best efforts to assist Lenders in their efforts to sell assignments and
participations hereunder. In addition, Borrower agrees to execute new Notes in
favor of each of the selling and purchasing Lender, upon each sale of an
assignment hereunder, provided that the existing Notes in favor of the selling
Lender are simultaneously therewith returned to Borrower.
12.10 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 or affecting the validity or
enforceability of such provision in any other jurisdiction.
12.11 Successors. This Agreement shall be binding upon each of
----------
Borrower, Agent and each Lender and their respective successors and permitted
assigns, and shall inure to the benefit of each of Borrower, Agent and each
Lender and their respective successors and permitted assigns.
12.12 Construction. Borrower acknowledges that this Agreement shall
------------
not be binding upon Agent or any Lender or become effective until fully executed
counterparts have been
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<PAGE>
executed and delivered to Agent and Borrower. Once effective, this Agreement and
the Related Agreements and Supplemental Documents shall, unless otherwise
expressly provided therein, be deemed to have been negotiated and entered into
in, and shall be governed and controlled by the laws of, the State of Illinois
as to interpretation, enforcement, validity, construction, effect, choice of
law, and in all other respects, including but not limited to the legality of the
interest rate and other charges, but excluding perfection of security interests
and liens which shall be governed and controlled by the laws of the relevant
jurisdiction.
12.13 Consent to Jurisdiction. To induce Agent and each Lender to
-----------------------
accept this Agreement, Borrower irrevocably agrees that, subject to Agent's sole
and absolute election, ALL ACTIONS OR PROCEEDINGS IN ANY WAY, MANNER OR RESPECT,
ARISING OUT OF OR FROM OR RELATED TO THIS AGREEMENT, THE RELATED AGREEMENTS, OR
THE SUPPLEMENTAL DOCUMENTATION OR THE COLLATERAL SHALL BE LITIGATED IN COURTS
HAVING SITUS WITHIN THE CITY OF CHICAGO, STATE OF ILLINOIS. BORROWER HEREBY
CONSENTS AND SUBMITS TO THE JURISDICTION OF ANY LOCAL, STATE OR FEDERAL COURT
LOCATED WITHIN SAID CITY AND STATE AND WAIVES PERSONAL SERVICE OF ANY AND ALL
PROCESS UPON BORROWER, AND AGREES THAT ALL SUCH SERVICE OF PROCESS MAY BE MADE
BY REGISTERED MAIL DIRECTED TO BORROWER AT THE ADDRESS STATED ON THE SIGNATURE
PAGE HEREOF AND SERVICE SO MADE SHALL BE DEEMED TO BE COMPLETED UPON ACTUAL
RECEIPT THEREOF.
12.14 Subsidiary Reference. Any reference herein to a Subsidiary or
--------------------
Subsidiaries of Borrower, and any financial
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<PAGE>
definition, ratio, restriction or other provision of this Agreement which is
stated to be applicable to "Borrower and the Subsidiaries" or which is to be
determined on a "consolidated" or "consolidating" basis, shall apply only to the
extent Borrower has any Subsidiaries and, where applicable, to the extent any
such Subsidiaries are consolidated with Borrower for financial reporting
purposes.
12.15 Waiver of Jury Trial. BORROWER, AGENT AND EACH LENDER EACH
--------------------
WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR
DEFEND ANY RIGHTS (a) UNDER THIS AGREEMENT OR ANY RELATED AGREEMENT OR UNDER ANY
AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE
FUTURE BE DELIVERED IN CONNECTION HEREWITH OR (b) ARISING FROM ANY BANKING
RELATIONSHIP EXISTING IN CONNECTION WITH THIS AGREEMENT, AND AGREES THAT ANY
SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers thereunto duly authorized as of the
date first written above.
PIONEER AMERICAS, INC.
By /s/ George T. Henning, Jr.
----------------------------------
George T. Henning, Jr.
Title Vice President and
Chief Financial Officer
-------------------------------
Address: 4200 NationsBank Center
700 Louisiana Street
Houston, Texas 77002
4426 Telecopier Number: (713) 225-4426
Attention: George T. Henning and
and Kent Stephenson, Esq.
Esq.
BANK OF AMERICA ILLINOIS
By /s/ Andrew A. Thomas
----------------------------------
Andrew A. Thomas
-95-
<PAGE>
Title Vice President
-----------------------------
Address: 231 South LaSalle Street
Street Chicago, Illinois 60697
60697 Telecopier Number: (312) 765-2193
Attention: Middle Market II
2193 Attention: Erik Dykema
Maximum Loan Amount: $30,000,000
$30,000,000
-96-
<PAGE>
LIST OF EXHIBITS AND SCHEDULES
Exhibits:
--------
Exhibit A Form of Borrowing Base Certificate
Exhibit B Form of Inventory Report
Exhibit C Form of Compliance Certificate
Exhibit D Form of Assignment and Acceptance Agreement
Exhibit E Form of Accounts Receivable Report
Exhibit F Closing Checklist
Schedules:
---------
Schedule 4.1 Schedule of Tradenames, State of Incor-
poration & Qualification
Schedule 4.7 Insurance Summary
Schedule 4.8 Schedule of Litigation and Contingent Liabilities
Schedule 4.9 Schedule of Liens
Schedule 4.10 Schedule of Subsidiaries
Schedule 4.11 Schedule of Partnerships and Joint Ventures
Schedule 4.12 Schedule of Business and Collateral Locations
Schedule 4.14 Schedule of Capitalization
Schedule 4.16 Schedule of Patents, Trademarks and Copyrights
Schedule 4.18 Schedule of Labor Matters
Schedule 4.19 Schedule of Contingent Employee Benefit Plan Liabilities
Schedule 4.21 Schedule of Noncompliance
Schedule 4.22 Schedule of Proposed Tax Assessments
Schedule 4.25 Schedule of Environmental Matters
Schedule 4.27 Schedule of Capitalized Lease Obligations
Schedule 5.14 Schedule of Indebtedness
Schedule 5.17 Schedule of Investments
Schedule 5.25 Schedule of Affiliate Transactions
<PAGE>
SUPPLEMENT A
to
LOAN AND SECURITY AGREEMENT
Dated as of April 12, 1995 among
Pioneer Americas, Inc.,
Bank of America Illinois, as Agent and as Lender,
and the other Lenders Party Thereto
1. Loan Agreement Reference. This Supplement A, as it may be amended or
------------------------
modified from time to time, is a part of the Loan and Security Agreement dated
as of April 12, 1995 among Borrower, Agent and Lenders (together with all
amendments, modifications and supplements thereto, the "Loan Agreement"). Terms
used herein and not otherwise defined shall have the meanings ascribed to them
in the Loan Agreement.
2. Revolving Credit Amount; Borrowing Base.
---------------------------------------
2.1 Revolving Credit Amount. The maximum amount of Revolving Loans
-----------------------
which Lenders will make available to Borrower (such amount is herein called the
"Revolving Credit Amount") is $30,000,000.
2.2 Borrowing Base. The term "Borrowing Base," as used herein,
--------------
shall mean:
(i) an amount equal to up to 85% of the net amount (after deduction
of such reserves and allowances as Agent deems proper and necessary in its
reasonable business judgment) of Eligible Accounts Receivable; plus
----
(ii) an amount equal to the least of (a) $10,000,000 (the
"Inventory Sublimit"), subject to Section 5.1 hereof, (b) up to the
-----------
"Inventory Percentage" (as defined below) (after deduction of such reserves
and allowances as Agent deems proper and necessary in its reasonable
judgment) of Eligible Inventory and (c) an amount equal to 35% of the
amount in Section 2.2(i) hereof.
--------------
The "Inventory Percentage" shall be equal to 50% on the Closing Date
and shall reduce by 10% on each consecutive sixth month anniversary of the
Closing Date until the Inventory Percentage is equal to 0%.
2.3 Agent's and Lenders' Rights. Borrower agrees that nothing
---------------------------
contained in Supplement A (i) shall be construed as Agent's or any Lender's
------------
agreement to resort or look to a particular type or item of Collateral as
security for any specific Loan or portion of the Liabilities or advance or in
any way limit Agent's or any Lender's right to resort to any or all of the
Collateral as security for any of the Liabilities, (ii) shall be deemed to limit
-i-
<PAGE>
or reduce any Lien upon any portion of the Collateral or other security for the
Liabilities or (iii) shall supersede Section 2.9 of the Loan Agreement.
-----------
3. Interest.
--------
3.1 Loans.
-----
3.1.1 Revolving Loans.
---------------
(a) Interest to Maturity. The unpaid principal balance of the
--------------------
Revolving Loans (other than Overdraft Loans and Over Advances) shall bear
interest to maturity at a per annum rate equal to the Reference Rate;
provided, that pursuant to the provisions of Section 3.1.1(c), below, from
----------------
time to time Borrower may elect to have all or any portion of the Revolving
Loans bear interest at the LIBOR Base Rate.
(b) LIBOR Rate Option. Borrower shall have the right, from time
-----------------
to time, to designate all or any portion of the Revolving Loans as bearing
interest at the then applicable LIBOR Base Rate, by means of a written
notice to Agent specifying (i) the amount of such Revolving Loans that will
bear interest at a LIBOR Base Rate (provided, that such LIBOR Rate Loans
shall be in a minimum amount of Five Hundred Thousand Dollars ($500,000));
(ii) the date on which the applicable Interest Rate Period shall begin; and
(iii) the Interest Rate Period applicable thereto. All designations of
Revolving Loans as LIBOR Rate Loans must be received by Agent not later
than 10:00 a.m., Chicago time, three (3) Banking Days prior to the date the
applicable Interest Rate Period is to begin (or is to be continued).
Notwithstanding the foregoing, (x) all undesignated portions of the
Revolving Loans shall bear interest at the Reference Rate, (y) no Interest
Rate Period may commence or be continued at any time that an Event of
Default is in existence under Section 6.1(a), 6.1 (e) or Section 6.1(h)
-------------- ------- --------------
(solely because of a breach of Section 5 of this Supplement A) of the Loan
--------- ------------
Agreement and in each case, Agent has determined in good faith that such a
commencement or continuation is not appropriate, in any case
notwithstanding a contrary designation by Borrower, and (z) in no event may
more than four (4) LIBOR Rate Loans having different Interest Rate Periods
be outstanding at any one time. Each designation by Borrower of a LIBOR
Rate Loan shall be irrevocable.
(c) Default Rate. If any principal amount of the Loans is not
------------
paid when due, at the option of Requisite Lenders, the entire unpaid
principal balance of the Revolving Loans shall bear interest until paid
at a
-ii-
<PAGE>
rate per annum equal to the greater of (i) the applicable interest rate
from time to time in effect plus 2.00% and (ii) 2.00% above the applicable
interest rate in effect at the time of such Event of Default.
3.1.2 Overdraft Loans; Over Advances. Overdraft Loans and Over
------------------------------
Advances shall bear interest at the rate(s) determined pursuant to Section
-------
2.7 or Section 2.8 of the Loan Agreement, as applicable.
--- -----------
3.2 Computation. Interest shall be calculated on the basis of a year
-----------
consisting of 360 days and paid for actual days elapsed; provided, that the
computation of interest on LIBOR Rate Loans shall include the date on which the
applicable Interest Rate Period began, but shall exclude the last day of the
applicable Interest Rate Period. LIBOR Rate Loans not repaid on the last day of
the Interest Rate Period applicable thereto shall be continued or converted into
Revolving Loans bearing interest at the Reference Rate, as applicable, and bear
interest as provided herein, from and including the last day of such Interest
Rate Period. Changes in any interest rate provided for herein which are due to
changes in the Reference Rate shall take effect on the date of the change in the
Reference Rate.
3.3 Payment. Until maturity, interest on the Loans shall be payable
-------
on the last day of each month, commencing on April 30, 1995, and at maturity;
provided, that interest on LIBOR Rate Loans shall be payable in arrears on the
last day of the Interest Rate Period applicable thereto and at maturity. After
maturity, whether by acceleration or otherwise, accrued interest shall be
payable on demand.
3.4 Funding Indemnification. If any payment of a LIBOR Rate Loan
-----------------------
occurs on a date which is not the last day of the applicable Interest Rate
Period, whether because of acceleration, prepayment or otherwise, Borrower will
indemnify each Lender and Agent for any loss or cost incurred by it resulting
therefrom, including without limitation any loss or cost in liquidating or
employing deposits acquired to fund or maintain such Loan. Agent shall deliver
a written statement as to the amount due, if any, under this Section, after
consultation with each Lender so affected. Such written statement shall set
forth in reasonable detail the calculations upon which Agent and each Lender
determined such amount and shall be final, conclusive and binding on Borrower in
the absence of manifest error. Determination of amounts payable under this
Section shall be calculated as though each Lender funded its LIBOR Rate Loans
through the purchase of a deposit of the type and maturity corresponding to the
LIBOR Rate Loan and applicable Interest Rate Period bearing interest at the
LIBOR Base Rate less two and seventy-five hundredths percent (2.75%), as
applicable, whether or not the Lender actually funded the Loan in that manner.
-iii-
<PAGE>
The amount specified in the written statement shall be payable on demand after
receipt by Borrower of the written statement.
3.5 Availability of Interest Rate Options. If any Lender determines
-------------------------------------
that maintenance of any of its LIBOR Rate Loans would violate any applicable
law, rule, regulation or directive, whether or not having the force of law, the
Lender shall immediately notify Agent thereof and Agent shall suspend the
availability of such LIBOR Rate Loans and require any LIBOR Rate Loans
outstanding and so affected to be repaid; or if any Lender determines that (i)
deposits of a type or maturity appropriate to match fund LIBOR Rate Loans are
not available, (ii) the LIBOR Rate does not accurately reflect the cost of
making such Loans, or (iii) the Lender's ability to make or maintain LIBOR Rate
Loans has been materially adversely affected by the occurrence of any event
after the date hereof, then Lender shall immediately notify Agent thereof and
Agent shall suspend the availability of the LIBOR Rate Loans, as applicable,
after the date of any such determination.
3.6 Lenders' Obligation to Mitigate. Agent and each Lender agrees
-------------------------------
that if it becomes aware of either (i) the occurrence of an event or the
existence of a condition described in Section 9.3 of the Loan Agreement or
-----------
Section 3.5 hereof that would cause Agent or such Lender to make a determination
-----------
of the nature described therein, or (ii) the imposition, assessment or
collection of any taxes on or in respect of any Loan or Letter of Credit, Agent
or such Lender will, to the extent consistent with its internal policies, use
reasonable efforts to issue, make, fund or maintain the affected Letters of
Credit or Loans through another lending office of such Agent or Lender, if any,
if, as a result thereof, the additional amounts that would otherwise be required
to be paid to Agent or such Lender in respect thereof, would be reduced, or
LIBOR Rate Loans could be maintained, as the case may be, and if, as determined
by Agent or such Lender in its reasonable discretion, the issuing, making,
funding or maintaining of such Letters of Credit or Loans through such other
lending office would not adversely affect Agent or such Lender or such Letters
of Credit or Loans. Borrower hereby agrees to pay all reasonable expenses
incurred by Agent or any Lender in using another lending office pursuant to this
Section 3.6.
-----------
4. Additional Eligible Account Receivable Requirements. Each Account
---------------------------------------------------
Receivable identified by Borrower as an Eligible Account Receivable must not be
unpaid on the date that is 60 days after the applicable invoice dates. If
invoices representing 15% or more of the unpaid net amount of all Accounts
Receivable from any one Account Debtor are unpaid more than 60 days after the
applicable invoice dates, then all Accounts Receivable relating to such Account
Debtor shall cease to be Eligible Accounts Receivable.
5. Additional Covenants. From the Closing Date and thereafter until all of
--------------------
Borrower's Liabilities under the Loan Agreement are
-iv-
<PAGE>
paid in full, Borrower agrees that, unless Requisite Lenders otherwise consent
in writing:
5.1 Interest Coverage Ratio. Borrower will not permit the ratio
-----------------------
("Interest Coverage Ratio") of (a) net earnings (excluding interest income)
before interest expense, tax expense, depreciation and amortization for any
period set forth below, to (b) interest expense (net of interest income not
otherwise included in the calculation of earnings) for such period, each
determined for New Pioneer, Borrower and its Subsidiaries on a consolidated
basis, and in accordance with GAAP, to be less than 1.0:1.0 at the end of each
month for the preceding twelve month period; provided, however that if the
--------
Interest Coverage Ratio is less than such amount at any time during the period
from the Closing Date to the six month anniversary of the Closing Date, the
Inventory Sublimit shall be immediately reduced to $0 until such breach is
cured, but such breach shall not constitute an Event of Default unless such
breach remains uncured after the six month anniversary of the Closing Date.
For purposes of Section 5.1, (i) net earnings shall not include any
-----------
gains or losses on the sale or other disposition of Investments or fixed assets
or any other extraordinary items of
-v-
<PAGE>
income, and (ii) interest expense shall include, without limitation, implicit
interest expense on Capitalized Leases.
PIONEER AMERICAS, INC.
By /s/ George T. Henning, Jr.
----------------------------------
George T. Henning, Jr.
Title Vice President and
Chief Financial Officer
-----------------------------
Address: 4200 NationsBank Center
700 Louisiana Street
Houston, Texas 77002
Telecopier Number: (713) 225-4426
Attention: George T. Henning and
Kent Stephenson, Esq.
BANK OF AMERICA ILLINOIS
By /s/ Andrew A. Thomas
----------------------------------
Andrew A. Thomas
Title Vice President
-----------------------------
Address: 231 South LaSalle Street
Chicago, Illinois 60697
Telecopier Number: (312) 765-2193
Attention: Middle Market II
Attention: Erik Dykema
-vi-
<PAGE>
MASTER CORPORATE GUARANTY
-------------------------
Pioneer Americas, Inc., a Delaware corporation (the "Borrower") has
requested that Bank of America Illinois ("BAI") and the other Lenders now or
hereafter party to the Loan Agreement (as defined below) (the "Lenders"),
provide certain financial accommodations to the Borrower. As one of the
conditions to providing financing to the Borrower, BAI, as agent for itself and
each of the other Lenders ("Agent"), has required that each of the subsidiaries
of Borrower set forth on Exhibit A attached hereto (collectively, "Guarantors",
and individually a "Guarantor") guaranty the obligations of the Borrower to
Agent and the Lenders.
For value received and in consideration of any loan, advance, or
financial accommodation of any kind whatsoever heretofore, now or hereafter
made, given or granted to the Borrower by Agent and the Lenders, each Guarantor
jointly and severally unconditionally guaranties the full and prompt payment
when due, whether at maturity or earlier, by reason of acceleration or
otherwise, and at all times thereafter, of all "Liabilities" as such term is
defined in that certain Loan and Security Agreement among the Borrower, Agent
and the Lenders of even date herewith (the "Loan Agreement") (all such
Liabilities being hereinafter referred to as "Borrower's Obligations"). Each
Guarantor further agrees to pay all costs and expenses including, without
limitation, all court costs and attorneys' and paralegals' fees and expenses
paid or incurred by Agent or the Lenders in endeavoring to collect all or any
part of Borrower's Obligations from, or in prosecuting any action against, any
Guarantor or any other guarantor of all or any part of Borrower's Obligations.
Each Guarantor hereby agrees that its obligations under this Master
Corporate Guaranty shall be unconditional, irrespective of (i) the validity or
enforceability of Borrower's Obligations or any part thereof, or of any
promissory note or other document evidencing all or any part of Borrower's
Obligations, (ii) the absence of any attempt to collect Borrower's Obligations
from the Borrower, any Guarantor or any other guarantor, or other action to
enforce the same, (iii) the waiver or consent by Agent or the Lenders with
respect to any provision of any instrument evidencing Borrower's Obligations, or
any part thereof, or any other agreement now or hereafter executed by the
Borrower and delivered to Agent and the Lenders, (iv) failure by Agent to take
any steps to perfect and maintain its security interest in, or to preserve its
rights to, any security or collateral for Borrower's Obligations, for its
benefit or the ratable benefit of the Lenders, (v) Agent's election, in any
proceeding instituted under Chapter 11 of Title 11 of the United States Code (11
U.S.C. Section 101 et seq.), as amended (the "Bankruptcy Code") of the
application of Section 1111(b)(2) of the Bankruptcy Code, (vi) any borrowing or
grant of a security interest by the Borrower as debtor-in-possession, under
Section 364 of the Bankruptcy Code, (vii) the disallowance, under
<PAGE>
Section 502 of the Bankruptcy Code, of all or any portion of Agent and the
Lenders' claim(s) for repayment of Borrower's Obligations, or (viii) any other
circumstance which might otherwise constitute a legal or equitable discharge or
defense of the Borrower or a guarantor.
Until the Payment Liabilities have been repaid in full and there is no
further commitment to make Loans or issue Letters of Credit under the Loan
Agreement, no payment made by or for the account or benefit of any Guarantor
(including without limitation (i) a payment made by the Borrower in respect of
Borrower's Obligations, (ii) a payment made by any Guarantor in respect of
Borrower's Obligations, (iii) a payment made by any person under any other
guaranty of Borrower's Obligations or (iv) a payment made by means of set-off or
other application of funds by Agent or the Lenders) pursuant to this Master
Corporate Guaranty shall entitle any Guarantor, by subrogation or otherwise, to
any payment by the Borrower or from or out of any property of the Borrower, and
no Guarantor may exercise any right or remedy against the Borrower or any
property of the Borrower including, without limitation, any right of
contribution or reimbursement by reason of any performance by such Guarantor
under this Master Corporate Guaranty. The provisions of this paragraph shall
survive the termination of this Master Corporate Guaranty or the release or
discharge of any and all Guarantors from liability hereunder. Each Guarantor
and Agent hereby agree that the Borrower is and shall be a third party
beneficiary of the provisions of this paragraph.
Each Guarantor hereby waives diligence, presentment, demand of
payment, filing of claims with a court in the event of receivership or
bankruptcy of the Borrower, protest or notice with respect to Borrower's
Obligations and all demands whatsoever, and covenants that this Master Corporate
Guaranty will not be discharged, except by complete and irrevocable payment and
performance of the obligations and liabilities contained herein. No notice to
any party, including any Guarantor, shall be required for Agent to make demand
hereunder. Such demand shall constitute a mature and liquidated claim against
each Guarantor. Upon any Event of Default (as defined in the Loan Agreement) by
the Borrower as provided in any instrument or document evidencing all or any
part of Borrower's Obligations, including without limitation the Loan Agreement,
Agent may, at its sole election, proceed directly and at once, without notice,
against any Guarantor, or all of the Guarantors, to collect and recover the full
amount or any portion of Borrower's Obligations, without first proceeding
against the Borrower, any other Guarantor, or any other person, firm, or
corporation, or against any security or collateral for Borrower's Obligations.
Agent shall have the exclusive right to determine the application of payments
and credits, if any, from any Guarantor, the Borrower or from any other person,
firm or corporation, on account of Borrower's Obligations or of any other
liability of any Guarantor to Agent and the Lenders.
-2-
<PAGE>
Agent and the Lenders are hereby authorized, without notice or demand
and without affecting the liability of any Guarantor hereunder, to, from time to
time, (i) renew, extend, accelerate or otherwise change the time for payment of,
or other terms relating to, Borrower's Obligations or otherwise modify, amend or
change the terms of any promissory note or other agreement, document or
instrument now or hereafter executed by the Borrower and delivered to Agent and
the Lenders; (ii) accept partial payments on Borrower's Obligations; (iii) take
and hold security or collateral for the payment of Borrower's Obligations
guaranteed hereby, or for the payment of this Master Corporate Guaranty, or for
the payment of any other guaranties or Borrower's Obligations or other
liabilities of the Borrower, and exchange, enforce, waive and release any such
security or collateral; (iv) apply such security or collateral and direct the
order or manner of sale thereof as in its sole discretion it may determine; and
(v) settle, release, compromise, collect or otherwise liquidate Borrower's
Obligations and any security or collateral therefor in any manner, without
affecting or impairing the obligations of any Guarantor hereunder.
At any time after maturity of Borrower's Obligations, Agent may, in
its sole discretion, without notice to any Guarantor and regardless of the
acceptance of any security or collateral for the payment hereof, appropriate and
apply toward payments of Borrower's Obligations (i) any indebtedness due or to
become due from Agent or any of the Lenders to any Guarantor, and (ii) any
moneys, credits or other property belonging to any Guarantor, at any time held
by or coming into the possession of Agent or any of the Lenders or any
affiliates thereof, whether for deposit or otherwise.
Each Guarantor hereby assumes responsibility for keeping itself
informed of the financial condition of the Borrower, the other Guarantors, and
any and all endorsers and/or other guarantors of any instrument or document
evidencing all or any part of Borrower's Obligations and of all other
circumstances bearing upon the risk of nonpayment of Borrower's Obligations or
any part thereof that diligent inquiry would reveal and each Guarantor hereby
agrees that Agent shall have no duty to advise any Guarantor of information
known to Agent or the Lenders regarding such condition or any such
circumstances. Each Guarantor hereby acknowledges familiarity with the
Borrower's financial condition and has not relied on any statements by Agent or
the Lenders in obtaining such information. In the event Agent, in its sole
discretion, undertakes at any time or from time to time to provide any such
information to any Guarantor, Agent shall be under no obligation (i) to
undertake any investigation not a part of its regular business routine, (ii) to
disclose any information which, pursuant to accepted or reasonable commercial
finance practices, Agent wishes to maintain confidential or (iii) to make any
other or future disclosures of such information or any other information to such
Guarantor.
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<PAGE>
Notwithstanding any provision of this Master Corporate Guaranty to the
contrary, it is intended that this Master Corporate Guaranty, and any liens and
security interests granted by any Guarantor to secure this Master Corporate
Guaranty, not constitute a "Fraudulent Conveyance" (as defined below) by any
Guarantor. Consequently, each Guarantor agrees that if this Master Corporate
Guaranty, or any liens or security interests securing this Master Corporate
Guaranty, would, but for the application of this sentence, constitute a
Fraudulent Conveyance by it, this Master Corporate Guaranty and each such lien
and security interest shall be valid and enforceable only to the maximum extent
that would not cause this Master Corporate Guaranty or such lien or security
interest to constitute a Fraudulent Conveyance by such Guarantor, and this
Master Corporate Guaranty shall automatically be deemed to have been amended
accordingly at all relevant times. For purposes hereof, "Fraudulent Conveyance"
means a fraudulent conveyance under Section 548 of the Bankruptcy Code or a
fraudulent conveyance or fraudulent transfer under the provisions of any
applicable fraudulent conveyance or fraudulent transfer law or similar law of
any state, nation or other governmental unit, as in effect from time to time.
Each Guarantor consents and agrees that Agent shall be under no
obligation to marshall any assets in favor of any Guarantor or against or in
payment of any or all of Borrower's Obligations. Each Guarantor further agrees
that, to the extent that the Borrower makes a payment or payments to Agent, or
Agent receives any proceeds of collateral, for its benefit and the ratable
benefit of the Lenders, which payment or payments or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set aside
and/or required to be repaid to the Borrower, its estate, trustee, receiver or
any other party, including without limitation any Guarantor, under any
bankruptcy law, state or federal law, common law or equitable cause, then to the
extent of such payment or repayment, Borrower's Obligations or the part thereof
which has been paid, reduced or satisfied by such amount shall be reinstated and
continued in full force and effect as of the date such initial payment,
reduction or satisfaction occurred and this Master Corporate Guaranty shall
continue to be in existence and in full force and effect, irrespective of
whether any evidence of indebtedness has been surrendered or cancelled.
Each Guarantor also waives all setoffs and counterclaims and all
presentments, demands for performance, notices of nonperformance, protests,
notices of protest, notices of dishonor, and notices of acceptance of this
Master Corporate Guaranty. Each Guarantor further waives all notices of the
existence, creation or incurring of new or additional indebtedness, arising
either from additional loans extended to the Borrower or otherwise, and also
waives all notices that the principal amount, or any portion thereof, and/or any
interest on any instrument or document evidencing all or any part of Borrower's
Obligations is due, notices of any and all proceedings to collect from the
maker, any
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<PAGE>
endorser or any other Guarantor or guarantor of all or any part of Borrower's
Obligations, or from anyone else, and, to the extent permitted by law, notices
of exchange, sale, surrender or other handling of any security or collateral
given to Agent, for its benefit and the ratable benefit of the Lenders, to
secure payment of Borrower's Obligations.
No delay on the part of Agent in the exercise of any right or remedy
shall operate as a waiver thereof, and no single or partial exercise by Agent of
any right or remedy shall preclude any further exercise thereof; nor shall any
modification or waiver of any of the provisions of this Master Corporate
Guaranty be binding upon Agent or the Lenders, except as expressly set forth in
a writing duly signed and delivered on Agent's behalf by an authorized officer
or agent of Agent. Agent's or the Lenders' failure at any time or times
hereafter to require strict performance by the Borrower or any Guarantor of any
of the provisions, warranties, terms and conditions contained in any promissory
note, security agreement, agreement, guaranty, instrument or document now or at
any time or times hereafter executed by the Borrower or any Guarantor and
delivered to Agent and the Lenders shall not waive, affect or diminish any right
of Agent and the Lenders at any time or times hereafter to demand strict
performance thereof and such right shall not be deemed to have been waived by
any act or knowledge of Agent or the Lenders, or their respective agents,
officers or employees, unless such waiver is contained in an instrument in
writing signed by an officer or agent of Agent, and directed to the Borrower or
a Guarantor, as applicable, specifying such waiver. No waiver by Agent and the
Lenders of any default shall operate as a waiver of any other default or the
same default on a future occasion, and no action by Agent or the Lenders
permitted hereunder shall in any way affect or impair Agent's or the Lenders'
rights or the obligations of any Guarantor under this Master Corporate Guaranty.
Any determination by a court of competent jurisdiction of the amount of any
principal and/or interest owing by the Borrower to Agent and the Lenders shall
be conclusive and binding on each Guarantor irrespective of whether such
Guarantor was a party to the suit or action in which such determination was
made.
This Master Corporate Guaranty shall terminate upon payment of all of
the Payment Liabilities (as defined in the Loan Agreement) and the termination
of the Loan Agreement in connection with its terms.
This Master Corporate Guaranty shall be binding upon each Guarantor
and upon the successors and permitted assigns of such Guarantor and shall inure
to the benefit of Agent's and the Lenders' respective successors and assigns;
all references herein to the Borrower shall be deemed to include their
successors and permitted assigns and all references herein to Agent or the
Lenders shall be deemed to include their successors and assigns. The Borrower's
successors and permitted assigns shall include, without
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<PAGE>
limitation, a receiver, trustee or debtor in possession of or for the Borrower.
All references to the singular shall be deemed to include the plural where the
context so requires.
EACH GUARANTOR HEREBY CONSENTS TO THE JURISDICTION OF STATE OR FEDERAL
COURT LOCATED WITHIN COOK COUNTY, ILLINOIS AND WAIVES ANY OBJECTION WHICH IT MAY
HAVE BASED ON IMPROPER VENUE OR FORUM NON CONVENIENS TO THE CONDUCT OF ANY
----- --- ----------
PROCEEDING IN ANY SUCH COURT AND CONSENTS THAT ALL SERVICE OF PROCESS UPON IT BE
MADE BY REGISTERED MAIL OR MESSENGER DIRECTED TO IT AT THE ADDRESS SET FORTH
BELOW SUCH GUARANTOR'S SIGNATURE AND THAT SERVICE SO MADE SHALL BE DEEMED TO BE
COMPLETED UPON THE EARLIER OF ACTUAL RECEIPT OR THREE (3) DAYS AFTER THE SAME
SHALL HAVE BEEN POSTED TO SUCH GUARANTOR'S AGENT SET FORTH BELOW. EACH
GUARANTOR HEREBY IRREVOCABLY APPOINTS CT CORPORATION SYSTEM AS ITS AGENT FOR THE
PURPOSE OF ACCEPTING THE SERVICE OF ANY PROCESS WITHIN THE STATE OF ILLINOIS.
THE BORROWER, EACH GUARANTOR AND AGENT EACH HEREBY WAIVE, TO THE EXTENT
PERMITTED BY LAW, TRIAL BY JURY. BORROWER AND EACH GUARANTOR FURTHER WAIVES ANY
BOND OR SURETY OR SECURITY UPON SUCH BOND WHICH MIGHT, BUT FOR THIS WAIVER, BE
REQUIRED OF AGENT. NOTHING CONTAINED HEREIN SHALL AFFECT THE RIGHT OF AGENT TO
SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR AFFECT THE RIGHT OF
AGENT TO BRING ANY ACTION OR PROCEEDING AGAINST ANY GUARANTOR OR ITS PROPERTY IN
THE COURTS OF ANY OTHER JURISDICTION.
THIS MASTER CORPORATE GUARANTY SHALL BE GOVERNED IN ALL RESPECTS BY
THE LAWS OF THE STATE OF ILLINOIS.
Wherever possible each provision of this Master Corporate Guaranty
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Master Corporate Guaranty shall be
prohibited by or invalid under such law, such provision shall be ineffective to
the extent of such prohibition or invalidity without invalidating the remainder
of such provision or the remaining provisions of this Master Corporate Guaranty.
Each Guarantor hereby certifies that it has all necessary corporate
authority to grant and execute this Master Corporate Guaranty.
The obligations of each Guarantor are secured by that certain Master
Collateral Security Agreement, of even date herewith, between Agent and each
Guarantor.
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<PAGE>
IN WITNESS WHEREOF, this Master Corporate Guaranty has been duly
executed by each Guarantor listed below this ___ day of April, 1995.
EACH OF THE SUBSIDIARIES SET
FORTH ON EXHIBIT A HERETO
By /s/ George T. Henning, Jr.
---------------------------------
George T. Henning, Jr.
Vice President of each of such
-----------------
Subsidiaries
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<PAGE>
Exhibits and Schedules provided separately.
<PAGE>
MASTER SECURITY AGREEMENT
THIS MASTER SECURITY AGREEMENT is made as of the 20th day of April,
1995 by each of the parties listed on Exhibit A attached hereto (collectively,
---------
"Guarantors" and individually a "Guarantor"), in favor of Bank of America
Illinois ("Agent"), as agent for itself and each other Lender (each, a "Lender")
party to the "Loan Agreement" (as defined herein), with an address at 231 South
LaSalle Street, Chicago, Illinois 60697.
1. DEFINITIONS.
-----------
As used in this Agreement:
"Agreement" shall mean this Security Agreement, as it may be amended,
---------
modified or supplemented from time to time.
"Borrower" shall mean Pioneer Americas, Inc., a Delaware corporation
--------
and the owner of one hundred percent (100%) of the issued and outstanding
capital stock of each Guarantor.
"Collateral" shall mean all of the following property of each
----------
Guarantor, whether now owned or existing, or hereafter acquired or coming into
existence, wherever now or hereafter located:
(a) Accounts Receivable (whether or not Eligible Accounts Receivable);
Contract Rights; any and all security deposits and other security held by
or granted to such Guarantor to secure payments from any and all persons
who are or may become obligated to such Guarantor under, with respect to,
or on account of any Account Receivable or Contract Right; and all chattel
paper and instruments evidencing, arising out of or relating to any
obligations to such Guarantor for goods sold or leased or services
rendered, or otherwise arising out of or relating to any Collateral;
(b) Inventory (whether or not Eligible Inventory);
(c) General Intangibles;
(d) Any and all balances, credits, deposits (general or special,
time or demand, provisional or final), accounts or monies of or in the name
of such Guarantor now or hereafter with Agent, any Lender or any
Participant and any and all property of every kind or description of or in
the name of such Guarantor now or hereafter, for any reason or purpose
whatsoever, in the possession or control of, or in transit to, or standing
to such Guarantor's credit on the books of, Agent, any agent or bailee for
Agent, any Lender or any Participant;
<PAGE>
(e) To the extent related to the property described in clauses (a)
-----------
through (d) above, all books, correspondence, credit files, records,
---
invoices and other papers and documents, including without limitation, to
the extent so related, all tapes, cards, computer runs, computer programs
and other papers and documents in the possession or control of such
Guarantor or any computer bureau from time to time acting for such
Guarantor, and, to the extent so related, all rights in, to and under all
policies of insurance, including claims of rights to payments thereunder
and proceeds therefrom, including any credit insurance; and
(f) All products and proceeds (including but not limited to any
Accounts Receivable or other proceeds arising from the sale or other
disposition of any property described above, any returns of Inventory sold
by such Guarantor, and the proceeds of any insurance covering any of the
property described above) of any of the foregoing.
"Default" shall mean the occurrence or existence of any of the events
-------
listed in Section 5 of this Agreement.
---------
"Guaranty" shall mean the Master Corporate Guaranty of even date
--------
herewith executed by each Guarantor in favor of Agent, as it may be amended,
modified or supplemented from time to time.
"Guaranty Documents" shall mean, collectively, this Agreement, the
------------------
Guaranty and all other agreements, instruments and documents now or hereafter
executed and/or delivered by any Guarantor to Agent in connection with the
transactions contemplated thereby, as each may be amended, modified or
supplemented from time to time.
"Loan Agreement" shall mean the Loan and Security Agreement of even
--------------
date herewith among Borrower, Agent and each Lender, together with Supplement A
thereto, as each may be amended, modified or supplemented from time to time.
"Obligations" shall mean all obligations with respect to the Guaranty
-----------
and all other loans and all other advances, debts, liabilities, obligations,
covenants and duties arising, due or payable from any Guarantor to Agent and
each Lender of any kind or nature, present or future, and arising under the
Guaranty, the Loan Agreement, the Related Agreements or any of the other
Guaranty Documents, whether direct or indirect (including those acquired by
assignment), absolute or contingent, primary or secondary, due or to become due,
now existing or hereafter arising and however acquired. The term includes,
without limitation, all interest, charges, expenses, fees, attorneys' fees and
any other sums chargeable to any Guarantor under the Guaranty, this Agreement,
the Related Agreements or any other Guaranty Documents.
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<PAGE>
The foregoing definitions shall be equally applicable to both the
singular and plural forms of the defined terms. Capitalized terms used in this
Agreement without definition and defined in the Loan Agreement shall have the
meanings ascribed to such terms in the Loan Agreement. Terms used in this
Agreement and not defined herein or in the Loan Agreement shall have the
meanings given such terms in the Uniform Commercial Code.
2. SECURITY INTEREST.
-----------------
2.1 Grant of Security Interest. To secure the payment and
--------------------------
performance of the Obligations, each Guarantor hereby grants to Agent, for the
benefit of itself and Lenders, a continuing security interest in the Collateral.
2.2 Accounts Receivable.
-------------------
(a) If requested by Agent, each Guarantor shall notify Agent
immediately of all material disputes or claims by any Account Debtor and, if
reasonably requested by Agent after the occurrence and during the continuance of
a Default, settle or adjust them, or cause them to be settled or adjusted, at no
expense to Agent or Lenders. If Agent directs after the occurrence and during
the continuance of a Default, no discount or credit allowance shall be granted
thereafter by any Guarantor to any Account Debtor, other than discounts and
trade allowances offered in the ordinary course of such Guarantor's business.
If requested by Agent, each Guarantor will make proper entries in its books and
records, disclosing the assignment of Accounts Receivable to Agent, for the
benefit of itself and Lenders.
(b) Each Guarantor warrants and covenants that: (i) all of such
Guarantor's Accounts Receivable are and will continue to be bona fide existing
obligations created by the sale of goods, the rendering of services, or the
furnishing of other good and sufficient consideration to such Guarantor's
Account Debtors in the regular course of business; (ii) all shipping or delivery
receipts and other documents furnished or to be furnished to Agent by such
Guarantor upon Agent's request in connection therewith are and will be genuine;
and (iii) none of such Guarantor's Accounts Receivable identified or included on
any schedule, Borrowing Base Certificate or report as Eligible Accounts
Receivable fail at the time so identified or included to satisfy any of the
requirements for eligibility set forth in the definition of Eligible Accounts
Receivable.
(c) Agent is authorized and empowered (which authorization and power,
being coupled with an interest, is irrevocable until the last to occur of
termination of this Agreement and the Guaranty Documents, termination of the
Loan Agreement, and payment and performance in full of all of the Obligations)
at any time in its sole and absolute discretion:
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<PAGE>
(i) To request, in the name of Agent, Borrower, any Guarantor or a
third party, confirmation from any Account Debtor or party obligated under
or with respect to any Collateral of the amount shown by the Accounts
Receivable or other Collateral to be payable, or any other matter stated
therein;
(ii) To endorse in any Guarantor's name and to collect any chattel
paper, checks, notes, drafts, instruments or other items of payment
tendered to or received by Agent in payment of any Account Receivable or
other obligation owing to such Guarantor;
(iii) After the occurrence and during the continuance of a
Default, to notify, either in Agent's name, Borrower's name or any
Guarantor's name, and/or to require any Guarantor to notify, any Account
Debtor or other Person obligated under or in respect of any Collateral, of
the fact of Agent's Lien thereon, for the benefit of itself and Lenders,
and of the collateral assignment thereof to Agent, for the benefit of
itself and Lenders;
(iv) After the occurrence and during the continuance of a Default,
to direct, either in any Guarantor's name or Agent's name, and/or to
require any Guarantor to direct, any Account Debtor or other Person
obligated under or in respect of any Collateral to make payment directly to
Agent of any amounts due or to become due thereunder or with respect
thereto; and
(v) After the occurrence and during the continuance of a Default,
to demand, collect, surrender, release or exchange all or any part of any
Collateral or any amounts due thereunder or with respect thereto, or
compromise or extend or renew for any period (whether or not longer than
the initial period) any and all sums which are now or may hereafter become
due or owing upon or with respect to any of the Collateral, or enforce, by
suit or otherwise, payment or performance of any of the Collateral either
in Agent's own name or in the name of any Guarantor.
Under no circumstances shall Agent be under any duty to act in regard to any of
the foregoing matters. The costs relating to any of the foregoing matters,
including Attorneys' Fees and out-of-pocket expenses, and the cost of any
Depository Account, Assignee Deposit Account, or other bank account or accounts
which may be required hereunder, shall be borne solely by Guarantors whether the
same are incurred by Agent or Guarantors.
(d) Each Guarantor will notify its Account Debtors to make all
payments in respect of such Guarantor's Accounts
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<PAGE>
Receivable directly to one or more lockbox accounts evidenced by agreements in
form and substance satisfactory to Agent. All deposits to such lockbox
accounts, and all checks, drafts, cash and other remittances in payment or as
proceeds of, or on account of, any of the Accounts Receivable or other
Collateral, shall be deposited in special bank accounts (the "Depository
Accounts") at such banks or financial institutions as Agent shall consent. Said
proceeds shall be deposited in precisely the form received except for such
Guarantor's endorsement where necessary to permit collection of items, which
endorsement such Guarantor agrees to make. Pending such deposit, each Guarantor
agrees not to commingle any such checks, drafts, cash and other remittances with
any of its funds or property, but will hold them separate and apart therefrom
and upon an express trust for Agent, for the benefit of itself and Lenders,
until deposit thereof is made in the Depository Accounts. All funds in the
Depository Accounts at the end of each Banking Day will be wire transferred or
transferred by other means acceptable to Agent to a special bank account (the
"Assignee Deposit Account") at Bank of America Illinois over which Agent alone
has power of withdrawal. Each Guarantor acknowledges that the maintenance of
the Assignee Deposit Account is solely for the convenience of Agent in
facilitating its own operations, and no Guarantor has or shall have any right,
title or interest in the Assignee Deposit Account or in the amounts at any time
appearing to the credit thereof, it being understood that if proceeds in the
Assignee Deposit Account are subsequently transferred to the Demand Deposit
Account or operating account, or a cash collateral account in accordance with
Section 2.10(b)(i) of the Loan Agreement, at the direction of Borrower, one or
more of the Guarantors may be entitled to such proceeds. Each Guarantor agrees
not to maintain any depository accounts other than Depository Accounts, the
Demand Deposit Account and the Assignee Deposit Account established pursuant to
this Section 2.2(d). Upon the full and final liquidation of all Payment
--------------
Liabilities, Agent will pay over to Borrower, on behalf of such Guarantor any
excess amounts received by Agent as payment or proceeds of Collateral, whether
received by Agent as a deposit in the Assignee Deposit Account, contained in a
lockbox account or any Depository Account or received by Agent as a direct
payment on any of the sums due hereunder.
(e) Each Guarantor appoints Agent, or any Person whom Agent may from
time to time designate, as such Guarantor's attorney and agent-in-fact with
power: (i) after the occurrence and during the continuance of a Default, to
notify the post office authorities to change the address for delivery of such
Guarantor's mail to an address designated by Agent; (ii) to receive, open and
dispose of all mail addressed to such Guarantor, but received by Agent; (iii) to
send requests for verification of Accounts Receivable or other Collateral to
Account Debtors; (iv) to open, under Agent's sole control (subject, where
applicable, to the provisions of the Loan Agreement), an Assignee Deposit
Account, Depository Accounts, Lockbox accounts or other accounts required under
this Agreement for the collection of Accounts Receivable or other Collateral, if
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<PAGE>
not required contemporaneously with the execution hereof and if not previously
opened by such Guarantor; and (v) to do all other things which Agent is
permitted to do under this Agreement or any Guaranty Documents or which are
necessary to carry out this Agreement and the Guaranty Documents. Neither Agent
nor any of its directors, officers, employees or agents will be liable for any
acts of commission or omission nor for any error in judgment or mistake of fact
or law, unless the same shall have resulted from gross negligence or willful
misconduct. The foregoing appointment and power, being coupled with an
interest, is irrevocable until all Obligations under this Agreement are paid and
performed in full and this Agreement, the Guaranty Documents, and the Loan
Agreement are each terminated. Each Guarantor expressly waives presentment,
demand, notice of dishonor and protest of all instruments and any other notice
to which it might otherwise be entitled.
(f) If any Guarantor's Account Receivable or Contract Right, in either
case in excess of $2,000,000, and designated by Borrower as an Eligible Account,
arises out of a contract with the United States or any state or local
governmental entity, or any department, agency, or instrumentality thereof, such
Guarantor will immediately notify Agent in writing and execute any instruments
and take any steps reasonably required by Agent in order that all monies due and
to become due under such contract shall be assigned to Agent, for the benefit of
itself and Lenders, and notice thereof given to the applicable government under
the Federal Assignment of Claims Act of 1940, as amended, or other applicable
laws or regulations, provided, that with respect to such Accounts Receivable and
Contract Rights in existence on the Closing Date or within 90 days thereafter,
such steps need not be completed until 90 days after the Closing Date. The
failure of a Guarantor to comply with this clause (f) shall not by itself
----------
constitute a Default; rather, such failure will cause the applicable Account
Receivable or Contract Right to be deemed not to be an Eligible Account under
the Loan Agreement.
(g) If any Guarantor's Account Receivable or Contract Right is
evidenced by chattel paper or promissory notes, trade acceptances, or other
instruments for the payment of money, such Guarantor will, unless Agent shall
otherwise agree, deliver the originals of same to Agent, appropriately endorsed
to Agent's order and, regardless of the form of such endorsement, such Guarantor
hereby expressly waives presentment, demand, notice of dishonor, protest and
notice of protest and all other notices with respect thereto.
2.3 Inventory
---------
(a) Each Guarantor warrants and covenants that: (i) all of the
Inventory is, and at all times shall be, owned by such Guarantor free of all
claims and Liens (except as set forth in Section 5.15 of the Loan Agreement);
------------
and no Guarantor will make any further assignment of any thereof or create or
permit to exist any
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<PAGE>
further Lien thereon, unless approved in writing by Requisite Lenders, nor
permit any of Agent's rights therein to be affected by any attachment, levy,
garnishment or other judicial process.
(b) Neither Agent nor any Lender shall be liable or responsible in any
way for the safekeeping of any Inventory delivered to it, to any bailee
appointed by or for it, to any warehouseman, or under any other circumstances,
other than for losses caused by its gross negligence or willful misconduct.
Neither Agent nor any Lender shall be responsible for collection of any proceeds
or for losses in collected proceeds held by any Guarantor in trust for Agent.
Any and all risk of loss for any or all of the foregoing shall be upon
Guarantors.
(c) Any material change in the value or condition of any Inventory,
and any errors discovered in any monthly inventory certificate under Section
-------
5.1.3 of the Loan Agreement or any other inventory schedule delivered to Agent
-----
and Lenders, shall be reported to Agent promptly. Each Guarantor represents and
warrants that, as to each schedule of Inventory delivered by Borrower to Agent
or any Lender:
(i) The descriptions, origins, sizes, qualities, quantities,
weights, and markings of all of such Guarantor's goods stated thereon, or
on any attachment thereto, are true and correct in all respects;
(ii) None of such Guarantor's goods are defective, of second
quality, used, or goods returned after shipment, except where described as
such; and
(iii) All of such Guarantor's Inventory not included on such
schedule has been previously scheduled.
2.4 Supplemental Documentation. At Agent's request, each Guarantor
--------------------------
shall execute and deliver, or cause to be executed and delivered, to Agent, at
any time or times hereafter, such agreements, documents, financing statements,
warehouse receipts, bills of lading, notices of assignment of Accounts
Receivable, schedules of Accounts Receivable assigned, and other written matter
necessary or reasonably requested by Agent to perfect and maintain perfected
Agent's security interest in the Collateral, for the benefit of itself and
Lenders (all the above hereinafter referred to as "Supplemental Documentation"),
in form and substance acceptable to Agent, and pay all taxes, fees and other
costs and expenses associated with any recording or filing of the Supplemental
Documentation. Each Guarantor hereby irrevocably makes, constitutes and
appoints Agent (and all Persons designated by Agent for that purpose) as such
Guarantor's true and lawful attorney (and agent-in-fact) (which appointment and
power, being coupled with an interest, is irrevocable until the last to occur of
termination of this Agreement and the Guaranty Documents, termination of the
Loan Agreement, and payment and performance in full of all of the
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<PAGE>
Obligations under this Agreement) to sign the name of such Guarantor on any of
the Supplemental Documentation and to deliver any of the Supplemental
Documentation to such Persons as Agent in its sole and absolute discretion, may
elect. Each Guarantor agrees that a carbon, photographic, photostatic, or other
reproduction of this Agreement or of a financing statement is sufficient as a
financing statement.
2.5 Collateral for the Benefit of Agent and Lenders. All Liens
-----------------------------------------------
granted to Agent hereunder and under the Guaranty Documents and all Collateral
delivered to Agent hereunder and under the Guaranty Documents shall be deemed to
have been granted and delivered to Agent, for the benefit of itself and Lenders,
to secure the Obligations.
2.6 Certain Intellectual Property. Each Guarantor hereby grants
-----------------------------
Agent, for the benefit of Lenders, a world-wide irrevocable license or other
right to use, without charge, labels, rights of use of any name, tradenames,
trademarks and advertising matter, or any assets and property of a similar
nature (collectively, the "Intangible Rights"), as they pertain to the
Collateral, in advertising for sale and selling any Collateral and such
Guarantor's rights under all applicable licenses and license agreements related
to the foregoing shall inure to Agent's benefit. Such license shall remain in
full force and effect until all of the Obligations have been repaid in full.
Any transfer of or Lien on the Intangible Rights granted by any Guarantor to any
other Person shall be subject in all respects to Agent's rights granted
hereunder.
3. REPRESENTATIONS AND WARRANTIES.
------------------------------
Each Guarantor hereby makes with respect to itself those
representations and warranties to Agent and Lenders applicable to such Guarantor
as are set forth in Section 4 of the Loan Agreement.
---------
4. COVENANTS AND CONTINUING AGREEMENTS.
-----------------------------------
Each Guarantor hereby covenants and agrees that, as long as any of the
Obligations remain outstanding, and even if there shall be no Obligations
outstanding, as long as this Agreement, any Guaranty Document or the Loan
Agreement remains in effect, each Guarantor shall comply, with respect to
itself, with each of the covenants set forth in Section 5 of the Loan Agreement.
---------
5. DEFAULT.
-------
5.1 Default. Each of the following occurrences shall constitute a
-------
Default under this Agreement:
(a) Breach of Loan Agreement. The occurrence of any Event of
------------------------
Default under the Loan Agreement.
-8-
<PAGE>
(b) Breach of Payment Obligations. Any Guarantor's failure to pay
-----------------------------
when due any Obligations of such Guarantor under the Guaranty.
(c) Breach of This Agreement. The occurrence of any breach of any
------------------------
of the covenants contained herein.
(d) Termination of Guaranty. The termination of the Guaranty by
-----------------------
any Guarantor.
(e) Bankruptcy. Any Guarantor applies for, consents to, or
----------
acquiesces in the appointment of a trustee, receiver or other custodian for
Borrower, such Guarantor or any other Guarantor, or for a substantial part
of the property of Borrower, such Guarantor or any other Guarantor, or
makes a general assignment for the benefit of creditors; or, in the absence
of such application, consent or acquiescence, a trustee, receiver or other
custodian is appointed for Borrower or any Guarantor or for a substantial
part of the property of Borrower or any Guarantor and is not discharged or
dismissed within sixty (60) days; or any bankruptcy, reorganization, debt
arrangement or other proceeding under any bankruptcy or insolvency law, or
any dissolution or liquidation proceeding, is instituted by or against
Borrower or any Guarantor; or any warrant of attachment or similar legal
process is issued against any substantial part of the property of Borrower
or any Guarantor.
5.2 Effect of Event of Default; Remedies.
------------------------------------
(a) In the event that one or more Events of Default described in
Section 6.1(e) of the Loan Agreement or one or more Defaults described in
--------------
Section 5.1(e) of this Agreement shall occur, then all Obligations shall be
immediately due and payable without demand, notice or declaration of any kind
whatsoever.
(b) In the event an Event of Default other than one described in
Section 6.1(e) of the Loan Agreement or one or more Defaults described in
--------------
Section 5.1(e) of this Agreement shall occur, then Agent may declare all
Obligations immediately due and payable without demand or notice of any kind
whatsoever. Agent shall promptly advise Guarantors of any such declaration.
(c) In the event of the occurrence of any Default, Agent may exercise
any one or more or all of the following remedies, all of which are cumulative
and non-exclusive:
(i) Any remedy contained in this Agreement or in any of the
Guaranty Documents;
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<PAGE>
(ii) Any rights and remedies available to Agent or any Lender under
the UCC, and any other applicable law;
(iii) To the extent permitted by applicable law, Agent may,
without notice, demand or legal process of any kind, take possession of any
or all of the Collateral (in addition to Collateral which it may already
have in its possession), wherever it may be found, and for that purpose may
pursue the same wherever it may be found, and may enter into any premises
where any of the Collateral may be or is supposed to be, and search for,
take possession of,remove, keep and store any of the Collateral until the
same shall be sold or otherwise disposed of, and Agent shall have the right
to store the same on any Guarantor's premises without cost to Agent;
(iv) At Agent's request, each Guarantor will, at such Guarantor's
expense, assemble the Collateral and make it available to Agent at a place
or places to be designated by Agent which is reasonably convenient to Agent
and such Guarantor; and
(v) Agent at its option, and pursuant to notification given to a
Guarantor as provided for below, may sell any Collateral actually or
constructively in its possession at public or private sale and apply the
proceeds thereof as provided below.
5.3 Notice of Disposition of Collateral. Any notification of
-----------------------------------
intended disposition of any of the Collateral required by law shall be deemed
reasonably and properly given if given at least ten (10) calendar days before
such disposition.
5.4 Application of Proceeds of Collateral. Any proceeds of any
-------------------------------------
disposition by Agent of any of the Collateral may be applied by Agent to the
payment of expenses in connection with the taking possession of, storing,
preparing for sale, and disposition of Collateral, including Attorneys' Fees and
legal expenses, and any balance of such proceeds may be applied by Agent toward
the payment of such of the Obligations, and in such order of application, as
Agent may from time to time elect.
5.5 Care of Collateral. Agent shall be deemed to have exercised
------------------
reasonable care in the custody and preservation of a Guarantor's Collateral in
its possession if it takes such action for that purpose as such Guarantor
requests in writing, but failure of Agent to comply with such request shall not,
of itself, be deemed a failure to exercise reasonable care, and no failure of
Agent to preserve or protect any rights with respect to such Collateral against
prior parties, or to do any act with respect to the preservation of such
Collateral not so requested by such Guarantor, shall be deemed a failure to
exercise reasonable care in the custody or preservation of such Collateral.
-10-
<PAGE>
5.6 Performance of Guarantor's Obligations. Agent shall have the
--------------------------------------
right, but shall not be obligated, to discharge any claims or Liens against, and
any Taxes at any time levied or placed upon any or all Collateral, including
without limitation those arising under statute or in favor of landlords, taxing
authorities, government, public and/or private warehousemen, common and/or
private carriers, processors, finishers, draymen, coopers, dryers, mechanics,
artisans, laborers, attorneys, courts, or others. Agent may also pay for
maintenance and preservation of Collateral. Agent may, but is not obligated to,
perform or fulfill any Guarantor's responsibilities under this Agreement which
such Guarantor has failed to perform or fulfill.
5.7 Agent's Rights. None of the following shall affect the
--------------
obligations of any Guarantor to Agent or any Lender under this Agreement or
Agent's right with respect to the remaining Collateral (any or all of which
actions may be taken by Agent at any time, whether before or after an Event of
Default, at its sole and absolute discretion and without notice to any
Guarantor):
(a) acceptance or retention by Agent or any Lender of other
property or interests in property as security for the Obligations, or
acceptance or retention of any Obligor(s), in addition to Guarantors, with
respect to any of the Obligations;
(b) release of its Lien on, or surrender or release of, or the
substitution or exchange of or for, all or any part of the Collateral or
any other property securing any of the Obligations (including but not
limited to any property of any Obligor other than Guarantors), or any
extension or renewal for one or more periods (whether or not longer than
the original period), or release, compromise, alteration or exchange, of
any obligations of any guarantor or other Obligor with respect to any
Collateral or any such property;
(c) extension or renewal for one or more periods (whether or not
longer than the original period), or release, compromise, alteration or
exchange of any of the Obligations, or release or compromise of any
obligation of any Obligor with respect to any of the Obligations; or
(d) failure by Agent or any Lender to resort to other security or
pursue any Person liable for any of the Obligations before resorting to the
Collateral.
6. GENERAL.
6.1 Guarantor Waiver. Except as otherwise provided for in this
----------------
Agreement, each Guarantor waives (a) presentment, demand and protest and notice
of presentment, protest, default, non-payment, maturity, release, compromise,
settlement, one or more
-11-
<PAGE>
extensions or renewals of any or all commercial paper, accounts, contract
rights, documents, instruments, chattel paper and guaranties at any time held by
Agent or any Lender on which any Guarantor may in any way be liable and hereby
ratifies and confirms whatever Agent or any Lender may do in this regard; (b)
all rights to notice and a hearing prior to Agent's or any Lender's taking
possession or control of, or Agent's or any Lender's relevy, attachment or levy
on or of, the Collateral or any bond or security which might be required by any
court prior to allowing Agent or any Lender to exercise any of Agent's or any
Lender's remedies; and (c) the benefit of all valuation, appraisement and
exemption laws. Each Guarantor acknowledges that it has been advised by
counsel of its choice with respect to this Agreement and the transactions
evidenced by this Agreement.
6.2 Power of Attorney. Each Guarantor appoints Agent, or any Person
-----------------
whom Agent may from time to time designate, as such Guarantor's attorney and
agent-in-fact with power (which appointment and power, being coupled with an
interest, is irrevocable until all Obligations under this Agreement and the
Guaranty Documents are paid and performed in full and this Agreement, the
Guaranty Documents and the Loan Agreement are terminated), without notice to
such Guarantor, to:
(a) At such time or times hereafter as Agent or its agent, in its
sole and absolute discretion, may determine in such Guarantor's or Agent's
name (i) endorse such Guarantor's name on any checks, notes, drafts or any
other items of payment relating to and/or proceeds of the Collateral which
come into the possession of Agent or under Agent's control and apply such
payment or proceeds to the Obligations; (ii) endorse such Guarantor's name
on any chattel paper, document, instrument, invoice, freight bill, bill of
lading or similar document or agreement in Agent's possession relating to
such Guarantor's Accounts Receivable, Inventory or any other Collateral;
(iii) use the information recorded on or contained in any data processing
equipment and computer hardware and software to which such Guarantor has
access relating to such Guarantor's Accounts Receivable, Inventory and/or
other Collateral; (iv) use such Guarantor's stationery and sign the name of
such Guarantor to verification of such Guarantor's Accounts Receivable and
notices thereof to such Guarantor's Account Debtors; and (v) if not done by
such Guarantor, do all acts and things determined by Agent to be necessary,
to obtain repayment of the Obligations and to fulfill such Guarantor's
other obligations under this Agreement; and
(b) At such time or times after the occurrence and during the
continuance of a Default, as Agent or its agent, in its sole and absolute
discretion, may determine, in such Guarantor's or Agent's name: (i)
-12-
<PAGE>
demand payment of such Guarantor's Accounts Receivable; (ii) enforce
payment of such Guarantor's Accounts Receivable, by legal proceedings or
otherwise; (iii) exercise all of such Guarantor's rights and remedies with
respect to the collection of such Guarantor's Accounts Receivable and other
Collateral; (iv) settle, adjust, compromise, extend or renew such
Guarantor's Accounts Receivable; (v) settle, adjust or compromise any legal
proceedings brought to collect such Guarantor's Accounts Receivable; (vi)
if permitted by applicable law, sell or assign such Guarantor's Accounts
Receivable and/or other Collateral upon such terms for such amounts and at
such time or times as Agent may deem advisable; (vii) discharge and release
such Guarantor's Accounts Receivable and/or other Collateral; (viii)
prepare, file and sign such Guarantor's name on any proof of claim in
bankruptcy or similar document against any Account Debtor of such
Guarantor; (ix) prepare, file and sign such Guarantor's name on any notice
of lien, assignment or satisfaction of lien or similar document in
connection with such Guarantor's Accounts Receivable and/or other
Collateral; and (x) do all acts and things necessary, in Agent's sole and
absolute discretion, to obtain repayment of the Obligations and to fulfill
such Guarantor's other obligations under this Agreement.
6.3 Expenses; Attorneys' Fees. Each Guarantor agrees to pay upon
-------------------------
demand all Attorneys' Fees (as defined in Section 12.3 of the Loan Agreement)
------------
and all other reasonable expenses incurred by Agent at any time, including fees,
costs and expenses incurred in connection with Collateral field audits or other
due diligence investigations by Agent, subject to the limits contained in
Section 5.5 of the Loan Agreement, and all Attorneys' Fees (as defined in
-----------
Section 12.3 of the Loan Agreement) and other Attorneys' Fees incurred by any
------------
Lender as provided in the Loan Agreement. Each Guarantor also agrees to pay,
and save Agent and each Lender harmless from all liability for, any stamp or
other taxes which may be payable with respect to the execution or delivery of
this Agreement, or any Guaranty Document, or the issuance of any other
instruments or documents provided for herein or to be delivered hereunder or in
connection herewith. Each Guarantor's obligations described herein shall
survive the termination of this Agreement.
6.4 Agent Fees and Charges. To the extent not already covered by
----------------------
Section 6.3, each Guarantor agrees to pay Bank of America Illinois on demand the
customary fees and charges of Agent for maintenance of accounts with it or for
providing other services to such Guarantor.
6.5 No Waiver by Agent or any Lender; Amendments. No failure or
--------------------------------------------
delay on the part of Agent or any Lender in the exercise of any power or right,
and no course of dealing between any Guarantor and Agent or any Lender shall
operate as a waiver of such
-13-
<PAGE>
power or right with respect to such Guarantor or any other Guarantor, nor shall
any single or partial exercise of any power or right with respect to any
Guarantor preclude other or further exercise thereof or the exercise of any
other power or right with respect to such Guarantor or any other Guarantor. The
remedies provided for herein are cumulative and not exclusive of any remedies
which may be available to Agent or any Lender at law or in equity. No notice to
or demand on any Guarantor not required hereunder shall in any event entitle
such Guarantor or any other Guarantor to any other or further notice or demand
in similar or other circumstances or constitute a waiver of the right of Agent
or any Lender to any other or further action in any circumstances without notice
or demand. No amendment, modification or waiver of, or consent with respect to,
any provision of this Agreement or any Guaranty Document shall in any event be
effective unless the same shall be in writing and signed and delivered by
Requisite Lenders. Any waiver of any provision of this Agreement, and any
consent to any departure by any Guarantor from the terms of any provision of
this Agreement, shall be effective only with respect to such Guarantor and in
the specific instance and for the specific purpose for which given.
6.6 Notices. Except as otherwise expressly provided herein, any
-------
notice hereunder to any Guarantor, Agent or any Lender shall be in writing
(including facsimile communication) and shall be given to such Guarantor, Agent
or such Lender at its address or facsimile number set forth on the signature
pages hereof and/or Exhibit A hereto or at such other address or facsimile
number as such Guarantor, Agent or such Lender may, by written notice, designate
as its address or facsimile number for purposes of notices hereunder. All such
notices shall be deemed to be given when transmitted by facsimile, delivered by
courier, personally delivered or, in the case of notice by mail, three (3)
Banking Days following deposit in the United States mails, properly addressed as
herein provided, with proper postage prepaid.
6.7 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 or affecting the validity or
enforceability of such provision in any other jurisdiction.
6.8 Successors. This Agreement shall be binding upon each Guarantor,
----------
Agent and each Lender and their respective successors and permitted assigns, and
shall inure to the benefit of each Guarantor, Agent and each Lender and their
respective successors and permitted assigns. No Guarantor may assign its rights
or duties hereunder without the consent of Agent.
6.9 Construction. Each Guarantor acknowledges that this Agreement
------------
shall not be binding upon Agent or any Lender or become effective until and
unless accepted by Agent or such Lender, as
-14-
<PAGE>
applicable, in writing. If so accepted by Agent or any Lender, this Agreement
and the Guaranty Documents shall, unless otherwise expressly provided therein,
be deemed to have been negotiated and entered into in, and shall be governed and
controlled by the laws of, the State of Illinois as to interpretation,
enforcement, validity, construction, effect, choice of law, and in all other
respects, including but not limited to the legality of the interest rate and
other charges, but excluding perfection of security interests and liens which
shall be governed and controlled by the laws of the relevant jurisdiction.
6.10 Consent to Jurisdiction. To induce Agent and each Lender to
-----------------------
accept this Agreement, each Guarantor irrevocably agrees that, subject to
Agent's sole and absolute election, ALL ACTIONS OR PROCEEDINGS IN ANY WAY,
MANNER OR RESPECT, ARISING OUT OF OR FROM OR RELATED TO THIS AGREEMENT, THE
GUARANTY DOCUMENTS OR THE COLLATERAL SHALL BE LITIGATED IN COURTS HAVING SITUS
WITHIN THE CITY OF CHICAGO, STATE OF ILLINOIS. EACH GUARANTOR HEREBY CONSENTS
AND SUBMITS TO THE JURISDICTION OF ANY LOCAL, STATE OR FEDERAL COURT LOCATED
WITHIN SAID CITY AND STATE AND WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS
UPON SUCH GUARANTOR, AND AGREES THAT ALL SUCH SERVICE OF PROCESS MAY BE MADE BY
REGISTERED MAIL DIRECTED TO SUCH GUARANTOR AT THE ADDRESS STATED ON THE
SIGNATURE PAGES AND/OR EXHIBIT A HERETO AND SERVICE SO MADE SHALL BE DEEMED TO
---------
BE COMPLETED UPON ACTUAL RECEIPT THEREOF.
6.11 Waiver of Jury Trial. EACH GUARANTOR, AGENT AND EACH LENDER
--------------------
WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR
DEFEND ANY RIGHTS (A) UNDER THIS AGREEMENT OR ANY GUARANTY DOCUMENT OR UNDER ANY
AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE
FUTURE BE DELIVERED IN CONNECTION HEREWITH OR (B) ARISING FROM ANY BANKING
RELATIONSHIP EXISTING IN CONNECTION WITH THIS AGREEMENT, AND AGREES THAT ANY
SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.
6.12 Termination. This Agreement shall terminate upon the last to
-----------
occur of payment and performance in full of all Obligations and termination of
all other Guaranty Documents and the Loan Agreement.
-15-
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed in Chicago,
Illinois, on the day and year specified at the beginning hereof.
BANK OF AMERICA ILLINOIS, as agent for itself and
each other Lender
By /s/ Andrew A. Thomas
---------------------------------
Andrew A. Thomas
Its Vice President
------------------------------
EACH OF THE SUBSIDIARIES SET
FORTH ON EXHIBIT A HERETO
By /s/ George T. Henning, Jr.
---------------------------------
George T. Henning, Jr.
Vice President of each of such
-----------------
Subsidiaries
-16-
<PAGE>
EXHIBIT A
---------
Pioneer Chlor Alkali Company, Inc.
4200 NationsBank Center
700 Louisiana Street
Houston, Texas 77002
Fax (___) ___-____
Imperial West Chemical Co.
2151 Wilbur Avenue
Antioch, California 94509
Fax (___) ___-____
All-Pure Chemical Co.
1660 West Linne Road
Suite J
Tracy, California 95376
Fax (___) ___-____
All-Pure Chemical Northwest, Inc.
1285 North West Third
Kalama, Washington 98625
Fax (___) ___-____
Black Mountain Power Company
4200 NationsBank Center
700 Louisiana Street
Houston, Texas 77002
Fax (___) ___-____
<PAGE>
EXECUTIVE EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT is made and entered into between GEV
Corporation, a Delaware corporation (the "Company"), and Richard C. Kellogg, Jr.
-------
(the "Executive").
---------
W I T N E S S E T H:
WHEREAS, Pioneer Americas Acquisition Corp., a Delaware corporation
("PAAC") and the Company, which is the owner of all of the outstanding capital
stock of PAAC, have agreed to acquire all of the issued and outstanding capital
stock of Pioneer Americas, Inc., a Delaware corporation ("Pioneer") pursuant to
-------
a Stock Purchase Agreement, dated as of March 24, 1995, by and among PAAC, GEV,
and all holders of equity securities and rights to acquire equity securities of
Pioneer (the "Purchase Agreement");
------------------
WHEREAS, the Executive is currently employed by Pioneer and the
Company desires to secure for itself the continued benefit of the Executive's
background, experience, ability and expertise and the Executive has indicated
his willingness to continue to provide his services, on the terms and conditions
set forth herein;
WHEREAS, by virtue of the Executive's position with Pioneer, the
Executive has knowledge of certain Confidential Information (as defined below)
and, therefore, in order to protect the value of the business acquired under the
Purchase Agreement, the Company desires to enter into this Agreement with the
Executive, and the Executive desires to make the agreements provided for herein
in consideration of the amounts payable to the Executive pursuant hereto;
WHEREAS, it is a condition to closing of the transactions contemplated
by the Purchase Agreement that the Executive and the Company enter into this
Agreement;
NOW, THEREFORE, on the basis of the foregoing premises and in
consideration of the mutual covenants and agreements contained herein, the
parties hereto agree as follows:
SECTION 1. EMPLOYMENT. (a) The Company hereby agrees to employ the
Executive and the Executive hereby accepts
<PAGE>
employment with the Company, on the terms and subject to the conditions
hereinafter set forth. Subject to the terms and conditions contained herein, the
Executive shall serve as President of the Company and, in such capacity, shall
report directly to the Board of Directors of the Company ("Board of Directors")
------------------
and shall have such duties, functions, responsibilities and authority as are
consistent with the Executive's position as the senior executive officer in
charge of the general management, business and affairs of the Company and
subsidiaries of the Company including, but not limited to, the development and
implementation of strategies and goals and internal policies and programs
designed to achieve the profit, market share and product mix goals of the
Company and its subsidiaries, together with such additional duties, functions,
responsibilities and authority including, without limitation, serving as an
officer and/or director of any subsidiary of the Company, commensurate with the
Executive's position as set forth in this Agreement, as may be reasonably
assigned to the Executive from time to time by the Board of Directors. In
connection with his employment under this Agreement, the Executive shall be
based at the offices of the Company where the Executive currently resides.
(b) As additional consideration for the Executive to enter into the
obligations set forth in this Agreement: (i) GEV shall, contemporaneous with
execution and delivery of this Agreement, cause to be granted to the Executive
options to acquire 492,304 shares of the Class A common stock, par value $.01
per share of GEV, pursuant to the GEV Corporation 1995 Stock Incentive Plan,
which options shall have an exercise price and vest and become exercisable in
the manner set forth in the stock option agreement to be executed by the
Executive and GEV evidencing such option rights; and (ii) GEV and the Company,
jointly and severally, shall indemnify and hold harmless Executive from any
claim asserted against him as an employee, officer or director of the Company or
any subsidiary or affiliate of the Company to the fullest extent permitted by,
and
2
<PAGE>
subject to the provisions of, the Delaware General Corporation Law, except only
that Executive shall not be indemnified for any violation by Executive of the
terms of this Agreement.
SECTION 2. TERM. Subject to the provisions and conditions of this
Agreement (including Section 6), the Executive's employment hereunder shall
commence on the date hereof and shall continue during the period ending on the
fifth anniversary of the date hereof (the "Employment Term").
---------------
SECTION 3. COMPENSATION.
(a) Salary. As compensation for the performance of the Executive's
------
services hereunder, the Company shall pay to the Executive a base salary (the
"Salary") of Three Hundred Thousand Dollars ($300,000) per annum with increases,
------
if any, as may be approved in writing by the Board of Directors. The Salary
shall be payable in accordance with payroll practices of the Company as
the same shall exist from time to time. In no event shall the Salary be
decreased during the Employment Term.
(b) Bonus Plan. The Executive shall be entitled to receive bonus
----------
compensation consisting of cash, securities or property ("Bonus") in accordance
-----
with any management incentive plan or plans (including, without limitation, any
shared earnings plan) which may be established by the Board of Directors of the
company for its executive officers and management.
(c) Benefits. In addition to the Salary and Bonus, the Executive
--------
shall be entitled to participate in or to receive the same health, insurance,
pension, automobile, severance, vacation, holiday, sick leave, disability,
profit sharing, 401(k) savings and other benefits as have been provided to
executive officers of the Company or its subsidiaries on the date hereof,
subject to such changes therein as shall be determined by the Board of Directors
to be consistent with the best interests of the Company.
3
<PAGE>
(d) Paying Entity. The Company may cause any one or more of its
-------------
subsidiaries to provide the salary and benefits to the Executive as are required
by this Agreement.
SECTION 4. EXCLUSIVITY. During the Employment Term, the Executive
shall devote substantially all of his time to the business of the Company, shall
faithfully serve the Company, shall in all respects conform to and comply with
the lawful and reasonable directions and instructions given to him by the Board
of Directors or its designee in accordance with the terms of this Agreement,
shall use his best efforts to promote and serve the interests of the Company and
shall not engage in any other business activity, whether or not such activity
shall be engaged in for pecuniary profit, except that the Executive may (a)
participate in the activities of professional trade organizations related to the
business of the Company, (be) engage in personal investing, charitable
activities and other personal business activities relating to ownership interest
in certain companies operating in Latin America, and (c) devote such portion of
his time as may be necessary to: (i) environmental matters affecting real
properties owned by any direct or indirect subsidiaries of the Company arising
prior to closing of the transactions, contemplated by the Purchase Agreement,
(ii) management and sale of the Subject Parcels covered by the Contingent
Payment Agreement (as such terms are defined in the Purchase Agreement); and
(iii) activities (including meetings of the Board of Directors and shareholders
or partners, as the case may be, of Basic and Victory Valley (as such terms are
defined in the Purchase Agreement)) provided that activities set forth in the
foregoing clauses, either singly or in the aggregate, do not interfere in any
material respect with the services to be provided by the Executive hereunder.
SECTION 5. REIMBURSEMENT FOR EXPENSES. The Company shall promptly
reimburse the Executive for all reasonable out-of-pocket travel, entertainment
and other business expenses incurred by the Executive during the term of this
Agreement and in the
4
<PAGE>
performance of his duties hereunder in accordance with the Company's
reimbursement policies in effect on the date hereof.
SECTION 6. TERMINATION.
(a) Death. This Agreement shall automatically terminate upon the
-----
death of the Executive and upon such event, the Executive's estate shall be
entitled to receive the amounts specified in Section 6(f) below.
(b) Disability. If the Executive is unable to perform the duties
----------
required of him under this Agreement because of physical or mental disability,
this Agreement shall remain in full force and effect and the Company shall pay
all compensation required to be paid to the Executive hereunder, unless the
Executive is unable to perform the duties required of him under this Agreement
for an aggregate of one hundred twenty (120) days (whether or not consecutive)
during any twelve (12) month period during the term of this Agreement, in which
event this Agreement (other than Sections 7, 8, 9 and 12 hereof), including, but
not limited to, the Company's obligations to pay any Salary or to provide any
privileges under this Agreement, shall, upon written notice by the Company to
the Executive to such effect, terminate; provided, however, that the foregoing
shall not prejudice the Executive's rights to continuing, existing insurance
benefits for which he is otherwise eligible, including disability benefits. In
case of any dispute as to whether Executive is disabled within the meaning of
this Section 6(b), the determination of such disability for the period specified
shall be certified by a physician reasonably acceptable to both the Company and
the Executive, which physician's determination shall be final and binding on the
parties hereto. The Company shall be permitted to hire a replacement for the
Executive, so long as this Agreement shall remain in effect, to serve in the
event and for so long as the Executive shall be unable to perform the duties
required of him hereunder due to his disability for an aggregate of sixty (60)
days during any 12-month period during the term of this Agreement.
5
<PAGE>
(c) Just Cause. The Company may terminate this Agreement (other than
----------
Sections 7, 8, 9 and 12 hereof) for "Just Cause." For purposes of this
----------
Agreement, "Just Cause" shall mean: (i) the Executive's willful and continued
failure, neglect or refusal to perform his duties hereunder which failure,
neglect or refusal shall not have been corrected by the Executive within thirty
(30) days of receipt by the Executive of written notice from the Company of such
failure, neglect or refusal, which notice shall specifically set forth the
nature of said failure, neglect or refusal; (ii) any willful or intentional
engagement by the Executive in misconduct (including repeated drunkenness or use
of illegal drugs) that is materially injurious to the reputation or business of
the Company or its affiliates or that materially impairs the ability of the
Executive to perform his duties and responsibilities hereunder; (iii) any
continued or repeated absence from the Company, unless such absence is (A)
approved or excused by the Board of Directors or (B) is the result of the
Executive's physical or mental disability (in which event the provisions of
Section 6(b) hereof shall control) or a personal or family emergency; (iv)
conviction of the Executive for the commission of a felony; or (v) the
commission by the Executive of an act of fraud or embezzlement against the
Company. If the Executive's employment is terminated for Just Cause, the
Executive shall be entitled to receive the amounts specified in Section 6(f)
hereof. In the event of any termination pursuant to this Section 6(c), the
Company shall deliver to the Executive written notice setting forth the basis
for such termination, which notice shall specifically set forth the nature of
the Just Cause, and the facts and circumstances in connection therewith, which
is the reason for such termination.
(d) Good Reason. The Executive may terminate this Agreement for "Good
----------- ----
Reason" following a Substantial Breach (as defined below) if such Substantial
------
Breach shall not have been corrected by the Company within thirty (30) days of
receipt by the Company of written notice from the Executive of the occurrence of
such Substantial Breach, which notice shall
6
<PAGE>
specifically set forth the nature of the Substantial Breach which, if not
corrected, will entitle the Executive at any time after such thirty (30 day
notice period and by subsequent written notice to terminate this Agreement. In
the event of resignation by the Executive following a Substantial Breach, the
Executive shall be entitled to receive the amounts specified in Section 6(f)
hereof. An election by the Executive to terminate his employment under this
paragraph shall not be a breach of this Agreement. The term "Substantial Breach"
------------------
means any material breach by the Company of its obligations hereunder consisting
of: (i) the failure of the Company to pay the Executive the Salary or Bonus, if
any, in accordance with Section 3(a) and (b) hereof; (ii) the failure by the
Company to substantially maintain and continue the Executive's participation in
benefit plans as provided in Section 3(c) hereof; (iii) any material
diminishment in the duties or responsibilities of the Executive described in
Section 1, or any removal of the Executive from or any failure to re-elect the
Executive to (x) the positions described in Section 1, except in connection with
promotions to higher office, or (y) the position as a director of the company;
(iv) the Company's requiring the Executive to be based anywhere other than in or
within 35 miles of the Executive's current principal place of employment, except
for required travel on the business of the Company to an extent substantially
consistent with the Executive's prior business travel obligations, or, in the
event the Executive consents to relocation, the failure of the Company to pay or
reimburse the Executive for all reasonable costs incurred by the Executive in
connection with such relocation as mutually agreed by the Company and the
Executive prior to such relocation; and (v) the failure of any successor to all
or substantially all of the business and/or assets of the Company to assume this
Agreement; provided, however, that the term "Substantial Breach" shall not
-------- ------- ------------------
include a termination of the Executive's employment hereunder pursuant to
Section 6(b) or (c) hereof. The date of termination of the Executive's
employment under this Section 6(d) shall be the effective date of any
resignation specified in writing by the Executive, which shall not be less than
thirty (30) days after receipt by the Company of
7
<PAGE>
written notice of such resignation, provided that any resignation by Executive
shall not be effective pursuant to this Section 6(d) if such Substantial Breach
shall have been corrected by the Company during the thirty (30) day period
following notice by the Executive of the existence thereof or if corrected
thereafter prior to the date of resignation by the Executive.
(e) Without Cause. The Company, by action of its Board of Directors,
-------------
may terminate this Agreement (other than Sections 7,8,9 and 12 hereof) without
Just Cause upon the giving to the Executive of thirty (30) days' prior written
notice of such termination. If the Executive's employment is terminated by the
Company without Just Cause, the Executive shall be entitled to receive the
amounts specified in Section 6(f) hereof.
(f) Payments. In the event that the Executive's employment hereunder
--------
terminates for any reason, the Company shall promptly pay to the Executive all
amounts accrued but unpaid hereunder through the date of termination in respect
of the Salary and for reimbursement of any expenses pursuant to Section 5
hereof, and, in the case of any termination by reason of death or physical or
mental disability of the Executive pursuant to Section 6(a) or 6(b) hereof, a
pro rated portion of the Bonus, if any, which the Executive would have been
otherwise entitled to receive under Section 3(b) for the calendar year in which
such termination occurs, such pro rated portion being the portion of such Bonus
corresponding to the period commencing on January 1 of such year and ending on
the date of termination. In the event that the Executive's employment has been
terminated by the Company for Just Cause, the Company shall have no obligations
to the Executive for Salary, Bonus or other benefits herein provided accruing on
or after the date of termination except as set forth in the preceding sentence
or as may be otherwise provided by law. In the event that the Executive's
employment hereunder is terminated by the Company without Just Cause or by the
Executive with Good Reason, in addition to the amounts specified in the
8
<PAGE>
first sentence of this Section 6(f), the Executive shall continue to receive the
Salary at the rate in effect hereunder on the date of such termination
periodically, in accordance with the Company's prevailing payroll practices,
until the last date of the Employment Term or until the first anniversary of the
termination date, if longer, plus (i) the cost of the Executive's premiums for
----
health care benefits under COBRA or the cost of the Executive's premiums under
any replacement health insurance coverage obtained by Executive containing
substantially the same coverage as provided to the Executive at such time, which
premiums shall be payable as and when the Salary would otherwise have been
payable as provided in this Agreement; and (ii) a pro rated portion of the
Bonus, if any, which the Executive would have otherwise been entitled to receive
under Section 3(b) for the calendar year in which the Executive is terminated
pro rated in the same manner as set forth in the first sentence of this Section
6(f). Without intending to limit the generality of Section 7, in the event that
the Executive accepts other employment or engages in his own business prior to
the last date of the Employment Term, the Executive shall forthwith notify the
Company and the Company shall be entitled to set off from amounts due the
Executive under this Section 6(f) the amounts paid to the Executive in respect
of such other employment or business activity. Upon any termination of this
Agreement, all of the rights, privileges and duties of the Executive hereunder
shall cease, except for any rights under this Section 6(f) and any obligations
under Section 7,8, 9 and 12 hereunder.
SECTION 7. SECRECY AND NON-COMPETITION.
(a) No Competing Employment. The Executive acknowledges that the
-----------------------
agreements and covenants contained in this Section 7 are essential to protect
the value of the Company's business and assets and that by virtue of his past
and current employment with the Company, the Executive has obtained and will
obtain Confidential Information and there is a substantial probability that such
Confidential Information could be used to the substantial advantage of a
competitor of the company or its subsidiaries and to the Company's or its
subsidiaries'
9
<PAGE>
substantial detriment. The Executive also acknowledges that GEV and PAAC have
purchased all of the outstanding shares of the Company in reliance on the
covenants made by the Executive in this Section 7, and that they would not have
acquired such shares in the absence of the covenants made by the Executive in
this Section 7. Therefore, the Executive agrees that during the term of this
Agreement and for a period of three years following the date of termination of
the Executive's employment hereunder (the "Restricted Period") the Executive
-----------------
shall not participate or engage, directly or indirectly, for himself or on
behalf of or in conjunction with any person, partnership, corporation or other
entity, whether as an employee, agent, officer, director, shareholder, partner,
joint venturer, investor or otherwise, in any business activities if such
activity consists of the manufacture, processing, marketing, sale, storage and
transport of chorine, caustic soda, muriatic acid, bleach, iron chlorides,
aluminum sulfate, hydrogen and steam and certain other products relating thereto
or the management thereof and all activities necessary therefor or incidental
thereto (the "Chlor Alkali Business"); provided, however, that nothing contained
--------------------- -------- -------
in this Section 7(a) shall prohibit or restrict the Executive from making any
investment, for investment purposes only, of up to three percent (3%) of the
stock of any publicly traded entity whose stock is either listed on a national
stock exchange or on the NASDAQ National Market System, provided, further, that
-------- -------
anything in this Section 7(a) or in Section 7(b) to the contrary
notwithstanding, following termination of this Agreement the Executive shall not
be prohibited from serving as a director, officer, or employee of, or consultant
to, an entity which is engaged in whole or part, in the Chlor Alkali Business so
long as the Executive, at all times during the Restricted Period, does not (i)
initiate contact or solicit, directly or indirectly, those Persons who were
customers of or suppliers to, or who otherwise had business relationships with,
the Company, or any of its respective subsidiaries, at any time during the
twelve month period preceding the date of termination, or (ii) disclose or use
Confidential Information in any manner which would be materially
10
<PAGE>
adverse to the Chlor Alkali Business conducted by the Company and its
subsidiaries as of the date of termination.
(b) Nondisclosure of Confidential Information. The Executive, except
-----------------------------------------
in connection with his employment hereunder or as required by legal process,
shall not disclose to any person or entity or use, during the Employment Term or
at any time thereafter, any information not in the public domain or generally
known in the industry, in any form acquired by the Executive while employed by
the Company or any predecessor to the Company's business or, if acquired
following the Employment Term, such information which, to the Executive's
knowledge, has been acquired, directly, or indirectly, from any person or entity
owning a duty or confidentiality to the Company or any of its subsidiaries or
affiliates, relating to the Company, its subsidiaries or affiliates, including
but not limited to information regarding customers, vendors, suppliers, trade
secrets, training programs, manuals or materials, technical information,
contracts, systems, procedures, mailing lists, know-how, trade names,
improvements, price lists, financial or other data (including the revenues,
costs or profits associated with any of the Company's products or services),
business plans, code books, invoices and other financial statements, computer
programs, software systems, databases, discs and printouts, plans (business,
technical or otherwise), customer and industry lists, correspondence, internal
reports, personnel files, sales and advertising material, telephone numbers,
names, addresses or any other compilation of information, written or unwritten,
which is or was used in the business of the Company or any of its subsidiaries
or affiliates (collectively, "Confidential Information"); provided, however,
------------------------ -------- -------
that the term Confidential Information shall not include (i) general skills and
general knowledge of an industry obtained by reason of the Executive's
association with the Company; (ii) information concerning the business and
operations of the Company and its subsidiaries and/or the industry in which the
Company and its subsidiaries conduct business which was in the possession of or
known to the Executive prior to the Executive's employment with the Company;
11
<PAGE>
and (iii) any financial or other information with respect to the assets,
properties, rights, business or operations of Basic or any of its subsidiaries,
or Victory Valley, or relating to the Subject Parcels (as such terms are defined
in the Purchase Agreement). The Executive agrees and acknowledges that all
Confidential Information, in any form, and copies and extracts thereof, are and
shall remain the sole and exclusive property of the Company, and upon
termination of his employment with the Company, the Executive shall return to
the Company the originals and all copies of any Confidential Information
provided to or acquired by the Executive in connection with the performance of
his duties for the Company, and shall return to the Company all files,
correspondence and/or other communications received, maintained and/or
originated by the Executive during the course of his employment.
(c) No Interference. During the Restricted Period, the Executive
---------------
shall not, whether for his own account or for the account of any other
individual, partnership, firm, corporation or other business organization (other
than the Company), directly or indirectly, solicit, endeavor to entice away from
the Company, its affiliates or subsidiaries, or otherwise directly interfere
with the relationship of the Company, its affiliates or subsidiaries with any
person who, to the knowledge of the Executive, is employed by or otherwise
engaged to perform services for the Company, its affiliates or subsidiaries
(including, but not limited to, any independent distributor or sales
representative or organization) or who is, or was within the then most recent
twelve-month period, a customer or client of the Company, its predecessors or
any of its subsidiaries or affiliates.
(d) Inventions. The Executive hereby sells, transfers and assigns to
----------
the Company, or to any person or entity designated in writing by the Company,
all of the right, title and interest of the Executive in and to all inventions,
sales materials, software, training materials, disclosures and improvements,
whether patented or unpatented, and copyrightable material, made
12
<PAGE>
or conceived by the Executive, solely or jointly, in whole or in part, during
his employment with the Company which are not generally known to the public or
the industry or recognized as standard practice and which (i) relate to
services, trade names, methods, ideas, apparatus, designs, products, processes
or devices which may be sold, leased, used or under construction or development
by the Company, or any franchise affiliated with the Company and (ii) arise
(wholly or partly) from the efforts of the Executive during and in the course of
his employment with the Company (an "Invention"). The Executive shall
---------
communicate promptly and disclose to the Company, in such form as the Company
reasonably requests, all information, details and data pertaining to any such
Invention. With respect to all Inventions which are to be assigned pursuant to
this Section 7, the Executive will assist the Company in any reasonable manner
to obtain for the Company's benefit patents thereon, including, but not limited
to, executing patent applications, transfers or assignments thereof to the
Company and any and all other documents reasonably deemed necessary by the
Company. The Company shall pay all costs incident to the preparation, execution
and delivery of such patent applications, transfers, assignments and other
documents. Any Invention by the Executive within six (6) months following the
termination of his employment hereunder shall be presumed to fall within the
provisions of this Section 7(d) unless the Executive bears the burden of proof
of showing that the Invention was first conceived and made following such
termination. Notwithstanding anything contained herein to the contrary, the
Executive shall continue to own the exclusive right, title and interest in and
to any and all inventions, improvements, discoveries, ideas, designs, documents
and other data (whether or not patentable): (A) conceived, made and developed
prior to the date of this Agreement; and (B) irrespective of when conceived,
made or developed, which do not relate to the actual or anticipated business of
the Company or any existing or prior research and development activities of the
Company or any of its subsidiaries.
SECTION 8. INJUNCTIVE RELIEF. Without intending to limit the
remedies available to the Company, the Executive acknowledges that a breach of
any of the covenants contained in
13
<PAGE>
Section 7 hereof may result in material irreparable injury to the Company or its
subsidiaries or affiliates 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 such a breach or threat thereof, the Company shall be entitled to
seek a temporary restraining order and/or a preliminary or permanent injunction,
restraining the Executive from engaging in activities prohibited by Section 7
hereof or such other relief as may be required specifically to enforce any of
the covenants in Section 7 hereof.
SECTION 9. EXTENSION OF RESTRICTED PERIOD. In addition to the
remedies the Company may seek and obtain pursuant to Section 8 of this
Agreement, the Restricted Period shall be extended by any and all periods during
which the Executive shall be found by a court to have been in violation of the
covenants contained in Section 7 hereof.
SECTION 10. SUCCESSORS AND ASSIGNS; NO THIRD-PARTY BENEFICIARIES.
This Agreement shall inure to the benefit of, and be binding upon, the parties
hereto and their respective successors and assigns, including, but not limited
to, the Executive's heirs and personal representatives of the Executive's
estate; provided, however, that neither party shall assign or delegate any of
-------- -------
the obligations created under this Agreement without the prior written consent
of the other party. Notwithstanding the foregoing, the Company shall have the
unrestricted right to assign this Agreement and to delegate all or any part of
its obligations hereunder to any of its subsidiaries, so long as such assignment
does not diminish the duties, function, responsibility or authority of the
Executive or result in any assignment of duties or responsibilities materially
inconsistent with those set forth in this Agreement (unless consented to by the
Executive) but in such event such assignee shall expressly assume all
obligations of the Company hereunder and the Company shall remain fully liable
for the performance of all such obligations in the manner prescribed in this
Agreement. Nothing in this Agreement shall confer upon any person or entity
14
<PAGE>
not a party to this Agreement, or (unless otherwise expressly provided herein)
the legal representatives of such person or entity, any rights or remedies of
any nature or kind whatsoever under or by reason of this Agreement.
SECTION 11. WAIVER AND AMENDMENTS. Any waiver, alteration, amendment
or modification of any of the terms of this Agreement shall be valid only if
made in writing and signed by the parties hereto. No waiver by either of the
parties hereto of their rights hereunder shall be deemed to constitute a waiver
with respect to any subsequent occurrences or transactions hereunder unless such
waiver specifically states that it is to be construed as a continuing waiver.
SECTION 12. SEVERABILITY AND GOVERNING LAW. The Executive
acknowledges and agrees that the covenants set forth in Section 7 hereof are
reasonable and valid in all respects. Each party hereto acknowledges and agrees
that if any of such covenants or other provisions of this Agreement are found to
be invalid or unenforceable by a final determination of a court of competent
jurisdiction (a) the remaining terms and provisions hereof shall be unimpaired
and (b) the invalid and unenforceable term or provision shall be deemed replaced
by a term or provision that is valid and enforceable and that comes closest to
expressing the intention of the invalid or unenforceable term or provision.
THIS AGREEMENT SHALL BE GOVERNED BY AND INTERPRETED AND ENFORCED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF TEXAS WITHOUT GIVING EFFECT TO THE CHOICE OF LAW
PROVISIONS THEREOF.
SECTION 13. NOTICES. All notices and other communications given or
made pursuant hereto shall be in writing and shall be deemed to have been duly
given or made if delivered personally or sent by registered or certified mail
(postage prepaid, return receipt requested), or sent by facsimile transmission
or overnight courier service, addressed in the case of the Company, to GEV
Corporation, 4200 NationsBank Center, 700 Louisiana Street, Houston, Texas
77002, Attention: President, fax: (713) 225-4426 with a copy to Interlaken
Capital, Inc., 165
15
<PAGE>
Mason Street, Greenwich, Connecticut 06830, Attention: Chairman of the Board,
Fax: (203) 629-8554 and, in the case of the Executive, to the Executive's
address set forth on the signature page hereof or, in each case, to such other
address as may be designated to the other party from time to time as provided
above. All notices so given shall be effective when received at the designated
address.
SECTION 14. CAPTIONS AND SECTION HEADINGS. Captions and section
headings herein are solely for convenience of reference and shall not affect the
meaning or interpretation of this Agreement or of any term or provision hereof.
SECTION 15. ENTIRE AGREEMENT. This Agreement constitutes the entire
understanding and agreement of the parties hereto regarding the employment of
the Executive. This Agreement supersedes all prior negotiations, discussions,
correspondence, communications, understandings and agreements between the
parties relating to the subject matter of this Agreement, all of which are
merged into this Agreement.
SECTION 16. COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original and all of which
together shall be considered one and the same agreement.
SECTION 17. DISPUTES. Any dispute or controversy arising under, out
of, in connection with or in relation to this Agreement ("Disputes") shall, at
--------
the election and upon written demand of either party, be finally determined and
settled by arbitration in the city of Houston, Texas in accordance with the
procedures set forth in the exhibit entitled "Arbitration Procedures" attached
----------------------
hereto, and judgment upon the award may be entered in any court having
jurisdiction thereof; provided, however, that: (a) this Section 17 shall not
-------- -------
apply to matters required to be determined by a physician pursuant to Section
6(b); and (b) the parties acknowledge and agree that an arbitrator or
arbitrators shall not have the power or right to
16
<PAGE>
order the payment by either party of damages (including punitive damages),
compensation or other amounts that are not provided for in this Agreement, it
being the intention of the parties that the arbitrator or arbitrators shall
resolve Disputes, in respect of payments, only as to whether or not a payment is
due hereunder and, if so, the amount thereof, but shall not provide for any
additional payments as a result of the matters contemplated hereby.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the 20th day of April, 1995.
GEV CORPORATION
By: /s/ William L. Mahone
-----------------------------------
Name: William L. Mahone
------------------------------
Title:
-----------------------------
EXECUTIVE
/s/ Richard C. Kellogg, Jr.
----------------------------------------
Richard C. Kellogg, Jr.
Address: 4200 NationsBank Center
700 Louisiana Street
Houston, Texas 77002
Fax. No.: (713) 225-4426
17
<PAGE>
Arbitration Procedures
----------------------
(a) All Disputes between the parties submitted to arbitration shall be
resolved by binding arbitration administered by the American Arbitration
Association (the "AAA") in accordance with, and in the following order of
---
priority: (i) the terms of these arbitration provisions; (ii) the Commercial
Arbitration Rules of the AAA; (iii) the Federal Arbitration Act (Title 9 of the
United States Code); and (iv) to the extent the foregoing are inapplicable,
unenforceable or invalid, the laws of the State of Texas. The validity and
enforceability of these arbitration provisions shall be determined in accordance
with this same order of priority. In the event of any inconsistency between
these arbitration provisions and such rules and statutes, these arbitration
provisions shall control. Judgment upon any award rendered hereunder shall be
entered in any court having jurisdiction.
(b) All statutes of limitation applicable to any Dispute shall apply
to any proceeding in accordance with these arbitration provisions.
(c) Arbitrators are empowered to resolve Disputes by summary rulings
substantially similar to summary judgments and motions to dismiss. Arbitrators
shall resolve all Disputes in accordance with the applicable substantive law.
Any arbitrator selected shall be required to be experienced and knowledgeable in
the substantive laws applicable to the subject matter of the Dispute. With
respect to a Dispute in which the claims or amounts in controversy do not exceed
$100,000, a single arbitrator shall be chosen and shall resolve the Dispute. In
such case, the arbitrator shall be required to make specific, written findings
of fact, and shall have authority to render an award up to but not to exceed
$100,000, including all amounts properly payable and costs, fees and expenses
(subject to Section 17 of the Agreement). A Dispute involving claims or amounts
in controversy exceeding $100,000, shall be decided by a majority vote of a
panel of three (3) arbitrators (an "Arbitration Panel"), the determination of
-----------------
any two (2) of the three (3) arbitrators constituting the determination of the
Arbitration Panel; provided, however, that all three (3)
<PAGE>
arbitrators on the Arbitration Panel must actively participate in all hearings
and deliberations. Arbitrators, including any Arbitration Panel, may grant any
remedy or relief deemed just and equitable and within the scope of these
arbitration provisions and may also grant such ancillary relief as is necessary
to make effective any award. Arbitration Panels shall be required to make
specific, written findings of fact and conclusions of law, and in such
proceedings before an Arbitration Panel only, the parties shall have the
additional right to seek vacation or modification of any award of an Arbitration
Panel that is based in whole, or in part, on an incorrect or erroneous ruling of
law by appeal to a Federal or State Court of Appeals, following the entry of
judgment on the award in Federal or State District Court, as appropriate. For
these purposes, the award and judgment entered by the Federal or State District
Court shall be considered to be the same as the award and judgment of the
Arbitration Panel. All requirements applicable to appeals from any Federal or
State District Court judgment shall be applicable to appeals from judgments
entered on decisions rendered by Arbitration Panels. The Appellate Courts shall
have the power and authority to vacate or modify an award based upon a
determination that there has been an incorrect or erroneous ruling of law. The
Appellate Court shall also have the power to reverse and/or remand the decision
of an Arbitration Panel. Subject to the foregoing, the determination of an
arbitrator or Arbitration Panel shall be binding on all parties and shall not be
subject to further review or appeal except as otherwise allowed by applicable
law.
(d) To the maximum extent practicable, the AAA, the arbitrator (or the
Arbitration Panel, as appropriate) and the parties shall take any action
necessary to require that an arbitration proceeding hereunder shall be concluded
within one hundred eighty (180) days of the filing of the Dispute with the AAA.
Unless the Company and the Executive shall agree otherwise, arbitration
proceedings hereunder shall be conducted in Houston, Texas. Arbitrators shall
be empowered to impose sanctions and to take such other actions as they deem
2
<PAGE>
necessary to the same extent a judge could pursuant to the Federal Rules of
Civil Procedure and applicable law. With respect to any Dispute, each party
agrees that all discovery activities shall be expressly limited to matters
directly relevant to the Dispute and any arbitrator, Arbitration Panel and the
AAA shall be required to fully enforce this requirement. The provisions of
these arbitration provisions shall survive any termination, amendment or
expiration of this Agreement, unless the parties otherwise expressly agree in
writing. To the extent permitted by applicable law, arbitrators, including any
Arbitration Panel, shall have the power to award recovery of all costs and fees
(including attorneys' fees, administrative fees and arbitrators' fees) to the
prevailing party or, if no clear prevailing party, as the arbitrator (or
Arbitration Panel, if applicable) shall deem just and equitable. Each party
agrees to keep all Disputes and arbitration proceedings strictly confidential,
except for disclosures of information required by applicable law.
3
<PAGE>
EMPLOYMENT AGREEMENT
FOR
FRANS G.J. SPEETS
<PAGE>
TABLE OF CONTENTS
ARTICLE I.
EMPLOYMENT AND DUTIES...........................................
ARTICLE II.
COMPENSATION AND BENEFITS.......................................
Section 2.1 Compensation...................................
Section 2.2 Increases in Salary............................
Section 2.3 Bonus..........................................
Section 2.4 Stock Participation Plan.......................
Section 2.5 Benefits.......................................
ARTICLE III.
VACATION........................................................
ARTICLE IV.
EXPENSES........................................................
ARTICLE V.
TERM............................................................
ARTICLE VI.
CONFIDENTIALITY.................................................
Section 6.1 Background.....................................
Section 6.2 Confidential Information.......................
Section 6.3 Exclusions.....................................
Section 6.4 Confidential Relationship......................
Section 6.5 Employee's Obligations.........................
Section 6.6 Additional Obligations of Employee.............
ARTICLE VII.
REMEDIES........................................................
ARTICLE VIII.
TERMINATION.....................................................
Section 8.1 Events of Termination..........................
Section 8.2 Effects of Termination.........................
<PAGE>
ARTICLE IX.
ARBITRATION.....................................................
ARTICLE X.
MISCELLANEOUS...................................................
Section 10.1 Waiver........................................
Section 10.2 Notice........................................
Section 10.3 Governing Law.................................
Section 10.4 Captions......................................
Section 10.5 Counterparts..................................
Section 10.6 Severability..................................
Section 10.7 Word Meanings.................................
Section 10.8 Assignment....................................
Section 10.9 Legal Fees....................................
Section 10.10 Sale of Employer.............................
Section 10.11 Entire Agreement/Amendment...................
<PAGE>
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is entered into effective as of the
12th day of April, 1995, by and between Pioneer Americas, Inc. ("Employer"), and
Frans G.J. Speets ("Employee").
R E C I T A L S:
WHEREAS, the Employer desires to hire the Employee to serve as President of
All-Pure Chemical Company ("All-Pure"); and
NOW THEREFORE, for and in consideration of the mutual promises set forth
herein, the Employer and the Employee agree as follows:
ARTICLE I.
EMPLOYMENT AND DUTIES
Section 1.1 Duties of Employee. The Employer hereby employs the Employee
------------------
and Employee hereby accepts employment in the position of President of All-Pure.
During the term of this Agreement, the Employee shall provide the Employer with
the benefit of his knowledge, experience, know-how and creativity. In
particular, the Employee shall, without limitation, perform the following
duties:
(a) Reorganize and re-direct All-Pure, and increase All-Pure's off-take of
chlorine and liquid caustic soda from Employer;
(b) Assist Employer in the formulation and execution of an international
sales and marketing plan;
(c) Prepare a business plan with respect to All-Pure's proposed activities
in Mexico;
(d) Assist in evaluating the merits of All-Pure acquiring complimentary
and competitive businesses; and
(e) Assist in strategic planning for All-Pure including, without
limitation, diversifying and increasing products sold by All-Pure.
<PAGE>
ARTICLE II.
COMPENSATION AND BENEFITS
Section 2.1 Compensation. For all the services rendered by the Employee in
------------
any capacity under this Agreement, the Employer shall pay the Employee a salary
of One Hundred Ninety Thousand Dollars per annum ($190,000). The Employee's
salary shall be paid twice a month in accordance with Employer's usual and 1
customary payroll practices. All compensation paid to Employee under this
Agreement shall be subject to customary employment taxes.
Section 2.2 Increases in Salary. The Employee shall be eligible to receive
-------------------
periodic salary increases in accordance with Employer's established salary
guidelines and policies.
Section 2.3 Bonus. The Employer shall pay the Employee a bonus in
-----
accordance with the terms of any bonus program or programs adopted by the
Employer.
Section 2.4 Stock Participation Plan. The Employee will be entitled to
------------------------
participate in any incentive stock option plan or other stock plan adopted by
the Employer in accordance with the terms and provisions set forth in any such
plan.
Section 2.5 Benefits. The Employee will also be entitled to participate in
--------
or become a participant in any employee benefit plan maintained by the Employer
for which he is eligible, including any 401(k) plan, profit sharing plan,
defined benefit plan, disability, hospitalization, major medical, life insurance
or such other employee benefit plan in accordance with the Employer's policies
and procedures.
ARTICLE III.
VACATION
The Employee will be entitled to vacation with pay in accordance with the
Employer's policies and procedures.
ARTICLE IV.
EXPENSES
2
<PAGE>
The Employee will be reimbursed for all costs and expenses incurred by
Employee in connection with his providing services hereunder in accordance with
the Employer's policies and procedures. Notwithstanding anything to the
contrary in this Article IV, the Employee will be required to submit expense
vouchers to the Employer in sufficient detail to permit the Employer to validly
claim any income tax deductions to which it is entitled, unless the Employer
agrees to maintain such expense records on behalf of the Employee.
ARTICLE V.
TERM
The term of this Agreement shall commence on April 12, 1995, and terminate
April 30, 2000, unless sooner terminated in accordance with Article VIII.
3
<PAGE>
ARTICLE VI.
CONFIDENTIALITY
Section 6.1 Background. Employer in the course of its business has
----------
developed valuable technical information and know-how, which information is used
in its business. The Employee acknowledges that much of the technical
information and know-how developed by Employer is not generally known in the
industry and gives Employer a competitive advantage over those who do not know
it. As a consequence of and during the course of his employment, the Employee
will have access to, and/or will learn or conceive confidential and/or
proprietary information on Employer's time and at Employer's expense, relating
to Employer's then-current or contemplated interests. This information is
likely to be of benefit to Employer, in its line of business even after
termination of the Employee's full-time employment.
Section 6.2 Confidential Information. The parties recognize that in the
------------------------
course of the Employee providing services to Employer, the Employee will have
access to various confidential and/or proprietary business information which
relates to Employer's business and which has commercial or other value
("Confidential Information," defined in more detail below). As used in this
Agreement, the term "Confidential Information" includes by way of illustration
but without limitation (except as expressly set forth in Section 6.3) any and
all information relating to the services performed or products sold by Employer,
processes therefor, apparatus and maintenance thereof, research, research
programs, processes, program files, flow charts, drawings, techniques,
standards, specifications, improvements, inventions, customer or potential
customer information, accounting data, statistical data, research projects,
development and marketing plans, strategies, forecasts, customer lists, sales
plans and sales and marketing information, and the like that are now in the
possession of or may be acquired by or on behalf of Employer, whether or not
tangibly embodied in a document, model, specimen, computer storage device, or
other physical object, including similar and/or confidential proprietary
information with respect to any subsidiary or related company of Employer.
4
<PAGE>
Section 6.3 Exclusions. Confidential Information does not include
----------
information that through no breach or fault of the Employee is or becomes (i)
fully described in an English-language printed publication distributed to more
than one hundred (100) persons in the U.S. or Canada; or (ii) disclosed to the
Employee by a third party not having an obligation of confidence to Employer.
All information relating to Employer's business shall be deemed to be
Confidential Information until shown to be within one or more of the foregoing
exceptions. This Section 6.3 is intended to illustrate but not to limit the
definitions of Confidential Information. No combination of information shall be
deemed to be within any such exception, whether or not the component parts of
the combination are within one or more exceptions, unless the combination itself
and its economic value and principles of operations are themselves so excepted.
Section 6.4 Confidential Relationship. The Employee understands that his
-------------------------
position as an employee creates a relationship of confidence and trust between
him and Employer with respect to any Confidential Information which pertains to
Employer's business or to the business of any actual or potential client or
customer of Employer, and which may be learned or developed by the Employee or
made known to him by Employer or any of its clients or customers during the
Employee's employment.
Section 6.5 Employee's Obligations. The Employee shall keep all
----------------------
Confidential Information in confidence and trust for the benefit of Employer.
Employee shall not use any Confidential Information except for the benefit of
Employer without the express prior written consent of an authorized officer of
Employer except in the ordinary course of his employment. Furthermore, the
Employee shall not disclose any Confidential Information to any person or entity
other than Employer and its authorized employees at any time without such
consent.
Section 6.6 Additional Obligations of Employee. Upon termination of
----------------------------------
employment, the Employee shall not take with him any drawings, blueprints,
notes, memoranda, specifications, devices, documents, or any other tangible
embodiments of any Confidential Information.
5
<PAGE>
ARTICLE VII.
REMEDIES
Without limiting other possible remedies to Employer available for breach
of any of the covenants contained in this Agreement, the Employee agrees that
the Employer shall be entitled to damages and to injunctive or other equitable
relief to enforce such covenants, such relief to be without the necessity of
posting a bond, cash or otherwise.
ARTICLE VIII.
TERMINATION
Section 8.1 Events of Termination. This Agreement may be terminated:
---------------------
(a) at any time by Employer for any reason, with or without cause,
however, Employer shall give Employee prior written notice of
termination;
(b) at any time by Employee for any reason, with or without cause,
however, Employee shall give Employer thirty (30) days notice of
termination;
(c) upon the death of the Employee.
The above notwithstanding, this Agreement shall terminate and have no
effect if the capital stock of Employer is not purchased by Pioneer Americas
Acquisition Corp. or another subsidiary of GEV Corporation on or before April
30, 1995.
Section 8.2 Effects of Termination.
----------------------
(a) If this Agreement is terminated by Employer, then Employee shall
be obligated to pay Employee, within ten (10) business days of such termination,
an amount equal to the present value of remaining salary payments due Employee
through April 30, 2000 under Sections 2.1 and 2.2 above, discounted at 7%.
(b) If this Agreement is terminated by Employee prior to December 31,
1996, then Employer shall continue to pay Employee in accordance with Sections
2.1 and 2.2 above through
6
<PAGE>
December 31, 1996, and on December 31, 1996. Employer shall pay Employee an
amount equal to the present value of Employee's salary payments remaining after
December 31, 1996 through April 30, 2000 under Sections 2.1 and 2.2 above,
discounted at 7%. If Employee terminates this Agreement on or after December 31,
1996, the Employer shall pay to Employee, within ten (10) business days of
receiving notice of termination, an amount equal to the present value of
Employee's salary payments remaining after the date of termination through April
30, 2000 under Sections 2.1 and 2.2 above, discounted at 7%.
All payments by Employer under Section 8.2(a) and (b) are subject to
deductions and withholding as required by law.
Should this Agreement be terminated because of Employee's death, the
obligations and responsibilities of Employer and Employee hereunder shall
terminate as of the date of Employee's death. Notwithstanding any of the
foregoing to the contrary, Articles VI, VII and IX shall survive termination of
this Agreement.
ARTICLE IX.
ARBITRATION
If any dispute shall arise between the Employer and the Employee regarding
Employee's employment by Employer, or the termination thereof, the dispute shall
be settled by arbitration in accordance with applicable California law. Either
party, by giving written notice to the other party of an intention to invoke an
arbitration proceeding pursuant to this Article IX, may apply to the American
Arbitration Association for an appointment of an arbitrator to be selected from
a list of three (3) arbitrators supplied by the American Arbitration
Association. For a period of five (5) days after the list is delivered to the
Employee and Employer, each shall have the right to strike one name from the
list of arbitrators and the arbitrator not stricken shall be the arbitrator
hereunder. Any party unable or unwilling to strike a name within the period
required shall forfeit his or its right to participate in the selection of the
arbitrator. The arbitrator so selected shall then diligently conduct an
arbitration proceeding in accordance with applicable California law. The
decision of the arbitrator shall be final and
7
<PAGE>
conclusive upon the parties, and a judgment upon the award may be entered in any
court having jurisdiction. Each party expressly acknowledges that the other
party has the right to undertake reasonable discovery procedures in connection
with the arbitration proceeding. The party against whom the arbitrator rules
will pay all costs with respect to the arbitration proceeding. Notwithstanding
any of the foregoing to the contrary, the arbitration provisions set forth in
this Article IX shall not apply to any dispute between Employee and Employer
relating to Article VI hereof.
ARTICLE X.
MISCELLANEOUS
Section 10.1. Waiver. The waiver by either party of a breach or violation
------
of any provision of this Agreement will not operate as or be construed to be a
waiver of any subsequent breach hereof.
Section 10.2. Notice. Any notice, request, demand or other communication
------
required, permitted or desired to be given hereunder will be deemed given when
personally delivered or mailed by prepaid certified mail, return receipt
requested, addressed as follows:
Employer:
Attn: Corporate Secretary
Employee: Frans G.J. Speets
c/o All-Pure Chemical Co.
1660 W. Linne Road
Tracy, California 95376
or to such other address, and to the attention of such other person or officer
as either party may designate, with copies thereof to the respective counsel
thereof, all at addresses which a party may designate by like written notice.
8
<PAGE>
Section 10.3 Governing Law. This Agreement will be interpreted, construed
-------------
and governed according to the laws of the State of California.
Section 10.4 Captions. The article and section headings contained in this
--------
Agreement are for convenience only and will in no manner be construed as part of
this Agreement.
Section 10.5 Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which will be deemed an original and together will
constitute one and the same agreement, with one counterpart being delivered to
each party hereto.
Section 10.6 Severability. This Agreement is intended to be performed in
------------
accordance with, and only to the extent permitted by, all applicable laws,
ordinances, rules and regulations. If any provision of this Agreement, or the
application thereof to any person or circumstance shall, for any reason and to
any extent, be invalid or unenforceable, the remainder of this Agreement and the
application of such provision to other persons or circumstances shall not be
affected thereby, but rather shall be enforced to the greatest extent permitted
by law.
Section 10.7 Word Meanings. Whenever used herein the singular number will
-------------
include the plural, and the plural number will include the singular; the
masculine gender shall include the feminine and neuter, and vice versa.
Section 10.8 Assignment. Neither party may assign its rights or delegate
----------
its duties hereunder without the prior written consent of the other party except
as otherwise provided in Section 10.10.
Section 10.9 Legal Fees. Except as otherwise provided in Article IX, in
----------
the event that either party elects to incur legal expenses to enforce or
interpret any provision of this Agreement, the prevailing party will be entitled
to recover such legal expenses, including, without limitation, reasonable
attorneys' fees, all costs and necessary disbursements, in addition to any other
relief to which such party shall be entitled.
9
<PAGE>
Section 10.10 Sale of Employer. If the Employer contemplates selling all
----------------
or substantially all of its assets or entering into any transaction with a third
party under the terms of which such third party may terminate this Agreement,
the Employer hereby agrees not to consummate any such transaction unless such
third party agrees to assume this Agreement or all the Employer's obligations
hereunder.
Section 10.11 Entire Agreement/Amendment. This Agreement contains the
--------------------------
entire agreement of the parties. It supersedes any and all other agreements,
either oral or in writing, between the parties hereto with respect to the
Employee providing services to the Employer. Each party to this Agreement
acknowledges that no representations, inducements, promises or agreements, oral
or otherwise, have been made by any party, or anyone acting on behalf of any
party, which are not embodied herein, and that no other agreement, statement or
promise with respect to the Employee providing service to the Employer not
contained in this Agreement shall be valid or binding. This Agreement may not be
modified or amended by oral agreement, but only in an agreement in writing
signed by the Employer and Employee.
IN WITNESS WHEREOF, the Employer and the Employee have executed this
Agreement on the 12th day of April, 1995.
EMPLOYER: PIONEER AMERICAS, INC.
------------------------------
By: /s/ Richard C. Kellogg, Jr.
------------------------------
Name: Richard C. Kellogg, Jr.
------------------------------
Title:
------------------------------
/s/ Frans G. J. Speets
EMPLOYEE: ------------------------------
FRANS G.J. SPEETS
10
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<PAGE>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial information extracted from
balance sheet, income statement and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<CASH> 2,703
<SECURITIES> 0
<RECEIVABLES> 28,570
<ALLOWANCES> 1,336
<INVENTORY> 13,338
<CURRENT-ASSETS> 46,895
<PP&E> 84,662
<DEPRECIATION> 2,269
<TOTAL-ASSETS> 254,135
<CURRENT-LIABILITIES> 38,955
<BONDS> 135,000
<COMMON> 86
0
0
<OTHER-SE> 35,266
<TOTAL-LIABILITY-AND-EQUITY> 254,135
<SALES> 36,405
<TOTAL-REVENUES> 36,405
<CGS> 24,901
<TOTAL-COSTS> 7,412
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,812
<INCOME-PRETAX> 629
<INCOME-TAX> 628
<INCOME-CONTINUING> 1
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1
<EPS-PRIMARY> 0.00
<EPS-DILUTED> 0.00
</TABLE>
